by Dan Harris
Had lunch the other day with two friends of mine here in Seattle. One of these guys has been sourcing product from China for about 30 years. The other has been working with big companies in Asia (mostly China) for about 30 years. We talked China pretty much the entire lunch.
At one point the sourcing guy asked me what I do for companies that have received bad product from China and are not getting any recourse (or are just being told that they will get a 5% discount on the next order, which is essentially the exact same thing). I grimaced and explained how only a few hours earlier, I had received an email (from an Eastern European company) asking me essentially that very same question. Here is the email, with any possible identifiers having been changed:
I’ve been working for a Company “LC” Ltd. and my boss asked me to write a claim against a Chinese company. We have bought ________, last Invoice 08/12/2010. Unfortunately, they didn’t supply us with spare parts (promised) and then disappeared. I have written a claim to China Chamber of Commerce – no answer was received. Your advice? The company name is __________, Email: ________ is not responding. So our losses are approximately more than 20 thousand USD, because 35% have been repaired on a guarantee. Our company have been successfully in the market of ______ for ______ years and this case is spoiling our good reputation.
I responded as follows:
I am sorry this happened to you, but unfortunately, there is typically not much (if anything) you can do in this sort of situation. You could try hiring a Chinese law firm in ______ [the town where the company was once located] to see whether the company still exists and to assist you in undertaking a cost-benefit analysis of suing it.
Man, I hate these situations. I do not have enough information to just flat out tell the person who emailed that her company has no chance or that it should just give up now. I mean it is possible that the Chinese company is thriving and hiring a Chinese lawyer will immediately get this Eastern European company paid, simply because the Chinese company would rather just pay than fight a lawsuit. But that is very unlikely. What is more likely is that the Eastern European company will pay a Chinese law firm to pursue the Chinese company and that it will eventually be determined that the contract between the Eastern European company and the Chinese company is not strong enough on which to sue in this type of case. Pretty much all of the contracts we have seen involving small companies buying small amounts of product from China are not written to provide the buyer with a good chance of prevailing in such a case. In fact, most of the time, these small companies do not have any contract at all; they have been buying the product strictly via Purchase Orders.
As for contacting a chamber of commerce or a consulate, I have never heard of either of those things achieving results in this sort of situations.
So what is a company in this situation to do? Just walk away? What have you seen out there? What would you do? What do you suggest?