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How does one handle a Chinese supplier who refuses to repair or replace a high value product during the warranty period?

Posted: 2011-02-14

Full Question

How does one handle a Chinese Mainland supplier who refuses to carry out the repair/replacement of a high value product during the warranty period of 1 year? The company concerned is XXXX and the products are Analog Gateways and Pri Gateways. In fact they have a unit that we were asked to send back for replacement and are refusing to return, after we have agreed to pay for the shipping charges, as well as refusing to send a replacement power supply, as they had promised earlier, unless we pay them.

Answer

I have a couple of suggestions for you.

If the project is of value and you have a small budget in place, you could obtain the support of a local based sourcing agent to travel to the factory to get a feeling for what is really going on.

If that fails or if you feel the supplier has broken their contracts and will never honor the contract (and I assume you have a proper signed and valid contract in place) then an excellent next step is to have a local lawyer send a demand letter. This doesn't mean you are going to court, it is simply an official notice that if the supplier continues to act in this negative fashion, you may go down a legal path to seek relief from the situation they have put you in. In most cases, the demand letter is enough to shock the supplier into positive action. A demand letter can be organized for a few hundred USD.

If the demand letter fails, you can take the supplier to court. Luckily the costs of attorney fees and court fees are much less than in most western countries. Also, in PRC I believe you can sue for lost profits rather than only being able to sue for direct loss (deposit for example). So if your deposit was 5000 RMB but the value of the order form your customer that was lost because of this supplier's poor performance is 500,000, then you will be happy to know that you can sue for the full 500,000. Most likely the supplier will negotiate and since they risk a lawsuit for 500,000 most likely they will be receptive about settling out of court for at least your deposit back.

If you need help find lawyers and sourcing agents, you can find plenty of options on line, but there is also a list of endorsed service providers of sourcing agents and lawyers at http://chinasourcinginfo.org/endorsed-service-provider

Also, next time, consider using www.globalsources.com's verified suppliers. The more stars the supplier has, the more reputable they are and the less likely you will experience the drama you have described below.

Let us know how the situation works out for you.

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