No, You can’t, but you can handle this in other ways.
This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection. We will explain how debt collection works in China below.
One of our clients from Italy purchases a batch of auto maintenance tools from China, and needs to prepay 20% of the contract price to the Chinese supplier and pay the remaining 80% by D/P 30 Days.
Before that, the Italian buyer had purchased several batches of goods from this Chinese supplier. However, the Italian buyer’s distributors kept telling the Italian buyer that the product quality of the previous batches did not meet reasonable standards.
As a result, the Italian buyer no longer wants to fulfill the latest order, although the goods under this order are already on the cargo ship from China to Italy.
The Italian buyer consulted us whether it could cancel the order, stop receiving the goods and recover the advance payment.
Regrettably, we can only to tell the Italian buyer that “No, you can’t”.
Because, at least for the time being, the product quality of the latest order cannot be proved to be unqualified. The buyer cannot hold the Chinese supplier responsible for the new order on grounds of quality problems under previous orders.
However, we also understand that if the problems under previous orders cannot be solved, and the Italian buyer now continues to accept the goods under the new order, then the Italian buyer may incur additional losses.
But if the Italian buyer refuses to take delivery of the goods, then the goods will be stored in the port upon arrival, which will also cause huge losses to the Chinese supplier.
So, how can this problem be properly solved?
Finally, we persuaded the Chinese supplier to apply with the bank for a quality guarantee. In the event of any product quality problems, the bank will indemnify the Italian buyer against anylosses.
The Italian buyer, after receiving the guarantee, took delivery of the goods from the port and made payment for it. After that, the two sides negotiated a price discount plan regarding the product quality problem.
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(2) Debt Collection
(3) Judgments and Awards Collection
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(6) Trade Contract Drafting and Review
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Contributors: CJO Staff Contributors Team
