Need an agreement template for your manufacturer or supplier based in China? Crafting a supplier agreement in both English and Chinese is a critical element to ensure smooth collaboration and protect buyer interests. To assist in this process, we’re offering a downloadable free template for a bilingual supplier agreement (a letter of understanding, LOU) to use for reference before you craft your own with legal counsel. (Note: This template is an example for of possible content to include in an agreement. Empress Brokers International LLC is not legal counsel; please use legal counsel to create enforceable agreements.)
The Importance of a Bilingual EN – CN Supplier Agreement
Navigating international business relationships requires clarity and understanding between parties. A bilingual supplier agreement in English and Chinese serves as a crucial document, bridging language barriers and aligning expectations between you and your China-based manufacturer or supplier. It establishes a solid foundation of the buyer’s expectations and rights, mitigates random price increases, and provides a pathway to legal recourse in case of disputes.
What We Think are Key Inclusions in a China Supplier Agreement
- Pricing, Payment, and Terms: One of the main uses of a supplier agreement is to set expectations on cost and reasonable, mutually agreeable controls on cost increases. Outline pricing structures, payment schedules, currency, and acceptable payment methods. Include terms related to currency fluctuations, tie pricing to raw material costs, and related indexes (as suggested by Willy C. Shih in HBR’s new supply chain book). The goal is to develop a long-term relationship with the supplier and help them navigate ways they can reduce their costs without compromising productivity. For example, one client Empress worked with kept a close tab on raw materials costs from upstream suppliers and was able to make recommendations to their first-tier supplier to switch to a lower-cost alternative.
- Include a Bill of Materials for Each Product: Get specific! Include the Bill of Materials (BOM) for every product. This helps you can verify the materials your supplier is using for compliance reasons and also to monitor pricing adjustments specifically broken down for materials, components, packaging, labor, etc.
- Specify Your Incoterms: Specify what Incoterm – a shipping term that defines the liability of a seller and buyer – you are agreeing to with you. Make sure to review Incoterm options and consult on the best Incoterm for your interest.
- Quality Control and Inspection: Supplier agreements are great for establishing the right to conduct ongoing factory and product inspections. Early on in the relationship, buyers should proclaim their right for themselves or a third party to visit the factory at any time. Detail quality assurance protocols, inspection procedures, and acceptance criteria for products. Specify responsibilities for defective or non-compliant goods.
- Examples of Certifications and Lab Test Results: Does your product require specific certifications or lab tests? Make sure to include the expected results in your agreement the supplier is clear they are responsible for meeting the standards.
- Intellectual Property Rights (IPR): Many companies will craft an NNN agreement as a first step when setting up a relationship with a supplier or manufacturer, but supplier agreements reinforce that commitment or even take it a step further. Address ownership of designs, trademarks, patents, and confidentiality clauses to safeguard proprietary information.
China Supplier Agreement (LOU) Template Download
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An agreement with a China-based manufacturer is fundamental to fostering a productive and transparent business relationship. By addressing crucial aspects in both English and Chinese, this agreement serves as a cornerstone for collaboration, minimizing misunderstandings, and setting a framework for successful partnership. Craft a robust and tailored agreement that aligns with your business objectives and ensures a smooth and mutually beneficial relationship with your China-based supplier.
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