• How to Resolve a Dispute with Your Supplier

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    dispute resolution in China

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    Picture that you’ve paid up thousands of dollars upfront, only to receive a delayed and defective batch of products. Or, what if your supplier decides to double the price, halfway through production?

    Sending angry emails at 1 AM will not get you far, but there are methods that can help you gain the upper hand in a dispute with a contract manufacturer.

    Methods that I will present in this article.

    But first, we need to draw the line between you being disappointed, disputes and outright frauds.

    This is how I define a supplier dispute

    If you the supplier has failed to comply with the written product specifications, quality requirements and order terms – signed and stamped in a contract – and refuse to comply, then you are in a dispute.

    A few examples follow below:

    a. The supplier fails to complete an order, after you have made a deposit payment

    b. A supplier delivers products with a high defect rate, or with compliance issues, and refuse to remake or rework the products

    c. You have paid for samples, but the supplier decides to not make them for you

    Now, let’s look into situations that should not be treated as disputes

    a. A supplier makes a sample that, despite their best efforts, don’t match your requirements.

    b. A sample order or production run is delayed, due to a subcontractor, or an optimistic deadline (this is to be expected in low cost manufacturing).

    c. The supplier must increase the price, because costs for materials, labor and shipping increased.

    d. You wired money to a scammer, and they went dark immediately (this is a fraud, not a dispute).

    And finally, anything that is not written on a contract, including emails, Wechat conversions – or anything that happens before you make a payment and start production – is not a dispute.

    Remember, just as you have the right to pick and choose suppliers, they too have the right to reject your business.

    In short, a dispute requires that you pay a supplier, and they then change the terms (or quality).

    With that clarified, you are now ready to learn which tools you have, to resolve disputes with your suppliers.

    But wait, should I not try to reason with them?

    No, if they have clearly violated the terms of your contract, and try to pressure you to give in, or more money – then you should not try to reason with them.

    Well, at least not at this stage. Instead, you apply the methods, and reason with them after you have demonstrated your capabilities.

    Many overseas suppliers, and I am not specifically referring to those in Asia now, think that their buyers don’t have the means to reach them.

    A demand letter, from a lawyer in the same city, can make them change position.

    1. Report the supplier dispute to Alibaba

    Is your supplier listed on Alibaba? Did you use Trade Assurance, and can you prove that the supplier is at fault?

    Congratulations, you can report the supplier to Alibaba.com, and they will take action.

    On Alibaba, there are 3 types of reports you can make:

    a. Report fishing
    b. Suspicious behavior
    c. Trade Assurance supplier refuses to offer coverage

    To make a report, you must first login on Alibaba, and follow this link. You can also learn more in their FAQ.

    Alibaba take disputes seriously, but there are limits to what they can do. In order for Alibaba to act, you need to provide that the supplier is at fault.

    This requires the following:

    a. Scan copies of the sales contract, with stamps and signatures

    b. Transaction records, showing that you actually paid the supplier

    c. Quality control reports, proving that the products don’t match the written requirements in the sales contract

    We have received several reports from disgruntled buyers, claiming that Alibaba doesn’t act on the Trade Assurance. However, in all the cases I am aware of, the buyer did not have any material to back up their claim.

    Alibaba.com can’t act based on “bad quality” or “not what I expected”.

    2. Hire a lawyer to draft a demand letter

    Many suppliers tend to assume superiority in deciding the outcome in any dispute, as long as they have (your) time and money on their side.

    A demand letter, stating that you will take legal action if a resolution ís not reached within a number of days, can make them retract from that position.

    Indeed, they could just decide to ignore, betting that you don’t have the financial strength to pursue them in their home country – but for the cost of a few hundred dollars, it might be worth a try?

    And, as explained by Dan Harris of Chinalawblog.com in this article, demand letters really work when resolving disputes.

    But, why not just call the police? Well, they don’t deal with commercial disputes, which is the topic of this article. You can, however, file a police report to report frauds – as explained in this article.

    3. Report the dispute to Supplierblacklist.com

    If you have exhausted all options, and you have proof that the supplier has violated the terms, written on your contract, you may try the nuclear option.

    Keep in mind, that you can be the one that receive a demand letter (or even get sued), if you use this method without records, proving the supplier to be at fault.

    Supplierblacklist.com is, you guessed it, a website where ‘bad suppliers’ get listed. Most companies listed on the site are scammers, and not ‘real’ suppliers caught up in a dispute.

    There are in fact a number of similar websites, but this one is the largest.

    The prospect of the supplier’s name ending up here may scare them, assuming they even understand the implications it may have for their business.

    Another thing I have seen clients do is to go as far as registering a domain, including the supplier’s company name, and listing emails, photos and other records supporting the disgruntled buyers claim.

    In at least one of these cases, the supplier decided to compensate the buyer, in return for them taking that website down.

    This will probably not work if you report a factory to the supplierblacklist.com, as you may not be able to remove the report, once submitted.

    Again, be careful with this. If you decide to go nuclear, don’t expect any resolution of the supplier.

    Perhaps this falls under retaliation (think MAD), rather than dispute resolution.

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