by Dan Harris in 'China Law Blog'
Every other month or so, we get a harried call from someone wanting our help in "getting their molds" back from their Chinese supplier. Though I know this cannot be the case, it does seem that nearly every time a foreign company decides to terminate its Chinese manufacturer, the Chinese manufacturer refuses to return the foreign company's molds. The Chinese manufacturer holds on to the molds either to extract money from the foreign company or simply out of revenge.
We have yet to take on a case for a foreign company wanting to sue to get its molds back. We have turned down all of these cases both because we have yet to deem one good enough and because they are generally too expensive in relation to the value of the asset. in other words, these are not good cases and the key to this sort of case is to avoid getting yourself into a situation where you feel you may need to bring one.
How can you achieve that?
The way to avoid having your Chinese manufacturer run off with your molds is to make sure you require the manufacture to sign (and seal) a contract (preferably in Chinese) that makes very clear to whom the molds belong (to you) and what will happen to the Chinese manufacturer (liquidated damages) if it fails to return your molds to you.
Even better, you should, if possible, get a deposit for your molds, which deposit you will return when your molds are returned to you. If the Chinese manufacturer will not give you a deposit for your molds, (most will not), put in a liquidated damages provision that applies if your mold is not returned when specified. That provision alone goes a long way towards taking away any incentive for your Chinese manufacturer to hang on to your molds.
You wanna keep those molds for which you paid? Do something about it now, not later.
What do you think?
Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes ChinaLawBlog.com as a source of China legal and business information.