Internatioal Trade Tips: Two words worth thousands when dealing with Chinese suppliers
Author: Lawman Tseng
30% paid in advance or 30% deposit is a commonly agreed term in international trade, however, when interpreting under Chinese laws, buyer and supplier often have different understanding towards them if supplier fails to perform the delivery obligation and buyer chooses to terminate the P/I. Buyer tends to have 30% refunded and further claim 30% as losses, but supplier tends to return 30% only.
In this case, the judge in China will favor the supplier. The word “定金ding jin” is a legal term with a penalty meaning, comparing to another word “订金ding jin” without any penalty. They share the same pronunciation and are often translated into the same English word DEPOSIT or paid in advance. Unless otherwise agreed, the supplier is unable to claim another 30% as losses by using the word deposit only.
Therefore, it is strongly advised that you add 定金 after the deposit in P/I.
Can jurisdiction solve the problem?
No. Even you do not know Chinese laws, using your country’s own judicial system is still an extreme waste of time, you need to serve a foreign entity, check out the treaty, and apply for recognition of the judgment, not to mention if you wish to apply for an interim measures.