Guide
Who is liable when equipment bought from China is defective?
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Sinospect supplies industrial equipment from China under its own contract and invoice, so the buyer has one company to hold to the specification and the warranty. Discuss a supply contract →
Sourcing agent, buying office, trading company or a supplier that invoices you: which do you need?
In practice these terms cover two arrangements. The question that decides the rest is who sells you the equipment, because that is who the claim runs against.
- Sourcing agent or buying office. When it acts for you, it provides the services in its engagement: search, selection, follow-up, sometimes inspection. You then normally buy the equipment from the factory. Check who handles selection, technical follow-up, inspection and defects, and who pays the agent.
- Trading company or a supplier that resells the equipment to you. That company is your seller. Its quality-control, warranty and defect-handling obligations belong in your contract. In its supply model, Sinospect is that seller: it buys from the factory and resells the equipment to you with the agreed quality controls, and its own payment of the factory’s balance stays conditional on its release criteria.
To buy directly from the factory, decide who will handle selection, technical follow-up and inspection. To have a company sell you the equipment, confirm it is the seller on the contract and set its quality-control and defect-handling obligations in writing.
Who is your contract with?
The claim for the equipment follows the purchase contract, so start with the seller: the company named as seller on the contract, on the invoice for the goods and on the bank account you paid. An invoice for a service fee is not a sale of the equipment. The usual arrangements put the seller in different places.
Through a sourcing agent
Usual claim for defective equipment
Factory
Sells to you, invoices you, receives your payment
Sourcing agent
Answers for its own service, as its agreement states
The agent may be paid by you, by the factory, or by both. Ask which.
Through a buying office acting for you
Usual claim for defective equipment
Factory
Sells to you, invoices you, receives your payment
Buying office
Paid a fee by you; answers for its own service
You remain the factory’s customer.
From a trading company
Usual claim for defective equipment
Trading company
Buys from the factory, resells to you, invoices you
Factory
Contracts with the trading company, not with you
Write its quality-control, warranty and defect-handling obligations into your contract.
Supplied by Sinospect
Usual claim for defective equipment
Sinospect Industrial Company Limited (Hong Kong)
Sells to you under its contract, invoices you, pays the factory
Factory
Contracts with Sinospect; final balance released after Sinospect’s quality control passes
Payment milestones, acceptance criteria, warranty and remedies are set in your contract with Sinospect.
From the factory, with Sinospect witnessing the FAT
Usual claim for defective equipment
Factory
Sells to you, invoices you, receives your payment
Sinospect
Witnesses the FAT or inspects for you; answers for that service
When Sinospect inspects for you, the factory stays your seller.
If the seller on the contract, the invoice and the bank account differ, get the reason in writing from the seller before paying. The difference between a sourcing agent and an execution partner and the difference between a manufacturer and a trading company have their own guides.
What does an inspection company answer for?
An inspection company such as SGS, Bureau Veritas, Intertek or TÜV is responsible for carrying out its agreed service with the required care and skill, and its report covers the scope and conditions it records. The seller is responsible for the equipment. A passed inspection gives you evidence; the seller’s obligations stay with the seller.
| The seller | The inspection company | |
|---|---|---|
| What it answers for | Equipment that meets the contract, and the warranty | The agreed inspection, carried out with the required care and skill |
| On what basis | The sales contract and the law that governs it | Its service agreement and general conditions |
| What its document shows | Invoice, packing list, certificates and test reports for the equipment | What was inspected, how, when, and what was found |
| How far its liability goes | As the contract and the applicable law set out: repair, replacement, price reduction, damages | Published terms often limit compensation by reference to the service fee and set claim deadlines; limits vary by company, contract and law |
| When you go to it | When the equipment does not meet the contract | When the inspection was not carried out as agreed |
Read the terms that apply to your own inspection order before relying on them. The comparison of pre-shipment inspection and accountable supply covers when an inspection on its own is enough.
The equipment failed at commissioning after a signed FAT: what now?
The question is the cause: manufacture, packing, transport, storage, installation or site conditions. Records help establish it and support the claim, so act on them first.
- Notify in writing, promptly. Tell the seller what failed and when. Where transport damage is suspected, notify the carrier and the insurer as well, within their deadlines.
- Read what the FAT report records. The unit’s identity and serial number, the tests performed, the measured results and any open findings. A signature alone does not mean every requirement passed.
- Compare factory and site results. Compare the relevant results where the methods and conditions are comparable. The FAT and SAT guide sets out what each test covers.
- Keep the transport, arrival, storage and installation records. Impact recorder readings, packing, pressure or oil readings on arrival, photographs at unloading, storage conditions and the commissioning procedure used.
The Incoterm shows who bore the transit risk between buyer and seller. Whether the carrier is liable, and whether the insurance covers the loss, are separate checks, and inadequate packing can itself be a conformity issue. Under the UN Convention on Contracts for the International Sale of Goods (CISG), which applies to sales between businesses in different contracting states, China among them (including Hong Kong since December 2022; the United Kingdom is not one), unless the contract excludes it, the seller is liable for a lack of conformity that existed when the risk passed, even if it only becomes apparent later (Articles 35 and 36). The buyer gives notice within a reasonable time after discovering the defect, or when it ought to have, and at the latest two years after the goods were actually handed over, unless a contractual guarantee period says otherwise (Article 39).
Where can you bring a claim?
Two clauses answer it. The governing-law clause names the law that applies to the contract; the dispute clause names the court, or the arbitration and its seat, that hears a dispute. Against a company whose assets are in mainland China, an arbitration award is usually easier to enforce than a foreign court judgment, because China is party to the New York Convention; awards made in Hong Kong are enforced in the mainland under a separate arrangement between the two. If your contract names no forum, take legal advice before spending on a claim.
What to put in the next contract
- The seller’s full legal name, registration number and bank account, matching on the contract and the invoice.
- The specification and the acceptance criteria for the FAT and for the site acceptance test.
- A payment schedule that settles what happens after the factory test: either hold an agreed portion of the price until the site acceptance test passes, or pay the balance on a passed FAT or inspection and rely on the warranty and remedies in your contract. The second leaves no unpaid money to set against a defect, so it suits a seller you can enforce the warranty against, given the dispute clause and where its assets are; see protecting a deposit on custom equipment.
- Warranty terms: duration, when it starts, what it covers, the remedies and the spare parts.
- A notice clause: how and by when a defect is reported.
- Packing, impact recorders and transport insurance suited to the equipment, and the Incoterm.
- The governing law, and the court or arbitration seat that hears a dispute.
How Sinospect handles this
When you buy equipment from Sinospect, Sinospect Industrial Company Limited, a Hong Kong company, is the seller named in your purchase contract. That contract sets your payment milestones, the acceptance criteria, the warranty and the remedies. On new orders, your balance falls due once you have received the inspection or FAT report for your order and the agreed acceptance criteria are met, or you have accepted any open findings; an order paid by letter of credit follows the credit’s terms. Sinospect holds the contract with the factory and releases the factory’s final balance after its own quality control passes.
Sinospect uses the second of the two payment routes in the checklist above: your balance is tied to the inspection or FAT report on the terms just described, not to the site test. As the seller, Sinospect answers to you for the warranty and remedies in your contract. You bring a defect to Sinospect, which investigates it against the supply contract and the acceptance record and coordinates the remedy with the factory.
Buyers who contract the factory directly can have Sinospect witness the agreed FAT and receive the report, the recorded results and the open findings for handover to the site team. A pre-shipment inspection with packing and loading checks can be added to the agreed scope.
Frequently asked questions
Inspection company (SGS, Bureau Veritas) or the company that sold the equipment: who is liable if a transformer fails at commissioning?
The seller answers for equipment that meets the sales contract and for the warranty. The inspection company answers for its own service: the agreed inspection, carried out with the required care and skill. You may have a claim against it if you ordered the inspection and it was not done that way; if the factory ordered it, your contractual route against the inspector may be limited. Its report covers the scope and conditions it records, and its published terms often limit compensation by reference to the service fee and set claim deadlines. A passed inspection does not transfer the seller’s obligations to the inspector. If you bought from the factory, the claim for the equipment is normally against the factory; if a trading company or Sinospect sold it to you, it is against that company. Who carries the failure then depends on its cause, the contract and the applicable law.
If I buy through a sourcing company in China, is my contract with them or with the factory?
It depends on the arrangement, and the purchase contract says which; the company’s label does not. When a sourcing agent or buying office acts for you, you normally buy from and pay the factory, so a claim for defective equipment goes against the factory, and the agent answers for its own service. When a trading company, or Sinospect in its supply model, sells you the equipment itself, that company is your seller and your claim is against it. Before paying, check that the seller named on the contract matches the invoice and the bank account, and get any difference explained in writing.
The transformer failed the site test after the factory test report was signed, and the factory blames transport. Who is responsible?
First check what the signed FAT report records: the unit’s identity, the tests performed, the measured results and any open findings. A signature alone does not mean every requirement passed. Compare the relevant factory and site results where the methods and conditions are comparable, keep the transport, arrival, storage and installation records, and notify the seller promptly in writing. Where transport damage is suspected, also notify the carrier and the insurer within their deadlines. The Incoterm shows who bore the transit risk between buyer and seller; carrier liability and insurance cover are checked separately, and inadequate packing can itself be a conformity issue. A passed FAT does not by itself exclude a claim for a defect found later; check whether the contract gives acceptance any conclusive effect.
Who do I sue if the equipment arrives defective?
Normally the company that sold it to you, in the court or arbitration named in your contract’s dispute clause. The governing-law clause names the law; the dispute clause names the forum and its seat. Against a company with its assets in mainland China, an arbitration award is usually easier to enforce than a foreign court judgment, because China is party to the New York Convention; awards made in Hong Kong are enforced in the mainland under a separate arrangement. If the contract names no forum, take legal advice before spending on a claim.
Does a passed FAT end the seller’s responsibility?
Not by itself. A FAT report records what was tested at the factory and the results on that date. Under the CISG, where it applies, the seller remains liable for a lack of conformity that existed when the risk passed, even if it only becomes apparent later. What a FAT signature triggers, such as a payment, permission to ship or acceptance, is whatever the contract says it triggers, so check whether the contract gives it any conclusive effect.
Buying equipment from China for a project?
Send the equipment scope. Sinospect replies with a supply proposal that names the contracting company, the quality gates, the warranty terms and who answers for what.