When the quality of your consignment sucks, what action can you take against your Chinese supplier?
Regular visitors to the Sourcing Allies blog will know that we have largely focused on how to prevent disasters while importing manufactured goods from China in past pieces.
But what happens when disaster takes place? When you have paid a Chinese factory for your order, the order has been shipped, there is a hole in your inventory that is waiting to be filled with the new consignment, your customers have been told new stock is on the way, and then the products arrive but they are total rubbish. They do not meet your quality specifications and you just cannot put them out for sale.
What do you do?
Your first reaction may (understandably) be panic. A number of thoughts might cross your mind… such as:
Before you proceed, however, you need to establish how exactly the consignment falls short of your quality standards. Poor quality could mean any or all of the following:
The first may be fixable depending on the dimension (too small holes can be drilled larger etc).
While the second is impossible to fix, the last four can be put right with a little effort.
In this blog, we will discuss your likely options. Your course of action depends on a number of scenarios of your purchase, each of which throws up its own challenges. These are the three main scenarios:
Scenario 1: This was a one-time buy via e-commerce giant Alibaba, another trading company, or direct from the Chinese factory.
Likely outcome: You are the most exposed in this scenario. The outcome ranges from “impossible to get a refund” to “slim chance that you might get a refund” to “let’s just write this off”.
This is the most common scenario. When you receive your consignment and find it is defective, the seller usually stops responding to your requests for replacements or refunds. If this happens, the likelihood of resolving this to your satisfaction depends on who the seller is. If the seller is a genuine company, you may still have a remote chance of getting your money back if you are willing to put in the money and time. But if the seller was actually a scamster, it will be quite impossible to track them down, and you would be better off writing off your losses.
Silver lining? As we mentioned in a previous blog, some e-commerce companies offer a service for buyers and sellers that is similar to an escrow service. Alibaba, for instance, says its “Trade Assurance” service adds an extra layer of security for buyers dealing with Chinese suppliers. It promises a refund if:
If you opted for this Trade Assurance, and have clearly defined your quality requirements in your contract with the supplier, you stand a good chance of getting a refund if you enforce your rights under this service. Of course, Alibaba will not take your word for it and will appoint a third-party inspector to investigate your claims to process any refunds. This is likely to take time.
Scenario 2: Yours was a one-time purchase using a China sourcing agent.
Likely outcome: You might get refunds, or have new products made correctly without additional cost.
If you had engaged a reliable sourcing agent (such as Sourcing Allies) to manage your sourcing from China project, you have a better chance at resolution because at least a dialogue can take place. Ideally, your sourcing agent is in your own country which increases your odds of resolving any issue you may have.
You will need to first establish who is at fault. Were the products made to the drawings and specifications but did not work? Or were the products not made to the drawings and specifications? If not, did the factory manufacture the products wrong, or was information about your specifications not communicated to the factory correctly? You need to apportion blame and when it is clear who is at fault, it will be possible to discuss refunds or new orders.
You could then ask your supplier to either:
If the supplier is amenable to any of these options, that’s great. Otherwise you’ll need to see what to do next (more on that later).
Scenario 3: You have a long-term relationship with the supplier either through a sourcing agent or trading company, and you have recurring business with them.
Likely outcome: Best chance for a refund or delivery of new products without additional cost.
A long-term relationship with a supplier always increases the chances of a resolution. In this scenario, you have the best chance of saving the day. Your relationship with your supplier gives them an incentive to fix whatever faults you find with your consignment. They may even send you another batch of products against which your previous payment can be adjusted.
Whatever the purchase scenario, let us assume that you haven’t been able to get your supplier to respond to you and you want to take formal action against the Chinese manufacturer.
You will need to carry out any legal action in China because its courts do not enforce judgments from courts in foreign countries. This process is expensive and time-consuming, and there is no guarantee that the outcome will be in your favor.
Most China sourcing lawyers suggest that buyers insert arbitration clauses in sales contracts to avoid expensive litigation in another country. Indeed, negotiating with your supplier may be the best and most inexpensive way to reach some sort of acceptable resolution. Litigation should always be your last resort.
You may decide to litigate if you haven’t specified a dispute resolution mechanism in your contract, if the value of your consignment is huge enough to warrant it and if the supplier has not responded to your attempts to resolve the impasse out of court. This decision too depends on a number of factors:
You will also do well to heed the advice of several China sourcing experts who have emphasized repeatedly that a buyer must have the following documents in hand to have a reasonable chance at resolution via litigation in China:
IF YOU DON’T WANT TO LITIGATE
Let’s assume, your supplier is not responding. You don’t want to litigate either because it’s not worth the additional expense, and you want to cut your losses and run. You can still do a few things for your personal satisfaction or closure.
For more on sourcing products from China, contact us at firstname.lastname@example.org. We have been helping western companies manufacture products in China since 2006.
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