China has become the biggest world manufacturer and there is an increasing number of foreign buyers taking part in all kinds of Chinese trade fairs, in order to find good suppliers and purchase Chinese products. The country’s large size and potential for development are two of the most relevant reasons why foreign investors choose to set up a business in China. Also, since Chinese factories have become more technically competent, foreign entrepreneurs have become more interested in investments in manufacturing.
Our Chinese lawyers can offer you legal assistance for manufacturing in China and can provide further information on the matter.
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Types of manufacturing contracts in China
When our attorneys in China sign manufacturing contracts, they first determine what kind of relationship has the foreign buyer (the client) with the Chinese factory. In order to guide the ones involved in the process, there have been identified three types of manufacturing arrangements that are used in China.
1. Original Equipment Manufacturing (OEM) – This arrangement establishes that the foreign buyer purchases a product from the Chinese factory that is already being manufactured by it. The buyer then will use its own trademark and logo when packaging this product. The factory and the buyer may agree to certain changes related to the general aspect of the product (shape, color, minor added features) in order to customize the product for the client.
2. Contract Manufacturing (CM). In this case, the foreign buyer has a fully developed product design. This design wasinitiallyof a product that had been manufactured by the buyer in its country. Recently, the product has a new design being manufactured for the first time in China. If interested in this type of manufacturing arrangement, our Chinese lawyers will provide further information and legal assistance on the matter.
3. Original Design Manufacturing (ODM). There are many variations on the ODM arrangement. Most often, in this case, Chinese factory makes some or all of the commercial design work for the product and the design concept and the basic specifications are developed by the foreign buyer. The latter may sometimes even provide drawings and a specification sheet, while Chinese factory does the rest of the work, consulting with the buyer.
Important aspects when signing a manufacturing contract
Manufacturing contracts signed between foreign investors and Chinese companies are increasing in importance and in value, so here are three key provisions that our attorneys highlight so that your Chinese contract is effectively enforceable in China:
• Governing law is the Chinese law;
• Enforcement is made through litigation in the Chinese court system;
• Governing language is Chinese language.
The legal assistance for manufacturing in China plays an important role in the business environment and this is why you can count on our Chinese attorneys‘ legal guidance for several business processes and activities.
Please contact our lawyers in China for more detailed information.