How to Buy PPE from China

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This article compiles our insights on successfully purchasing PPE from China. It serves as a valuable resource for those aiming to buy PPE for export into the United States or the European Union.

A 35-year-old man was diagnosed with coronavirus in suburban Seattle shortly after returning from China on January 19. This incident led our law firm to represent numerous companies seeking to acquire large quantities of personal protective equipment (PPE) from China. We recognized that these procurement efforts necessitated a team of qualified China lawyers, paralegals, and business experts ready to assist clients in securing PPE promptly and effectively.

Our law firm assembled a dedicated PPE team to assess the support needs of our PPE-buying clients. The majority of these buyers include hospitals, hospital networks, and consortia, though we also collaborate with states, countries, charities, and brokers. What they all share is the urgency to procure quality products at reasonable prices.

For most clients, our legal expertise on PPE transactions from China encompasses several critical areas:

a. Ensuring that the Chinese supplier is authorized to sell the medical products. The verification process is typically swift. If we find that the seller is unauthorized, we will advise you to inquire how they intend to procure and deliver the products. Conversely, if the supplier is legitimate, we move on to step #2. It’s essential to note that approval regulations from the Chinese government are frequently changing. Recent updates indicate that China has imposed further restrictions on the exportation of certain medical products.

b. Conducting due diligence on potential suppliers. This includes checking various Chinese governmental databases to confirm the legitimacy and licensing of your prospective sellers. We assess their financial stability and legal standing, offering a comprehensive 3-5 page report on our findings, usually completed within a few hours. Better established companies frequently present a greater likelihood of successful customs clearance both in China and in the importing country.

c. Assessing the compliance of the products for import into your country. We provide customs advisory services for products heading to the United States and the EU, and can extend to other countries as necessary.

d. Drafting purchase agreements between you and your Chinese sellers. We offer legal counsel regarding payment terms, including letters of credit.

e. Helping secure quality control (QC) support in China. It’s vital to have someone overseeing the production of your PPE to ensure that the shipped items match what was ordered.

While we've primarily focused on sourcing PPE from China, we also consult buyers about international options for smaller quantities of higher-quality PPE products. My role has humorously shifted to being referred to as a "face mask lawyer," as I now spend the majority of my work hours assisting clients with their PPE purchasing decisions.

Despite extensive industry writing on this topic, we continue to receive numerous requests for more information. However, advice given today may likely change within a week. Therefore, it’s imperative to familiarize yourself with our past posts for context.

We field countless requests concerning various PPE items such as face shields, gloves, gowns, goggles, masks, and respirators. Simultaneously, we’re regularly approached by entities in China seeking to sell these products in European and American markets.

Our approach typically divides PPE buyers into two groups:

1. Entities who "know someone in China" with a vast quantity of PPE available and aim to make quick profits by re-selling to hospitals and government bodies.
2. Medical providers, primarily hospitals and government entities, who urgently need PPE to safeguard their health personnel or citizens.

These two buyer categories possess distinct motivations, and understanding these can greatly affect the procurement processes involved.

1. For-Profit PPE Buyers

For-profit buyers usually contact us with urgent requests, demanding quick answers on how to obtain vast quantities of PPE from China. They often inquire about FDA approvals and whether we could facilitate an escrow arrangement for their purchases.

In many cases, we clarify that FDA approval is often not necessary for surgical masks, and we suggest they first check if their supplier is amenable to such an escrow arrangement.

When reaching out to these buyers, our correspondence typically emphasizes caution. We encourage them to review our comprehensive articles covering the inherent risks and challenges associated with PPE procurement from China.

We represent an array of businesses seeking masks from China and have successfully facilitated numerous PPE transactions. However, it’s critical to note that only a small fraction of Chinese sellers have proven to be legitimate, which often leads to unsuccessful deals. Our role as lawyers is to safeguard our clients against numerous unreliable participants in the current PPE market.

Upon being hired for a PPE deal, the first step involves conducting thorough due diligence on the Chinese distributor. We have even designated a specialized team proficient in both Chinese and English to probe the legitimacy of PPE manufacturers and brokers in China. Our investigation encompasses the entire supply chain, as reliability in one link is essential for the entire transaction to succeed.

A concerning issue involves brokers posing as suppliers. Disturbingly, some businesses may claim they produce PPE while they are merely intermediaries hoping to profit from an order they haven’t secured yet or may even be fraudulent entities attempting to misappropriate funds.

Previously, FDA regulations were relaxed for certain PPE imports, but compliance is mandatory for masks and NIOSH standards from both the products and the supplying companies. Our findings reveal that about 90% of certifications examined by our team are falsified.

A continuous challenge lies in the necessity of genuine suppliers, amidst shifting regulations aimed at protecting genuine Chinese manufacturers while navigating international sales. Establishing trust with suppliers is key, particularly as the market evolves and geopolitical strategies further complicate the landscape for foreign buyers.

Clients who neglect to meticulously vet their suppliers often face dire outcomes, including significant financial losses in cases where they’ve invested more than a million dollars for substandard or non-existent products.

2. The Medical Provider/Government PPE Buyers

This group is often in a state of urgency, working against impending PPE shortages in COVID-19 epicenters. Their decision-making is pressured by internal demands as they search desperately for adequate supply.

Many within this category draw upon informal networks of contacts that can provide leads for large PPE suppliers but are confronted with the realities of navigating complex procurement channels.

To serve these buyers effectively, we established a dedicated due diligence team focused on evaluating potential PPE sellers in China. Our goal is to determine legitimacy efficiently, providing swift decisions necessary in crisis situations. If a supplier is deemed legitimate, we discuss practical next steps.

For smaller or urgent orders, our lawyers may quickly draft a basic contract in Chinese to expedite the transaction. For larger acquisitions, we may advocate for supplemental due diligence through factory inspections or bank confirmations, leading to more robust contracts.

Amid these negotiations, we always prioritize the end goal of protecting health personnel during this crisis. Our firm stands firm on enhancing safety while reducing risk throughout the process.

Protecting intellectual property (IP) remains a concern in these rapid transaction environments. We urge clients to secure their IP with customs registrations to prevent counterfeit entries amid heightened global trade pressures.

In recent reports, we highlighted that potential buyers must exercise caution and discernment while navigating through scattered networks of brokers and procedures.

3. China’s New PPE Rules

As global demand for PPE from China has surged during the pandemic, so have the challenges associated with export quality and regulatory compliance. Recent policies have severely limited the exportation of PPE, requiring credentials that many manufacturers lack.

In April, a new Order, imposed by several governing bodies in China, mandates that all PPE devices must have a Medical Device Product Registration Certificate in addition to ensuring compliance with foreign regulations.

This has created substantial constraints on supply, severely affecting those who need it most. While framed as a protective measure for international buyers, many suspect this tactic serves to hoard supplies within China to prepare for potential resurgence of outbreaks domestically.

Key requirements now in place require thorough registration and proof of compliance, compounding challenges for foreign buyers while limiting product exports when demand remains high.

The consequences are profound, especially for manufacturers previously validated, who face dual demands of domestic registration and meeting international shipping standards.

New uncertainties also arise from classification terminology—such as what constitutes "medical use masks"—which may directly impact orders in progress.

As we navigate this turbulent landscape, it is crucial for buyers to remain informed and agile. Precautionary measures and diligent research are essential, especially with unforeseen delays in exporting sought-after products to foreign markets.

4. How to Increase The Odds of Your PPE getting Through China Customs

Considering China's evolving export regulations, we advise PPE buyers to ensure the following:

a. The manufacturing company is licensed for the PPE products.

b. The Chinese exporter has the necessary authorizations in place.

c. Documentation is flawless and complete.

d. The quality of the PPE is verified and genuine.

e. The importation destination country is compliant with legal standards for those products.

Until transactions clear customs, it’s prudent not to consider payments "safe." Transactions ideally stipulate no payments until agreed-upon products are securely on board the carrier, reducing risks from potential customs actions post-payment.

This negotiation, however, may prove difficult due to the dominance of Chinese producers and their leverage over foreign buyers in this rapidly changing market, thereby highlighting the importance of diligently researching your supplier. We emphasize the necessity of thorough, professional diligence to validate the authenticity and reliability of prospective sellers.

In approaching our investigations, clear positives have emerged regarding genuine PPE suppliers with proven track records compared to newer brokers or dubious entities, emphasizing the importance of recognizing established businesses.

5. Buying products from China has always been risky, but COVID-19 heightens those risks

Since the onset of COVID-19, we strive to keep our clients informed regarding the unstable and fluctuating PPE supply chain landscape. As the situation continues to evolve, so too do conditions affecting product quality and safety standards.

Additionally, frequent allegations of defects in masks and other equipment from China further strain buyer trust, prompting heightened scrutiny into procurement strategies.

We remain dedicated to providing our clients with strategic advice to navigate challenges and ensure the successful procurement of PPE. Those efforts include encouraging ongoing vigilance regarding quality controls and prioritizing due diligence to mitigate the risks increasingly prevalent in today's environment.

Our firm is devoted to supporting our clients throughout this critical time. Our commitment is to not only grant access to reliable vendors but provide them with the tools necessary to simplify their purchasing decisions.

Contact us for further assistance in your PPE sourcing endeavors. We are determined to empower you with the guidance necessary to navigate this evolving landscape effectively.

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