Why Supplier Agreements Fail To Protect You

International Trade Resources Podcast

On this episode of the International Trade Resources Podcast with your host, Kim Kirkendall, we’re sitting down with Art Dicker. Art is a senior lawyer at R&P China Lawyers, a full-service PRC law firm advising international businesses in China. He’s spent the last 15 years working in China to advise technology, manufacturing, and consumer companies on structuring their investments and managing legal risk in their operations here. He’s the host of the podcast Ganbei and is involved in the American Chamber of Commerce in Shanghai.
Our topic today surrounds supplier agreements and why they are so important. Many people will establish basic Purchase order Terms & Conditions with their supplier, who will then, in turn, send back their acceptance with their own Terms & Conditions. This can lead to a lot of obscurities in whose terms control. A basic purchase order with basic terms and conditions is not going to be comprehensive enough to protect the seller. In addition, a supplier agreement leads to a better understanding of expectations between you and the supplier. It can protect payment and ownership, which T&C’s don’t do. Art and Kim go on to discuss what many companies miss when drafting a supplier agreement and problems that can arise.
A major point of contention that foreign companies face when dealing with Chinese suppliers is agreeing on indemnification and insurance coverage. Indemnification is essentially another party promising to defend you in case you are sued by a third party. The idea of a supplier defending you if you’re sued comes as a foreign concept to many Chinese business owners, especially when dealing with IP ownership outside of China. So, how can the disconnect be addressed? Art and Kim discuss strategies you can employ to make sure you are covered.
The issue of IP ownership has evolved in China over the years, and it’s critical to be very clear about the IP you’re using. In China, any improvement the supplier makes to your technology, can mean the technology is theirs, unless you can argue otherwise. Art and Kim extrapolate on why NDAs aren’t enough, and ways you can protect your IP ownership.
Finally, there is one major, but simple mistake many companies make that can make or break your IP, and Art points it out. You don’t want to miss it.
Things You’ll Learn

1. The difference between Terms and Conditions and a Supplier Agreement, and why they are so important.
2. Indemnification and Insurance coverage as it relates to Chinese suppliers.
3. How to protect your IP ownership and what to look out for when drafting an agreement.

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