Manufacturing Agreements you Need While Producing Goods in China

Building a large list of China manufacturers will greatly help you to streamline your product sourcing. Foreign businesses can use Alibaba’s for finding and sourcing manufactured goods produced by Chinese firms. Apart from Alibaba, local trade shows are also a great place to meet trustworthy manufacturers face to face. Attending trade shows can give you greater confidence and reliability as you get the chance to meet your China manufacturer and get your questions answered by them directly.

Just like other businesses, China manufacturers want to get as many clients as possible on boards. So, do your research and have a target dollar amount that you want to pay. If you don’t make selecting good China suppliers as a part of your growth plan, you’re likely to miss big business. Having a good negotiation skill is the single most important part of dealing with the China manufacturers.

Foreign companies doing business in China usually maintain three types of manufacturing agreements with a Chinese factory:

1. Original equipment manufacturing (OEM): Used when a foreign buyer purchases a product already being made by the factory and simply adds its own branding to it;

2. Contract manufacturing (CM): Used when a foreign buyer has a fully developed product design, which is then brought to a factory for commercialization and mass production; and

3. Original design manufacturing (ODM): Used when a foreign buyer approaches a factory with a basic design and specifications, but the factory actually makes the commercial design and ultimately the production.

In the opinion of the China business law experts, when producing goods in China you should consider having NNN agreements, Product Development Agreements (PDA), and Manufacturing Agreements (MA) with your Chinese suppliers.

It is a common practice for the foreign firms that in order to save money, they draft the China contract on their own, and send the contract to the legal firms for making the necessary improvements. For their kind information, we would like to say that the charges of improving a pre-written China contract are same as drafting a new one.

If you think, just because most of the elements are already written in the contract, legal firms will charge less for making only improvements, then you are wrong, as they will charge you the same price. So why not drafting the entire contract by the professional China lawyers rather than paying for making only improvements.

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