Quality Disputes with Chinese Suppliers: Your Legal Options

You ordered 10,000 units from your Chinese supplier, but when they arrive, they don't meet specifications. The color is wrong, dimensions are off, or they simply don't work. What are your options?

Immediate Steps When You Discover Quality Issues

1. Document Everything

Before anything else, create a thorough record:

• Photograph and video the defective products
• Keep samples of defective items
• Document the inspection process
• Preserve all packaging and shipping documents
• Note the date and circumstances of discovery

2. Notify the Supplier Immediately

Send written notice to your supplier as soon as possible. Under Chinese law and most contracts, you have a limited time to raise quality objections — often just days after delivery.

3. Get Independent Inspection

Consider hiring a third-party inspection company to document the defects. Their report carries more weight than your own assessment in any dispute.

Your Legal Remedies

Rejection and Refund

If goods fundamentally fail to meet specifications, you may be entitled to:

• Reject the entire shipment
• Demand a full refund
• Recover shipping and inspection costs

However, rejection rights are often limited by contract terms and timing.

Replacement or Repair

For less severe defects, you might negotiate:

• Replacement of defective units
• Repair at supplier's expense
• Supplier sends workers to fix issues at your location

Price Reduction

If you can still use the goods but they're not perfect, negotiate a price reduction proportional to the defect severity.

Damages

You may be entitled to compensation for:

• Direct losses (cost difference, inspection fees)
• Consequential damages (lost sales, customer claims)
• However, many contracts limit consequential damages

Practical Negotiation Strategies

Leverage Your Position

• Unpaid balance: If you haven't paid in full, you have leverage
• Future orders: Suppliers value ongoing relationships
• Reputation: Threat of negative reviews on sourcing platforms

Propose Practical Solutions

Chinese suppliers often respond better to practical proposals than legal threats:

• Partial refund plus keeping the goods
• Credit toward future orders
• Supplier covers rework costs

Escalate Appropriately

If initial discussions fail:

1. Escalate to supplier's management
2. Send formal legal demand letter
3. Consider mediation before litigation

When Negotiation Fails

Arbitration

If your contract includes an arbitration clause (it should), this is usually your best option:

• CIETAC (China) or HKIAC (Hong Kong) are common choices
• Awards are enforceable in China under the New York Convention
• Process is typically faster than litigation

Litigation

Court action in China is possible but has challenges:

• Requires Chinese legal representation
• All documents must be translated and notarized
• Can take 6-18 months or longer

Prevention: Contract Provisions That Matter

The best time to address quality disputes is before they happen:

Detailed Specifications

• Include precise technical specifications
• Reference industry standards (ISO, etc.)
• Attach samples or detailed drawings

Inspection Rights

• Right to inspect before shipment
• Third-party inspection requirements
• Clear acceptance/rejection procedures

Quality Guarantees

• Warranty period and scope
• Defect rate tolerances
• Remedies for breach

Payment Terms

• Retain portion of payment until inspection
• Letter of credit with inspection conditions
• Milestone payments tied to quality checks