China Sourcing Contract Tips: Protect Your Business

A well-drafted sourcing contract is your best protection when working with Chinese suppliers. Here are essential terms and strategies to include.

Why Written Contracts Matter

• Verbal agreements are hard to enforce in China
• Chinese courts require written evidence
• Clarifies expectations for both parties
• Provides legal recourse if problems arise

Essential Contract Terms

Product Specifications

• Detailed technical specifications
• Materials and components
• Reference samples and photos
• Packaging requirements
• Labeling and marking

Quality Standards

• Acceptable Quality Level (AQL)
• Testing requirements
• Inspection rights
• Third-party inspection provisions
• Rejection procedures

Pricing and Payment

• Unit price and currency
• Payment terms (T/T, L/C, etc.)
• Deposit and balance schedule
• Price adjustment mechanisms

Delivery Terms

• Incoterms (FOB, CIF, etc.)
• Delivery schedule
• Late delivery penalties
• Force majeure provisions

IP Protection

• Ownership of designs and molds
• Confidentiality obligations
• Non-compete clauses
• Trademark usage rights

Dispute Resolution

Choose carefully:

• Arbitration: Often preferred for international disputes
• Chinese courts: If supplier has assets only in China
• Governing law: Chinese law often necessary

Language Considerations

• Bilingual contracts recommended
• Specify which version controls
• Ensure accurate translation

Common Mistakes

• Using supplier's template contract
• Vague quality specifications
• No inspection rights
• Weak IP protection
• Inappropriate dispute resolution