If a manufacturer fails to ship machinery after receiving the deposit, follow these four steps to protect your rights: ① Formal written demand (set a deadline of 7–10 business days: either ship the goods or refund the deposit; keep a record); ② Platform complaint (e.g., Alibaba Trade Assurance or 1688 escrow compensation); ③ Invoke the deposit penalty rule (Article 587 of the Civil Code: if the party receiving the deposit breaches the contract, they must refund double the deposit amount; the deposit must be ≤20% of the contract value); ④ Arbitration/Litigation (CIETAC arbitration, enforceable globally under the New York Convention)—evidence (contract, transfer records, demand notices) is the foundation of your claim.
I.
Issue a formal demand and preserve evidence
Written demand: Include a transaction summary (deposit amount, order date, scheduled shipping date) + two options (ship by the deadline OR refund the deposit) + a clear deadline (7–10 business days); Chain of evidence: Contract, Proforma Invoice (PI), quotation, transfer records, chat logs (if no formal contract exists, the transaction can be reconstructed using the order, chat history, and transfer remarks); Channels: Send via both email and WhatsApp/WeChat—the demand letter serves as crucial evidence for arbitration or litigation (relevant case factors: performance deadline, demand records, and severity of the breach).
II. Platform Complaints
Trade Assurance: For transactions on the Alibaba platform, one can apply for compensation via the escrow mechanism (funds are released only after inspection); 1688/Domestic Procurement: Platform complaint + compensation from the store’s security deposit; Timing: Act as quickly as possible (platforms have limited processing windows)—disputes regarding deposits for orders placed via the platform benefit from a fast-track process (compensation can be secured within days).
III.
Deposit Penalty Rules
Article 587 of the Civil Code: If the party receiving the deposit fails to perform the obligation or performs it in a manner inconsistent with the agreement, rendering the contract’s purpose unachievable → Double refund of the deposit; Upper Limit: The deposit must not exceed 20% of the principal contract value (the excess portion does not carry the legal effect of a “deposit” and is treated as a prepayment); “Dingjin” (Prepayment) vs. “Dingjin” (Earnest Money/Deposit): Payments not explicitly designated as “deposit” (in the strict legal sense) are treated as general prepayments (no double refund)—the penalty rule applies only when the specific term “deposit” is agreed upon (per the stance of Zhenhai Court).
IV.
Arbitration and Litigation
CIETAC Arbitration: China International Economic and Trade Arbitration Commission (stipulated in most foreign trade contracts); awards are globally enforceable under the New York Convention; Litigation: Chinese courts (jurisdiction based on the defendant’s location or the place of contract performance); Calculation of Losses: Deposit + price difference + inspection fees + warehousing fees + substitute procurement costs + interest (claims should be measured; exaggeration undermines credibility); Enforcement: Investigation of accounts, equipment, inventory, and affiliated companies—for cross-border disputes, arbitration is preferable to litigation (due to higher certainty of enforcement).
V. Urgent Actions for Overseas Buyers
First, SWIFT recall (request the bank to recall or trace the payment within 48–72 hours; recovery becomes difficult after one week); second, do not pay “release fees,” “security deposits,” or “taxes” (these are escalated scam tactics—avoid compounding your losses); third, preserve evidence (export all correspondence and bank records); fourth, 48-hour action plan (formal demand + platform complaint + bank intervention)—addressing deposit disputes involves four steps (formal demand to establish a record, platform complaint, invoking the double-deposit penalty rule, and arbitration/litigation);
overseas buyers should act within 48 hours and must not pay any additional “release fees.”
