Things to Keep in Mind While Sourcing Products from Vietnam Instead of China

Vietnam is quickly becoming a viable option to source products and outsourcing manufacturing projects. The footwear giants like Nike and Adidas have been steadily moving production out of China to Vietnam. Facing rapid wage rises in China, companies from all over the world are attracting to Vietnam for its competitive labor cost, top-notch quality and lightning-fast productivity. Another major advantage of this country is its location as it is situated at the heart of Asia.

Foreign-Owned Manufacturers in Vietnam

Vietnam business set up has become an appealing option for many foreign companies. It is noted that, because of the recent tariff war between Washington and Beijing, US companies are more inclined to source products from Vietnam instead of China. However, China business lawyers are of the opinion that foreign entrepreneurs should be prepared for complex regulations, bureaucratic challenges and licensing delays. You need to keep in mind that many factories in Vietnam that cater to America and European and Australian companies are owned out of Chinese companies.

Your Product Should be Made in Vietnam for the US Tariff Purpose

The entire product line is located in China, the product is manufactured in China and then it is shipped to Vietnamese distributions centers from where it is transported to various locations. China lawyers suggest that, foreign businesses need to make sure that their product is actually manufactured in Vietnam, not shipped there from somewhere else. For the US tariff purpose, the product your sourcing should be completely made in Vietnam.

The Legal Consequences of Sourcing China Made Products from Vietnam-

Quite often it has been noticed that Chinese companies assure their foreign clients that they will ship their product to Vietnam from where they will ship it to their locations as though they are not from China to make it tariff-free.

>>  The first concern that China lawyers pointed out, if the deceit is revealed to the authorities, it may lead to a huge penalty as well as imprisonment.

>>  Your entire product could be ceased and your trade license may be withheld for lifetime as this type of transshipping is entirely illegal.

>>  For saving only a few bucks, your business reputation could be at stake for breaching the rules of United States customs law.

Conclusion

The decision is up to you, whether you want to follow a sound and legal sourcing strategy or take an unnecessary risk. Vietnam Manufacturing is booming and finding the right supplier is getting easier, so you don’t need to take any unethical steps.

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Trusted Counsel Required for Drafting WFOE & JV

Among other transitions, one of the notable developments observed in China is the country’s approach for getting more legalistic with the overseas companies operating over here. Often it is noted that, foreign companies pay very little attention to China’s growing legalization protocols. The consequence is they end up tangling in the legal battle that not only cost them money but also hampers their productivity and peace of mind.

In the view of the veteran China business lawyers, it is the negligence, sloppiness and the too trusting mindset of the foreign agencies are responsible for their bad luck. Take a look at the incidents that lead to it.

  • Foreign Companies Trusted Persons in China on their Face Value

A maximum number of overseas companies think by forming a WFOE is enough for gaining the legal status for continuing operations in China. Then comes a situation where the company wants to terminate one of its employees and come to the China lawyer for assistance. When the China lawyers look at the official Chinese government corporate records for the WFO so as to get a better handle on the employee’s authority at the company, they discover there is no WFOE.

Now the question is how does a company think it has a China WFOE but in actuality it has nothing. Most of the time the mistake foreign companies make is trusting the person the company now wishes to terminate. That person claimed to have formed a WFOE for the foreign company but never did or maybe this person never formed any Chinese entity at all. The money foreign corporates give to this person for forming WFOE, goes straight to his pocket and now the company cannot sack the employee from a company that does not exist.

  • Complications Regarding Joint Ventures in China
  • The complexity regarding Joint Ventures is to a some extent similar to the WFOE with the only difference is it is more complicated in nature. The putative JV partner is put in charge of forming a China Joint Venture and it either does never forms any company at all or it forms a company in Hong Kong that the foreign company believes to be a China Joint Venture. It is a case of a complete Joint Venture scam with the only exception that it makes you lose even a greater amount of money that you may lose in WFOE.

    Bottom Line

    It is advised not to trust your Joint Venture or WFOE employee without verifying the documents. Drafting WFOE and JV in China is a complicated task. In order to get everything in excellent working order, foreign companies need to seek assistance from the experienced and trusted counsel.

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