What Belongs in a China Purchase Agreement

The contract terms that actually protect you — and what typically goes wrong when they're missing.

Most disputes between buyers and Chinese suppliers don't come from bad faith — they come from purchase orders that never specified the terms that mattered. An invoice with a price and a quantity isn't a contract. The following sections are what a purchase agreement should actually cover before you send a deposit.

Identify the parties correctly

Use the supplier's full registered legal name — the one on their business license — not a trading name or a name that only appears on marketing materials. If a trading company is involved, name it explicitly and clarify whether it's acting as principal or agent. This matters directly if you ever need to enforce the agreement.

Attach a binding product specification

Reference a detailed specification sheet as a signed attachment: materials, dimensions, tolerances, packaging, labeling, and any required certifications. "As per sample" is not a specification — samples get lost, and memory of what a sample looked like is not enforceable. The spec sheet is what an inspector checks production against.

Define the quality standard and inspection process

Specify the inspection standard you're using — commonly an AQL (Acceptable Quality Level) sampling plan, which defines the maximum number of defects tolerated in a random sample before a shipment is rejected — and who conducts the inspection (buyer, a hired third party, or both). State explicitly what happens if a shipment fails: rework at the supplier's cost, a price adjustment, or the right to reject the shipment and withhold final payment.

Structure payment to match your leverage

A common structure is a deposit (often 30%) at order confirmation and the balance before or against shipping documents — but the split should reflect your relationship history with that supplier, not just convention. With a new, unaudited supplier, hold as much payment as possible until after inspection. Specify the payment method (wire transfer, letter of credit) and, for wires, confirm the receiving account name matches the registered company exactly.

Clarify tooling and IP ownership

If the order requires custom molds, tooling, or dies, state in writing who owns them once paid for — and get physical possession or a written release if you switch suppliers later. Without this, a factory that made your tooling has no obligation to hand it over, or to stop using it to produce for someone else. Address design and IP ownership the same way: what you're paying for should include a written assignment of relevant rights, not just an implied understanding.

Set delivery terms and lead time consequences

Specify the Incoterm being used (FOB, EXW, CIF, etc. — these determine exactly where responsibility and cost transfer from seller to buyer) and a firm production lead time with a stated consequence for missing it, whether that's a penalty clause or a defined cancellation right.

Include a dispute resolution clause

State which country's law governs the agreement and where disputes will be resolved — arbitration (commonly through CIETAC, the China International Economic and Trade Arbitration Commission) is generally more enforceable against a Chinese counterparty than a foreign court judgment. Silence on this point means you'll be negotiating it after a dispute has already started, from a weaker position.