Double Trouble: The Hidden Risks of Dealing with Chinese Suppliers with Shared Contacts

What happens when a Chinese contact represents two suppliers simultaneously? Who exactly am I dealing with?

One of our clients in New York, USA, had been sourcing toys from a Chinese supplier for a long time. This Chinese supplier had appointed a regular contact person to liaise with the US buyer.

After dozens of successful orders between the parties, the Chinese contact person noticed that they had registered a new company and that a small number of future orders would be handled under the new company’s name, while the contact person would remain himself.

The US buyer knew that contracting with the new company was risky, but agreed to the arrangement anyway. That’s because the US buyer thought the risk was manageable, since the two Chinese suppliers had the same contact person and only a small portion of the orders were completed with the new company.

However, in subsequent transactions, Chinese companies gradually mixed the old and new companies, and the US buyer could no longer tell which payment was for which order with which company.

Thereafter, the Chinese supplier delayed delivery. The US buyer demanded cancellation of the order and a refund of the down payment from the Chinese supplier.

However, the Chinese contact person said that the US buyer’s subsequent orders were placed with the new company and that it could only claim against the new company. And the new company has little money to repay the debt. Therefore, the US buyer is unlikely to recover the payment for the goods.

We recommend that you follow these tips if you find yourself in a similar situation:

1. Specify with whom each order or contract will be signed when it is signed;
2. Specify the contract or order for which delivery or payment is being made when each batch of goods is delivered, or each payment is made; and
3. Perform periodic written reconciliations with the supplier to confirm the amount of the debt and the debtor for each debt.

Photo by Gabriel Alenius on Unsplash