In a typical arrangement, Company X provides Manufacturer Y with the specifications and possibly materials necessary for the manufacturing process. If you have completed your product specifications only after we have been able to perform your manufacturing contract, we may provide in the contract that these specifications will be “provided by the buyer as later”. You must then clearly identify your final specifications, which control the manufacturing process and defect criteria. The same goes for the final production prototype. If this will only be completed after the conclusion of your manufacturing contract, we must record that it is “as approved by the buyer before the start of production”. Again, you need to be clear with your factory about what constitutes the approved final production prototype. International manufacturing contracts are used when a company hires another company in another country to manufacture its products. To guide you, I have integrated a few pages below of an international standard manufacturing agreement. 7. How long is your contract for contract manufacturing? Since you are not obliged to place an order, I recommend a three-year period with subsequent automatic renewal for renewal periods of one year, unless one of the parties notifies its intention to terminate the contract in advance in writing. It doesn`t require you, but it does require the factory to work with you for three years. 10.
Your orders must indicate an “early” delivery date. If the delivery is made more than two weeks after the scheduled delivery date, a fee of 1% per day will be charged up to 30 days. This amount will be treated as a credit and the purchase price to be paid from your first payment on your next order will be reduced by the amount of the credit. After 30 days (now six weeks from the scheduled delivery date), the work is considered to be in breach of contract and you have the right to terminate. If you do not cancel, the penalty of 1% per day will continue to apply. This sample can be used to contract products such as food, textiles and clothing, furniture, toys, electronic components, machinery, etc.: 12. You pay according to the conditions of 35/65. When exactly is each payment due? 35% five days from the acceptance of the order? Note that if production of your product does not begin until the factory has received your first 35% payment, this will further delay work on your product.
That is why it is important that we are aware of this. When is the 65% payment due? “After completion” of your product? “Upon delivery” of the Product or “upon delivery” to the Carrier. “Shipping” is common and means nothing and leads to all kinds of problems. What documents will be provided to you in relation to this second payment? This can be quite complicated and we need to clarify this with the factory. If it is not clear, I will provide you with a general provision that you can clarify in your accepted order. 2. What agreement have you reached on the price? Do you have a quote that we include in the manufacturing agreement? Otherwise, we can refer to a separate quote. What is the basis of the price? What is the shipping time? It looks like you`ll be shipping intermodally. Most intermodal carriers suggest FCA as the right term, but that doesn`t answer the question of where the factory will make the delivery to the carrier. Will it be at the factory or at the port? As we have discussed, you need to be clear about the procedure and the right shipping time and provide me with 6 information.
Your product is an individual product. They own all the intellectual property and the factory is not allowed to manufacture for itself or for any other customer. Is that right? For confidential information, we provide that your existing NNN agreement is controlled. Confidential information is limited to what is required in addition to the NNN, if any. I invite you to read this article on NNN agreements as it gives you a better idea of what they protect and how they protect your intellectual property. This article is about China`s NNN agreement, but practically everything is the same for Thailand. Last week, a relatively large company emailed me asking what our law firm charges for “model production agreements in Thailand and Vietnam.” A few hours later, I received the same request from another company for Mexico. In response to those emails, I explained why we don`t have manufacturing agreements anywhere in the world and why they shouldn`t want such an agreement. See contract templates in China for $99 each. While the majority of my cases focus on international litigation or arbitration, I feel great enthusiasm in structuring international commercial contracts. I`m posting the email below (without any credentials) because it illustrates so clearly why a manufacturing contract template can`t work and doesn`t make sense even in a peak situation.
An international manufacturing agreement must contain at least the following 5 terms: The other day I received a call from a company asking for help structuring an international manufacturing contract. It is also important to point out that intellectual property rights (patents, industrial designs, etc.) are usually transferred to the manufacturer for the duration of the contract. Then, over the weekend, while cleaning up my emails, I found one where I had been cc`ed. This email came from one of our international manufacturing lawyers to a client. The lawyer who sent this email was simply working with a small company with a great product that is quick to make its product in time for the upcoming holiday season in Thailand, and – like so many others – is late because it recently changed production from China to avoid tariffs. See Moving Your Production from China: The First U.S.-China Customs Decisions and Updates: What You Can (and Should) Do NOW. International transactional work allows me to gain insight into the business side of many different industries. 3. You have indicated that you have already paid for your “tools”. Please describe and provide a copy of the order or other documents proving it. In our standard contract, we provide for a detailed tooling and ownership procedure. If you want to make this shorter and less threatening, we can simplify the determination of tools.
This would make sense if the value of the tools is low and easily replaceable. As with all agreements, drafting an international manufacturing agreement requires special attention to determine the scope of the transaction. 5. How can I pay for the packaging? Will this be included in the cost of the goods or will it be charged separately? Have you agreed on a packaging program with the factory? If so, please describe who pays for what, who takes care of the printer, who designs what, who sources materials, and list any deadlines. Have you made a deposit or other security or are you going to pay any of them? I assume you own the copyright to the packaging design. Are there any other concerns you have? Before we can begin the elaboration, we need to clarify/confirm the conditions. Please note the following information. Once you have answered all these questions, I will start working on the agreement. Once all the following points are clear, I can usually finish a draft in two to three days, so it is important to complete this phase as soon as possible to complete the design quickly. I look forward to hearing from you soon. 13.
After receiving your products in the United States, you have the right to inspect. For defects discovered during this inspection, the factory is obliged, at its discretion, to repair or replace or credit your next order. The 3% “epidemic failure” rule still applies. Will the factory also give you a product warranty? If so, will it be one year or two years or some other period? What is the factory if there is a product recall due to its negligence? Total cost? Total costs include consumer lawsuits and government-ordered penalties. Due to the nature of your product, these are obviously important topics that we need to discuss. For me, now that it is clear that you will not be done with these materials, I can start creating your contract manufacturing contract and we will do our best to complete our design and translation as soon as possible. In the meantime, I suggest you work with the factory in Thailand to clarify your plan and get confirmation that they have sufficient capacity to complete your order on time. 4. Do you have a written QC program/procedure? If so, please indicate this. Otherwise, we will create a general description. 9. To secure the plant so that it must accept your reasonable orders, provide a 12-month rolling estimate of purchases and update it quarterly.
The work has five days to refuse this in writing, and if it does not, it is considered accepted. The factory must then accept any order you submit as part of the projection in terms of quantity and delivery date, provided that it corresponds to the agreed price. You must complete an initial cost estimate, which we can attach as an exhibition. It is not uncommon for these issues to be closed at the last minute. In fact, it is not uncommon for these to change after the start of production. The challenge for you is to keep track of what has been approved and what applies to the final product being manufactured. We also need to be clear with the factory that, although it is involved in some or all of the process, your company owns everything and the factory will not have any intellectual property rights in anything. 8.
Your prizes will be blocked for one year. After one year, prices may be increased or reduced each year only on the basis of (a) changes in costs, up or down, and/or (b) changes in the exchange rate. .