Ethos Business Law

Recently, a number of my clients have outsourced manufacturing to international companies.  While this is a multi-faceted decision involving price, security, expertise, logistics, convenience and many other factors, I put together a brief list of items you should consider when evaluating an international manufacturing relationship:

• Know your manufacturer
• Know the culture
• Compare similar metrics between manufacturers (apples to apples)
• Independently research the manufacturer’s reputation
• Carefully review the manufacturer’s financial performance
• Visit the facilities
• Conduct a factory audit
• Consider intellectual property rights and protections
• Determine responsibility for product specifications, changes and improvements
• Agree to detailed commercial terms
• Understand and apportion currency risks
• Understand “hidden” costs, such as transportation, import duties, VAT and other incidental costs
• Consider independent testing of your products
• Know the legal and regulatory landscape that affects your manufacturing and importing
• Have a back-up plan or second source — avoid single-source situations
• Have a reverse logistics plan from the start
• Be sure to negotiate a solid warranty and indemnification
• Consider recall and product liability exposure
• Consider how to best approach a dispute in another country
• Execute a detailed Manufacturing Agreement BEFORE you start to source products

If you have any thoughts to add to this post, please provide comments below.

For more information or help with an international manufacturing relationship, please contact attorney David Baer at david.baer@ethoslaw.com or 612.767.3311.