Based on our observations, more than one fourth of the startups run by foreigners in China are in trade industry or related to trade. However, not everyone can make good money, some of them even went to bankruptcy. The following tips are summarized based on our analyze of the cases we dealt with:
1. Due diligence
Though the term “due diligence” is self-explanatory, we still want to emphasize its importance.
Please note that no matter how the sellers or brokers introduce themselves on their website, business card or their flyers, you actually know nothing about them. You need to do your homework: ask them to provide you with the copy of their business license or their company name in Chinese, and check it on the government database: National Enterprise Credit Information Publicity System (国家企业信用信息公示系统). Also, you can check the company’s information on two APPs, which are Qichacha (企查查) and Tianyancha (天眼查). Most of the information the two APPs provide are similar, both APPs provide VIP service for paid users if you need more detailed information. If you understand Chinese language or if you have any Chinese friends, you will find these very helpful. Or you may hire a PRC lawyer to do the due diligence for you. The main purpose of doing it is to make sure you are dealing with a legitimate company instead of a fraudster.
2. A forceable purchase contract
China court barely enforce judgment made in other jurisdiction. Choose to file lawsuits in China court and file for property preservations before or during the lawsuits will make sure the judgment in favor of you could be executed. That’s why we suggest most of our clients to select China as the jurisdiction in the event of any dispute arise. Our second suggestion is: try to find an English-speaking Chinese lawyer to help preparing an bilingual agreement. Why? because local lawyer know what happened in practice and they are aware of the newest change in court if finally a lawsuit is inevitable. They can provide more practical suggestions that the overseas lawyers can’t. In one word, their job ensure the contract’s enforceability. You may check our post: Tips on Preparing OEM Contract with China Factory for more information.
3. QC before shipping
Despite all the above-mentioned efforts, you still have to undertake the quality inspection seriously, as more than one third of the trade disputes are quality disputes. Our suggestion is: instead of doing QC after the goods arrive at the destination, do it before the shipment. The reason is simple: in international trade, all issues are more easily to be solved before you make the payment than after. If possible, do it during the manufacturing process and then once more before shipment, especially where the quality or type of the raw material is very important to the quality and function of the manufactured product. You need to make sure the raw material and the process are up to required standards before the shipment instead of finding out that something went wrong in the last minute.
