If you’re new to manufacturing, the idea of getting your product made in China might seem overwhelming. It may even feel out of reach.
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Where do you start? How do you find manufacturers in China? You probably have quite a few questions…
Fortunately, I’ve created this easy-to-read guide on getting your product manufactured in China.
Keep reading, because you’re about to learn:
What’s the big challenge companies face today? It’s getting new products to market as quickly and efficiently as possible. You’re probably aware that China offers the ability to manufacture a wide variety of products at competitive rates.
But before you embark on your Chinese manufacturing journey, it’s crucial to understand the advantages and disadvantages. The process can be challenging, so it’s important to determine if it’s the right decision for you.
A major reason many companies choose China is the cost savings. Labour can be up to 80% cheaper, though this depends on the complexity of your design.
However, remember to factor in shipping and duties, which you wouldn’t incur with domestic manufacturing. Also, all prices are negotiable, so don’t hesitate to be firm in your negotiations.
Chinese factories are known for their high capacity and quick turnaround times. The lower labour costs enable the hiring of more workers to handle large orders efficiently.
If your manufacturer promises a four-week turnaround, it’s likely to be met.
However, there are ethical considerations regarding low labour costs, but not all facilities are equally exploitative. Thorough research is essential.
Chinese manufacturers are eager for your business, often going above and beyond to secure it. Keep in mind that service levels may change after the contract is signed, so set clear expectations. We’ll discuss how to do this later in the article.
Manufacturing in China might also offer opportunities to market your products within the local market. With over 1.3 billion potential consumers, there’s significant potential for good returns.
Companies that outsource to China often find it easier, faster, and cheaper to enter the Chinese market.
Protecting and enforcing intellectual property (IP) in China can be costly and complex. While you may understand the need to protect your IP when selling in China, you must also safeguard yourself from your manufacturer.
Regulating and enforcing IP rights requires time and money. Always consult an attorney experienced in Chinese law. We’ll explore IP protection strategies in more detail later.
One of the first challenges is finding the right factory for your products. This will require effort and due diligence to ensure you receive quality service. Building a relationship with a manufacturer across the globe isn’t easy.
However, many resources and strategies can make this process smoother and less stressful. We’ll cover how to find your manufacturer in detail later.
If your Mandarin or Cantonese isn’t up to par, you may face communication challenges. Although China has opened up to international trade, not everyone is fluent in English. Hiring a translator can significantly ease the process.
Additionally, the difference in business culture adds complexity. It’s different from Western business practices, so you’ll need to be diligent in building relationships.
We’ll discuss Chinese business culture in more detail later.
Chinese factories often have higher minimum order requirements due to lower profit margins. If your company can’t meet these minimums, you might need to explore other options. If you find a factory willing to produce smaller orders, the price per unit might increase.
However, there are strategies to negotiate minimum order quantities (MOQs). We’ll go over these strategies later in this guide.
Shipping can be a hassle and time-consuming, depending on your choice of shipping method. Be sure to consider the shipping costs, including duties and tariffs, when comparing manufacturing costs in China.
China has a reputation for quality issues, but it largely depends on the manufacturer and the products you have made. Opting for the cheapest option often results in lower quality, so it’s best to avoid this route.
To manage quality, consider hiring a trusted local agent to conduct in-person inspections. We’ll discuss how to create a quality control plan in more detail later.
There’s a stigma attached to products made in China, but it’s not likely to change soon. While some consumers may prefer domestically manufactured goods, many purchase products made in China every day.
Some of the world’s top-selling brands have their products manufactured in China, so this shouldn’t be a deal-breaker.
You won’t get all the benefits without some disadvantages. If you choose to manufacture in China, you’ll need to take steps to balance out the drawbacks.
It may sound complex, but it’s manageable, and we’ll delve into how to address these issues later in this guide.
Image source: Pixabay
China is a vast, diverse country, and its business culture can be quite perplexing for Westerners, especially if you’ve never conducted business there before. However, taking the time to understand cultural norms can significantly impact your success.
Networking is crucial for success in China. To succeed, you need to grasp the concept of guanxi. In Western culture, it’s typical to negotiate contracts and start business relationships without much preliminary interaction. In China, however, you need to establish a relationship with your manufacturer before engaging in business.
So, what is guanxi? It refers to your network of connections or relationships within the Chinese market. Remember that Confucian values like trust, mutual reciprocity, and harmony are fundamental to every guanxi network.
Without guanxi, your chances of building a successful business in China are slim. Building this network is not something to rush. You’ll need to nurture these relationships and demonstrate that you’re a worthy addition to their network.
Developing strong guanxi will grant you access to decision-makers, local bureaucrats, and policy-makers. However, this does not mean you should resort to bribery—corruption is not accepted within a reputable guanxi network.
Chinese businesspeople value trust and tend to view business relationships with a long-term perspective. They are often hesitant to trust outsiders and will prefer business connections that come with recommendations from within their network. This is why building relationships is crucial for success.
Engage a reliable local contact who can connect you with established networks. If you have acquaintances with connections in China, now is the time to seek their help in making introductions. Chinese individuals prefer working with those recommended by someone they know over a ‘bigger’ or ‘better’ company they don’t have a personal connection with.
Alternatively, consider connecting through economic development groups in your country, professional business organizations, and services with strong, reliable networks.
The Chinese term for negotiation is tan pan, combining characters meaning “to discuss” and “to judge.” From a Chinese perspective, negotiations are primarily about building trust so that both parties can collaborate and benefit together.
Negotiations in China are delicate. You’ll need to be patient and maintain a good sense of humour. Avoid complaints or criticisms during negotiations, as these can be perceived as insults to their company. Instead, frame your feedback as suggestions for improvement that benefit both parties.
Chinese business culture values personal camaraderie over formal contracts. You’re more likely to secure a better deal if there is goodwill between you and your counterparts.
Negotiation in China is seen as a framework for long-term cooperation and problem-solving, rather than a one-time agreement. This ongoing process takes into account practical matters and context.
Many Chinese prefer this approach over the Western-style of creating contract-based absolutes. Americans often view Chinese negotiators as inefficient and vague, while Chinese see American negotiators as impersonal, impulsive, and overly focused on immediate gains.
To effectively compete in Chinese negotiations, you must adapt to their style, balancing the need for swift agreements on specific issues with the slower, relationship-building process.
Strategies for Successful Negotiation
You won’t build personal trust without face-to-face interactions. Attempting to finalise a contract through long-distance communication can be tedious and ineffective.
For the best results, plan your trips to China and spend at least a week on your first visit. Engage in non-business activities, such as sightseeing and social events, to build personal rapport, which will pave the way for smoother and faster negotiations later on.
In Western cultures, negotiations typically involve discussing and agreeing upon a list of open items, with each agreement considered final. However, in China, change is seen as a constant. All items are interconnected, and if one item changes, all items may be renegotiated.
If you’re uncomfortable with uncertainty, remain calm and patient. This is a cultural difference, not a tactic to mislead you.
Using a mediator can be effective in a relationship-oriented culture. The trust established with a mediator can be transferred to you by association, making business dealings more personal.
Mediators can present disagreements in a non-threatening manner, which is beneficial in China, where maintaining harmony and protecting “face” are essential for a good business relationship.
Avoid directly confronting your Chinese counterparts with strong disagreements. If negotiations become stalled, communicate through a mediator. By understanding both parties and their priorities, the mediator can help achieve a compromise.
Patience is crucial when doing business in China. Negotiations can be a lengthy process, often requiring multiple approvals. Unlike the fast-paced decision-making valued in the U.S., Chinese decisions typically involve a slower, more deliberate process.
Plan for extra time in the negotiation process and manage expectations regarding timing.
Plan for additional visits if necessary, as achieving everything in one trip can be difficult. Remember, processes in China often take longer than anticipated.
It can be challenging to gauge the success of a meeting in China. Chinese businesspeople often avoid expressing true feelings to save face, so they might tell you everything is going well even if it isn’t.
Saving face is crucial in Chinese culture, so they may avoid uncomfortable situations by not openly expressing dissatisfaction. If they say yes but nothing progresses, it’s likely to avoid direct conflict.
If your counterpart rarely makes eye contact, don’t be alarmed. Many foreigners interpret this as disinterest or lack of attention, but it’s often a cultural norm rather than a sign of disengagement.
To accurately assess the outcome of your meeting, it’s beneficial to have knowledgeable advisors who speak Chinese, understand the culture, and can interpret body language.
Understanding social hierarchy and status is essential in Chinese business culture. Several key points are important:
Whether you’re a man or a woman, dressing conservatively is crucial when doing business in China.
For Men: You should wear a suit and tie. Leave behind any flashy or humorous ties; opt for something classic and understated. The goal is to present yourself as sophisticated and professional. A well-chosen watch or a simple wedding band are suitable accessories.
For Women: Choose pastel or darker colours instead of bright, bold hues. Your skirt should fall well below the knee, and high heels should be modest—preferably no more than an inch or two high. Open-toed shoes can be seen as unprofessional, so it’s best to avoid them. It’s important to not tower over your business counterparts.
Sending a sincere follow-up after a meeting is a good practice. Within 48 hours of your meeting, write a positive and polite to thank your hosts for their time. Summarize the advantageous terms discussed and outline the agreed-upon points. This will help strengthen your guanxi and move your relationship forward.
Exchanging business cards is a crucial part of first meetings. Ensure your cards have information on both sides: one side should feature simplified Chinese characters, while the other side should have the English translation. Avoid traditional Chinese characters, as these are typically used in Hong Kong or Taiwan. Consider using a translation service familiar with the local dialect of the city you’re visiting to ensure accuracy.
When presenting your card, hold it with both hands, with the Chinese characters facing the recipient. This gesture shows respect and refinement. When you receive their card, take a moment to read it before placing it in a case—never stuff it into your pocket.
Be prepared to exchange gifts with your Chinese counterparts. It’s common for them to offer a gift at the end of your meeting or stay, and it’s courteous to reciprocate. While you don’t need to select an expensive gift, it’s thoughtful to choose something that represents your home city or region.
Shanghai, located on China’s central coast, is home to one of the largest and busiest ports in the world. It is a major economic, financial, trade, and shipping hub. Key products manufactured here include communication equipment, automobiles, textiles, electronics, steel, chemicals, petrochemicals, and biomedicine.
Nearby cities Ningbo and Hangzhou, connected to Shanghai by the Hangzhou Bay Bridge and high-speed rail, are also significant in heavy manufacturing of both consumer and commercial goods.
North of Shanghai, Beijing stands out as another leading manufacturing city. It focuses primarily on pharmaceuticals and electronics, and is also a leader in bioengineering and information technology.
Located south of Beijing on the west coast of the Bohai Gulf, Tianjin is connected to Beijing and boasts the largest port in northern China. Situated on the Haihe River Estuary, it serves 11 provinces and Mongolia. Tianjin is a key player in aerospace and aviation, mobile phones, automobiles, and alternative energy products.
As the main manufacturing hub of the Pearl River Delta, Guangzhou is home to thousands of factories, producing everything from toothpicks to automobiles. Located in Southern China, its primary industries include automobiles, electronics, and petrochemicals. Global brands such as Toyota, Honda, Nissan, Panasonic, Sony, Ericsson, and Haier have their products manufactured here and maintain headquarters in the city.
Directly north of Hong Kong, Shenzhen is renowned as the world’s manufacturing hub for electronics and hosts the second busiest port globally. Its logistics sector is one of the most advanced in China. Prominent global brands such as Apple, LG, ZTE, and Huawei have their products manufactured here.
With a better understanding of China’s business culture and key manufacturing cities, you’re now ready to prepare for your search for manufacturers.
Before beginning your search for a manufacturer, you should consider three key factors: product, price, and quantity. Knowing these details will make it much easier to find a quality manufacturer that meets your needs.
If you haven’t decided yet, now is the time to clarify what you want to produce. Having a clear plan will help you identify a manufacturer that specializes in your product. For example, if you want to produce denim jeans, focus on manufacturers who specialize in denim clothing.
Determine your sales price to understand how much you can spend on manufacturing each item while still making a profit. Consider all your start-up costs to figure out your budget for production. If you plan to sell your product for $30 and other costs amount to $5, you’ll have less than $20 available for production to ensure a good profit margin.
Knowing your budget will help you determine the quantity you need. Manufacturers in China often have a minimum order quantity (MOQ). By knowing how many units you require, you can quickly narrow down your options when selecting a manufacturer.
Once you have these details, you’ll be well-prepared to research and find potential suppliers for your product.
With a solid understanding of doing business in China, a clear idea of what you want to produce, your budget, and the quantity required, it’s time to start searching for your manufacturer. It’s crucial to approach this step with diligence, as finding the right partner involves thorough research.
Without proper due diligence, this process can become exhausting and costly. If you’re new to sourcing from China, locating quality manufacturers that align with your needs may be challenging and may sometimes feel like an endless search.
Patience is key—take the time to find the ideal partner for your business. Here’s how you can start finding Chinese manufacturers:
Online directories are an excellent and cost-effective starting point. They often feature profiles of hundreds or thousands of manufacturers. Here are some top options:
Alibaba is the world’s largest online directory of manufacturers and suppliers. It features thousands of verified manufacturers with strong performance ratings. The site is user-friendly and provides a reliable trade assurance rating to ensure a safe trading experience.
Global Sources, Alibaba’s main competitor, offers a comprehensive directory of manufacturers. While it lacks a trade assurance feature, it includes extensive ratings and some support. It’s advisable to read as many reviews as possible. If you can’t find what you need on Alibaba, Global Sources can be a useful alternative.
The Hong Kong Trade Development Council (HKTDC) supports Hong Kong-based suppliers and organizes trade shows at the Wan Chai exhibition centre in Hong Kong. This site predominantly features Hong Kong companies. Be aware that some listings may include trading companies rather than manufacturers, which we will discuss further below.
As one of the major players in the market, Made-in-China.com primarily focuses on larger items. While its rating system may not be as robust as others, the site offers quality inspection and reporting services. It’s particularly useful for sourcing industrial products and parts.
By leveraging these resources and following these tips, you’ll be better positioned to find a reliable Chinese manufacturer that meets your needs.
When searching for Chinese manufacturers, leveraging online directories can be an effective starting point. However, a strategic approach can significantly improve your chances of finding a reliable and suitable manufacturer.
In China, manufacturing often occurs in geographical clusters. Identifying these clusters can help you find the best manufacturers for your product category. For example:
Instead of searching for individual factories, look for clusters related to your product. Visit these areas in person to explore various options and find the best manufacturer.
Online directories are valuable for price comparison. If you’re unsure whether your supplier’s pricing is fair, you can request quotes from other similar factories listed on these platforms. This helps you gauge the price range and ensure you’re getting a competitive deal.
While online directories provide initial information, many of the best factories might not be listed online. Visiting manufacturers in person allows you to:
If you choose to visit manufacturers, follow these steps to ensure a smooth process:
If traveling is not feasible, consider sending a trusted representative to perform these tasks on your behalf.
Trade shows are excellent opportunities to connect with top suppliers and manufacturers who might not be listed on online directories. They offer a chance to:
Notable trade shows include:
If you can’t travel to China, look for trade shows in the U.S. with significant Chinese participation, like the International Consumer Electronics Show (CES) in Las Vegas.
Companies that offer factory tours can streamline your search process by organizing visits to multiple factories. They handle logistics such as transportation, translators, and accommodations. Some popular tour operators include:
Social media platforms can provide feedback and reviews of potential suppliers, although they are not the primary tool for finding manufacturers. Use platforms like LinkedIn to connect with industry professionals and join groups focused on sourcing in China:
Social media can complement other methods by offering insights into suppliers’ reputations and previous experiences.
Finding a reliable Chinese manufacturer involves a multi-faceted approach. Here’s a detailed guide to help you use various strategies effectively:
Why: Trade magazines are valuable for gaining insights into industry trends and discovering reputable suppliers. Over time, these publications can help you identify top manufacturers and stay informed about the market.
How:
Find Trade Magazines: Search online for trade publications relevant to your industry, or check industry associations for recommendations.
Why: Manufacturers’ websites might not always be optimized for SEO, making it necessary to dig deeper to find reliable suppliers.
How:
Tips:
Why: Referrals from industry connections or existing partners can lead to trustworthy and high-quality manufacturers.
How:
Tips:
Why: Sourcing agents can help identify and verify suppliers, saving you time and effort.
How:
Tips:
Why: These providers manage the entire sourcing process, including supplier identification, negotiation, and quality control.
How:
Pros:
Cons:
Why: Trading companies can be a convenient option for small orders but often come with higher costs.
How:
Tips:
Why: Visiting factories personally allows you to assess production capabilities, quality, and working conditions directly.
How:
Tips:
Why: Trade shows provide a platform to meet and evaluate numerous suppliers in one location.
How:
Tips:
Why: Factory tours offer a structured way to visit multiple manufacturers efficiently.
How:
Popular Tours:
Why: Social media can provide additional insights and reviews of potential suppliers.
How:
Tips:
To find the ideal Chinese manufacturer, employ a mix of these strategies. Visiting factories, leveraging trade magazines, using sourcing agents, and attending trade shows will enhance your chances of finding a reliable partner. Stay proactive, thorough, and engaged throughout the process to ensure successful manufacturing partnerships.
Next Steps: As you progress, focus on how to keep track of all the information you gather during your research phase to make informed decisions.
Selecting the right Chinese manufacturer is crucial for the success of your product. Here’s a step-by-step guide to help you evaluate and choose the best manufacturer for your needs:
Before you start evaluating manufacturers, clearly define what you’re looking for:
Use your master list to conduct initial screenings:
Assess their ability to meet your requirements:
Questions to Ask:
Compare pricing and terms from different manufacturers:
Questions to Ask:
Evaluate their responsiveness and support:
Questions to Ask:
Conduct background checks to ensure their reliability:
Questions to Ask:
Assess the financial health of the manufacturer:
Questions to Ask:
Think about the potential for a long-term partnership:
Questions to Ask:
By following these steps, you can effectively evaluate and choose the right Chinese manufacturer for your needs, ensuring a successful and smooth manufacturing process.
When selecting a manufacturer in China, asking the right questions is crucial to ensure you partner with a reliable and competent company. Here’s a comprehensive list of questions you should consider:
When evaluating potential manufacturers, it’s essential to ask detailed questions to gauge their suitability and reliability. Here’s a comprehensive list of questions to ensure you cover all critical aspects:
Minimum Order Quantities (MOQs) are often negotiable, and understanding the reasons behind them can help in negotiations. Here are some strategies to consider:
By asking these key questions and using negotiation strategies, you can better evaluate and select a Chinese manufacturer that aligns with your business needs and goals.
To manage MOQ (Minimum Order Quantity) requirements effectively and lower your overall costs, you can employ several strategies to streamline materials and components. Here’s how you can approach it:
Perform thorough due diligence to ensure the manufacturer you select is reliable and capable. Here’s how:
By employing these strategies and conducting thorough research, you can effectively manage MOQs, ensure you are working with a reputable manufacturer, and safeguard the quality and cost-effectiveness of your products.
When evaluating a Chinese manufacturer, verifying their legitimacy and operational standards is crucial. Here’s a comprehensive guide to understanding and requesting the essential documents and certifications:
To ensure you choose a reputable Chinese manufacturer, thoroughly verify their credentials and operational standards. By obtaining and scrutinizing the business license, bank account certificate, tax registration certificate, ISO certifications, product test reports, and samples, you can significantly reduce the risk of partnering with an unreliable manufacturer. Always cross-check the details with third-party sources and confirm the validity of certifications to ensure a successful and secure manufacturing partnership.
After narrowing down your options to a few potential manufacturers, making the final decision can still be challenging. Here are some key considerations and steps to help you make the best choice:
Before moving forward with production, take steps to safeguard your intellectual property (IP). This includes:
Here’s the blog converted to Canadian English:
How to Protect Your Intellectual Property Rights When Manufacturing in China
The step before full production is to get samples made of your products to truly test the manufacturer’s skills.
However, before you start sending your product design to manufacturers, you should do your best to protect your intellectual property rights (IP).
IP protection is the number one challenge for most companies operating in China. According to Forbes, IP theft costs the U.S. as much as $300 billion annually, accounting for 50-80% of intellectual property theft.
Among Europeans, the loss of IP in China has reduced potential profits by 20%.
In this section, we’re going to go over the different strategies you can use to protect your IP.
Non-Disclosure Agreement (NDA)
Once you’re at the stage where you have your product design and are left with a few different manufacturers who you’re excited about working with, you’ll need to send them your design file.
However, you don’t want to risk your design being leaked and exposed to everyone right away.
You should consider an NDA. The most important thing to know about NDAs is that they’re far more effective when signed before you reveal the information, rather than trying to get someone to sign one after they already have your product information.
NDAs are quick, inexpensive, and easy because they don’t require a lot of customization from company to company or product to product. It’s a good idea to include a provision for attorney’s fees and for injunctive relief. If they violate the terms, you can quickly stop them and recover your attorney’s fees in the process.
These provisions can make a violation less likely.
You should also consider having two copies made: one in English and one in Chinese. The Chinese version should be the official document because Chinese courts will be able to understand and enforce it more quickly. This also eliminates their argument that they didn’t know what they were signing.
Taking your time to craft your NDA can be effective in China for two reasons:
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Why Most NDA Agreements Don’t Work
The vast majority of NDAs used “quickly” by U.S.-based companies with their potential Chinese manufacturers are essentially useless. The main reason they’re unenforceable is that they call for disputes to be resolved in the U.S.
There’s a significant problem with this because Chinese courts do not enforce U.S. court judgments.
Even if your company were to win the case in your home country, there are no repercussions for the Chinese company unless they have assets in your country. And Chinese companies know this, so they can freely violate the NDA terms.
You shouldn’t just pull a U.S.-style NDA “off the shelf” when manufacturing in China; it’s not going to work. Your NDA doesn’t need to be complicated, but it does need to be done right. This is why you should consider creating an NNN Agreement.
Non-Use/Competition, Non-Disclosure, Non-Circumvention Agreement (NNN)
So, we’ve discussed why NDAs are great and not so great. It’s likely an NDA alone won’t completely protect your IP from Chinese companies. Here’s what you need: a China-centric NNN agreement.
Let’s discuss each section of an NNN Agreement:
First N: Non-Use/Competition
Non-use/competition means your Chinese manufacturer agrees, by written contract, not to use your idea/concept/product in any way that competes with you.
This has nothing to do with intellectual property rights and has nothing to do with trademarks, copyrights, patents, or trade secrets.
You’re protected because the Chinese manufacturer cannot use your work because they signed a contract agreeing not to.
Using a non-use/competition agreement means you may not have to look outside the contract to other areas of law for you and China’s courts to control your manufacturer.
Second N: Non-Disclosure
I won’t go into too much detail here; we’ve already discussed what a Non-Disclosure Agreement is above. But I will discuss a common issue that can arise and how you can help prevent it.
Chinese manufacturers rarely care about making your product design public. They typically want to use your idea for their own purposes. If you stop your Chinese manufacturer from using your IP, your clever Chinese manufacturer won’t directly breach the non-use agreement.
Instead, they’ll disclose your concept to someone in their “group” and deny having breached the non-use agreement because they did not directly make use of the information.
Because of this, it’s crucial to understand the type of group you are dealing with. You’ll want to make it clear in your contract that:
You may have to educate yourself further on this issue because there are different situations with different manufacturers. Chinese companies often don’t see disclosure to a member of their group as violating a non-disclosure agreement.
Some of the most common scenarios with Chinese manufacturers are:
Third N: Non-Circumvention
Adding non-circumvention is vital because your Chinese manufacturer knows you’re adding a big margin on top of what you’re paying them. Imagine this…
Your Chinese manufacturer contacts your customers and sells your product at the Chinese price! After they’ve gone through your customers, they start marketing and selling your product to the rest of the world. You’re in a nightmare situation!
A China-appropriate non-circumvention agreement is the best way you can help protect yourself against this.
Drafting an NNN That Works in China
You might be thinking, “This is all great information. But how do I make sure it’s enforceable in China?” Here’s how:
Drafting an NNN agreement that is enforceable in China means that Chinese law is the governing law, Chinese is the governing language, and exclusive jurisdiction is in a Chinese court with jurisdiction over your manufacturer.
You want to use a China-focused approach because, in the case of infringement or circumvention, you need to move quickly against your manufacturer. Generally, any other approach will make the agreement unenforceable or delay enforcement to the point of making it useless.
Here are some basics you should follow:
You’ll need to write an NNN Agreement that actually makes your Chinese manufacturer fear breaking the contract. Use the information above to make sure it’s enforceable, then ensure it provides for contract damages in a specific monetary amount for every act of breach.
Using a contract damages provision offers you two main benefits:
Your NNN agreement must include a sum certain contract damage provision which a Chinese court can, and will, enforce by allowing seizure of your manufacturer’s assets.
However, it’s vital you set the contract damages at an amount that reasonably substitutes for the damages if they breach your agreement. The Chinese legal system doesn’t allow for punitive or extensive consequential damages.
When approaching a Chinese manufacturer with a China-centered NNN agreement, you’ll likely experience one of these three responses:
Now, what I want to stress is that this information you’ve read is the result of extensive research; we’re not lawyers.
If you want to find out more or need a service to help you with creating an enforceable NNN, check out ChinaLawBlog.
They have a wealth of experience and knowledge when it comes to creating China-centered NNN agreements.
Register Your China Trademark
A common mistake made when manufacturing in China is believing your patents and trademarks are valid. They’re not. Patents and trademarks are territorial and will only protect your intellectual property in the country where they’re registered.
I highly recommend you register your trademark in China, and you do it as soon as possible.
If you don’t, it could have serious consequences:
China’s First-to-File Rule
In many countries, if you haven’t registered your trademark, you may still have a legal claim over that trademark if you can show the reputation your business has gained from using it in the past.
However, in China, it’s different. Prior usage is not considered within the trademark examination process. China uses a first-come, first-served rule: the first person to file for a particular trademark becomes the owner if their application is successful.
Chinese Characters
You’ll need to secure the trademark of your brand in English, Chinese characters (translated), and transliterated form.
Difference Between Translation and Transliteration
If you do not use a Chinese version of your brand, your distributors, manufacturers, and even customers will start using a Chinese name. Someone could then register this name, blocking you from marketing in China.
You should consider a Chinese name or transliteration for your brand at an early stage. And you should get a branding consultant or lawyer to inform you of the different meanings for the Chinese characters.
In transliteration, after your trademark has been translated into a Chinese name, an English version is created. E.g., Penfolds has been transliterated to Ben Fu.
Perform Research
Researching and selecting a suitable brand is important for marketing, but it’s more crucial from a legal perspective. You need to ensure you’re not infringing on someone else’s registered trademark.
How to Check for Similar Trademarks in China
The Chinese Trademark Office provides a free search for existing trademark applications and registrations. The only downside is that this site can only be properly viewed if your computer has Chinese simplified characters installed. And you’ll need to be able to read Chinese.
You may need some help with this bit. It’s a good idea to seek professional advice.
What You’re Not Allowed to Include in Your Chinese Trademark
A big issue you may face is that trademarks cannot be detrimental to socialist morals, customs, or have other unhealthy influences. This can be very different or broader than what most Westerners might think. So, I recommend you seek advice from Chinese trademark counsel or lawyers.
Filing Your Trademark Directly in China
Filing your application through the Chinese Trade Marks Office (CTMO) is generally referred to as direct filing. You should note that filing this way means your date of application becomes your date of priority.
Having an earlier filing date can be crucial if someone else is applying for the same trademark due to China’s first-to-file rule. I recommend using an IP professional experienced in Chinese trademark law or a reliable agent in China who specialises in intellectual property.
The Benefit of Filing Direct
When you file directly, you can nominate your own subclasses. It’s important to classify your proposed goods and services correctly in your Chinese trademark application, so specialist advice should be sought as early as possible.
If the names of your goods or services are not included in the International Classification and the List of Acceptable Names of Goods and Services, you will only get one chance to amend before your application is rejected.
If your amended names are not acceptable to the examiner, your application will be rejected, and you will need to re-file – losing your original priority date.
What You’ll Need
The Examination Process
The CTMO will start by checking all of the required information and documents. They will then embark on a detailed examination to identify any conflicting applications or registrations and assess whether your trademark meets the requirements.
This process can take up to 9 months, culminating in either the CTMO rejecting your application or providing a preliminary approval, which allows your application to move to the next stage: the opposition period.
The Opposition Period
This is a 3-month period (after you’ve received your preliminary approval) during which other companies or individuals can challenge your trademark.
If an objection is raised and the CTMO rejects it, the decision is final.
However, if the objection is accepted, you can request a review from the Trademark Review and Adjudication Board (TRAB). This process can take 6-12 months.
If your application proceeds smoothly without any opposition, you can expect the entire process to take 12-15 months from filing to receiving your Certificate of Registration. The registration is valid for 10 years, after which you can renew it.
Reasons Your Trademark Can Be Cancelled
How to Protect Your Molds and Customized Tooling
If your Chinese manufacturer needs to create or buy tooling that is customised for your product, you risk them keeping and using your mold to supply (or become) your competition.
Fortunately, there are a few tactics you can use to help prevent this:
Mark Your Molds
You should consider making your molds easily identifiable by etching or engraving (in Chinese) that they’re your property. If possible, do this in a conspicuous location to deter others, and in a hidden location to deter those who might try to remove it.
Get Your Molds Wrapped Between Production Runs
During the final inspection of your products (before they’re shipped out), your inspector can wrap the molds using proprietary adhesive tape, and then place a seal or proprietary sticker on the wrapping.
You should instruct your manufacturer to only unwrap the package when the next production batch is to take place. Before they unwrap your mold, they must send a photo of the whole package with the day’s newspaper next to it to prove the date.
Transfer Your Molds to a Separate Location Between Production Runs
The most straightforward way to avoid your manufacturer using your molds is to have a reliable third party in China keep them between production runs. Ensure that any ownership terms regarding the mold are clearly stated in your sales agreement.
Consider the following:
Other Ways to Reduce Your Risk
Use Codes
Look for ways to encrypt important information on technical files. For instance, a German company places a code on each drawing, such as a code that means “add 11% to all measurements.”
Break Up the Manufacturing Process
You could design your product in such a way that it’s impossible for one supplier to make the whole product. This can be done by creating two parts that control each other.
The downside is that this is only feasible for certain products with embedded electronics, not for garments or classic furniture.
Provide Your Country’s Customs with Information
While this won’t stop a manufacturer from recreating your product, it will make it harder for them to profit at your expense.
Some countries take fighting counterfeits very seriously. If you can provide information about the importing channel where the copies enter your country and if you’ve registered your IP, you might be able to block the containers.
Pre-Production: Getting Your Product Samples
Once you’ve selected the Chinese manufacturers you’d like to work with and have implemented your IP protection, it’s time to start the pre-production process.
Getting potential manufacturers to create pre-production samples is essential for testing both your design and the manufacturer’s ability to produce it. If you don’t manage this process properly, it can cost you months, sometimes up to a year.
Your first task is to create sample order terms. Well-drafted sample order terms can save you thousands in development costs and prevent delays caused by constant revisions.
Since Chinese manufacturers are primarily OEM suppliers (custom products), they’ll expect you to provide all relevant product information.
Include the following:
Include as much detail as possible, including non-modeled parts like glue, wires, and labels. Ensure you manage different versions of your BOM to avoid confusion.
Establishing a thorough testing process throughout manufacturing is crucial. Catching issues early will save time and costs compared to reworking fully assembled parts later.
Before your manufacturer can begin creating your samples, you must communicate all technical standards and substance restrictions.
If possible, you should have your sample product submitted for compliance testing once it’s complete. However, this isn’t always feasible for several reasons:
You must communicate all applicable standards and regulations to your supplier. However, don’t expect, given these constraints, that your Chinese manufacturer will be able to produce a fully compliant sample.
Whether you’re producing an OMD (private label) or OEM (custom designed) product, you need to include the following:
For OMD (factory standard packaging with your own artwork), you should be able to request an artwork template from your manufacturer.
Chinese manufacturers expect you to provide all details. Ensure your packaging artwork is compliant with all applicable labeling requirements, which depend on your market and product. Here’s a detailed guide:
Custom packaging can be complex. Design the packaging according to the product’s shape and dimensions. Never rely on your manufacturer to make final adjustments. If you lack experience, consider professional help. If you proceed yourself, keep track of:
Custom packaging will require additional tooling, adding to your total costs. However, these costs are generally quite low, often a few hundred dollars.
If you lack experience, using factory-designed packaging can be advantageous. The design is tested and based on your product’s dimensions. The tooling is already covered by your manufacturer or its subcontractor, saving you time and money. You can still personalize the artwork and layout based on the template provided by your manufacturer.
Most countries have legal requirements for product labeling. Labels provide information such as:
Requirements vary by product category. Ensure you understand and meet the specific labeling requirements for your product. Do not rely on your Chinese manufacturer to ensure compliance with labeling requirements.
Once you’ve identified the necessary labeling requirements, incorporate them into your label design. Chinese manufacturers commonly work with .eps and .ai files. Ensure your manufacturer knows:
It’s also good practice to provide drawings showing the exact position of labels on the packaging.
In the U.S., most products must carry a Country of Origin Label. For products manufactured in China, this should be labeled as:
The label must be visible on the product, packaging, or both. The Country of Origin Label cannot be hidden.
Exceptions exist, such as for watches, which can be labeled according to the origin of the movement. Failure to properly label your product may result in your product being returned by customs or fines if sold non-compliantly.
California Proposition 65 restricts over 800 substances. Compliance is mandatory if selling to consumers in California. Options for compliance include:
The second option isn’t ideal.
These must comply with FTC (Federal Trade Commission) requirements, including:
This regulation applies to toys and children’s products, requiring a “tracking label” and possibly user instructions and warning labels.
The FCC mark indicates compliance with FCC part 15 Subpart B, which regulates electronic products. Research the specific FCC labels applicable to your product.
UL standards, mainly for electronic products, are not mandatory but are seen as a mark of quality.
The CE mark indicates compliance with one or more EU directives, including:
The CE mark is found on various products, such as watches, bikes, and laptops. Apparel and textiles do not require CE marking.
This mark is mandatory for electronic products and indicates separate storage for electronic waste.
For clothing sold in the EU, care instructions and fiber composition must be provided in the target market’s language. There is no mandatory sizing system at the time of writing.
As of the writing, the UK remains part of the EU. Post-Brexit, it’s likely that UK policies will continue to align with EU requirements. Keep updated on any changes if you plan to import and do business in the UK.
For products imported into Australia and New Zealand, certain safety standards and labeling requirements apply. Examples include:
Incorrectly labeled products cannot be legally sold. Customs will have the right to return non-compliant products to China. Selling non-compliant products can result in hefty fines. Clear communication with your manufacturer is essential.
Avoid shortcuts. Ensure all required information for production and packaging is included. Use additional notes to clarify key areas and critical-to-quality aspects. Don’t hesitate to ask questions and confirm details with your Chinese manufacturer to ensure they understand every requirement.
When discussing with your manufacturer, they might assure you they can produce the exact sample you envision. However, it’s common for samples to require multiple revisions.
Depending on your product’s complexity, anticipate needing two or three revisions. You don’t want to find yourself in a position where your manufacturer demands additional payment due to their failure to meet your specifications.
Include these terms to protect yourself:
The aim of these terms is to:
These terms become void if you change specifications after your manufacturer begins work on your pre-production samples.
Every time you receive a sample product, conduct thorough quality checks. Evaluate:
Test the sample as if it were the final product. Collaborate with your manufacturer for any necessary amendments: take pictures or videos, and keep detailed notes. Send copies of all documentation back to your manufacturer along with the sample.
Testing is crucial for identifying issues with your product and avoiding unpleasant surprises during full production. Ensure your manufacturer clearly understands the requirements.
For custom-designed products, injection molds and other tooling are often required and can constitute a significant portion of your product development cost.
To address potential issues with tooling ownership, include these clauses:
The purpose of pre-production samples is to assess the manufacturer’s ability to produce your product. If the manufacturer subcontracts your sample production to another factory, you may face quality issues during full production.
To prevent this, include the following term:
For high sample costs, you’ll often need to pay 100% of the cost upfront. For more complex designs, costs can reach thousands or even tens of thousands of dollars.
To manage risk, apply these payment terms:
As previously discussed, protecting your intellectual property with NDAs (Non-Disclosure Agreements) and NNN (Non-Disclosure, Non-Use, Non-Circumvention) Agreements is crucial.
Attach your agreed NDA/NNN document to your sample order terms.
Before proceeding with full production and finalizing your purchase order, create a sales agreement contract. This can safeguard you against a range of common mistakes and issues when working with a Chinese manufacturer.
Clear compensation terms will signal to your manufacturer that non-compliance carries serious consequences. Never pay the final amount before production; withhold payment until your products pass quality control or testing.
Be Taken Seriously: Chinese manufacturers are accustomed to signing agreements with new buyers. Presenting a sales agreement demonstrates organization and seriousness.
A quality control plan sets your expectations before full production begins. There are two types:
This document helps you:
Prepare these documents, and consider visiting the factory or having a trusted representative explain them to ensure they’re properly implemented.
By taking these steps, you can better manage the manufacturing process, mitigate risks, and ensure that your product meets your standards and expectations.
You’ll face a choice between ocean or air shipping. Which option is best? The right choice depends on various factors including cost, speed, reliability, and environmental impact.
Typically, shipping by ocean is cheaper than air freight. However, the cost can vary based on how you are charged.
Airlines bill you by chargeable weight, which is calculated from a combination of the weight and dimensions of your shipment.
Ocean carriers charge based on container size. The most common containers are 20’ and 40’. While weight can be a factor, charges are usually based on the shipment’s volume.
For very large and heavy shipments, ocean freight is generally more economical. For smaller shipments, the cost difference narrows, and sometimes air freight may end up being more cost-effective.
You also need to factor in destination charges. Regardless of whether you choose air or ocean, customs and destination fees apply. While ocean freight is often cheaper, warehousing fees at seaports tend to be higher compared to airports.
To calculate shipping costs, consider using tools like Universal Cargo.
Air freight is significantly faster. If time is critical and you’re on a tight deadline, the higher cost of air freight might be justified. Ocean freight can take around a month to arrive, compared to just a few days by air.
However, shipping technology is improving. Ships are becoming faster, and new canals are shortening routes. Some shipments are now delivered in as little as 8 days.
Air freight generally has the edge in reliability. While flights can be delayed due to weather or other factors, airlines maintain tight schedules with daily flights between major cities. If your cargo misses a flight, the delay is usually minimal.
Conversely, ocean carriers are known for less reliable schedules. Ships can fall behind schedule, and a missed cutoff can result in a longer delay, as many operate on weekly schedules.
Ocean freight is more environmentally friendly. Air freight has higher carbon dioxide (CO2) emissions; for example, 1,000 kilograms of air freight emits about 500 grams of CO2 per kilometre. In contrast, ocean freight emissions are significantly lower, averaging 15 grams of CO2 per kilometre.
When manufacturing in China, hiring a customs broker and a freight forwarder is essential.
To choose the right brokers and forwarders, consider these tips:
A well-chosen broker can significantly streamline your customs processes and avoid delays, errors, and fines. Take your time to select the right partner and do thorough research.
Once you’ve tested your sample and are satisfied with the result, it’s time to place your order and enter the full production phase.
You’ll need to create a purchase order (PO) form. Relying solely on a proforma invoice from your manufacturer could be risky, as it might indicate inexperience on your part and doesn’t give you control over the details.
A well-drafted PO ensures you control all aspects of the order. Include all crucial information and reference any necessary documents your manufacturer needs to follow.
When preparing your PO, consider local holidays and customs that might impact your order and delivery.
Here’s what to include:
Manufacturing your own product in China can be challenging and time-consuming. However, as you progress through the process, things will become easier and less intimidating.
With the knowledge gained, you should be well-prepared for what to expect. And remember, when you finally receive your product, the sense of accomplishment will be well worth the effort.
Contact us to discuss your requirements of OEM ODM Cosmetics. Our experienced sales team can help you identify the options that best suit your needs.