A Lesson on Chinese Law: Blocking Seizure of Containers of Goods and Obtaining Access to the Cash of a Chinese Entity That Produced Defective Goods
Chine is home to millions of manufacturers - some excellent, and some not so excellent. HJM Asia Law provides an example of protecting the interests of global trading partners when a Chinese manufacturer produces defective goods.
One of HJM's Canadian clients had a contractual dispute with a Chinese company located in Xiantao city, Hubei Province. Due to the poor quality of the products manufactured by the Chinese supplier, the client terminated the contract and suffered losses such as rework costs, transportation costs and inspection costs. To recoup some of its losses, the client withheld part of a payment owed to the manufacturer. The Chinese manufacturer responded by seeking full payment through a complaint filed with the Hanjiang Intermediate People’s Court in Xiantao. The Chinese manufacturer also applied for seizure of containers owned by HJM's client. Twenty-five (25) containers were seized by the Court. Ten (10) containers were held in Shanghai customs, eleven (11) containers were held in Wuhan customs, two (2) containers were held in Qingdao customs and two (2) containers were held in Dezhou customs. To protect the interests of its client, HJM invoked article 93 of the Civil Procedure Law of the PRC. Under article 93, the plaintiff (in this case, the Chinese company) must provide a deposit before the Court is entitled to seize the goods. After investigating, HJM discovered that the Chinese company had not provided the required deposit. The firm then objected to the seizure due to the absence of the deposit, and pressured the cash flow of the Chinese company by requiring cash as deposit instead of providing real estate as deposit. Eventually, the Court seized four (4) bank accounts of the Chinese party in Wuhan and Beijing. HJM also assisted the client by obtaining the release of the seized containers by providing a deposit and filing a defence and counterclaim with the Court.