China Lawyer: Risk Control Solutions for Purchasing Medical Products from Chinese Suppliers
Updated: Apr 5, 2020
Recently, coronavirus (also known as COVID-19) has spread globally. During the fight against COVID-19, many foreign countries are purchasing products such as musks, isolation gowns and medical caps from China.
It is becoming a big market in recent months, in which baddies and good people mix together and it is difficult to tell from each other. Therefore, what can you do to protect your interest when you are placing an order and making payment?
Here we have a solution for you, consist of 3 Steps Check Before Purchase, 4 Key Issues for Contract/Invoice and 5 Steps for Solving Dispute.
3 Steps Check Before Purchase
Before placing an order, it is important to verify the product compliance, seller's credit information and license of export.
1. Product Compliance Check
a. Medical products of: Isolation gowns, medical caps, medical gloves, medical isolation shoes, medical isolation shoe covers, medical isolation face masks and medical isolation eye masks are classified as the First Category Medical Devices, which shall be filed and be put on record at the Food and Drug Administration.
b. Medical products of: Surgical masks, sterile gloves and protective clothing are classified as the Second Category Medical Devices, which shall be registered at the Food and Drug Administration. Such registration will be under scrutiny of the Food and Drug Administration.
c. You may check if the products you are purchasing are filed or registered with the Drug Administration on the official website of National Medical Products Administration. To check products in different Categories, select the search option for record of domestic medical devices or products (国产医疗器械产品备案) or registration of domestic medical devices or productsproduct registration (国产医疗器械产品注册) and then enter the product name or company name in the search bar for results.
2. Entity Credit Check
a. Check if the seller is a registered entity in China in the National Enterprise Credit Information Publicity System.
b. Companies manufacturing any First Category Medical Devices need to be filed and be put on record at the Food and Drug Administration; Companies manufacturing any Second Category Medial Devices need to apply for licence to manufacture at the Food and Drug Administration.
c. Filing at the Food and Drug Administration is not necessary for companies selling First Category Medical Devices, but necessary for companies selling Second Category Medical Devices.
d. Check on the official website of the State Drug Administration if the seller's registered scope of business includes R&D/Manufacture/sales of: surgical masks, protective clothing and other medical devices. Select the search option for record of enterprising operating medical devices (医疗器械经营企业备案) and then enter the company name in the search bar for results.
3. Export Check
a. Check if the export company holds license to export on the Credit Publicity Platform of Import and Export Business of Customs of China.
4 Key Issues for Contract/Invoice
When you are entering into a contract/ invoice with the seller, the following key issues shall be kept in mind:
1. Entity name: please make sure the seller put their full Chinese name on the contract/ invoice, and confirm if the entity in the contract/invoice is a mainland China company as claimed by them
2. Receiving Bank:
a. The account holder of the bank account receiving payment shall be the same as the seller; if not, then the deal could be risky;
b. The bank of the recipient’s bank account shall be in a same location, or at least the same country, as the seller’s company. The deal could be risky if the company locates in Mainland China, but it uses a Hong Kong or foreign bank account to collect payment, it is also risky if the seller is a company, but it uses a personal bank account to collect payment.
3. Company seal and signature:
a. The legal representative of the Chinese company shall sign the contract/invoice;
b. The contract/invoice shall be stamped with company’s official seal, which is normally in red and a round shape.
4. Quality standard and quantity
a. There shall be clear specification on quantity of the goods in the contract/invoice;
b. The contract shall stipulate liquidated damages for contract violation, such as delay of delivery or low quality products.
5 Steps for Solving Dispute
When the seller delay the shipment, send low quality merchandise or when you encountered fraudulent seller, here are the steps you shall take.
1. From the outset, you should prepare all documents relating to the transaction, including the contract/invoice between parties of the transaction, record of communication, bill of lading or delivery bills as well as proof of quantity and quality of goods.
2. Send official letters to the seller about its violation/ fraudulent behavior.
3. You could discuss with a Chinese lawyer about the claim you may take:
a. We will assist you to confirm your legal standpoint for raising a litigation against the opposing party, and your claims: whether you could claim for refund or damages; and how much damages you may claim.
b. We will assist you to form the strategy of what legal action you may take in order maximum your interest. Such as if it’s more favorable to report the case to the police or initiate a civil litigation.
4. You could instruct a Chinese law firm to send a lawyer's demanding letter to the seller, and initiate negotiation with them.
5. If negotiation fails, you could instruct a Chinese law firm to commence litigation, arbitration, or report the case to the police.
For more professional information and suggestions about purchasing medical supplies for epidemic prevention in China, please feel free to contact our experienced Chinese lawyers to have a consultation.