Small Biz Starter Kit

Small Biz Starter Kit

Alibaba.com is the world’s largest business e-commerce marketplace connecting buyers and suppliers.

SOURCING INTERNATIONALLY

Seven Steps to Better Sourcing from Alibaba.com 5

Step 1: Marketing and Business Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Step 2: Product Sourcing and Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Step 3: How to Check Your Supplier Before Ordering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Step 4: Do I Need a Factory Audit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Step 5: Price Negotiation and MOQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Step 6: Best Payment Method and Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Step 7: Pre-Shipment Inspection is 70% of the Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

How to Verify Suppliers at the Early Stages of Trade from Alibaba.com 19

Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Do Some Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Factory Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Inspection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Find Trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Contacting Your Supplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

GETTING THE GOODS

Things You Never Knew About Logistics from Alibaba.com 23

Moving Goods: The Basics of Shipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Freight Forwarders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Shipping Documentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Quality Control and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Covering Against Lost: The Trader’s Guide to Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Resolving Payment Problems with Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

TRADING SAFELY

Safe Trading Tips from Alibaba.com 31

Tips for Safe Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Fraud Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Fraudulent Emails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Buying and Selling with Confidence and Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Websites for Fraud and Internet Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Get Your Guide to Safe Trading on Alibaba.com 40

Search Buyer Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Check Membership Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

TABLE OF CONTENTS

Alibaba.com is the world’s largest business e-commerce marketplace connecting buyers and suppliers. Alibaba .com Small Biz Starter Kit 2

Verify Companies Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Pay Securely Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Question? Ask It! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

IP Protection in China from Alibaba.com 43

Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Patent Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Trade Secrets and Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46


Sourcing InternationallyMaking Global Trade a Possibility for You

SOURCING INTERNATIONALLYMaking Global Trade a Possibility for You

SEVEN STEPS TO BETTER SOURCINGfrom Alibaba.com

■ Step 1: Marketing and Business Planing

■ Step 2: Product Sourcing and Certification

■ Step 3: How to Check Your Supplier Before Ordering

■ Step 4: Do I need a Factory Audit?

■ Step 5: Price Negotiation and MOQ

■ Step 6: Best Payment Method and Incoterms

■ Step 7: Pre-shipment Inspection is 70% of the Game

Seven Steps to Better Sourcing:

A Step-By-Step Guide to Sourcing from China













HOW TO VERIFY SUPPLIERS AT THE EARLY STAGES OF TRADE

from Alibaba.com

■ Reference

■ Do Some Research

■ Factory Visit

■ Website

■ Inspection Agency

■ Find Trader

■ Contacting Your Supplier


Editor’s Words

Did you ever have a hard time finding a trustworthy supplier? Do you know how to verify suppliers at the early stages of trade?

By participating in our forum activities, our members and experts have shared their great insights and experiences with the community .

Let’s see what they have to say on this topic:

Reference

Tips

To check if the supplier is trustworthy or not you can ask for any references of his existing clients .

(From Forum Member: khashar)

Do some research

Tips

To find a reliable supplier from a host of choices, it is important to know your requirements and communicate this to the suppliers in advance .

Do some research first about the company profiles, investments, locations and product lines .

If you can see their product lines suggest a very chaotic succession from products to products without a core strong objective, this should be a red flag . There should be a professionalism and innovation on the side of the suppliers to give you more than you want .

Factory Visit

Tips

The best option for you when you want to visit the factories is to have the company located within 50 km of each other, this way

your travel expense will be much lesser at first . It is important to visit the factory of your suppliers to know first hand their abilities and their long term relations with you .

(From Forum Member: GMPImportExport)

Website

Tips

Look at their website, they have to have one if they are serious . Search for meaningful content about themselves and what they do . If they have a telephone, contact email, an “about us” page . Scammers rarely go to all this trouble and usually have one web page that is 3 million characters long .

(From Forum Member: secondreview)

Inspection Agency

Tips

Inspection Agencies is the best way to go . Locate one . Pay your desired 2 - 3 percent and sleep easy .

Find Trader

Tips

Go to Hong Kong . Find a good trader there . Pay your 2 - 5 percent and let them take up the headaches .

Hong Kong laws will prevent anyone to deceive or dupe importers . They can get their hides peeled off for that .

(From Forum Member: multibizhk)

1. Contact your supplier through correspondences or emails, or call them directly if you can speak Chinese. If not, it doesn’t matter; most of the suppliers have their staffs to deal with the language problem.

EXPERT INSIGHTS

How to Verify Suppliers at the Early Stages of Trade?


A reliable supplier would ask you more detail about product before offering the price including description, specification, packing condition, payment method, delivery time, etc . Because all these factors would affect the price, the price offering is the most serious process and also the final transaction process . Go through this procedure you can feel and touch the suppliers and know how good they are . If the seller promise whatever you want, or the price they offered is too low than average, this is most likely fraudsters . Just ignore and go to next .

2. Face to face meet with your suppliers and establish personal relationships with them.After you find some of satisfied suppliers, invest a few thousands to make a trip to China, visit China Suppliers factories, face to face to discuss further detail about your products including price, payment term, quality inspection, delivery time etc .

(From Forum Member: kellyli)

Contacting Your Supplier

The trustworthy supplier on Alibaba is Gold member with trust pass verified member;

For Non-member, you may have to get some information to verify it by asking the supplier:

1 . To whom or which companies that they ever supplied, ask the reference letter from the supplier’s customer, ask its contact person and address to get some info .

2 . Cross checking, ask the permission from supplier that you will contact the companies that been given, to get their opinion and impression about the performance of this Supplier .

3 . Re-Checking their address, phone number, website, license (if any) etc via Search Engine (Google, Yahoo, AOL, Who is, Ask, Answer, etc) then the Yellow page&white page for their phone number (fix station) not the cell or mobile phone . The Zip or code post for the address . etc . ▪ It also must do the same to the references source that been given for . ▪ It may happen that those several contacts are from the same group/team .

4 . If you or any from your resource are good enough in IT (web mail) . ▪ You will and can check the web, domain, email, from the IP, hosting, server, etc; if it is unknown zone, unidentified, not trustworthy source or not authenticated

etc, then be aware of it, chose and select the most save, clear and authenticated one . ▪ If you unable to do this verification, consult with some IT expert or Web master to checking the e-mail, domain, website and the company statistic&historical . ▪ You may try use Alexa and few SE . too .

After the above Preliminary or sorting the nomination of few contacts/suppliers, next step is to email them each, and asking them by several correspondences of :

▪ Their company profile, organization, experiences, comparative advantages .

▪ Their achieving, best products, high demand items etc .

▪ How long been in export business in the items or similar with? etc .

Those are the very early stage points that you need to do to verify the supplier .

(From Forum Member: Oneuni)

EXPERT INSIGHTS

GETTING THE GOODSKnowing the Ins & Outs of Logistics

■ Moving Goods: The Basics of Shipment

■ Freight Forwards

■ Shipping Documentations

■ Quality Control and Inspections

■ Covering Against Lost: The Trader’s Guide to Insurance

■ Resolving Payment Problems with Buyers

THINGS YOU NEVER KNEW ABOUT LOGISTICS

from Alibaba.com

Things You Never Knew About Logistics

A Detailed Guide on How to Ship by Air and Sea from China


1. Moving Goods: The Basics of Shipment

Types of international transportation

There are a number of shipping options open to you. Obviously, they are determined by the quantity and size of your shipment, where it is going to or where it has come from.

Exporters may find it useful to consult a freight forwarder in determining the method of international shipping. Since carriers are often used for large and bulky shipments, the exporter should reserve space on the carrier well before the actual shipment date. This reservation is called the booking contract.

International shipments are increasingly made through bills of lading under a multimodal contract. The multi-modal transit operator (frequently one of the transporters) takes charge of and responsibility for the entire move-ment from factory to final destination.

First steps

Order confirmation: Once an order has been confirmed, a document called a commercial invoice, or sales confirma-tion, will be completed by the seller. Upon confirmation of the order, you should be aware of:

Responsibility: Who is responsible for the shipment is dependent on the Incoterms parties agree to during nego-tiations. These terms are fundamental to international trade as they clarify when responsibility for the shipment passes from seller to buyer. Caution must be exercised when selecting Incoterms because they usually relate to particular modes of transportation. For example, some In-coterms deal solely with transport by sea. Terms such as FOB and CIF can be used only for ocean-bound freight:

2. Freight Forwarders

Freight Forwarders are professionals who take care of the more important steps regarding the shipment of your goods. You can get all of the transport information you require from a freight forwarder. For example, they can inform you of shipping rates and routes, and they can also book cargo space for you. They can also prepare the documents you need and serve as an import agent. Their roles may vary according to the shipping responsibilities outlined in the Incoterms agreed upon between the seller and the buyer/importer.

Finding a Freight Forwarder

The following resources can help you locate suitable freight forwarders:

Choosing a Freight Forwarder

Using the right freight forwarder can save time, money and establish a more competitive base for your product. Using the wrong one can send you in the opposite direc-tion. If you have decided you need the assistance of a freight forwarder, you must find one that suits your needs. This section covers the criteria for determining if the freight forwarders you select are appropriate to your type of product and the shipping destination.

Some forwarders are more familiar with certain aspects of trade than others. Therefore, it is a wise business deci-sion to interview each forwarder. In considering a for-warder, ask these questions.

The quantity of the products being shippedThe entire cost of the shipmentHow and when they will be shippedWho is responsible for the shipment

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CIF - COST, INSURANCE AND FREIGHT This means the seller’s responsibility ends when the goods pass the ship’s rail in the port of ship-ment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination; although, any additional costs due to events occurring after the time of deliv-ery are transferred from the seller to the buyer. However, in CIF the seller must also procure marine insurance against the buyer’s risk of loss of or damage to the goods during carriage.

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For the US, go to the USDA’s Freight For-warders Online Directory at http://www.ams.usda.gov/tmd/freight/ffdb/index.asp or visit the National Customs Brokers and Forwarders Association of America website at http://www.ncbfaa.org/Check your Local Yellow Pages under “Freight Forwarders.” Ask an experienced importer/exporter who deals in similar products as yours to refer you to a good forwarder.

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page 2 of 6

Contents of this white paper are contributions from members of Alibaba.com Copyright © 2007 by Alibaba.com Hong Kong Ltd. All rights reserved

FOB - FREE ON BOARD: This means the shipper (seller) has upheld his/her part of the agreement when the goods pass the ship’s rails at the port of exit. The receiving party (buyer) assumes risk and costs associated with the goods once they pass the ship’s rail in the seller’s home port.


Have an office near your shipping port? Have experience handling your type of product and shipment to your market?Have experience with the type of carriers you require?Have a good credit rating?Have favorable shipping rates and delivery schedules?Receive good recommendations from carriers?Belong to any professional associations or organizations?Have a reputation for friendliness, competence, efficiency, reliability, cost-effectiveness, trust-worthiness and using fair business practices?

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Many customs brokers and freight forwarders use these web-based applications to ensure accurate submission of import documentation to customs agencies for security tracking of various shipments. Third party logistics provid-ers can also provide clients with up-to-date cost analysis, logistics and import compliance information. The following fee-based online websites can prove useful if you want to import yourself:

Smart Border - www.smartborder.com Open Harbor - www.openharbor.com Nextlinx - www.nextlinx.com

3. Shipping Documentation

Numerous documents are required for shipping. The primary documents are listed below with links to samples. Exporters should seriously consider having a freight for-warder handle the formidable amount of documentation that exporting requires, as forwarders are specialists in this process.

Documentation must be precise because slight discrep-ancies or omissions may prevent merchandise from being exported, result in nonpayment, or even result in the sei-zure of the shipment by customs. Collection documents are subject to precise time limits and may not be honored by a bank if time has expired.

Most documentation is routine for freight forwarders and customs brokers, but the exporter is ultimately respon-sible for the accuracy of its contents.

The following documents are commonly used in the ship-ping process:

A. Airway Bills

An air waybill is used for air transport and is documentary evidence of the conclusion of a contract for carriage. It serves as:

Proof of receipt of the goods for shipmentAn invoice for the freightA certificate of insuranceA guide to airline staff for the handling, dispatch and delivery of the consignment.

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Usually, the document consists of three originals and nine copies. The first original is intended for the carrier and is signed by an export agent; the second original, the consignee's copy, is signed by an export agent and accompanies the goods; the third original is signed by the carrier and is handed to the export agent as a receipt for the goods after they have been accepted for carriage.

B. Bill of Lading (B/L)

A bill of lading (B/L) is used for sea shipment and is a certificate of ownership of goods. It must be produced at the port of final destination by the importer in order to claim goods.

As a document of title, the bill of lading is also a nego-tiable document and you may sell the goods by endorsing or handing it over to another authorized party, even while the goods are still at sea.

Although negotiable bills of lading are in common use, some countries do not allow them or make it difficult for them to be used. You have to be sure that a negotiable B/L is accepted in your country; otherwise, a non-negotia-ble B/L is issued.

The B/L is a formal, signed receipt for a specified num-ber of packs, which is given to the export agent by the shipping line when the shipping line receives the consign-ment. If the cargo appears to be in good order and is properly packed when received by the shipping line, the bill of lading is deemed as "clean". The ship owner thus accepts full liability for the cargo described in the bill.

page 3 of 6


Does the freight forwarder:


C. Commercial Invoices

A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are often used by govern-ments to determine the true value of goods when assess-ing customs duties. Governments that use the commer-cial invoices to control imports will often specify its form, content, number of copies, and language to be used, as well as other important details.

D. Insurance Certificates

An insurance certificate is a representation of the insur-ance policy taken out by the buyer or the seller (depend-ing on the Incoterms) for a shipment.

Blank insurance certificates are supplied by the insurer pre-signed and bearing the open policy number of the exporter. For an air shipment, an air waybill serves as an insurance certificate.For a sea shipment, an insurance certificate is issued as evidence of the existence of the marine insurance policy.The marine insurance policy is a contract between the insured and the insurer which de-fines the terms of the agreement between the insured and the insurer.

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E. Packing Lists

The packing list indicates the number of items in the contents of each pack, along with individual weights and dimensions. This list enables you to check that the cor-rect number of units has been received. Customs authori-ties can also easily identify a specific pack if they wish to inspect it.

4. Quality Control and Inspections

Quality Control and Compliance

When purchasing volume goods internationally, there are many areas in the process where you should conduct checks on your prospective suppliers.

The first one is during the discovery and nego-tiation process when you are deciding which supplier to go with. More often than not, the prospective supplier will indicate whether he or she has achieved ISO accreditation for their products (see below for details).The other very important stage in quality checking is prior to shipment. You need to en-gage the services of an inspection officer to go through the shipment to check and see if what you are about to receive is what you paid for.

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International Organization for Standardization (ISO)

ISO (International Organization for Standardization) is the world's largest developer of standards. ISO has built a strategic partnership with the WTO (World Trade Organi-zation) having the common goal of promoting a free and fair global trading system. Between 1947 and the present day, ISO has published more than 15,000 International Standards.

Although ISO's principal activity is the development of technical standards, ISO standards also have important economic and social repercussions. ISO standards make a positive difference, not just to engineers and manufac-turers for whom they solve basic problems in production and distribution, but to society as a whole.

ISO: 9000 is concerned with ‘quality manage-ment.’ This means what an organization does to enhance customer satisfaction by meeting customer and applicable regulatory require-ments and continually to improve its perfor-mance in this regard.

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page 4 of 6



Shipment inspectionsGovernments or buyers demand inspection reports for a number of reasons:

To ensure shipments do not contain illegal or low-quality merchandiseTo make sure importers are properly declaring their goodsTo ensure they have received what they have paid for or are about to pay for (usually by inde-pendent inspection)

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The process typically starts with the buyer. Once a con-tract between a buyer and seller has been established, the importer or buyer will arrange a pre-shipment inspec-tion with their favorite inspection company. Although somecountriesrequireaspecificcompanytoperformthe inspection, others have opened it up to a variety of competitors.

Upon requesting an inspection, the following information needs to be given to the inspecting company: company name, contact name of the exporter, and the type and location of the goods to be inspected.

Note: Regarding the time of the inspection, inspec-torshavebusyschedulesandneedafivetosevendaywindow to schedule a visit. Once you have a tentative date for inspection you need to have the goods ready for inspection. This may mean opening the shipping unit or having the container staged and ready to load.

Some other advice:

Many Less than Container Load (LCL) ship-ments can be inspected at the port of export.It is recommended that the inspection take place where you can supervise and answer questions the inspector might have.You may also need to close up a crate or box following the inspection so it is best that you or your forwarder is available to assist during the examination.Following the inspection, a “Clean Report of Findings” (or something similar) will be issued. This is usually required at the time of import. Most reports are issued following proof of ex-port and usually can be completed by fax.

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The importer usually pays the costs for such examina-tions; however, delays can be invoiced directly to the exporter. The inspector will look at the following aspects of the products in the shipment:

Safety: Are the products compliant with appli-cable safety regulations?Performance: Does the product function prop-erly and as intended?Appearance:Whatistheconditionofthefinish,printing and marking?Packaging: Is the condition of packing, marking and accessories appropriate?

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5.

Generally speaking, all international shipments should be insured against loss or damage.

Obtaining insurance:

Many SME importers and exporters can ap-proach their freight forwarders for coverage or buy insurance directly.Most SME shippers organize an ‘all-risk’ cover-age that covers all reasonable risks to a given shipment.Proof-of-insurance coverage is outlined and verifiedinadocumentknownasapolicyorinsurancecertificate.Insurancepolicyformatsvary from insurer to insurer.

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Remember, it is the Incoterms which decide who is re-sponsible for organizing insurance coverage. It is advis-able when shipping to use a Group F Incoterm and import with a Group C Incoterm, and then move beyond use of these as your experience builds.

Some common Incoterms and their insurance obligations are:

CIFThe exporter is responsible to insure on behalf of the buyer until goods arrive and are unload-ed at the port of destination.

FOB or CFR (Cost & Freight)The importer is responsible to insure goods from the time the goods are loaded on the seagoing vessel.

If the other party is responsible for the insur-ance and you have doubts about the cover-age, you may want to consider buying back-up insurance, called contingent insurance. This provides supplementary coverage that is activated if the primary insurer does not pay a legitimate claim.

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ISO: 14000 is primarily concerned with ‘envi-ronmental management.’ This means what an organization does to minimize harmful effects on the environment caused by its activities and to continually improve its environmental performance.

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Covering Against Loss: The Trader's Guide to Insurance


6. Resolving Payment Problems with Buyers

If a payment problem occurs, you will want to resolve the issue as quickly as possible with the buyer. You first need to get a good understanding of the entire situation before seeking dispute resolution assistance. Ask:

Were the goods supplied per the contract /invoice?Are all your shipping and customs documents in order?Was there damage or theft?Have you attempted to negotiate a solution to the problem, along with a payment plan or future concessions to the buyer?Have you discussed your problem with your bank and your lawyer?Do you have copies of all correspondence and records related to the dispute?

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Help with payment disputes

If you have come to the point where negotiations with the buyer are not leading to a resolution and you are deter-mined to collect, you will have to turn to the advice of your bank, legal adviser and perhaps other advisory bod-ies involved in mediation, arbitration or even litigation.

The International Chamber of Commerce handles the majority of international arbitration and is usually accept-able to foreign companies because it is not affiliated with any single country. For additional information, go to

Councils of the International Chamber of Com-merce at http://www.iccwbo.org/ orICC Dispute Resolution Services at http://www.iccwbo.org/home/bdrs/bdrs.asp

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page 6 of 6


TRADING SAFELY Becoming a Global Trade Expert

■ Tips for Safe Trading

■ Fraud Case Studies

■ Fraudulent Emails

■ Buying and Selling with Confidence and Trust

■ Websites for Fraud and Internet Security

SAFE TRADING TIPSfrom Alibaba.com

Safe Trading Tips: Case Studies on Detecting and Avoiding

Fraudulent Suppliers and Marketers

1. Tips for Safe Trading

There are a number of actions you can take to research potential business partners met on the Internet. These actions can reduce the risk of you being subjected to fraudulent transactions or business misunderstandings.

Confirm contact details

Always confirm if the address, phone number and email address given to you by your trading partner belongs to the same company. If a trader provides inconsistent contact details, for example an address in the USA and phone number from another country, we recommend you look up the address in the local phone directory, obtain the local phone number, and call this number to confirm that the person you are in touch with actually works for the company. Similarly, if a partner's email heading states that they work for a certain company, you should verify this. Be aware that some scam artists alter their return email address heading to make it look like they work for a company when, in fact, they don't.

Check the partner's background

Background checks from independent third-party sources include a search for legal registration and credit reports. In many countries, the existence of a company and its legal status is a matter of public record. Check the company’s registry in the partner's country to ensure that the company exists with a valid registration. If you cannot gain independent access to your partner's registration information, ask your partner to provide you with a Certifi-cate of Good Standing issued by the company’s registry office in his/her country or state/province. You can also gain further knowledge about your partner by ordering a credit history report from a local credit agency. Credit his-tory reports contain information about the partner's busi-ness history in their relationships with banks and other trading partners. Contact credit agencies that can provide credit history reports. See Credit Agencies List in page 7.

Meet your partner in person

Whenever possible, meet your business partner in person and visit their company's facilities. While the Internet of-fers you a wealth of information on your potential partner, that enables you to make an initial assessment, there is no substitute for face-to-face contact.

Protect yourself when ordering or providing samples

Buyers should order a sample before committing to a purchase order to be sure that the product meets their ex-pectations. Sellers should request payment for a sample and/or payment for shipping costs before you send out the sample, especially if your product has a high resale value.

Use pre-shipment inspection services

If you are a buyer, you can protect yourself against poor quality by ordering a pre-shipment inspection of the prod-ucts. You can demand the inspection as a condition of payment. For additional information, go toBureau Veritas Group at www.bureauveritas.com,Intertek at www.intertek.com and SGS at www.sgs.com

Protecting yourself against payment risks as the seller

If you are a seller and have not been doing business with your partner for very long, avoid selling your products on open-account (in which case you are extending credit to your buyer). Instead ask your buyer to open a letter of credit (L/C).

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Protecting yourself against payment risks as the buyer

If you are a buyer, sometimes a supplier may ask you for a deposit (usually 30%) before they accept your order. While this is not unusual between longstanding trading partners, if you are doing business with the supplier for the first time, make sure you have done sufficient back-ground checks on the supplier before you agree to the deposit, or ask for a different form of payment, such as a letter of credit. If the seller seems more focused on pay-ment than any other issue or indicates that cash payment must be made urgently, more caution should be given to the transaction. Be extra cautious when the seller asks you to send money to an account whose real owner cannot be traced: for example, you cannot trace the real name of the person behind an account with a wiring ser-vice such as Western Union.

Suspect shipping or contact addresses

Pay close attention to shipping or contact addresses located in regions with high reported incidences of online fraud, such as Eastern Europe, Western Africa and Cen-tral America.

2. Fraud Case Studies

1. Gold Supplier Identity Theft

Case description

One buyer sent an email saying: "I have received a quotation in my email; the sender said his company was a Gold Supplier. I knew Gold Supplier members are verified, so it gave me confidence in this transaction and I paid 30% deposit to buy the Ipods he provided. But after the payment, I didn't receive my ipods, nor get any response from them. Their contact person, Tony Yang just seemed to ignore my emails. Please help me contact this company to either get a refund of my payment or send the items I paid for."


Analysis of this case

Make your own investigation before dealing with your potential partner. Use the company name they provided to search your B2B web-site and the company's website.Compare the products listed on the company website. If they are in entirely different catego-ries; for example, the company usually sells shoes but the offer you received is an Ipod, it might be a signal of fraud.Contact the company on your B2B website directly and confirm with them whether the per-son contacting you is really from their company or not. Or you can send email to the service team of your B2B website, and they can help you verify the contact person.

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2. The "Low Price" Trap

Case description

One buyer complained: "I have contacted a seller to buy 100 Nokia 8800 mobile phones, and the price offered by the supplier is 20USD/set. After paying 1000USD upfront, the supplier refused to send the goods unless I agreed to buy more products from him. He also threatened to raise his unit price."


The normal price for Nokia 8800 mobile phones on the market is around $250 USD. Compared to the market price, the offer price is unbelievably low. It is unreasonable and unre-alistic to expect to receive these types of goods at this price.Be cautious. Some dishonest suppliers will of-fer extremely low prices to attract buyers look-ing for their first deal. After receiving payment, they will raise their price or demand buyers place a larger order. Whether it is a market-ing ploy or a deliberate kind of fraud, it is not a good business experience for buyers. Paying full payment upfront isn't a wise choice when doing business. Always try to find a secure payment method, such as an escrow service, which protects your payment until your items are received without any problem. Be aware of the market price of the products you are looking for. You should reconsider the deal if the price offered is 30% lower than the current market price.

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3. False Information

Case description

"I didn't receive the products. The supplier said the goods were detained in the Customs Office because Customs didn't find the original invoice attached to the goods. The supplier explained that it's his company's policy to issue original invoices only when quantities are above 5 units. He told me to pay for another 2 units with another $150 USD, but I have refused. I paid by Western Union. He registered on your website as a US company, but actually it is a Chinese company. All his information is fraudulent. This is a fraudulent company!"


It is a sign of potential fraud if the seller re-quests that you send payment to another coun-try instead of their registered country shown on the website: e.g., the company claims to be a UK company and requests that you send pay-ment to Nigeria, or other African countries. If you think their price is very attractive and want to deal with them, it is absolutely neces-sary for you to verify that they are a legitimate company and their contact information is correct. In this case, the fraudster is pretend-ing to be a US company, but all his registered information is false. This can be judged easily by calling his company telephone number or by searching the company name on related state government websites. The fraudulent company will always find some excuses, such as their products are detained by a Customs Office for some reasons, and then ask buyers to add more payment to re-lease the products. Be cautious and make your own decision if your seller behaves in this way. Western Union is a dangerous payment method, it can be picked up anywhere in the recipient's country, with no way of tracing the person who picked it up. The criminal remains anonymous. So it is a commonly used payment method by fraudsters. Try to avoid adopting this payment method and consider other more secure payment methods like escrow.

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After checking with the Gold Supplier member mentioned by this buyer, the Tony Yang in this case wasn't an em-ployee of this company at all. The so-called "Tony Yang" was a scammer posing as a verified company’s represen-tative in order to defraud innocent people on our website.

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4. Meeting Your Supplier for the First Time

Case description

“I was almost robbed by one of the suppliers I contacted! I was contacting a supplier to buy iPods, and he invited me to visit his city and to meet him in person to pick up the iPods. It was a good suggestion since my city is not so far away from his city and I can drive to his factory di-rectly to pick up the iPods. I drove to the appointed place together with my friend, but the supplier didn't show up at all. After I came back, the supplier contacted me and requested to meet him in person. He must have been a robber who hid and observed me in the appointed place secretly and wanted to rob me if I was by myself.”


Picking up products directly is a good way to avoid being defrauded by others. But if you don’t make a background check against your business partner and then meet them in per-son, you could potentially be in danger. Always investigate the company on search engines to find useful information. You can also get help and advice from other experienced members in our forum. If you would like to meet your partner in per-son, please arrange the meeting in a public place and go there with a friend and do not carry precious belongings with you.

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5. The Contract Trap

Case description

“This company offered us a government project for the supply of wooden furniture to a Togo government agency. I even went to Togo to meet the principal and the people from this government department. We had been tricked into paying the sum of USD 30,000 plus other expenses to the value of almost USD 40,000. The money our company paid was supposed to pay for the bidding/lawyer fee and legal fee for the contract.They said they would pay us the money for the furniture immediately after the legal process, but to date, they have not dispatched the money for the said contract.”

Any unsolicited business proposal, especially large high-profit government projects from Af-rican countries should be carefully scrutinized. Most of them are too good to be true. Check with your embassy in that country if there is really such a government agency. Or consult with your bank, an attorney, or the police about the contract.Scammers will always tell lies to you, like “you need to register with some business agency to export your products to their country” or some-thing else. In this case, they asked for a bid-ding fee, a lawyer’s fee and legal fees for this contract. It is necessary to understand whether or not this is normal process for a business contract in that country. In fraud cases like these you are not dealing with one scammer; you are dealing with an or-ganized group of scammers. Someone will pre-tend to be an attorney and guide you into their trap step by step. Someone will pretend to be a government official and give you confidence in this contract. They are a professional group of scammers rather than individual scammers.Search the company name or government agency via a search engine to find some useful information for your business

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6. False Shipping Website

Case description

“This company cheated me out of 2000 USD. Our terms were USD 200 for shipping, USD 1,000 once the tracking info was verified and the balance of $1,460 paid once the package was received. This guy said that he was going to use a local courier. He gave the website and track-ing number for checking. When it showed "package now on hold in London", I sent USD 1,000 as per the agree-ment. After that the company demanded the balance right away. He said his superiors wanted payment in full due to something about an audit and not being allowed to give credit to people from the USA. He said I needed to send at least $800 more and he'd take care of the rest. So I scraped up $800 more and sent it. Then he came with a new excuse. Something about a death in the family and if I wanted my package I needed to go ahead and pay the last $660! So basically, he's made up some fake business and website and is using it to con people into believing that their package is on the way. Then he puts the package "on hold" and says "if you want your pack-age, I'm going to need more money."

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Avoid using unknown shipping websites. It is risky to allow unknown shipping websites to deliver your products. Before you accept this delivery method, do your own due diligence, including searching the shipping website on search engines to see what others have to say. Or you can go to http://www.whois.com/ to search for registered information of this web-site. Be wary if the domain of this website was created less than three months ago. When your supplier is making excuses about the delivery (or lack thereof) of products and asking for additional payment, it is generally a trick.Search the company name on the forum or search engine to find something useful to you. Or you can contact your B2B website’s service team.

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7. Remain Vigilant

Case description

We were scammed by one of our clients. We are export-ing silk ties from China. This client is a Korean, but he is doing business in Spain. We exported to his Korean agency as per our contract. Then his Korean company sent the products to Spain. It worked well for several small order; we received quick payment after we sent out our products. Then this client wanted to place a larger or-der and requested to prolong the payment time. Consid-ering our good cooperation from last order, we accepted his suggestion. Then we never received our USD 7,000. This client always gave me the excuse that he cannot arrange payment because of a problem with his Korean partner. It has been half a year now and still I haven't received the payment.


This is an advanced fraud trick: the fraud-ster will build confidence with the supplier to conduct fraudulent activities. He will place small orders first and transfer payment quickly to convince the supplier he is a good partner. Then he will place a large order and set a trap for the supplier. Based on the good cooperation of previous business, the supplier will fall into the trap easily.

Always follow normal foreign trade processes when doing business with your partner.

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3. Fraudulent Emails1. What is Fraudulent Email?

Email fraud comes in many different forms, many of which we’ll layout below. However, simply put, email fraud is any activity that originates from an email that aims to separate you from your money through the use of lying and cheating. Scammers have many ways to get hold of your money. Most of these people are professional scam artists and they make thousands of dollars a year preying on the good trust of naïve people. But by understanding some of the telltale signs you can learn to easily identify and prevent falling victim to email fraud.

2. One way scammers use email to gain your trust

The scammer sends an email posing as a potential buyer. The person requests a price list along with full details/specifications and is eager to see samples. Everything seems like a normal buyer inquiry. You send them the information they request and await their reply. They then request samples, at which time you inform them of the price, etc. This is where the scam begins. They request a Proforma Invoice, which is normal for business, but then again it's potentially dangerous in the hands of a scammer. The scammer now has two choices to get your money or products for free:

They inform you that they can only send you pay-ment by Cheque or Credit Card. If you accept these terms, you are in big trouble as you have just been scammed. You might feel that you have no problems because the cheque went through and the credit card was accepted, but you will have trouble in the future. Ninety nine percent of the time those cheques are forged from someone else's account and the credit card numbers are stolen. When the owner finds out, they will recall the money and you lose your merchan-dise costs, etc.When they receive your Proforma Invoice, it will contain all the information the scammer needs to take your identity, try to withdraw your funds, and purchase samples using your name and business reputation to scam their next victim.

You will never hear from any of these people once they have scammed you. However, they might contact you in the future using a new identity and a new story or com-pany and try to defraud you again.


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Claim your account was suspended or that you need to verify your account by inputting information about your member ID and pass-word or credit card without any explanation of the reasons.Try and scare you into “urgent action” by threatening that your account will be suspend-ed or closed if you do not follow their instruc-tions and submit sensitive personal information as soon as possible.Include incorrect English and unprofessional expressions.Make reference to a User Agreement in order to seem more legitimate.

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How to Spot Fraudulent Email

Fake email address

Most fraudulent email senders send emails with forged email addresses, which appear to be real email address-es of an established B2B website (e.g. From [email protected] or Alibaba Inc, or Alibaba Department). The“From”fieldofanemailcaneasilybealtered–itisnot a reliable indicator of the true origin of the email.

Impersonal and general greetings

Most fraudulent emails start with a general greeting such as “Dear Member” or “Dear User” while emails from a legitimate B2B website generally include your First name and Last name.

Stress urgency and threaten your user account status

Most fraudulent emails:

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Use fake links or URL address

Most fraudulent emails have links included for you to update or submit information. Remember that these links can be forged too! These emails usually contain HTML links that look genuine but hide their actual URL address. Generally, if a B2B website requests information from you, they will always direct you back to their website. Do not click links in any email that seems suspicious.

Use fake feedback forms

Many fraudulent emails ask you to submit sensitive in-formation such as member ID and password, credit card details, etc. by clicking a link or completing a form which is very similar with those of your B2B website. Through this scam the perpetrators attempt to steal private and confidentialinformationfrommembers.

Other ways to determine a scam letter/inquiry

The majority of these letters are from Nigeria and other African countries. Sometimes you will receive these from other areas like the UK, but thepersonwilltellyoutheyhavefledfromtheirhome country awaiting release from a Political Asylum camp.The person always gives you a Mobile Phone/Satellite Phone number. They do this because it is easily thrown away or changed with a new SIM card.The person who sent you the inquiry says he wants to place a large volume order, but has not asked to see a sample. Instead, he asks that you send a Proforma invoice to him by e-mail so that he can get approval by his gov-ernment. Do not fall for this! The scammer will most likely copy or edit your Proforma invoice, and maybe even send it to other people. To be safe, you should make it a policy to only send Proforma invoices by fax.

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Protecting your B2B account against fraudulent emails

Fraud safety guidelines

In The Future

Most sites never ask for your password or per-sonal information in an email unless you con-tactthemfirstaboutyouraccountproblems.Most company emails contain your personal member ID at the bottom.

Avoidfillingoutformsinanyemailthatasksforsensitive information. Don’t click on suspicious links. Instead, type URLs into your browser address bar. Always ensure that you’re using a secure website when submitting credit card or other sensitive information via your Web browser. Regularly sign in and make sure that your ac-count information is current. Try and check at least once a month. Regularly check your bank, credit and debit card statements to ensure that all transactions are legitimate. If anything is suspicious, contact your bank and all card issuers.

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Fake signatures

As many fraudsters have received or have access to a website’s emails, it is easy for them to copy signatures to their fraudulent emails in order to seem more legitimate.

4.

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4.

These safe trading tips are designed to help you identify trustworthy trading partners as well as online and offline resources that can help to make your Internet experience safer and more secure.

Knowing Your Trading Partner

Learning more about your trading partner has always been important when making trading decisions. In import and export, there is little room for error in choosing a trustworthy supplier or relying on a credible buyer. When using a B2B website, it’s best to find one that offers a number of services to help you learn more about your trading partners: a B2B site that has already done the basic verification background checks on these suppliers for you, including:

Third-party Authentication and Verification by reputable credit agencies Proof of valid business registration On-site visits by their staff (if possible)

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Detecting, Avoiding and Reporting Fraud

The vast majority of Internet introductions result in a successful partnership that generates profit for both the buyer and seller. However, it is important that you protect yourself from the rare cases of fraud that may occur due to concealment of true identity on the Internet. Please keep up-to-date on fraud alerts helping you learn about new forms of online fraud that have been most recently reported on the Internet. If you suspect fraud, you can take action:

Contact your trading partner and arrange a telephone call or face-to-face meeting. This usually resolves the situation. Most buyers and sellers are honest and dependable and problems are often simply a matter of mis-understanding due to language and cultural differences.If you suspect your potential partner of fraudu-lent activities, we recommend that you inform the relevant law enforcement authorities. You should also report any suspected abuse by its members to your B2B website, so that they can review the status of the member's account.

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Computer Crime and Intellectual Property Sec-tion (CCIPS): Responsible for implementing the Computer Crime Initiative, a comprehen-sive program designed to address the growing global computer crime problems at http://www.cybercrime.gov/Hoaxbusters: Get information about fraudulent email chain letters, warnings, offers, pleas for help, computer viruses and more at http://hoax-busters.ciac.org/Interpol Technology Crime Information: In-cludes a FAQ on information security, a check-list of IT security, crime prevention methods, and more at http://www.interpol.int/Public/Tech-nologyCrime/default.aspCybercrime on the Internet: Includes defini-tions of the most common types of cyber crime. From Jones Telecommunications & Multimedia Encyclopedia at http://www.cybercrime.gov/Computer Crime Research Resources: In-cludes a definition of computer crime. By Bruce T. Fraser of Florida State University at http://www.crime-research.org/links/

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Reporting Fraud Cases

Web Police: Fighting all forms of Internet crime. A branch of InterGov. Internet Fraud Complaint Center (IFCC): Pro-vides an avenue for fraud victims to file com-plaints. A partnership between the FBI and the National White Collar Crime Center.

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Learning How to Protect Yourself Online

Site Seeing On the Internet: A guide to help you prepare for your voyage on the Internet and avoid fraud and deception en route. From the U.S. Government at http://www.ftc.gov/bcp/conline/pubs/online/sitesee.shtmInternet Fraud Watch: News, updates and advice from the National Fraud Information Center at http://www.fraud.org/internet/intinfo.htmInternet ScamBusters: Information to help you avoid getting ripped off by Internet scams, fraud, misinformation and hype at http://www.scambusters.org/

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Knowing Fraudulent Internet Transactions Buying and Selling with Confidence and Trust

Remember, the best tools for fighting fraud are aware-ness, education and vigilance. Remain cautious when-ever providing sensitive information, whether it is in an email or any other form of communication sent to a potential trade partner.

5. Websites for Fraud and Internet Security

The following resources provide information to help en-sure safe trading and protect your company.

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Dun & Bradstreet (D&B): The world's lead-ing provider of business information, enabling business-to-business commerce for nearly 160 years. Asian Company Profiles Ltd (ACP): A subsid-iary of the FBR Group of companies, market leaders in providing Asian corporate informa-tion and support to international businesses operating in Asia. Huaxia Credit Ltd. (Now known as Huaxia D&B) A leading provider of Chinese business credit information and ratings. • Xin Hua Xin (China) • Coface Group: A complete seamless service offering protection to enterprises.

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Ask for the phone number and fax number, and call the numbers they provide to confirm that they are available on those numbers. Check with the business registrar in the country of the supplier to ensure that the business is legitimate and licensed. Pay for a sample before purchasing in bulk to be sure that the product meets your expectations. Or, ask for the freight collection terms of sending the requested samples, especially if your product is more expensive among other general goods. Ask for an inspection service to ensure the products meet the required general standards and that they match the quality of the samples provided. Make sure you do not pay for products in cash. Use L/C or D/P for payment instead. If the trader keeps on talking about payment or other sensitive issues rather than pursuing the regular business process, caution is advised in the transaction. In addition, you are suggested to take the neces-sary legal measures in the event of any trade dispute or perpetration.

Simple Procedure to Verify:

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Credit Agencies List

You can contact the following credit companies to get credit reports on the traders for which you need more detailed information:


GET YOUR GUIDE TO SAFE TRADINGon Alibaba.com

■ Search Buyer Reviews

■ Check Membership Type

■ Verify Companies Online

■ Pay Securely Onlin

■ Question? Ask It!

No.1 Search Buyer Reviews

Search Buyer Reviews

A great way to verify a company is to see what other buyers think about them .

The best way to find reviews on companies you are considering doing business with is through your preferred search engine .

Post Your Buyer Review

Been a victim of scam? Hope to warn other buyers? Post Your Review on Ask It!

Note: If the company you are searching for does not appear in the results list, it simply means no member has asked about the company before. All comments on Ask It! are written by our members and are intended as a reference only. These comments are not on behalf of Alibaba.com. Alibaba.com takes no responsibility for the validity and accuracy of these comments.

No.2 Check Membership Type

Factory Audited Suppliers

Factory Audited Suppliers are Gold Suppliers who have been inspected onsite by Bureau Veritas or Intertek, world-renowned inspection companies . All Factory Audited Suppliers display

Factory Audited Gold Suppliers on listing results, product detail page, and company website on Alibaba .com . Learn more

▪ 3 Steps to find Factory Audited Supplier with ReportsHave a try now

1 . User Audit filter

2 . Click the icon to see Audit Reports Summary

3 . Download Audit Reports

Gold Suppliers

▪ What is Gold Supplier? Is Gold Supplier 100% safe and trustworthy?

▪ View list of Banned Paid Members on Alibaba .com .Download PDF Version

No.3 Verify Companies Online

Verifying a Company’s Registration

It is important to verify the company registration of the buyer/supplier that you want to trade with . This is to ensure that they are real and legitimate in the country/ region that they operate in . Learn more

Verifying IP Addresses

Email IP addresses can be verified to make sure that the buyer/supplier is really from the country/region that they claimed to be from . Learn more

Verifying Phone Numbers

You should always check that the phone number of the buyer/supplier you intend to trade with is real . Learn more

To learn how to make international phone calls, click here

Verifying Zip Codes

Check your buyer/supplier’s postal/zip codes to make sure the address provided is correct . Learn more

No.4. Pay Securely Online

Escrow on Alibaba.com

The Escrow service on Alibaba is powered by Alipay .com, a leading third-party online payment platform from the Alibaba Group . Escrow allows you to pay securely online without exposing your credit card details . You can also track delivery of your order and payment is only released to the supplier after you confirm you’ve received the order . Learn more

FROM THE ALIBABA.COM COMMUNITY

Get Your Guide to Safe Trading on Alibaba.com

Get useful tips and tools on verifying companies and avoiding scammers online


Popular Payment Methods and Risks Involved

There are several payment methods that are popular with buyers/suppliers such as L/C, T/T, PayPal and Escrow . Check out each payment method and the benefits/risks involved .

1 . Paypal

▪ Bad experience of using PayPal

2 . Western Union

▪ Western Union payment fraud

3 . T/T

▪ How secure is T/T for buyers?

4 . L/C

▪ Is safe to deal with L/C?

No.5 Question?Ask It!

Ask It! is Alibaba .com’s question & answer platform that allows members to ask trade-related questions and share answers . If you have trade problems, Ask It! is the place where you can quickly get solutions from Experts and other members .

Post a question on Ask It!



IP PROTECTION IN CHINAfrom Alibaba.com

■ Trademark

■ Patent Protection

■ Copyrights

■ Trade Secrets and Confidential Information

■ Conclusion

Generally speaking, property rights obtained through patents, trade secrets, trademarks, copyrights, and the law of unfair competition have come to be known, collectively, as “intellectual property .” Derived and revised from the already existing regulations and international conventions, the latest versions of the Patent Law, Trademark Law, and Copyright Law have come into effect in 2001 . As with the rest of the countries in the world, most types of IP can be registered and protected in the People’s Republic of China . Furthermore, developing along with new technology and the Internet, domain names are now considered as a supplementary type of intellectual property .

The below is applicable generally to IP protection and may be used for a number of different operations in China, whether it be trade, distribution, provision of services, solely within China or for goods which will be fully exported and sold in foreign markets .

A. TRADEMARK

1. General Information

Mainland China employs a centralized trademark registration system, the “first-to-file” and single-class system for trademark registrations . This means that the owner of a trademark in a foreign jurisdiction has no priority in China unless and until it has filed its marks . The exception is “well-known” foreign trademarks, such as Coca-Cola or McDonalds, though, the applicability of this category is limited to only the largest and most famous of marks . Therefore, even though a trademark is registered outside China, in almost all cases it will not be protected in China (unless in the case of well-known marks) . The same trademark, if used for different products, should be registered in a number of appropriate classes .

The Trademark Office of the P .R .C . is responsible for the registration and overall administration of trademarks in China . If the application proceeds smoothly without any

office intervention, it will take about a year and a half to fully register the trademark .

2. Trademark Filing

Filing Requirements

a . Name and address of the applicant, and a Chinese translation for the name and address;

b . 10 reproductions of the trademark (not beyond 10cm x 10cm, but no less than 5cm x 5cm) . If color is claimed, two reproductions in black&white are required in addition to the 10 colored ones;

c . A list of goods/services to be covered by the filing (if priority is to be claimed, the goods/services should be the same as those which are shown on the priority documents); and

d . Power of Attorney duly executed by the applicant .

3. Trademark Registration and Use

Upon approval of registration, the term of validity for a trademark will be ten years from the registration date . However, the registrant is obligated to use their registration during this ten-year period for at least three consecutive years . (Failure to do so may result in cancellation .)

The exclusive right to use of a registered trademark is limited to the classes in which the trademark is registered . When using the registered mark, the registrant should not alter its appearance nor its details without authorization of the Trademark Office . A new application must be made whenever there is an alteration of the registered trademark, or an extension of the goods designated . Where a registered trademark is used, the characters “registered trademark” may be indicated on goods, packages of goods, description of goods or other ancillary items . The registered mark may also use the ® symbol which should be placed on the


IP Protection in ChinaIntroduction to Intellectual Property in the People’s Republic of China


upper- or lower- right hand corner .

Renewal must be filed before expiration of validity . The Trademark Office permits an extension of six months for late filing . However, extra official fees must be paid .

4. Trademark Protection

In China, when discussing trademark protection, we usually refer to the protection of registered trademarks or unregistered, but well-known or famous trademarks . Little protection is granted to unregistered marks . Therefore, registration is the first step to protect your IP .

Trademark Law and the Implementation of the Trademark Law of the P . R . C . are the basis and main regulations for the protection of a trademark . Members of the Paris Convention provide broader protection to well-known marks . If your mark is proved to be a well-known mark under the Convention, you may seek protection under this Convention when an infringement occurs .

There are a number of options available when one suspects infringement of their product:

a . Administrative action: Issued by the local Administration of Industry and Commence, this will be a prompt action, much as the name indicates, to force cessation of infringement . However, very little compensation or indemnity may be collected .

b . Courts: If the registrant, as the victim of infringement, has collected sufficient evidence, it may bring an action directly in court . Civil courts can order the infringer to cease the infringing activity, eliminate the negative effects caused by the infringement, and further award compensation for losses .

c . Customs: Customs may also stop the import or export of products with suspicious trademarks, under the requirement that the registrant provides the necessary evidence or documents . (To be clear, the trademark owner must make a filing with Chinese customs .)

d . Criminal: Serious acts of trademark infringement may be punished by criminal courts, rather than administrative bodies . The Public Security Bureau and Prosecutors are the authorities in charge of investigation and prosecution in criminal tribunals .

5. Trademark’s Function

The basic function of a trademark is to distinguish the goods or services of one natural person, legal person or any other organization from those of another . However, as a type of intellectual property, trade activity in commercial society endows the trademark holder with a potentially valuable

asset .

The trademark’s value may be increased by the registrant’s direct and indirect use . The registrant may also collect profits through the sale of their products/services with their trademark . To some degree, the price of products/services are determined by recognition of the trademark attached . Correspondingly, the registrant may collect funds through indirect use, such as licensing, or franchising .

6. Trademark License

Among the methods of indirect use of a trademark, the license is a very important and effective method for the registrant . Licensing means the registrant enters into an agreement with another party, in which registrant allows them to commercially use or develop the trademark for a period of time . In return, the registrant receives money- either a one-time payment or continuous payments called royalties . The power to make this agreement is based on the premise of entitlement to intellectual property rights . Licenses can rapidly increase the fame of a trademark without much investment . Further, the registrant can collect extra royalties as an additional source of income .

License Agreements must be prudently executed in writing and enforced with particular concern . When a trade secret is involved, a nondisclosure agreement must be signed as a necessary supplementary agreement . When a registered trademark is involved, recording of the license agreement with the Chinese Trademark Office is required . Currently, only license agreements for registered trademarks can be recorded with the Trademark Office, which further entitles the licensee to remit royalties out of China .

B. PATENT PROTECTION

In China, patents are divided into three types: invention, utility model, and design . The Patent Law of China defines the three types of patents as follows:

a . An “Invention” patent is defined as any new technical solution relating to a product, a process or improvement thereof;

b . A “Utility model” is any new technical solution relating to shape, structure, or a combination of a product, which is fit for practical use;

c . A “Design” patent is defined as any new design in the shape, pattern, color, or combination thereof, of a product, which creates an aesthetic feeling and is fit for industrial application .

An invention patent refers to “the new technical solution

FROM ALIBABA COMMUNITY


relating to a product, a process or improvement thereof”, which may include inventions or innovative processes . The requirements for invention patents are more stringent than in other categories . Correspondingly, protection for an invention patent, once obtained, is the most extensive among the three types of patents . The process may take 4-6 years for an applicant to obtain a patent after filing; this period may be lengthened if the applicant is a foreign entity .

Utility model patents focus on the specific use of the end product and design patents on the physical features of the product . Compared to invention patents, utility model and design patents are relatively easy to obtain . Since no substantive examination is conducted during the filing procedure, these patents are granted within 8-14 months from the filing date . However, utility model and design patents can also be revoked easily when subjected to the scrutiny of a revocation petition . One reason for this is the requirement that a product must be “novel” . If products were put on the market several years prior to the application, the “novelty” of the products would be lost, an opening that an opposing company may exploit during revocation proceedings .

In addition, as China is a contracting party to the Patent Cooperation Treaty, it is a good practice to file any patents under this regime in order to enable a company to take advantage of the PCT priority date (though it must be made clear that the patent must enter the national phase for each country independently in the sense that there has to be individual registration in each country designated) .

C. COPYRIGHTS

In China, copyright protection arises in an “original” work of authorship “fixed” in a tangible medium of expression . Registration with the China Copyright Office is recommended, especially if you wish to file an infringement suit . The copyright owner has five exclusive rights in a copyrighted work, these being the right of reproduction, modification, distribution, public display, and public performance . This is a measure that can proactively prohibit competitors from using a company’s promotional materials/text on packaging to promote their own product .

To be clear, in China, copyright works are automatically protected upon their creation, under the law . However, they may be recorded at the Copyright Bureau, which will issue the owner a certificate of ownership . Armed with this document, the owner will have a significant advantage in the event of future disputes involving the ownership of materials . Pictures, technical blueprints or drawings, designs, written

materials, electronic materials such as web pages and computer software can all be recorded at the Copyright Bureau .

D. TRADE SECRETS AND CONFIDENTIAL INFORMATION

In China, a trade secret is defined as information of any sort that is

a . valuable to its owner,

b . not generally known; and

c . that has been kept secret by its owner .

It includes information, formulae, patterns, compilations, programs, devices, methods, techniques, databases, or processes that derive independent economic value from not being generally known or readily ascertainable and is subject to reasonable efforts to maintain its secrecy .

A trade secret owner has the right to keep others from misappropriating and using the trade secret . In China, many trade secret cases involve former employees who steal employer’s trade secrets and Foreign Invested Enterprise partners . Discovery of protected information through independent research, or reverse engineering (taking a product apart to see how it works) is not considered misappropriation .

Trade secret protection endures so long as the requirements for protection (generally, value to the owner and secrecy) continue to be met . Protection is lost, however, if the owner fails to take reasonable steps to maintain secrecy .

Confidential information is information not known to third parties, or the general public, and is deemed and defined by the individual entity as confidential by certain means, usually in writing .

Typically, prudent companies enter into stringent employment, nondisclosure, non-compete, trade secret, conflict of interest, and related agreements in order to avoid later problems .

E. CONCLUSION

As you may see from the above, protection/registration of IP is an essential aspect to protect your company in China . Further, given the lead times for registration, it is advisable to file applications as early as possible . At a minimum, prior to entering the Chinese market in any way other than for simple exploratory visits, it is recommended to file your marks so that you will have priority of registration when the rights are actually granted .

FROM ALIBABA COMMUNITY


Date post:	19-Oct-2014
Category:	Business
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