• June 21, 2022

Outsourcing to China: Five Basics to Reduce Risk

Many small and medium-sized companies that engage in OEM
manufacturing/outsourcing in China do not take the necessary steps to
protect themselves When problems arise, little or nothing can be done to
protect themselves because they have no legal basis for protection. The fact is that outsourcing disputes must be resolved in China, under the Chinese legal system. The Chinese legal system has improved a lot in the last ten years and taking
a few basic legal steps can greatly reduce your risk. The cost of such
the protection is modest compared to the protection it will provide.

The following five basic steps will greatly reduce your problems with
Chinese manufacturers, while improving their chances of recovery should
problems arise.

1. Properly create and register your intellectual property rights in
the United States. If you do not have a firm basis for your IP rights under
American law, it will have nothing to protect in China. before going to
China, make sure your intellectual property is protected by US law.
Protect your brand identity by creating and registering your brand,
slogan and logo of the United States Patent and Trademark Office. Register your
important copyrights with the U.S. Copyright Office. Carefully identify and
protect your trade secrets, proprietary information and know-how.

2. Register your trademarks in China. Registration can protect your
future access to the Chinese market, prevent the export of counterfeit products
of China and prevent a competitor from registering its trademark in China,
which would prohibit him from exporting his own product from China.

3. Use a written agreement to protect your knowledge and trade secrets
in China. Small and medium-sized companies do not usually have a wide
patent portfolio. Your most valuable intangible assets are usually
their knowledge and trade secrets, which cannot be protected by
Registration. However, Chinese law allows companies to hire
protect your knowledge and trade secrets by contract. Such agreements may also address issues such as non-competition and confidentiality. without such writing
agreement, such protection is not available.

4. Product quality and payment terms. The rule here is simple. Do not do
make the final payment to your Chinese manufacturer until you are sure that
you will receive a timely shipment of the correct items and quantities in
the quality standards you require. This usually means that you must incur
inspection costs in China and establish a clear procedure
to deal with these problems as they arise. You must take the initiative
East. You can’t depend on the OEM manufacturer to do this for you.

5. Use comprehensive OEM Agreements with each manufacturer. small and
Medium-sized companies often enter into OEM manufacturing transactions with
a simple purchase order. This is a mistake. The purchase order will protect
the Chinese manufacturer, not you. Your protection depends on your safety
a written OEM manufacturing agreement with each Chinese manufacturer with
what do you treat The ideal OEM deal will address all issues
discussed above while also addressing other basic legal issues such as
jurisdiction and dispute resolution. This agreement must be in Chinese
and English, as the Chinese version will control in China.

Leave a Reply

Your email address will not be published. Required fields are marked *