Thanks to the commonness of online B2B services, trading with China is getting easier. However, it results in entrepreneurs thinking that it is enough to order goods via the internet without going through any additional formalities. Unfortunately, when importing from China, we can come across many pitfalls. Therefore, one should always remember about protection measures such as partner verification or a commercial contract. In case of any problems with a contractor or goods, the contract with a Chinese supplier will allow us to assert our rights.
How to secure a commercial transaction with a Chinese partner?
When starting a cooperation with a Chinese contractor, firstly we should check the company, in terms of credibility and reliability. Even if we verify the partner and we are sure of their honesty, it is worth considering signing a commercial contract. An agreement with a Chinese supplier is a very good way to secure our order. A clear statement of the terms of the transaction will allow us to avoid later misunderstandings and problems, resulting from, e.g. imprecise presentation of requirements.
In the case of a smaller order, we can only consider verification of the Chinese company to minimize the risk. However, if the order is for a large amount of money, we highly recommend both the verification of the Chinese contractor and signing a trade agreement. When trading with China, one should always take some precautions. To ensure that the product meets our requirements, it is also worth carrying out quality control during the production process.
Why is it worth to sign a commercial contract with a Chinese company?
Some of the entrepreneurs are skeptical about the idea of signing trade agreements with Chinese suppliers. This is often due to the desire to avoid additional costs. Nonetheless, given the costs of the whole import process, as well as potential losses resulting from the lack of a contract, it is a small expense.
If we have not signed a commercial contract with a Chinese contractor, there is a greater risk that the final product will not meet our requirements. In case of any problems with goods (e.g. non-compliance with the order, production and delivery delay, lack of certificates), without an agreement, our chances of recovering losses are negligible. However, if we have signed a contract, based on written provisions, we can assert our rights and get a refund.
What should a contract with a Chinese supplier contain?
The trade agreement should be written in a bilingual version: in Chinese and English. Preferably, it should be drawn up by an attorney in China to ensure that it complies with the laws of China. Furthermore, the contract with the Chinese supplier must clearly state the terms of the commercial transaction. It should contain provisions such as:
- Buyer’s and seller’s details
- Description of the product
- Quality of the product
- Packaging of the product
- Terms of payment
- Payment currency
- Delivery terms according to Incoterms
- Bank account details
- Other arrangements between the seller and the buyer.
How to make a good commercial contract with a Chinese supplier?
Dan Harris, a well-known lawyer that specializes in business with China, on his China Law Blog page, gave five issues that are crucial to getting a good deal with a Chinese company.
- The agreement must indicate the Chinese arbitration tribunal to which the parties will turn in case of a dispute. Chinese courts rarely recognize foreign arbitration tribunal decisions, thus in the event of a conflict, the best solution will be to settle it in China.
- Chinese should be the official language of the contract. However, you should remember to make sure that there are no discrepancies between the Chinese and the English versions.
- A commercial contract with a Chinese contractor should be made drawn up in accordance with Chinese law. This is necessary if any disputes are to be settled in a Chinese court.
- There should be a provision made for compensation in case of breach of contract.
- Make sure that the name of the Chinese company is 100% correct and fully corresponds to the official company name.
ExamineChina.com offers a comprehensive service of drawing up a trade agreement with a Chinese contractor. If you are interested, please contact us.