How To Avoid Paying a Chinese Manufacturer That no Longer Exists
Nearly All China Problems Are Preventable
Nearly all problems foreign companies face involving China are neither new nor unpreventable. Put another way, when a foreign company comes to one of our China lawyers with a China legal problem, we almost invariably can find a number of things the foreign company could and should have done differently that likely would have prevented and/or ameliorated their problem.
Therefore, on the rare occasions when someone contacts one of my law firm’s China lawyers with a China-related problem for which the company calling us bears no responsibility, it takes us aback.
This post sets out 10 critical red flags that can signal your China supplier is facing financial trouble or potential bankruptcy. Spotting these warning signs early allows you to mitigate your risks. We explain how to monitor for supplier issues and safeguard your business by responding quickly.
Long-Term China Manufacturing Relationships and Sudden Changes
The one area where our China attorneys most often see this is when a foreign company has had a great relationship with its China factory for ten or twenty years and then all of a sudden that factory just disappears. Was the foreign company supposed to conduct due diligence on its China factory every two weeks to make sure everything was still okay? Adopting such a rigorous oversight approach is often just not practical.
The Unresponsive China Manufacturer
With all that has been going on with China these last few years, our lawyers are getting inundated by companies that want to know why their China product suppliers are ignoring their emails and phone calls. You can imagine the stress level for these companies, some of which have not gotten product for months. They are getting pressured for dates from their own buyers, and they don’t even know if their China supplier still exists.
Our job as lawyers is to figure out why the silence and/or lack of deliveries. We much prefer to do this sort of work before our client has paid its Chinese supplier, but about half the time, we are called in only after money has already been sent.
Unfortunately, twice in the last few weeks we have talked with companies that paid their China suppliers for product, only to learn that their suppliers no longer exist. This is becoming very common.
Identifying Bankruptcy Signs in Chinese Suppliers
Ten Key Indicators of a Failing China Manufacturer
What exactly can a company do to avoid paying money to a supplier on the verge of going bankrupt? 10 Red Flags Your China Supplier is Going Bankrupt does a great job laying out the following “tells” for spotting a China manufacturer in trouble: