Mid-market companies often discover that a China-relatedproblem becomes urgent only after money, tooling, inventory, or customer commitments are already at risk. The practical steps below are intended to help management identify the right counterparty, preserve leverage, and decide when local counsel or other specialists should become involved.
Ownership and possession are different
A buyer may have paid for tooling but still face difficultyrecovering it because the factory physically controls it. The key questions are who owns the tooling, whether the payment documents identify it, whether the factory has a contractual lien or setoff claim, and whether the tooling can be distinguished from equipment owned by the factory.
Document ownership before production
The manufacturing agreement should identify each mold ortool, state who owns it, prohibit unauthorized use, require labeling, address maintenance, and require return or transfer on demand. Purchase orders and
invoices should separately describe tooling charges rather than burying them in unit pricing.
Anticipate the factory’s defenses
Factories sometimes claim that tooling was subsidized,modified at their expense, jointly developed, or held as security for unpaid invoices. Even a weak defense can delay recovery. Before escalating, reconcile all outstanding payments and identify any genuine dispute that may be used to justify retention.
Use a staged recovery strategy
Start with a written inventory and demand, then seekconfirmation that the tooling remains intact. Where feasible, arrange transfer to another factory under supervision. If the factory refuses, Chinese counsel can evaluate preservation measures, litigation, or negotiation leverage.
Do not wait until the relationship collapses
Periodic tooling audits, photographs, serial numbers, andbackup technical files make recovery easier. A buyer that begins planning only after a dispute may discover that the tooling was altered, moved, pledged, or used for other customers.
Practical next step