Successful Claim Negotiations with Chinese Factories

Bulldozing your way through a claims issue will get you nowhere with your China supplier. Investing the time and effort on discussions is essential to continued business, and terminating your contract should only be a last resort. All serious exporters are open to reason, so organize your evidence and make your point logically.

By Klaus-Dieter Hanke

Presenting the Facts
After the customary small talk with factory management, it's time to discuss hard business. Be sure to present all necessary evidence, such as documents, statements, invoices and samples. Present everything you need to convince the decision maker of his responsibility and hopefully he will accept your point.

Samples of a defective product are especially important at proving your case since everybody can directly see the problem in plain sight.

A nicely prepared folder or binder containing all necessary documents and photos can help you in your presentation. Make several copies for the other managers as well. It would be better if you have Chinese translations prepared for the non-English speaking members of their management team.

The Claim's Effects on Your Company
Clearly point out to your supplier the consequences the claim has already had on your company (e.g. loss of turnover, loss of customer confidence, loss of reputation as a quality importer). Then explain future consequences this claim will have if it is not resolved soon. Never assume the supplier knows these things. He may not understand much about how business is conducted in your home country.

Line out Your Settlement Proposal
Lining out the details of your settlement proposal is very important. If something is unclear or misunderstood, this is the time to straighten it out. Suppliers will usually ask for a written copy of your proposed settlement to review before the meeting. There is nothing wrong with this but a personal presentation gives it more weight.

Listen to Your Supplier's Arguments
Although you may be frustrated and even angry with your supplier, listen to his arguments before making demands. Remember he is in control of a large organization, often much larger than your own company, and deserves some respect. He will try rejecting your claim but you still must listen to him before proposing a settlement.

Your supplier should be given the chance to reply to your proposal and he may even have new ideas for solving the problem. Be patient if you want to achieve anything. You have come to obtain a claim and must be willing to invest sufficient time.

Give Your Supplier Time to Reconsider
It is very unlikely that your claim can be settled on the first attempt. Give your supplier some extra time to reconsider all the information presented and the proposed settlement. He also may want to investigate details with his company or seek outside advice.

Lunch or dinner times provide the perfect timing for this. Take a break from the serious discussions and have a meal with your supplier. They may try to ply you with some heavy drinking but that is part of the game. Join in if you want. It may lead to an easier resolution of the problem.

A Subsequent Meeting
During the next meeting, which could be within the next one or two days, listen carefully to any revised proposals your supplier comes back with.

They will propose a possible solution if your arguments and evidence are sufficient. If they still reject your claim or insist on a previous proposal, you may have to take a tougher approach by insisting a new proposal be put on the table.

Calculate Your Losses
Recovering all your costs is usually impossible. If your supplier offers a compromise, do the math to determine if the result is acceptable for you. If their proposal is insufficient, make a counter proposal or request time for another meeting to present a counter proposal. However, this only makes sense if you think it will help to improve the outcome.

If you feel that the supplier will not accept an alternative settlement, decide whether you want to continue meeting or accept their current offer. Terminating the arrangement with your existing supplier should only be done as a last resort because it is very unlikely that they will voluntarily compensate your company for anything at that point.

You need to invest sufficient time for your meetings and be patient for a favorable claim settlement.

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 1. Graypayday
Graypayday, Unregistered

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 Posted 2010-01-15 23:35:13

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