1. Introduction
In today’s globally interconnected economy, it’s critical to manage your business relationships diligently to protect your interests and those of your customers. Specifically, when dealing with Chinese suppliers, you should strive to protect your customer information and prevent these suppliers from contacting your customers directly. Here we will explain how you can do this effectively in China.
2. Add an NNN (Non-use, Non-disclosure, Non-circumvention) Clause to the Purchase Contract
The NNN clause is an important tool when doing business in China to prevent Chinese suppliers from directly dealing with your customers. This agreement essentially binds the supplier not to use or disclose any of your business secrets (like customer information) and not to bypass you to conduct business directly with your customers. An NNN clause explicitly included in your purchase contracts will provide legal cover against any such breaches.
Remember that all contracts that you use must be adapted to Chinese law and have jurisdiction set to China to ensure they are enforceable in China. Using Chinese in contracts will give you better protection in China, make your contracts enforceable, and avoid translation problems later in the Chinese court. If the contract is not in Chinese, the court will translate contracts into Chinese, which might lead to poor translations and less protection. Chinese courts seldom rely on rulings made in other jurisdictions outside of China, so it is important to adapt your contracts to Chinese law.
Local courts in China have the authority to execute judgments against Chinese corporations, making it simpler to enforce against suppliers in conflict situations. They also have the ability to seize a Chinese company’s assets if a disagreement occurs.
3. Instruct the Chinese Sellers Not to Display Any Specific Seller Information on the Goods or Packages
This is crucial to maintain anonymity in your dealings. Ask your Chinese supplier not to include their contact information, logo, or any other identifying information on the goods or packages. Instead, instruct them to use your company’s branding and contact information. This not only hides the Chinese seller’s information from your customers but also reinforces your brand.
4. Don’t Display the Chinese Sellers and Your Customer’s Information on the Bill of Lading
The Bill of Lading is an important document in international trade. However, it also contains information that can lead back to your Chinese supplier. Therefore, make sure not to include the Chinese supplier’s information on it. Also, avoid putting your customer’s contact details on the Bill of Lading. It is sufficient to include just the delivery location without specific customer details.
5. Make Two Purchase Agreements: One between Chinese Sellers and You and Another between You and Your Customers
This strategy can further help to isolate your supplier and your customers. The first agreement should govern the relationship between you and your Chinese supplier, while the second one should regulate the relationship between you and your customer. It ensures that your Chinese supplier doesn’t have a direct legal or contractual relationship with your customers. It’s essential to seek legal counsel to ensure that these contracts are valid, enforceable, and beneficial to your business.
6. Use a Third-Party Logistics Provider (3PL)
A 3PL can act as an intermediary in the supply chain process, providing an additional layer of separation between you and your Chinese supplier. They handle receiving, storing, and shipping products on your behalf, meaning your suppliers wouldn’t necessarily know the final destination of the goods.
7. Regularly Audit Your Supplier’s Compliance
Even with all these measures, regular checks are crucial to ensure your Chinese supplier’s compliance with these terms. This can be done through audits or surprise inspections of packages, documents, etc.
8. Conclusion
By implementing these strategies, you can secure your customer information, maintain control over your business relationships, and prevent any unwanted communication between your Chinese suppliers and your customers. It’s important to be open about your needs and expectations with your suppliers from the outset to build a long-lasting, mutually beneficial relationship. Remember to use contracts that are adapted to Chinese law, ensuring that they’re enforceable in China and protect you.
FAQ
1. What is an NNN agreement? An NNN (Non-use, Non-disclosure, Non-circumvention) agreement is a legal contract used in international business. It prohibits the supplier from using your business secrets, disclosing them to others, or bypassing you to do business with your customers directly.
2. How can I prevent my Chinese supplier from putting their information on the packages? You can instruct your Chinese supplier not to include their information on the goods or packages. It’s a good idea to include this as a term in your contract. Instead, you can ask them to use your company’s branding and contact information.
3. What information should I avoid putting on the Bill of Lading? It’s recommended to avoid putting the Chinese supplier’s information on the Bill of Lading. Also, try not to include specific customer details other than the delivery location.
4. Why should I create two separate purchase agreements? Creating two separate purchase agreements, one with your Chinese supplier and one with your customers helps to isolate these two parties from each other. This ensures that your Chinese supplier doesn’t have a direct legal or contractual relationship with your customers.
5. What is a Third-Party Logistics Provider (3PL)? A Third-Party Logistics Provider (3PL) is a firm that provides outsourced logistics services. They handle tasks such as transportation, warehousing, picking and packing, inventory forecasting, order fulfillment, packaging, and freight forwarding.
6. How can I ensure that my Chinese supplier is adhering to the agreed terms? You can regularly conduct audits or surprise inspections of the packages, documents, etc., to ensure that your Chinese supplier is complying with the agreed terms.
7. What if my supplier breaches the NNN agreement? If your supplier breaches the NNN agreement, it could be grounds for legal action. However, international lawsuits can be costly and time-consuming, so it’s better to prevent breaches by selecting trustworthy suppliers, clearly communicating your expectations, and regularly auditing their compliance.
Contact us if you need legal help in China, like drafting contracts that follow Chinese law, background investigation of Chinese companies, protecting patents, trademarks, and verification of contracts to the law in China, etc.
If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Manager, Jan Erik Christensen, at janerik@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.
