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Over the past few years, many companies have decided to manufacture in China. They then hire local companies to produce various products at competitive prices. These products then go on to global markets. Chinese injection molding manufacturers hired by foreign companies must meet certain quality standards These five key points help to reduce risks when dealing with Chinese suppliers This article will cover the terms and conditions foreign companies should consider when manufacturing fishing lure molds in China. This article will also discuss how to negotiate Manufacturing Contracts with Chinese suppliers. Product and Specifications: It’s important to clearly define the products that will be manufactured in the contract. An Appendix should also include plastic fabrication specifications. Forecasts and binding purchases/supply obligations: To ensure that a Manufacturing Contract is legally binding both the buyer (and seller) will place firm orders through Purchase Orders. This forecast is provided to the supplier to help plan and allocate the necessary resources. This usually takes place over 6-, 12-, or 18-month periods. Prices: The parties should agree on the prices for the products described previously. These prices will remain in effect for the duration of the contract or at most for a portion of it. We recommend that prices do not rise above 5% per year. Quality Control: Buyer and seller will agree to certain terms to ensure product quality control. This could include access to production sites, sometimes with very short notice. Their effectiveness will hinge on the buyer’s loyalty. Raw Materials/Components: As part of the quality control process, buyer should require that supplier provide a list of its suppliers along with purchase orders over a pre-set period to ensure that the agreed upon raw materials/components are being used. Intellectual property: The supplier should license all intellectual properties, including copyrights and trademarks, that are used in the manufacturing of the product. The license is granted to the supplier only to fulfill its obligations under the agreement. Terms: The parties can extend or decrease the term of their agreement upon request by the buyer. Buyers should have enough time to make their initial investment back. Termination: Like most agreements, termination events include any event that gives rise to an immediate right of termination (e.g. Termination: As with most agreements, termination events will include any event that gives rise to an immediate right to terminate the agreement (e.g. unauthorized buyer’s use of intellectual property and violation of noncompete conditions). Non-competition. An OEM relationship involves substantial intellectual property transfer as well as confidential information. The supplier must not manufacture additional products. The supplier’s directors, management and affiliate companies must be monitored. This could lead to the product being sold in China as well as other markets. Arbitration: As manufacturing tends to be concentrated in lesser-developed regions in China in addition to cost/time/reliability benefits often associated with arbitration, we advise clients to select arbitration for dispute resolution. Arbitration can be done in China, or internationally (in any New York Convention signatory country), but domestic arbitration gives buyers access to Chinese courts for interim relief. Foreign companies that decide to produce in China should have a well-drafted Manufacturing Contract. If they do not meet these requirements, the contract can expose the Chinese company to legal liability. Steven Cheng, the founder of Topworks Plastic Mold, a China injection molding company with the most complete services, from design to production. Topworks provides customers with a one-stop service for Polycarbonate injection molding and ABS injection molding. The company’s professional team has excellent product knowledge of the plastics industry, which enables it to provide customers with quick responses and high-quality service. |
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Frequently asked questions
What are the key elements of an injection molding contract with Chinese manufacturers?▼
A solid injection molding contract should include clear product specifications, binding purchase obligations, agreed prices with reasonable annual increases, quality control terms, raw materials documentation, intellectual property licensing, contract duration, termination clauses, and dispute resolution methods like arbitration.
How can foreign companies protect their intellectual property in injection molding contracts?▼
Suppliers must license all intellectual properties including copyrights and trademarks exclusively for fulfilling contract obligations. Include non-competition clauses preventing the supplier from manufacturing competing products, and monitor supplier directors, management, and affiliate companies to prevent unauthorized use or market competition.
What quality control measures should be included in manufacturing contracts?▼
Contracts should specify terms allowing buyer access to production sites with short notice, require suppliers to provide lists of their own suppliers and purchase orders over set periods, and ensure agreed raw materials and components are consistently used throughout production.
What price terms are recommended for injection molding contracts?▼
Parties should establish fixed prices for the specified products and limit annual price increases to no more than 5%. Prices typically remain in effect for the full contract duration or specified portions, with clear agreement on adjustment mechanisms.
Why is arbitration recommended for resolving disputes in Chinese manufacturing contracts?▼
Arbitration offers cost, time, and reliability benefits. Selecting domestic arbitration in China allows foreign buyers access to Chinese courts for interim relief, while international arbitration can be conducted in any New York Convention signatory country for added flexibility.