1. How to protect trade secrets and processes?
The best thing your company can do is to only disseminate trade secrets to those who have a need to know the information.
When outsourcing manufacturers you may consider separating your designs, ideas and know-how amongst various manufacturers to ensure that no one manufacturer is able to steal your trade secrets and know-how. This works like a puzzle, distributing each single piece to another location to eliminate the chances of putting the pieces all together. The primary law on the trade secrets is Anti Unfair Competition Law. This law is drawn up in order to safeguard the healthy development of the socialist market economy, encourage and protect fair market competition, prohibit unfair competition, safeguard the legal rights and interests of managers. "Unfair competition", in this Law, means activities made by managers who damage the others' legal rights and interests, disturb the order of social economy and violate the provisions of this Law. The governments in all levels shall adopt methods to prohibit unfair competition and to create the sound environment and conditions for fair competition. The Bureaus of Industrial and Commercial Management of the People's Government over the county level supervise unfair competition, except for the supervision made by the other organisations in accordance with the provisions of the other laws or regulations.
2. How to assure product quality?
Sometimes a buyer may receive poor quality products after payment has been made, but the supplier refuses to compensate the importer or does not even respond to complaints. Sometimes a supplier may send high quality samples to the buyer but the quality of the real end product is very poor. In order to avoid poor quality, you should undertake quality and inspection before ordering, during the production process and just before the shipment leaves.
3. Why is it best to see the factory for myself?
Good relationships (or guanxi in Chinese) play a crucial role in business in China, so it is advisable to meet the suppliers before placing an order. You can inspect manufacturing areas to get an idea of raw material quality, workers' skills, production capabilities and the internal QC process of the manufacturer.
4. What precautions should I take before making the final payment?
You should use the services of a credit institution that checks the background of manufacturers before you make your nal payment. Always remember: No final payments unless you are certain you will receive the goods.
5. What should I do if the suppliers do not deliver goods?
When failed in communicating with the supplier, keep a record of contact emails, payment bills and other valid documents to report the case to the police and also voice a complaint to local trade committee or department of commerce.
6. When should I be suspicious?
If the supplier avoids giving you substantive information about its company, you should be suspicious.
They may act excited but vague, emphasizing what a great opportunity this is for you. The supplier asks you for up-front payment. They request payment options other than Letter of Credit, T/T or Western Union.
7. How do I structure the relationship with my China sourcing partner?
Some companies use a full-service China sourcing agent and others set up a representative o¬ ce to manage China sourcing operations. You can also find quality Chinese manufacturers online or on trade fairs.
8. How to make sure goods brought into my country meet all national regulatory requirements?
Goods that don't meet requirements can be stopped at the border or result in future legal suits. It is highly recommended to consult a good customs broker before placing any orders.
9. How about after-sale service of Chinese suppliers?
At present, a lot of excellent Chinese suppliers provide comprehensive after-sale service, set up repair centers overseas or authorize cooperation partners to offer after-sale service. It includes consultation, products maintenance, accessories replacement, etc.
10. What problems do most people complain about?
Failure to send the correct products.
Sending product of inferior quality than the samples.
Failure to deliver on time. Failure to disclose all relevant information about a product or terms of the sale.
11. Examples of fraud.
Trading with Fake Companies
Doing business with strange companies is a big trade risk. The company you are dealing with could be a fake or fraudulent company that could disappear the moment they receive any money from you. In order to avoid being cheated by these companies, you can order a background check from independent third-party sources including a search for legal registration and credit record.
Fake Check Scams
There are many variations of the fake check scam, but the common thread is a stranger proposing to send the victim a check and have the victim wire money in return. It may start with someone offerring to buy something you promoted for sale, pay you to work at home, or give you an advance on a sweepstakes you won. Whatever the bottom line is if someone you don't know wants to pay you by check but wants you to wire money back, it's a scam.
Beware of sending free samples
This concerns a supplier requesting a sample from the buyer to produce a product according to the client's requirements. Sometimes the supplier may use these samples without delivering the actual product to the buyer. In such cases, when samples are required for production, the supplier should pay for the samples and the shipment cost. Once the product has been delivered and the sample returned to the buyer, the money for the sample and shipment may be returned to the supplier.
Poor Product Quality
Sometimes a buyer may receive poor quality products after payment has been made, but the supplier refuses to compensate the importer or does not even respond to complaints. Sometimes a supplier may send high quality samples to the buyer but the quality of the real end product is very poor. In order to avoid poor quality, you can use Pre-Shipment Inspection Services and demand the inspection as a condition to payment.
12. Is there any possibility that some 'fraud' may not actually be fraud?
Yes, some 'fraud' may not actually be fraud but problems occurring due to misunderstanding and miscommunication and the lack of understanding of each others' culture. Many of these issues can be avoided by seeking trade information from Chinese related government institutions.
13. How to avoid fraud?
(1) Use L/C (Letter of credit). Since payment options other than T/T and Western Union are currently quite limited in China and therefore a Western Union account is not always a reason to be suspicious, it is still important to recognize that fraudulent suppliers have used Western Union accounts for money scams! Once the money is paid, it becomes di¬ cult to follow up where the money actually went to and it is impossible to get the money back.
(2) Search related government websites for information and help.
(3) Ask Made-in-China.com when you are unsure about a supplier or when you need professional assistance to conduct business with Chinese suppliers. (fee based service )
14. How to protect my IP Rights?
China promulgated the Trademark Law in 1982, the Patent Law in 1985 and the Copyright Law in 1990. Over the past 30 years, China also enacted laws to protect Geographical Indications, Trade Secrets, New Plant Varieties and Layout Designs of Integrated Circuits. After its accession to the World Trade Organization in 2001, China has strengthened its legal framework and amended its IPR and related laws and regulations to comply with the WTO Agreement on Traded-Related Aspect of Intellectual Property Rights (TRIPs).
You can register your intellectual property right(s) (IP rights) under your country's law. You can protect your Logo(s) and Slogan(s) under the Chinese Anti Unfair Competition Law. Try to register your IPR(s) in China as well. Small and medium enterprises should therefore always use written agreements addressing the issues surrounding know-how, trademarks, IPR, non-competition and confidentiality.
Trademark Law
This Law is enacted for the purposes of improving the administration of trademarks, protecting the exclusive right to use trademarks, and encouraging producers and operators to guarantee the quality of their goods and services and maintain the reputation of their trademarks, with a view to protecting the interests of consumers, producers and operators and to promoting the development of the socialist market economy.
The Trademark O¬ffice of the administrative authority for industry and commerce under the State Council shall be responsible for the registration and administration of trademarks throughout the country.
The Trademark Review and Adjudication Board, established under the administrative authority for industry and commerce under the State Council, shall be responsible for handling matters of trademark disputes.
Patent Law
This Law is enacted to protect patent rights for inventions-creations, to encourage inventionscreations, to foster the spreading and application of Inventions-creations, and to promote the development of science and technology, for meeting the needs of the construction of socialist modernization. In this Law, "inventions-creations" mean inventions, utility models and designs.
The Patent Administrative Organ under the State Council is responsible for the patent work nationwide, receives and examines patent applications and grants patent rights for inventions-creations that conform to the provisions of this Law.
The authorities for patent work under the people's governments of provinces autonomous regions and municipalities directly under the Central Government are responsible for the patent administration work of their own administrative areas.
Copyright Law
This Law is enacted, in accordance with the Constitution, for the purposes of protecting the copyright of authors in their literary, artistic and scienti_ c works and the copyright-related rights and interests, of encouraging the creation and dissemination of works which would contribute to the construction of socialist spiritual and material civilization, and of promoting the development and prosperity of the socialist culture and science.
15. How to judge a supplier's quality?
(1) Provide clear requirements regarding product quality, material speci cation, and dimensions etc.
(2) Obtain quality certificates including material composition reports, independent quality reports and other evidence of testing and inspection. Make sure the certi cates match the claims of the suppliers.
(3) Obtain samples for assessment. For small items purchase more than just one or two to get a better indication of the standard quality level.
(4) If possible visit the factory. Suppliers may not always meet or adhere to the quality certifications they claim to possess, and visiting a factory can help to determine this. Ask to see some evidence of their quality management system such as procedural flow charts, quality inspection records, or internal audit reports etc. Even if they are in Chinese, you will be able to see if up-to-date records are being kept for key processes.
(5) Provide suppliers with detailed feedback about the product and how they can improve their service. Without feedback, they may not fully understand your requirements.
(6) Be patient. Conducting international business requires experience and knowledge, and this only comes with time. Seek professional assistance from quality inspectors and MIC's Buyer Services team to ensure your business with Chinese suppliers is as efficient and trouble free as possible.
16. Buyers' Experiences
To protect the secret of the client, the name of concern company and person is omitted.
Quality Fraud:
To whom it may concern: Our company is an experienced import and marketing firm in the United States and we used to source new products on-line. Approximately 4 months ago we placed an order for 1 container of gas and electric scooters from a Chinese company. When this container arrived every single scooter inside was broken.
The damage was as follows: the body of the scooters was cracked and many of the scooters were scratched. Many of our customers told us that the scooters looked like they have been used. The damage was so bad that it could not have possibly been caused during shipment.
We then contacted the company and described to them the problem but they refused to cooperate with us and refused to reimburse us for the costs of the products. I received an e-mail from the company representative stating that the company owner did not want to refund us the money.
We have documented evidence of the damage and a picture of the scooters. We use Price Transfer Inc. in Long Beach, CA for storage and customs clearance and they have also confirmed that the products have been sold to us damaged.
A United States Company
Money Fraud/Trade Dispute:
1st example
Dear Sir,
Hi,
Two months ago I contacted this supplier from Anhui requesting toys. He agreed and told me that he needed to have some up-front payment to be able to produce the requested products. I was supposed to transfer 2000USD via Western Union to the name of Mr. Wang who was the general manager at this time. I transferred the money and waited for a reply from Mr. Wang, which I never received, I called several times but there wasn't a Mr. Wang in this company and suddenly no one spoke English even though I had received much English written e-mails before.
I want to warn you of this company and hope you pass that warning on to all other global buyer members on your website.
A UK Company
2nd example
Dear Sir,
After having been contacted by a supplier, I forwarded $US337 to obtain a sample of a motor mower, which I believed was being supplied by the above member. As soon as the money was received, the supplier said that they could no longer supply the sample and refused to refund the money. I see this as fraud.
New Zealand Company
17. Chinese government departments which could help you.
The Ministry of Public Security of the People's Republic of China
14 East Changan Road, Beijing, China
Website: mps.gov.cn
General Administration of Quality Supervision Inspection and Quarantine
10A Chaowai Dajie, Beijing, China
TEL: 86-10-6599-3922
FAX: 86-10-6599-4421
Website: aqsiq.gov.cn
State Administration for Industry and Commerce
Trademark O_ ce
8 Sanlihe East Road, Xicheng District, Beijing, China
TEL: 86-10-6803-2233
FAX: 86-10-6801-0463
Website: www.tmo.gov.cn
State Intellectual Property Office
No 6 Xitucheng Road, Haidian District, Beijing, China
TEL: 86-10-6209-3268
FAX: 86-10-6201-9615
Website: www.sipo.gov.cn
National Copyright Administration 85 Dongsi Nan Dajie, Beijing, China
TEL: 86-10-6512-7869 or 6527-6930
FAX: 86-10-6512-7875
Website: www.ncac.gov.cn
General Administration of Customs
6 Jianguomenwai DaJie, Beijing, China
TEL: 86-10-6519-5243 or 6519-5399
FAX: 86-10-6519-5394
Website: www.customs.gov.cn
