Garrett Temple posted an update 3 weeks, 3 days ago
Of course, China has become the world’s leading manufacturing base. However, together with the recent product safety scares as well as the constant media attention, "Made in China" has developed into a high-profile gripe for consumers and retailers. Now how will a foreign company minimize the potential risks of tainted/substandard products created in China? On this page, we discuss car loan terms which foreign companies should think about when coming into OEM relationships with Chinese suppliers. (Basically we highlight some of that which you feel will be the main issues to get covered by the agreement, we know that each case is unique and there isn’t any such thing as being a ‘typical’ OEM arrangement.)
Standard Form Agreements. An OEM could have a standard form agreement that they may well be more than ready to provide to foreign companies who would like to use their helps. Even if this may lower costs in the beginning and invite the foreign company to ‘build favor’ with their Chinese counterpart, using this type of agreement is nearly never advisable, and foreign companies can be wise to consult counsel, that will profit the foreign company to properly negotiate and prepare agreements.Remember that we often suggest that the written agreement is preceded by preparation and negotiation on such basis as a company term sheet, that will outline the most important relation to its cooperation. The agreed points from the term sheet then serve as the foundation for the written agreement.
Major Relation to its Agreement. Below, we highlight several major (though non-exhaustive) terms which should be a part of an OEM Agreement:
1. Products and Specifications: The products to be manufactured ought to be well-defined in the agreement, along with product specifications which needs to be described in more detail in relevant appendix(es).
2. Forecasts and Binding Purchase/Supply Commitments: As OEM Agreements often require that firm orders are positioned through Purchase Orders, to ensure that you’ve a binding supply/purchase commitment in the agreement itself, the parties will frequently designate some minimum commitment on sides, to produce and purchase a certain amount of product within a moment period. In addition to the minimum requirement, the customer will frequently supply a non-binding forecast to supplier, in a way that supplier can plan and allocate adequate resources (often 6-, 12-, 18-, 24- month terms).
3. Price: For anyone products designated as described previously, the parties have to research firm prices, that can be either effective through the term with the agreement, or at least a portion thereof, be subject to (we propose) maximum periodic price increases. Further, it’s beneficial to include for discounts upon meeting certain pre-determined purchase volumes.
4. Qc: Buyer and supplier will agree with certain terms afforded to buyer/required of seller for conducting product qc. Typical terms include i) access (often on short or no notice) to production sites, and ii) random testing of each and every batch of goods before dispatch to buyer. Further, the parties may, with regards to the valuation on the documents, look after an associate from the buyer to get on-site with a full-time/regular basis, for that reasons like assisting in qc. (The buyer’s representative might also monitor supplier’s use of intellectual property along with other improper dealings, though their effectiveness will usually depend on his/her loyalty to the buyer.)
5. Term: The parties determines the right term because of their contract, and may even make the agreement renewable on request by buyer. This term ought to be sufficiently long to be able to be sure that buyer’s wind turbine might be adequately recovered.
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