Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract

11 October 2025

Spain

Agency
Contracts
Distribution
Litigation

How do you approach negotiating a trade agreement with China?

Based on my experience, let’s examine the issues to be addressed and the main questions to ask, taking the negotiation of a trade distribution agreement as a practical example.

Let’s start with the first issue that is important to clarify.

Nice Business Card – But Who Is This Guy?

Business cards, websites, printed or digital brochures, presentations, and any other materials shared in English have no official value in China.

The company name of the counterparty and the first and last names of people representing it or acting on its behalf, written in English, are only fictitious names.

To be certain of the company’s data and the identity of the persons, it is necessary to ask for the information in Chinese, with particular reference to the company’s business license (equivalent to the Companies House or Chamber of Commerce’s excerpt), from which the name, corporate purpose, registered and paid-up share capital, and the name of the legal representative can be inferred.

The data can then be verified by accessing the portal of the State Administration of Industry and Commerce (SAIC) of the province where the Chinese party is based.

This first verification is essential to ensure that you do not waste time or even run into scams (here’s an in-depth article on Legalmondo’s blog).

If You Don’t Own Your Trademark, Someone Else Will – and Charge You for It

Trademark First, Trade Later. China operates on a first-to-file system for trademarks, which means that the first person or company to register a trademark – not necessarily the original creator or most famous user – gains the legal rights to it. This creates a serious risk: if you haven’t registered your trademark in China, someone else might do it before you, and then either use it freely or demand a hefty ransom to give it back. Even high-profile figures like Elon Musk and Michael Jordan have been entangled in costly and protracted disputes with Chinese trademark squatters. In many cases, getting the mark back is highly complicated, and sometimes legally impossible.

To avoid this, register your trademarks early, even before entering the Chinese market. File directly with the China Trademark Office (CTMO) and don’t stop at the English version — consider registering a Chinese character version as well, since that is how your brand will often be known locally.

Once that base is covered, clearly state in your contract that your Chinese partner is not allowed to file a registration of any of your trademarks in China, in Latin or Chinese characters, and that he will use trademarks and IP rights in strict conformance to the contract and your instructions.

For a deeper dive into how to effectively protect your IP rights in China, check out our detailed article on the Legalmondo blog.

Contracts can wait. First, get on the same page

When negotiating with a Chinese partner, it’s often a mistake to begin the conversation by exchanging contract drafts. Instead, focus first on the substance — the relationship’s commercial and technical terms. Using a clear checklist of key discussion points (such as products, pricing, delivery terms, technical standards, after-sales support, exclusivity, duration, payment terms, etc.) helps ensure that both sides are aligned on what really matters. Take detailed notes and keep minutes of the discussions, especially where and when consensus is reached, and make sure those minutes are circulated and expressly agreed upon. Once substantial agreement has been achieved on the main terms, this memo can then be handed over to your lawyer, who will translate the business understanding into clear and coherent contractual language. This approach saves tons of time, as it helps avoid unnecessary back-and-forth on legal language before the core deal is in place.

Think Your NDA Covers You in China? Think Again

Yes, they are—and often underestimated. A well-drafted Non-Disclosure Agreement (NDA) is essential when the parties plan to exchange confidential information, such as technological know-how, commercial strategies, supplier data, or client lists. Especially in the early phases of negotiation or cooperation, before a main contract is signed, an NDA helps protect intellectual and business assets.

However, as with all contracts in China, a generic NDA template copied from other jurisdictions will likely be of limited use. To be truly effective, the NDA must be adapted to the specifics of the Chinese legal environment. This includes ensuring that it is enforceable in China: the NDA should include the proper dispute resolution mechanism (see below on why you should consider applying Chinese law and litigating in China), and it must specify clear, valid, and proportionate penalties for breach. In Chinese practice, stating specific contractual penalties (liquidated damages) is often more effective than vague references to compensation, as courts and arbitrators in China tend to enforce these more reliably if they are reasonable.

While a good NDA is useful, it often falls short in China’s manufacturing and sourcing landscape. This is where the NNN Agreement – standing for Non-Disclosure, Non-Use, and Non-Circumvention – becomes critical. Unlike standard NDAs that primarily focus on confidentiality, an NNN Agreement is designed to address the unique risks of doing business in China. It prevents the recipient from not only disclosing confidential information but also from using it for their benefit or bypassing the disclosing party to work directly with suppliers, clients, or partners. Which, in China, is a very real risk.

This broader scope is vital when dealing with Chinese manufacturers or intermediaries, who may otherwise be tempted to replicate products or contact customers directly or through third parties. As seen with the NDA, also the NNN Agreement must be drafted in Chinese, governed by Chinese law, and enforceable in Chinese courts -otherwise, it may offer little real protection.

Joint venture? Easy, Cowboy

A joint venture is often the first proposal that comes up when negotiating with a potential Chinese partner. It seems appealing: sharing risks and investments, accessing the local market with an ally, leveraging their knowledge and network of contacts. But the reality is often very different from what it appears to be.

A joint venture is a complex, expensive, and rigid corporate structure that requires significant investments of money, time, and human resources, as well as the ability to continuously manage often divergent interests among the partners. The vast majority of Sino-Foreign JVs have gone wrong, or will go wrong. Or very wrong. First and foremost, because the JV is usually managed by the Chinese partner, and exercising effective control over the company’s operations is a very challenging undertaking.

Before going down this road, it is essential to ask yourself a few questions: Is the joint venture really indispensable for developing this business in China? (Spoiler: generally, no). Are there less restrictive and risky alternatives, such as a distribution agreement or a licensing agreement? (Yes, almost always). And above all: how well do we really know our potential partner?

A joint venture should only be considered if it is strictly necessary for the project’s development, after carefully verifying the commercial viability and the reliability of the Chinese partner, and ensuring the ability to maintain effective control over the JV’s operations.

It is better to start with simpler and more flexible forms of collaboration to test the market and the relationship with the other party before committing to such a demanding investment. Otherwise, the mirage of the joint venture risks turning into a nightmare that can be very costly.

Memorandum of Understanding: Where Good Intentions Become Bad Contracts

A Memorandum of Understanding (MoU) is a helpful tool at the early stage of a commercial relationship. It serves as a roadmap for future negotiations, where the parties outline the main principles and intentions that will guide the drafting of the final agreements. When used correctly, an MoU can significantly facilitate negotiations by ensuring that both sides commit to negotiating the agreement in good faith and share a common understanding of key points such as pricing models, territorial scope, exclusivity, milestones, budget, or performance expectations.

However, an MoU must be used for what it is: a preparatory document, not a binding contract. Care must be taken to avoid ambiguity and unintended commitments. The text should clearly specify that the parties remain free to conclude – or not – the final agreements and which clauses are non-binding – such as the commercial framework or indicative timelines – and which provisions are binding, typically confidentiality, exclusivity during the negotiations (if agreed), governing law, and dispute resolution. A poorly drafted MoU, which includes overly precise and complete terms, can be misinterpreted as a final agreement, creating unnecessary legal risk. So yes, MoUs are valuable – but only when used correctly. If you’d like to know more, go deeper by reading this article.

Bad Drafts, Big Headaches, Poor results

Draft agreements used in China are often copied and pasted from incomplete, superficial, poorly organised templates written in bad English, which often do not match the Chinese version of the contract.

Correcting and integrating these drafts is complicated and more time-consuming than starting from a good template, with suboptimal results.

It would be better to propose a consistently constructed text and ask the other party to propose any changes and additions to this draft.

Your Western Contract Template Won’t Work Here

Even if an English-language contract is perfectly valid, there are many reasons why using contract templates built for other countries in the Chinese market is inadvisable.

The first is the fact that Anglo-Saxon-based agreements, such as those for the U.S., refer to a common law system (which is based on judicial decisions and case law precedents) that is very different from that of civil law countries (such as China and Italy), which derives from the Roman legal tradition, based on a codified set of written laws.

It follows that the layout of an agreement on the Anglo-Saxon model is different, much more detailed, and wordy than that of a typical agreement based on a civil law system. Since contract negotiations in China are generally lengthy and complex, working on redundant and complicated text at the outset does not help.

If we stick to the example of a distribution contract, it should be added that it is advisable to apply Chinese law to provide for arbitration based in China (e.g., at CIETAC) or in Hong Kong or Singapore (third countries, where, however, the costs of the procedure increase significantly) as the mode of dispute resolution. So, the contract should be built on a model that conforms to the law that will apply to the relationship.

Home Court Advantage Won’t Help You in China. In fact, quite the opposite

This is a typical point of disagreement in the negotiation of an international contract: the parties aim to have the law of their own country apply, and to stipulate that any disputes be adjudicated by their domestic courts.

In our case, insisting on the application of Italian (or any other foreign) law and state court is not a good idea: it should be considered, in fact, that a distribution agreement is carried out, for the vast majority, in the country where the distributor operates and where the products are sold (in our case, in mainland China).

In disputes, the parties’ (particularly the manufacturer’s) interest is to obtain a quick decision by the adjudicating body, especially if situations requiring immediate protection (such as unfair conduct or counterfeiting of trademarks and patents by the distributor) are ongoing.

None of this is possible if one goes to an Italian judge (with lengthy litigation time and the need then for a complex and costly process to recognise and enforce the decision in China); on the contrary, an arbitration in China, applying Chinese law, allows one to reach a decision quickly (on average 6-9 months) and, if necessary, also to obtain urgent measures to stop any unfair conduct.

Chinese Law Isn’t a Black Box (If You Know What You’re Doing)

The lawyer assisting you should know it.

Therefore, it is not a leap in the dark, and one should not fear surprises.

In addition, it should be remembered that an agreement is primarily based on the covenants that the parties have written in the contract; therefore, if the contract has been well drafted, the rules to be applied are clear.

Finally, if we consider distribution agreements, keep in mind that they are a framework contract, within which a series of separate product sales contracts are concluded. If both countries are contracting parties to the 1980 Vienna Convention on the International Sale of Goods (CISG), then the uniform, clear, and balanced rules of the convention apply automatically, just don’t opt out!

One Contract, Two Languages

The contract is also valid in English only. However, it is undoubtedly advisable to draft a Chinese version with facing text.

This is for several reasons: first, it prevents the Chinese party from having to arrange for a translation of the text during negotiations for its own internal use (top managers often do not speak English), thus slowing down the various steps of negotiations.

Also, to ensure that the Chinese side fully understands the agreement’s content and to avert misunderstandings (real or instrumental) about the interpretation of certain covenants.

Finally, it should be borne in mind that if the contract were later to be used before a court or administrative authority in China, the only language admitted would be Chinese; for this reason, it is better to have already a text agreed and signed by the parties in Chinese as well, rather than having to prepare a unilateral translation later.

Sign. And chop

Does the contract need to bear the company’s official stamp? Yes, and this point is absolutely crucial. In China, a company’s official “chop” (the red-ink stamp) is equivalent to a signature and is conclusive proof that the person signing the contract has the authority to represent the company. A signature alone, even from someone with an important-sounding title, may not be sufficient if it is not accompanied by the official chop. Without it, the contract might later be challenged or even considered void. Before signing, always verify that the stamp used matches the one registered with the company’s business license or official corporate records, and ensure that the stamp is applied on every page or at least on the signature page, in line with local practice.

Don’t Let Your Contract Collect Dust

Things change fast, especially in China. New products are added, market conditions evolve, people leave the company, new competitors emerge on the horizon, and so on. Companies constantly adapt to the new conditions, and so must the contract.

Any change in the relationship should be formalized correctly. To avoid misunderstandings and disputes, it’s advisable to include an integration clause in the contract, specifying that any amendments or additions will only be valid if agreed in writing, signed by the parties’ authorized representatives, and annexed as an addendum to the original agreement.

It’s not enough to include this clause – you must follow it consistently. If things change, agreements reached verbally, through Wechat messages, and through email exchanges may make things complicated if they are not formalised adequately according to the procedure set out in the original contract.

If you’d like to go deeper, check out this article.

It is quite common for business relationships with agents or distributors to last for years without any signed documents. And be careful, because we know that a contract can exist even verbally.

The absence of a written contract will add difficulties in the event of a possible claim, so what you do between the decision to terminate, and the moment of the claim is very important. Remember: ‘anything you write will be used against you’.

The decision to terminate a business relationship is a very delicate moment to which, for some reason, solicitors are not invited. Here are some examples (all real) in which companies or employees with the best of intentions wrote to the agent/distributor. All of them were subsequently very damaging to the company:

Saying ‘We are terminating our business relationship’ when the strategy will be to argue that no such business relationship exists, but rather that there are separate and linked contracts (e.g., supply rather than ongoing distribution contract; very significant compensation consequences).

‘You no longer represent our company’, which may be evidence that you did so before.

‘As of day X, you may no longer act on behalf of our company,’ which would prove that you were previously able to act on its behalf.

‘You may not attend the X trade fair on our behalf.’ A way of confirming that the agent/distributor’s responsibilities included participating in trade fairs and probably accrediting the customers obtained.

‘The sales you promoted have been significantly reduced in year N.’ When there is no written contract or other form of documentation, imputing a breach of an obligation that is not clear can be counterproductive.

Saying ‘You are not actively promoting our products’ and then adding: ‘We urge you to stop promoting the sale of our products’.

‘You are no longer our exclusive representative’, which proves a type of relationship (representation/agent) and a tacit or express agreement (‘exclusivity’).

‘We have appointed another representative in your area’, which shows that the agent/distributor had an assigned area and was “representing”.

‘From this moment on, orders will be handled by X’, which also confirms a type of relationship.

In summary: from the moment the company considers terminating a commercial relationship, especially when it is not in writing and before sending any letter, it is advisable to think carefully about the strategy in case of a possible claim. This is the best time to seek advice and avoid surprises. Any communication that is not in line with this strategy designed from the outset can only lead to confusion and problems.

Remember the USA – EU agreement on 15% tariffs? I wrote that with a negotiator like Trump the game is never over (article here) and—after the recent interlude featuring a threat of 100% tariffs on pharmaceuticals—the U.S. government has announced the imposition of an overall 107% duty on Italian pasta, which could take effect on January 1, 2026.

Where this new duty comes from

The antidumping investigation was launched by the U.S. Department of Commerce at the request of certain competing American companies and is based on a 1996 antidumping order that allows for periodic reviews of imports of Italian pasta. The Department of Commerce conducts these checks annually to assess whether Italian producers are selling pasta at prices lower than the U.S. domestic market, a practice known as “dumping.”

Companies involved in the investigation

The Department of Commerce selected two sample companies for in-depth analysis, defined as “mandatory respondents”: La Molisana and Pastificio Lucio Garofalo. According to the official document published by the U.S. administration, for the period from July 1, 2023 to June 30, 2024, both companies allegedly sold their products below market prices, resulting in the imposition of a duty of 91.74%.

U.S. authorities justified this percentage by claiming the two companies did not provide complete or compliant information as requested by the Department and were therefore insufficiently cooperative during the investigation. What is very important is that, in addition to the two companies directly examined, the additional 91.74% duty is also applied to numerous other Italian producers not individually reviewed. This methodology, while formally permitted under U.S. law as an exception, is being applied without any direct verification of the other companies.

Next steps in the procedure

Italy’s Ministry of Foreign Affairs moved immediately, formally intervening in the proceeding as an “interested party” through the Italian Embassy in Washington. The Foreign Ministry is working in close coordination with the companies concerned and, in concert with the European Commission, to persuade the U.S. Department to revise the provisional duties.

The two companies involved (La Molisana and Garofalo) can submit documentation to contest the dumping allegations. However, if dumping is confirmed, the Department of Commerce will instruct Customs to apply antidumping duties on goods sold and entered into U.S. commerce.

The preliminary nature of this determination means there is still room to change the decision before it becomes final.

Possible effective date

The new super-duty of 91.74%, which will be added to the existing 15% tariff for a total of 107%, is scheduled to take effect on January 1, 2026. This date therefore represents a crucial deadline for all ongoing diplomatic and legal actions.

If confirmed, the economic impact would be significant: in 2024, Italian pasta exports to the United States reached a value of €671 million according to Coldiretti, accounting for nearly 17% of the sector’s total exports. A 107% duty would risk seriously undermining competitiveness in one of the most important markets for Italian agri-food products.

What to do between now and January 1, 2026?

At this stage, the entry into force of the new duty depends on the outcome of the ongoing procedure: given what has happened in recent months, and the political use the U.S. administration has made of tariffs—well beyond their technical function—it is reasonable to be pessimistic.

So, what to do? In recent months we have seen companies react to the uncertainty over the fate of the tariffs in three ways:

Some rushed to ship as many products as possible before the potential effective date of the duty;
Some granted—upfront—discounts equivalent to the threatened duty, in case it came into force;
Some suspended orders, pending definitive news on the impact of the duties.

These are all valid options, but other effective tools for managing the uncertainty caused by the flurry of announcements, negotiations, and threats from the U.S. administration should not be forgotten: the risk of new duties being introduced, or existing ones being increased, can be managed in the contract by agreeing with the U.S. importer how any tariff change will affect the product.

The parties can stipulate, for example, that the increase will be split equally; or that the importer will bear it beyond a certain threshold; or that if the duty exceeds a certain level, the contracts may be terminated. You can find a deeper dive in this article.

The only certainty is that trade relations with the U.S. will stay unpredictable for a long time, and it’s vital to carefully manage the risk factors involved in selling products there. Right now, the focus is on tariffs and prices, and I encourage you to take this chance to thoroughly review existing agreements and assess whether—and how—other important points are addressed that could entail significant liabilities: we discuss them, very practically, in this book.

On 29 June 2025, the Vietnamese government introduced Decree No. 163/2025/ND-CP (Decree 163). This decree provides detailed guidance on how the updated Law on Pharmacy will be implemented.

Like the amended Law on Pharmacy, Decree 163 came into effect on 1 July 2025, replacing the previous Decree No. 54/2017/ND-CP (Decree 54). The new decree sets out comprehensive rules for key aspects of managing pharmaceuticals, including:

Pharmacy practice certificates
Certificates allowing pharmaceutical businesses to operate
Import and export of medicines and drug ingredients
Good Manufacturing Practice (GMP) inspections of overseas manufacturers
Recalling medicines and drug ingredients
Certificates for medicine advertising content
Medicine price management

Key Changes in Decree 163

Here are some important changes and additions introduced by Decree 163:

Destroying Specially Controlled Medicines

You no longer need to get approval from the relevant authority before destroying narcotic, psychotropic, and precursor drugs, or pharmaceutical ingredients that are narcotic or psychotropic substances or precursors used in medicines. Instead, you just need to provide notification at least seven working days in advance. This notification must include the planned destruction date and a detailed list of items to be destroyed.

E-commerce in Pharmaceutical

Pharmaceutical businesses that sell products online must openly display the following information to ensure transparency and consumer safety:

Their certificate allowing them to operate as a pharmaceutical business.
The pharmacy practice certificate of the person responsible for pharmaceutical expertise.
Information about the medicines themselves.

Shelf-Life Rules for Imported Products

For medicines and ingredients with a total shelf life of nine months or less, at least one-third of their shelf life must remain when they clear customs. Medicines with a shelf life of 30 days or less must still be within their shelf life at the time of customs clearance.

Controlling Imported Products

All medicines with marketing authorisation (MA) are subject to import control, except for:

Medicines needed for preventing and treating Group A infectious diseases that have been declared epidemics, as per the Law on Prevention and Control of Infectious Diseases.
Medicines with a shelf life of less than 30 days.

Importers must inform the provincial People’s Committee at least five working days before making a customs declaration. The People’s Committee can then issue a written notice of non-compliance to the customs authority within five working days of receiving this notification.

Medicine Advertising

Decree 163 adds a process that allows an approved medicine advertising certificate to be adjusted for certain changes (such as a change to the MA holder or manufacturer information). This means you don’t have to go through the entire initial registration process for medicine advertising content again, as was required under the previous rules.

Medicine Price Management

Businesses must announce or re-announce wholesale prices, similar to the medicine price declaration process under Decree 54. Some medicines are exempt from this requirement, including those provided free of charge for emergency responses, national health programmes, humanitarian aid, clinical trials, scientific research, or exhibition purposes, and medicines carried as personal luggage.

The Ministry of Health (MOH) can make recommendations if the announced or re-announced price is significantly higher than similar medicines already on the market. This includes situations where:

The announced or re-announced wholesale price of the medicine is higher than the highest price of similar medicines.
The price difference is more than 35% (for medicines priced under VND 1 million) or 15% (for medicines priced at VND 1 million and above) compared to winning bid prices in tenders.
The announced or re-announced price is higher than prices in the country of origin or other markets (if there’s no similar product in Vietnam).
When such differences are found, the MOH issues a formal recommendation to the announcing business and publishes it online for transparency and accountability.

Further Guidance in New Circular

On 1 July 2025, the MOH issued Circular No. 31/2025/TT-BYT (Circular 31), which further details how the amended Law on Pharmacy and Decree 163 should be implemented. Circular 31 officially replaces Circular No. 07/2018/TT-BYT and Decree 54 and came into effect immediately.

Key provisions of Circular 31 include:

Notification of Practising Pharmacists

Pharmaceutical businesses that are not part of a pharmacy chain must inform the relevant authority of a list of people currently working at the business who hold pharmacy practice certificates. This notification must be submitted within 15 days of the date the certificate allowing the pharmaceutical business to operate was issued, or when there are any changes to the list. This is a shorter deadline than the previous 30 days under earlier rules.

Pharmacy chains have similar notification duties and deadlines. Specifically, the chain operator must inform the provincial authority where each pharmacy in the chain is located about the list of practising pharmacists at those sites. Additionally, pharmacy chains must notify the authority if pharmacies are added or removed from the chain, and if there are any rotations of the people responsible for pharmaceutical expertise between pharmacies within the chain.

Medicine Information Activities

Under Circular 31, medicine information can still be given to healthcare professionals through information materials, seminars, and medical representatives.

However, Circular 31 introduces a significant change by removing the need to obtain a certificate for medicine information content before carrying out these activities. Under the new rules, pharmaceutical businesses, representative offices of foreign pharmaceutical companies in Vietnam, and MA holders are now responsible for creating and distributing medicine information materials. These materials must comply with the package inserts for medicines approved by the MOH, the Vietnamese National Drug Formulary, and any related documents and professional instructions issued or recognised by the MOH.

Donald Trump, never one to shy away from drama or diplomacy-via-caps-lock, has slapped a 50% tariff on all Brazilian exports to the United States. The justification? In his own delicate prose: “The treatment of former President Jair Bolsonaro is a disgrace… A witch hunt that must end IMMEDIATELY!”

And just in case anyone thought this was about trade imbalances or economic strategy, Trump made things crystal clear: “Due to Brazil’s insidious attacks on free elections…”.

In short, the 50% tariff isn’t about coffee, orange juice, or flip-flops. It’s about a Supreme Court judgment, applying Brazilian law, regarding Brazilian politicians accused of conspiring in a coup d’état. In other words, this is a brazen (and frankly absurd) attempt at judicial intervention via trade war.

Trump, with his characteristic subtlety, offered a solution: manufacture in the U.S., and he’ll look kindly upon Brazil, like a mafia don offering “protection” after smashing your shop window. But what he meant was: consider Bolsonaro innocent, and we’ll talk.

The Brazilian market took the bait

Although the fishy interference in Brazilian affairs was determined from a fish out of the water, the market took the bait: in the first 48 hours after the infamous letter, at least 1500 tons of fish were already held in Brazilian ports, as US buyers suspended their contracts due to uncertainty about the costs upon arrival. The fish market is on alert, as 80% of the exports head to the US, mainly coming from small family-owned industries that distribute the catch from artisanal fishing communities.

The same effect hit other sectors, from orange, honey, and coffee to aircraft.

Brazil’s response and sorcery: don’t mess with us (or our weather)

Naturally, Brazil will not sit quietly sipping caipirinhas while its sovereignty is trampled. Reciprocity is on the table: if Washington raises tariffs, Brasília can do the same. But above all, one thing is sure: Brazil will never tolerate foreign interference in its independent judiciary.

And then, a curious coincidence: right after Trump’s speech, a tornado accompanied by lightning struck the White House grounds. Pure chance? Maybe. Or could it have been the work of Brazilian indigenous shamans, a particularly well-organized group of umbanda practitioners, or simply the fact that, as every Brazilian child knows, God is Brazilian.

Trump might want to check the weather forecast next time before penning another angry letter.

The unpredictable becoming predictable

Trade wars are rarely tidy affairs, but one thing they consistently deliver is chaos (in legal terms, disruption). And when disruption meets contracts, force majeure disputes often end up in court.

At first glance, Trump’s decision to impose a 50% tariff overnight might feel like an unpredictable thunderbolt (quite literally, given the weather at the White House). But here’s the catch: by now, unpredictable tariffs are becoming predictable. When a government with a well-documented love for impulsive economic diplomacy imposes politically motivated tariffs, can anyone claim to be surprised?

In most jurisdictions, force majeure requires that the event be extraordinary, unforeseeable, and beyond the parties’ control. A sudden 50% tariff certainly ticks a few of those boxes, but following a repetition of erratic trade policy, one might argue that businesses should expect what in past times was considered unexpected, especially when dealing with certain jurisdictions or political figures. In other words, Trump’s tariffs might not excuse performance if parties didn’t prepare for exactly this kind of volatility.

This is where good contract drafting comes into play

Savvy businesses are learning that their contracts must go beyond a vague boilerplate clause about “acts of government” or “changes in law.” Instead, they should expressly address the risk of sudden tariff changes, including

hardship clauses that allow renegotiation when costs become commercially unreasonable;
price adjustment mechanisms linked to tariff thresholds;
termination rights triggered by specified levels of customs duties;
currency fluctuation provisions (because tariffs rarely travel alone, and currency swings often accompany them).

In short, while no contract can immunize a business from every shock, smart drafting can mean the difference between a commercial headache and a catastrophic breach.

Therefore, tariffs may no longer be an unpredictable storm; they are part of the new predictable landscape. Given that your contract might wake up tomorrow facing ‘IMMEDIATE’ punitive tariffs in all caps, your contract should be ready today.

The unwitting cupid: strengthening EU-Brazil relations

While the tariffs may ruffle trade flows between Brasília and Washington, there’s an unintended silver lining: Trump is proving to be the most efficient matchmaker between Brazil and other markets, such as China and the European Union.

The EU-Brazil relationship, already a flirtation with promising prospects, with relevant progress in the EU-Mercosur Agreement, now seems destined for deeper romance. If Mr. Trump insists on isolating the US from Brazil, the old continent stands ready, with flowers and wine in hand, to pick up where the US left off. After all, Brazilian fish can pair up nicely with champagne, cava and prosecco.

So thank you, Mr. Trump. In your quest to bully Brazil into submission, you may have done more to strengthen transatlantic ties than any EU Commissioner ever could. As they say in Brasília these days: Trump is not a trade warrior. He’s a cupid in disguise.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

I have often dealt with commercial distribution agreements between Italian and Chinese companies, sometimes following negotiations in the wine sector for various types of agreements: sales, distribution, franchising, establishment of joint ventures, and sales through online stores.

I am sharing some key considerations for approaching this complex but opportunity-rich market.

📌 Here are my 10 takeaways

Step Zero. Protect your IP

it is essential to protect your intellectual property before entering China. This includes trademarks (including their Chinese transliteration), labels, web domains, and social media accounts. Neglecting this aspect can have disastrous consequences, exposing you to the widespread phenomenon of trademark squatting (even famous names such as Michael Jordan, Elon Musk, and Donald Trump have fallen victim to this).

For more information, you can read this article about Intellectual property protection in China

1 – Know your enemy

trust is good, but mistrust is better. Before entering into commercial agreements, it is essential to check the credentials of potential partners through the databases of the State Administration for Industry and Commerce. When it comes to wine, it is necessary to check whether the prospective distributor has a license to import and distribute wine.

2 – No copy-paste

Contracts must be tailor-made, adapting them to local specificities. In particular, it is crucial to clearly regulate promotional activities: budget, commercial actions, communication methods, and management of the producer’s trademarks. It is also best to write the contract in Chinese to ensure that there are no misunderstandings and in case it needs to be used before a judge or local administrative body, as Chinese is the only official language. (N.B.: if you think of entrusting the task to ChatGPT, this is not a good idea).

For an in-depth article, check out The commercial distribution contract in China

3 – Decide immediately how and where to litigate

It may seem counterintuitive, but it is best to avoid providing for Italian (or French, or German) jurisdiction and applicable law, which is an ineffective solution, especially in cases where urgent action is needed to stop unfair competition or counterfeiting. Consider applying Chinese law and provide for an arbitration clause at CIETAC. An effective dispute management strategy is a key element of the agreement and must be negotiated carefully. (P.S.: This applies not only to China but to all international agreements. For more information, see this article).

4 – China is big

And it is the sum of many very different internal markets. Exclusivity should be granted for good reasons, but only if the distributor has a well-developed commercial network and can achieve specific shared objectives. If granted, it should be limited to the province where the distributor is based and subject to the achievement of agreed sales volumes. Having a single distributor for the whole of China is like entrusting an Italian distributor with promoting a product throughout Europe. Or appoint a NYC-based company to promote and sell your wines in all 50 US States.

5 – China is far away

Delegating everything to the local distributor and taking no interest in what is happening on the Chinese market is never a good idea. Firstly, because you have no idea how, where, and with what results the wines are being sold. Secondly, because you cannot verify compliance with agreements, for example on non-competition or the use of trademarks. It is therefore important to schedule meetings to share commercial policies and be able to verify what is happening, including through audits and visits to warehouses and the sales network.

6 – China is expensive

Competition in the Chinese domestic market is fierce. This is also true in terms of price, as some countries that are direct competitors of Italy (Australia, Chile, New Zealand) have free trade agreements and can therefore enter the market on more favorable terms than Italian wine, which is subject to a total tax burden of around 43% after payment of duties, excise taxes, and VAT. It is necessary to position oneself in the right market segment (medium-high), and to do so, it is necessary to plan the right commercial actions together with the distributor. Selling Ex-Works and hoping that the distributor will take care of everything is not an excellent strategy for being competitive.

7 – China is dangerous

Scams are always around the corner. In the wine world in particular, for example, spontaneous expressions of interest are frequent, arriving via the company website, social media accounts, or directly via email. They sound like this: we have discovered your wines, we think they are fantastic, we want to place an order immediately. If it sounds too good and easy, it is certainly a scam. There is an easy way to check: if the next step is a request for payment of a few thousand euros, justified by the need to register the wines on the CIFER (China Imported Food Enterprise Registration) portal, or to register your trademark to prevent others from doing so, or to authenticate the signature on the sales contract… these are attempts at fraud, and the elusive order will never arrive after payment has been received. How can you check whether the person you are dealing with is a reputable company or a fraudster? 👉🏼Go back to point 1 (here is an in-depth article).

8 – E-commerce? Yes, but with method (and money)

Online wine sales continue to grow, but entering large platforms is complex, competition is fierce, and running an online store requires meticulous planning and highly efficient system implementation. The online market in China is all pay-for-play. Nothing is achieved with no money or minimal effort. If you want to sell online, you need to build an omnichannel system integrated with traditional distribution, and to do this, it is essential to involve a local partner with well-defined investments and responsibilities.

9 – China is not a market for everyone

You need to protect your brands, study the market thoroughly, know your competition (both foreign and local), find the right market channel, select a distributor motivated to invest time and money in promoting your product, and be willing to support them with the right investments. If you want to build a serious plan to enter the Chinese market, you must have a medium- to long-term perspective. There are no shortcuts (actually, there are many, but they almost always lead to wasted time and money). If you are unwilling to invest in entering the Chinese market through the front door, it is unlikely that anyone else will do it for you.

10 – Don’t do it yourself

If you have read up to point 9 and are still keen to enter the Chinese market, consider doing so professionally, involving consultants who can support your company throughout the market research, scouting, negotiation, and contract drafting processes. This is also part of the investment needed to build and develop a solid and resilient business model. This advice applies to all foreign markets, and even more so to China.

Ignacio Alonso

Practice areas

Agency
Corporate
Distribution
Franchising

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