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Chinese supplier got my deposit, now ignores me. What to do?

by Mike Bellamy 

Rajvansh in Dubai asks: 

We have placed an order to a Chinese supplier for Paper Bags. The supplier is located near Qingdao.

We have made the advance payment to them as per the agreed terms. We even paid the balance for the first shipment they sent us. But, they had forged the documents and shipped less quantity.

To explain in brief – we placed an order worth about USD34,000. We paid the 20% advance of around USD6,800.

Then when they made the first shipment, we paid them around USD16,000. (But, they had shipped much less goods and we shouldn’t have paid this amount). They have in total USD22,000 from us and now they are demanding us to pay the balance USD12,000 to finish the production.

I visited their factory in first week of April 2015 to check the goods, as they had promised that they will finish the production of goods by March 30. But, they had not finished the goods and demand us to pay the balance.

What’s the guarantee that we will get our goods if we pay the balance. We don’t trust the supplier and would like to recover our money.

 

“I paid for it. But they didn’t ship it!” Guess what..your order is not on this boat…

Thanks for contacting me. I have a couple of options for you.

If you wish to get the order shipped with this supplier, but reduce your risk, you could consider linking the supplier’s performance to you payment. For example, pay the supplier AFTER the goods have been inspected (by a 3rd party) but BEFORE the goods ship out of China.  This inspection could take place at the factory if a random inspection is sufficient, or 100% inspection could take place at a 3rd party (like my warehouse in China for example) if you wanted a very close inspection.  It would also be wise if you had a team representing you on the ground in China to help mediate and explain to the Chinese supplier how the above solutions benefits both parties.

If you have already given up on the supplier due to their poor performance, then here are two ideas:

List them at SupplierBlackList.com and expose them to the world and help other buyers avoid this bad supplier.

Consider issuing a demand letter from a Chinese lawyer to show them you are series about getting your money back as they messed up the order and caused you substantial financial loss.  I’m happy to recommend the lawyers at ChibridgeLaw.com as they did a good job for me and I joined their board of directors.


Question answered by Mike Bellamy, an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. Mike is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.

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