Legal Considerations When Sourcing from China

When engaging in cross-border procurement from China, international buyers must carefully navigate several legal aspects to ensure compliant and successful business operations. Key considerations include:

Contractual Agreements
Drafting clear purchase contracts specifying product specifications, payment terms, delivery schedules, and quality control standards is critical. Ensure contracts comply with the United Nations Convention on Contracts for the International Sale of Goods (CISG), which China ratified. Include dispute resolution clauses favoring internationally recognized arbitration bodies like the China International Economic and Trade Arbitration Commission (CIETAC).

Product Compliance
Verify that sourced products meet destination country regulations (e.g., CE marking for EU markets, FCC certification for the U.S.). Chinese suppliers should provide valid test reports from accredited laboratories. For electronics, confirm RoHS compliance for hazardous substance restrictions.

Intellectual Property Protection
Conduct thorough due diligence to avoid IP infringement. Use China’s trademark database (CNIPA) to check product designs and logos. Include IP indemnity clauses in contracts, requiring suppliers to bear liability for infringement claims. Consider registering trademarks through China’s Madrid Protocol membership for international coverage.

Customs and Export Controls
Confirm suppliers have proper export licenses, especially for dual-use items. Verify Harmonized System (HS) codes with Chinese customs authorities to prevent shipment delays. Review China’s Catalog of Technologies Prohibited and Restricted from Export to identify restricted product categories.

Labor and Ethical Standards
Require suppliers to provide social compliance audit reports (e.g., SMETA, BSCI) validating adherence to Chinese labor laws regarding working hours, minimum wage, and workplace safety. For textile/apparel sourcing, confirm compliance with the Cotton Industry Responsibility Alliance (CCIA) standards.

Taxation and VAT
Understand China’s Value-Added Tax (VAT) refund policies applicable to exported goods. Ensure suppliers provide valid fapiao (official tax invoices) containing unified social credit codes. Consult tax professionals to optimize customs duty payments under free trade agreements between China and your country.

Payment Security
Use secure payment methods like Letters of Credit (L/C) confirmed by reputable banks. For smaller orders, consider escrow services through platforms like Alibaba Trade Assurance. Verify beneficiary account information matches the supplier’s official business registration.

Data Privacy Compliance
When sharing business information with Chinese partners, ensure compliance with China’s Personal Information Protection Law (PIPL) and relevant data localization requirements. Include data processing agreements in contracts where personal data transfers occur.

Maintaining ongoing communication with Chinese local authorities and consulting legal professionals specializing in China-EU/US trade relations helps mitigate risks. Regular supplier audits and monitoring regulatory updates through platforms like China’s State Administration for Market Regulation (SAMR) website enhance compliance management.