Pre-Production Sample Order Terms

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Developing pre-production samples is the only way to truly test the viability of a new design, and the manufacturers capability to produce it. It’s also a minefield, that can cost you months, sometimes up to a year, in lost time if not managed properly.

The first step of the pre-production sample development is to draft Sample Order Terms. A well drafted document can save you thousands of dollars in development costs, and prevent severe delays caused by never ending sample revisions.

Keep reading, and learn how to draft a Sample Order Terms Documents, including product specifications, compliance requirements, sample revision and tooling ownership terms.

Product Details

a. Product Spec Sheet & Attachments

A product must exist on paper before it can be put together on the assembly line. Chinese manufacturers, being primarily OEM suppliers, expect the customer to provide all relevant product information, including the following:

  • CAD files

  • Design Drawing (ANSI or ISO Standard)

  • Bill of Materials

  • Size Table

  • Color codes (i.e., Pantone or RAL)

  • Reference product samples

  • Reference material samples

  • Reference color samples

b. Product Safety Standards & Substance Restrictions

All applicable product regulations, including technical standards and substance restrictions, must be communicated to the manufacturer before they get started on the samples. If possible, the product sample shall be submitted for compliance testing upon completion.

While you must still communicate all applicable standard and regulations to your supplier, don’t take for granted that they can assemble a ‘compliant sample’. Get a word from your supplier before you call your testing laboratory, and make sure to get it on paper.

c. Product Packaging & Labelling Requirements

Developing new product packaging is a challenge on its own. However, regardless of whether you buy Private Label (ODM) or Custom Designed (OEM) packaging, you must include the following:

  • Artwork files (.ai format)

  • Packaging Design File (.ai format)

  • Bill of Materials

Sample Order Terms

a. Production Time & Included Revisions

Samples rarely come out perfectly on the first try. Depending on the product and its complexity, two to three revisions are to be expected. However, you don’t want to end up in a situation where the supplier is asking you for more money, because they failed to get your approval on the pre-production samples. For this reason, include the following terms:

1. The supplier must produce an unlimited number of sample revisions (in case the previous sample batches don’t comply with the product specifications and quality requirements in this document).

2. The seller may not request additional payments from the buyer, unless the buyer makes changes to the product designs, materials, quality requirements or compliance requirements.

3. Pre-Production Sample Revision Time:

  • 1st Sample: XX days

  • 2nd Sample: XX days

  • Nth Sample: XX days

4. If the supplier fails to produce an acceptable sample after X revisions, the buyer may request a full refund ($XXX) from the supplier.

5. If the supplier fails to produce samples within the time limits set under ‘Pre-Production Sample Revision Time’, the buyer may request a full refund ($XXX) from the supplier.

However, these terms are for obvious reasons void if you change the specification, after the supplier starts working on the pre-production samples. Again, get your spec sheet right before you move forward.

One more thing. Don’t think that you’ll actually get your money back just because it’s on paper. Still, they will (hopefully) take your company more seriously, thereby giving your pre-production samples a higher priority.

b. Mold and Tooling Ownership

When buying custom designed products, injection molds and other tooling are generally required. Tooling is always paid for by the buyer, and can make up a large share of the product development cost. As such, you want to avoid any of the following situations:

  • The supplier using your tooling for other buyers

  • The supplier refusing to transfer the tooling to you or your new supplier

The first scenario requires more than just a written clause. As for the second scenario, you shall have a clause to avoid this.

c. Subcontracting

Half the point of buying pre-production samples is to test the manufacturers capability to produce your design. What if the manufacturer contracts sample production to another factory? Well, you have no indication of the supplier capability to actually make your products. Thus, new quality issues, that you thought were already corrected during the sample development phase, may arise.

This happens. While most horror stories of subcontracting in China refer to shifting mass production to another factory, you surely don’t want this to be the case for your pre-production samples either.

Thus, you shall have a clause to avoid this.

d. NDA (Non-Disclosure Agreement) Attachment

Assuming you’re developing a product with a new design, function or your own brand, you want to prevent the supplier from selling your product, or brand, to other buyers. Both domestically and internationally. This is why an NDA (Non-Disclosure Agreement) shall be added, as an attachment, to your Sample Order Terms.

The purpose of the NDA is to make the supplier think twice before mass producing copies of your product. Then again, this is Asia, and pragmatism wins over ‘how things should be’ everyday. The NDA might buy you some time, but it’s surely not going to prevent the supplier to start making the product, using a different company entity, if that’s what they really want to do.

In the end, what really matters is design patents and trademark registrations.

Final Comments

1. The purpose of the Sample Order Agreement is to give the supplier various incentives to deliver acceptable pre-production sample, with as few revisions as possible and within a reasonable time frame. It shall not be seen as an insurance policy for the sake of recovering money and lost time.

2. The supplier shall print, sign and stamp a paper copy of the sample order terms. Terms listed in an excel or word file carries no significance whatsoever.