It is a relatively challenging task for most of the global and American SMEs to get their products into Chinese market and sell them. Norms and rules of doing business in China are sometimes complex, hard to understand, and ambiguous. But that doesn’t mean you won’t to be able to explore the massive Chinese market. Seeking assistance from the experienced Chinese distributors and Chinese business lawyers is perhaps the best way to capture Chinese market.
Few things are quite identical in terms of distribution contracts with the Chinese companies and the US, while few distribution agreements are entirely different between both the nations. One of the striking contrasts we observed is that, it is hard and expensive to terminate distributors according to US laws, but on the other hand, China makes no special allowances for distributors. This makes it easier for us to draft China distribution agreements in accordance with the Chinese law in a Chinese court. This also enables us not to get bother about the provisions that are directed to to work around distributor protections.
Intellectual property protection is perhaps the most challenging issue in China for almost all the distributor agreements. In order to protect the IP of our American clients, we have come up with a “no registration” provision in our distributor agreements. According to this provision, our clients exclusively hold all the rights for trademarks and other IP and the distributors can’t claim any of these rights. Distributors will not be allowed to register any IP in any way related to our client’s IP. You need to register your trademarks immediately in China, that’s why we have kept “further protect” term in our contract.
Because of China’s strong Anti-Monopoly law, a distributor has to sell goods to the third parties at a minimum resale price. For this reason our China distribution agreements should not require your Chinese distributor sell your goods at a certain price.
Signature line is another major difference between Chinese and American distribution agreements. It signifies that your distribution contract must have a place for your Chinese distributor to affix its company seal. Without a valid company seal, Chinese court may consider your distribution contract invalid.
To get your product into Chinese market, the best way is to form a relationship with a reliable Chinese distributor and a China-specific distribution agreement.