International Manufacturing Protections: My Elevator Speech – Contracts and Commercial Law – Corporate/Commercial Law

Last week I had a Zoom call with a long-time, no nonsense,
client regarding an ongoing matter. As we were wrapping up the
meeting, he mentioned his company was looking to start moving the
manufacturing of some of its products from China to Vietnam or
Thailand, and he wanted me to tell him what his company needed to
do to protect itself.

He wanted the soup to nuts version, and I had five minutes max.
This is my elevator speech on how to protect your company when
having your product made in a foreign country:

Obey the
law. You will hear about companies that are violating
this or that law and are getting away with it, but that just means
they have been lucky so far. Everyone knows someone who smoked
until they died in great health at 88.

Protect your Intellectual
Property. IP is where your company’s value lies,
and you must protect it. Trademarks are valuable and they almost
always cost less than $2,500 to register. But, if you do
not register your trademark, someone probably will and in
most countries, this means you will lose it. The first to
register a trademark in most countries gets it, so register your
brand names and your logos right away. Do not wait. Copyrights and
patents, we will discuss next time. Non-compete agreements,
non-disclosures (NDAs), we will talk about later. In the meantime,
check out
this post on NNN Agreements, which are usually absolutely
critical.

Manufacturing
Contracts. You need good manufacturing contracts.
NNN Agreements.
Product Development Agreements.
Manufacturing Agreements. Some or all of these.

Choosing the right jurisdiction for your disputes is critical
in any contract. Choosing the wrong jurisdiction is a very common
mistake.

Due
Diligence. With whom you do business overseas is key.
If you team up with a crook, we lawyers cannot help you much, if at
all. Our law firm can help you
conduct due diligence on your potential suppliers.

If I have an additional five minutes, I discuss the
following.

Sourcing websites. These are designed to
provide marketing channels for suppliers/exporters and aggregate
product/supplier content for buyers/importers online. Read the User
Agreements closely as they clearly state that you are essentially
using the site at your own risk.

Never rely solely on any ratings systems provided by these
sites. Always conduct your own due diligence on your product
supplier.

Trade shows. A potentially great place to meet
suppliers and learn more about the industry, manufacturing process,
products, export issues, etc. The exhibitors can teach you many
things and are willing to do so if they believe you are a serious
buyer and potential customer.

Like finding the right supplier, it is not easy selecting the
right trade show to attend. Do your homework, ask other importers
you know which shows they attend and also look for UFI approved
events (www.UFI.org).

Quality Assurance. There are companies that
specialize in factory audits and product testing. Use their
expertise.

Shipment. If by air, then speak to FEDEX, DHL,
etc. to understand not only shipping costs, but also import taxes.
If by sea, look for a shipping company that can also help you
manage the taxes. It’s also a good idea to speak to your local
customs office.

Get your shipping terms done right,
which is much tougher than most realize.

Payment. Never send cash if you can avoid it.
Talk to your bank about Letters of Credit and Escrow, but these do
not work so well in many less developed countries. There are
systems to protect your money, so use them. A good contract helps
here.

Patience. Take your time, look at alternatives
and start small. If something looks too good to be true, it is.

By adhering to legal requirements, protecting your intellectual
property, and using appropriate and well-drafted contracts, you can
mitigate your international manufacturing risks and safeguard your
company’s interests. Conducting thorough due diligence,
choosing the right suppliers, and understanding logistical details
are also vital to successful overseas manufacturing.

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.