My Chinese Supplier Sent Defective Goods — What Now? Step by Step

Defective goods from China. Those words make every importer who has been through it shudder. The container arrived at the warehouse, and during unloading it turned out that 30% of the goods are damaged, non-conforming to specification, or simply not what was ordered. What do you do?

From over 25 years of experience in the Chinese market, we know that the reaction in the first 48–72 hours determines whether you recover your money or goods — or lose everything. Here is the complete action plan.

Step 1: Stop and document everything (0–24 hours). Before calling the factory, supplier or lawyer — take photos. Lots of photos. Photograph packaging, labels, defects, batch numbers, product codes. Record an unboxing video. This documentation is your only evidence in subsequent negotiations. We know from experience: factories very often dispute claims arguing that damage occurred during transport or at the customer's premises. Without photographic documentation you are in a very weak position.

Step 2: Classify defects and calculate losses. Not all defects are equal. Divide them into: critical defects (goods cannot be sold/used, safety risk), major defects (significant portion of goods unusable) and minor defects (aesthetic, not affecting functionality). Count precisely: how many units, what percentage of the batch, what financial value. This number is your negotiating base.

Step 3: Check the contract and payment terms. The key question: how much has the factory already received? If you paid 30% deposit and 70% before shipment (standard FOB terms) — you are in a very weak position, because the factory has the full amount. If you paid 30% deposit and 70% after delivery or after inspection — you are in a much stronger position.

Step 4: Send a formal written complaint to the factory (don't call). Written communication (email) is crucial — it leaves a trail. Send: (1) description of the problem with attached photos and video, (2) list of defects with classification and quantities, (3) a single demand — agree on one of three: replacement of goods, partial refund, repair/remanufacturing. Give the factory 5 business days to respond. If there is no response — you have evidence of the claim being ignored.

Step 5: Escalation — options when there is no response or refusal. Option A: Mediation through an agent with physical presence in China. If you have an agent (like Oriental IMEX) who is the formal client of the factory — the agent escalates directly from a contractual position. This is the most effective route. Option B: CIETAC arbitration (China International Economic and Trade Arbitration Commission) — expensive and slow, but possible for large values. Option C: Report to the escrow/payment platform provider if the transaction was conducted through a platform. Option D: Accept the loss and change supplier — sad, but sometimes more cost-effective than escalation.

Step 6: Prevent it next time — pre-shipment inspection. The only effective method of preventing these situations is a PSI (Pre-Shipment Inspection) — conducted BEFORE the goods leave the factory. Oriental IMEX conducts inspections to AQL standard (ANSI/ASQ Z1.4-2008) with a report containing photos, test results and a PASS/HOLD/FAIL decision within 24 hours. The report is delivered before the payment transfer reaches the factory.

Our case: ultrasonic flow meter — FAIL inspection. In 2021 we conducted an inspection of ultrasonic flow meters for a European client. Order: 50 devices. During functional testing, 14 out of 50 units showed readings outside tolerance — measurement error above the permissible threshold for industrial devices. Inspection result: FAIL. The goods did not leave the factory. The client did not lose 70% of the order value. The factory carried out repairs and a re-inspection gave a PASS result. Cost of inspection: a fraction of the value of the saved transaction. Full report available in the Journal section.