NDA's, NNN's and China Sourcing Agents

Discussion in 'International Business' started by Clive Wryht, Aug 27, 2020.

  1. Clive Wryht

    Clive Wryht UKBF Newcomer Free Member

    2 0
    Morning all,

    I'd like to use a China sourcing agent for a brand new product design and having approached a well-known one I have been sent one of their own NDA's to sign (before anything gets taken further). The received wisdom across the web seems to be that in China NDA's just don't work and that you need an NNN agreement instead. I could get an NNN drawn up (bilingual) by a freelancer for a reasonable sum instead of using their NDA. Now, the difference here is that I am dealing with a Chinese-based Sourcing agent, not a manufacturer so what advice can members offer here?

    Cheers

    Clive
     
    Posted: Aug 27, 2020 By: Clive Wryht Member since: Jan 27, 2019
    #1
  2. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Legend Full Member

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    Get a China lawyer to arrange the NNN and ensure it includes what you want it to include.

    It should be in Mandarin (for legal purposes) and in English (so you understand it).

    You should be preparing/giving the NNN to the agent and more importantly the supplier.
     
    Posted: Aug 27, 2020 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #2
  3. consultant

    consultant Your Business Community Staff Member

    5,664 797
    ...and also make sure you have lots of money if the agreement is broken and you want to pursue.

    Unless you are a really big company, I wouldn't waste the money.
     
    Posted: Aug 28, 2020 By: consultant Member since: Jan 21, 2008
    #3
  4. Maple Sourcing

    Maple Sourcing UKBF Regular Full Member

    370 79
    In my opinion, the key is to find the trustworthy person. NNN or NDA is just a piece of paper for dishonest people.
     
    Posted: Sep 4, 2020 By: Maple Sourcing Member since: Oct 8, 2012
    #4
  5. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Legend Full Member

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    I disagree strongly with the above 2 comments.

    If orders are (say) over £20k, it's essential to have a contract to protect all confidential elements of the order.

    If you're dealing with orders over £100k, it's reckless not to have a contract with clear penalties if breached.

    An order does not rely on a 'trustworthy person', but relies on the whole company and it's supply chain connected with the order.

    A good contract will safeguard you, whether its used as a deterrent, or to emphasise the contract terms to employees and component suppliers.

    Any large orders we receive, we have an NDA (or NNN) contract in place. To date, there have not been any instances where a contract has been breached.

    Not sure if I could say the same if we didn't have any contracts in place.

    Just my opinion. . . . . . . . and over 30 years experience of working in China.
     
    Posted: Sep 4, 2020 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #5
  6. consultant

    consultant Your Business Community Staff Member

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    I totally agree with this, but an NDA isn't a trading contract!
     
    Posted: Sep 4, 2020 By: consultant Member since: Jan 21, 2008
    #6
  7. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Legend Full Member

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    Each individual order will have a P.I (The Contract for that specific order).

    Each supplier should sign an NDA or NNN,(The Confidentiality Agreement for all your orders with that supplier). This covers all orders with that supplier.

    The NDA is a legal contract.
     
    Posted: Sep 4, 2020 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #7
  8. consultant

    consultant Your Business Community Staff Member

    5,664 797
    And what happens if the supplier breaks the NDA or NNN? How much to take them to court and enforce it?

    Whilst my experience is a few years old, I was involved in multi million dollar deals with suppliers and, sadly, it was not uncommon to be let down by suppliers. Even with offices in HK, Shenzhen and Shanghai, I can't remember ever taking a supplier to court.

    I am sure some companies do e.g. Apple, however, for most buyers, they would not have the funds to do so.
     
    Posted: Sep 4, 2020 By: consultant Member since: Jan 21, 2008
    #8
  9. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Legend Full Member

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    As my post above suggests, if it acts as a deterrent, it's worth it for that alone.

    To-date I have not had any instances where litigation has been required, which may well be the effect of the NDA signed.

    I've recently had contracts with John Lewis and they have specifically asked for an NDA to be in place.

    In the vast majority of cases, it's the supplier that will want an Agreement in place. I'm referring to high street names, not your 'one-man' business.

    China has changed over the past few years. (Still far from perfect, but slowly learning the errors of their ways).
     
    Posted: Sep 4, 2020 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #9
  10. consultant

    consultant Your Business Community Staff Member

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    I was responsible for $4-500m of purchases, over half of that from China, for the biggest importer of consumer electronics and appliances in the UK, not a one-man business!

    Good that China suppliers want this in place, but the cost of litigation is as relevant for a big importer as it is for a one-man band!
     
    Posted: Sep 4, 2020 By: consultant Member since: Jan 21, 2008
    #10
  11. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Legend Full Member

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    I wasn't suggesting you was working for a one-man business. My point was that generally, for large companies an NDA is a fairly standard requirement these days.

    As mentioned before, if it acts as a deterrent, it's worth the cost alone.

    There are always litigation cases going on with all the major brands, whether in China, Europe or USA.

    An NDA should be a standard approach for any large order.

    If there is a breach of contract, you then have the option (after taking legal advice) whether to take it further.

    Without an NDA in place, your chances are virtually zero.
     
    Posted: Sep 4, 2020 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #11
  12. CHUKTC

    CHUKTC UKBF Regular Free Member

    172 29
    Clive going back to your original question we would strongly advise getting an NNN not NDA. You are the one (correctly) that wants protection so you should get it drawn up. If you have to enforce it it will be in a Chinese court so the Chinese version is the one which has legal precedence. They are n't just pieces of paper btw we have successfully sued on behalf of a client using an NNN. I do accept however the key is to try and choose the right supplier to work with in the first place - it does reduce the risk.
     
    Posted: Sep 4, 2020 By: CHUKTC Member since: Jan 2, 2019
    #12