Verifying Secondary Chop Authority in PRC Master Supply Agreements
Verify secondary contract chops against Public Security Bureau 13-digit codes and secure a primary-chopped Power of Attorney to prevent non-authorization defenses.
Tooling Recovery Rights
Meaning
Proprietary entitlement under Chinese manufacturing agreements allows a foreign buyer to reclaim possession of production molds and specialized machinery from a local supplier. When the manufacturing relationship terminates, tooling recovery rights ensure that the buyer can retrieve the physical tooling to prevent its unauthorized use or retention. These rights must be explicitly detailed in the contract to overcome the supplier’s possessory lien under Chinese civil law.
Contractual Protection
Drafting these clauses requires specifying that the buyer retains full ownership of the tooling, regardless of its physical location. The agreement must outline the supplier’s obligation to return the molds within a set number of days upon request. To ensure that tooling recovery rights are enforceable, the contract must include a provision stating that the supplier waives any right to assert a lien over the equipment.
It should also specify a high daily liquidated damages rate for any delay in returning the molds.
Judicial Enforcement
Enforcing these rights in a Chinese court involves applying for a pre-litigation asset preservation order to secure the physical equipment before the supplier can hide it. The buyer must provide a financial guarantee to the court, such as a cash deposit or a bank guarantee, to cover potential damages to the supplier if the claim fails. Once the court grants the order, court officers will secure the tooling, preventing the supplier from using or destroying it.
This judicial intervention is the only reliable way to recover molds when negotiations break down.
Procedural Defense
Defending against supplier claims for unpaid invoices or design modifications is a common obstacle during recovery. The supplier may refuse to release the molds, citing outstanding payments. Having a clear record of payment for the tooling itself allows the buyer to separate the ownership issue from general commercial disputes.