Choosing a supplier

China is home to approximately 2 million factories, many of whom advertise their services on B2B websites such as Alibaba. Spend time researching your options— selecting the right international supplier is as important as every other step. The time investment is worth it.

Make sure you have your tech pack complete before approaching international suppliers. The successful ones that you want to work with are large, busy operations that want orders ASAP, so knowing all of your specs right away is critical.

When reaching out to an international supplier, get their business license immediately. Also, check that they serve your home country or target market— some factories serve only Asia.

Once you get started, invest time in prototyping and testing. This is a crucial process to avoid having to go through the costly, time-consuming process of retooling later on down the line.

A final tip— the price of working with international suppliers directly is more than just the quote for your product. Factor in the costs of prototype development, your time and travel, potential delayed shipments, defects, and the loss of business that may be incurred from these before making a decision.

Ensuring quality is intact 

China does not have the same QA standards as the US, so you must be especially vigilant to ensure the high quality that you require for your product and brand. There are a few steps you can take to bridge the gap.

During the international supplier selection phase, keep in mind that factories often falsely advertise on B2B profile sites such as Alibaba. Images of clean, well-lit, well-organized factories may bely a reality of sanitary issues and abysmal working conditions.

In truth, you can’t verify the conditions or quality of the factory without visiting it yourself to perform an audit. This is the only way to truly see the procedures and practices of the factory, and ensure that they comply with your standards.

Your time visiting the factory is also an excellent opportunity to build rapport with the manager: if you end up choosing this specific international supplier, having a strong relationship can work to your advantage.

Find out what other companies they are manufacturing for. You are looking for international suppliers who are proud of the products they make and the people they serve. It’s also smart to ask where parts are being made. Even if the pieces are assembled in an acceptable facility that you are thinking of working with, the parts may be sub-contracted from a subpar supplier nearby. China has a large network of small factories operating out of garages, where a huge amount of the actual manufacturing process occurs before being sent to a higher-level operation for assembly. You want to ensure that the entire production process is up to your standards.

Finally, once you have begun manufacturing, make sure to perform regular lab tests. Some suppliers will substitute raw materials for cheaper alternatives to save on production costs. Testing, and letting your supplier know that you are testing, is your means of avoiding this.

Protecting your product

Write a contract

Chinese contract law is complicated and different from what we are used to in the United States. These three rules can help you navigate the process of writing an enforceable contract.

  1. Enforcement must be done in China, through litigation by Chinese courts. China is notorious for ignoring decisions made by foreign courts.
  2. The governing law is Chinese law— this must be noted in the contract.
  3. Write it in Mandarin Chinese. Hire a native or bilingual-level Mandarin Chinese speaker to do so. You can use other languages, but if you do, a translator will be appointed by the court to translate it. This opens up the possibility of the terms of the contract being misconstrued.

Be as detailed as you can in your contract. Include all of your product specs, materials, quality assurance plans, packaging information, and penalties for defects and late deliveries. Include a non-compete clause in your contract to keep the supplier from selling your product to other people. This is also part of why a good relationship with your international supplier is key. They are less likely to conduct these types of backdoor sales if they are on your side and invested in your success.

If you find yourself needing to go to court, hire a local Chinese professional to represent you. This is more than just a workaround of the language barrier: the Chinese legal system sees both parties as equal, but judges notoriously look down on foreign businesses in the courts.

Register a trademark

China’s intellectual property rights laws follow a “first-to-file” principle, meaning the first to register the trademark obtains all rights. This is excellent motivation to register your trademark in China and your home country right away.

This is your insurance against imitators. China will block products with trademarks belonging to others from leaving the country at customs. You can continue to protect your trademark by regularly conducting online research and attending trade shows, if possible.

Last tip about trademarks: no city or place names can be trademarked in China.

Register a patent

Register patents in China and in your market country, if possible. Registering in China is the most important, as China’s first-to-file principle will work to your advantage. It will undercut competitors in your home country who may see your product and send it to China themselves. If you have registered your trademark first, then any imitation goods will be blocked by customs from leaving China.

Invention and design patents are the strongest patents. A utility model patent only protects the improvement of an existing product— not recommended, because anyone can make a microscopic change to your product and then file a new patent.

Working with international suppliers in China involves a lot of moving parts, and being informed about all of the intricacies of the process requires a significant investment of time and research.

Let this guide act as your starting point if you decide to take it on yourself, or turn it over to the experts here at Lab 916. With years of experience sourcing products for our own brands, as well as being the middleman between international suppliers, China, and our clients, we can take all the guesswork out of the process.

 

Source: Cunningham, Nick. “The China Challenge.” Prosper Show, 12 April 2017, Las Vegas Convention Center, Las Vegas, Nevada. Conference Presentation.