Business Values Hidden in a China OEM Agreement

An original equipment manufacturer better known as OEM contract is used by a company that takes components of products from one or more companies in order to build one product which it then sells under its own brand and company name. Many OEM relationships fail to meet the definition of the term because the dynamics of the OEM are changing. It is interesting to know that OEMs are not the original manufacturers; they customize the original product.

Protect your R&D with the right OEM contract

OEM agreements hold huge importance especially when you manufacture your products in China. The most significant benefit of China OEM is you have complete control over your IP. The hard work you’ve put in R&D of your product remains safe as all the IP rights belong to you.

Match the original specification of your product

Have you ever installed a new replacement part that didn’t quite line up with your existing components? This is unlikely to ever happen with an OEM part. All intellectual property used to manufacture the product, including trademarks, patents, copyrights, and other business secrets should be licensed to supplier, for the limited purposes of complying with its obligations under the agreement. All your parts and components are created and tested to match the original specification, and are sure to be high-quality. They will be compatible with your equipment and perform according to factory specs.

Reduce the cost of production

A professionally drafted OEM manufacturing contract with well-crafted damages provisions will convince your China manufacturer that it will be better off complying with your contract than violating it. All OEM policies allow for this, even though it is often buried in the fine print. Owing to economies of scale, OEM products significantly reduce the cost of production. Moreover, the company purchasing these products can use them to build systems without running their own factory.

The Following is a Checklist of OEM Agreement:

Components – The kind of material the China manufacturer is going to use must be clearly mentioned in the contract.

Manufacturing– Review consignment terms, contracts, and Standard Operating Procedures (SOP).

Price– There would be a clear provision in the contract that will state the manufacturing price.

Order placement– This section will define how the orders should be placed.

Quality control and quality assurance– The end-product will be of the standard guide provided by the foreign companies.

In the opinion of the China trademark attorneys, extra time should be allotted to cover negotiations for OEM design and customization plus, other related matters such as technology transfer, cost and IP security. The contract manufacturer can pass along additional outsourcing cost reductions to the OEM. China OEM manufacturers offer you the flexibility to sell your product at a desired price and terms.

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