Can a Foreign Buyer Cancel a Custom Order from China Before Shipment?

A foreign business buyer does not automatically gain a right to cancel a Chinese custom order or recover every payment simply because the goods have not shipped. The first questions are whether the supplier is actually in breach, whether a cancellation right exists, and which law governs the transaction. If the buyer is changing its own purchasing plans, a documented exit agreement may be the practical route, but the supplier’s recoverable losses still need to be assessed.

This guide concerns commercial purchases of manufactured or customised goods. It does not apply consumer cooling-off rules to business orders. Legal sources checked on 23 September 2026.

1. Separate a change of plans from a supplier’s breach

Before describing the order as “undelivered”, check the agreed delivery date, production milestones, approved drawings, instalments, shipping instructions and any agreed extensions. Goods still being manufactured before the contractual deadline may be exactly what the contract permits. Full payment does not, by itself, give the buyer a discretionary cancellation right.

If the supplier has missed a due obligation, refused delivery or supplied materially different specifications, examine that evidence separately. Termination for breach requires the relevant contractual or legal conditions; under the CISG, Article 49 is not a general change-of-mind provision. Our guide to a Chinese supplier failing to ship after payment addresses that different situation.

A buyer considering an exit should request a dated production update and propose how further work will be handled. A request to pause production is not necessarily an effective contractual suspension: obtain agreement or establish the legal basis before assuming that the supplier must stop.

2. “Custom-made” does not settle the contract’s legal classification

The United Nations Convention on Contracts for the International Sale of Goods (CISG) may apply to a sale between parties whose places of business are in different Contracting States, subject to its scope and any effective exclusion. Article 3(1) generally treats goods to be manufactured as sales, unless the buyer undertakes to supply a substantial part of the necessary materials. Article 3(2) excludes contracts in which the preponderant part of the goods supplier’s obligations consists of labour or other services. Neither “custom order” on an invoice nor a domestic contract label resolves those tests.

China’s current treaty status records entry into force on 1 January 1988 and its declaration not to be bound by Article 1(1)(b). Check the actual places of business, transaction and exclusions rather than assuming every purchase from China is covered. Article 4 generally leaves contractual validity and the effect on ownership outside the Convention.

A choice of domestic law should not simply be treated as an express exclusion of the CISG. The Supreme People’s Court’s Guiding Case No. 107 illustrates application of the Convention alongside a domestic-law clause. Its Interpretation on International Treaties and International Usages, Fa Shi [2023] No. 15, effective 1 January 2024, addresses treaty application, reservations and permitted exclusions. This is why the governing-law analysis comes before reliance on a domestic cancellation rule.

3. Identify the actual route out of the order

Possible route	What must be checked
An agreed cancellation right	The permitted trigger, deadline, notice method, charges and any production-stage conditions. A cancellation clause and a refund promise are not necessarily the same thing.
Mutual termination	CISG Article 29 permits termination by agreement. Article 562 of the Chinese Civil Code also recognises agreed termination. Set out the financial settlement and comply with applicable writing requirements and contractual formalities.
Termination for supplier breach	Prove the breach and the applicable termination conditions, including any necessary notice or additional performance period. The buyer’s own revised plans do not establish supplier breach.
A Chinese-law contract for work	If the transaction is genuinely governed by the Civil Code’s contract-for-work rules, Article 787 allows the ordering party to terminate before the contractor completes the work, with compensation for resulting loss. “Before completion” is not the same as “before shipment”.

Civil Code Article 770 describes a contract for work as completing and delivering work results to the ordering party’s requirements in return for remuneration. The actual obligations, materials, production arrangement and applicable law require review. Do not assume that Article 787 grants every buyer of customised goods a free cancellation right, or use it to override matters governed by the CISG.

If no exit right or agreement has been established, a refusal to continue the purchase can expose the buyer to contractual remedies. Under CISG Article 53, payment and taking delivery are buyer obligations. Any claim for performance or damages must still satisfy the applicable legal conditions.

4. Establish what the payment was and what can be retained

Reconcile the signed seller’s name, invoice issuer, payment recipient, amount, currency and payment purpose. A trading company, manufacturer and collection agent can be different entities; payment to one does not, without further evidence, establish another’s refund obligation.

A prepayment or full purchase price is not automatically a Chinese-law earnest-money deposit (dingjin). If Chinese earnest-money rules apply, Civil Code Article 586 requires the relevant deposit arrangement and actual payment; only up to 20% of the principal contract amount can have that statutory deposit effect. Article 587’s forfeiture or double-return consequences require the specified breach preventing achievement of the contract’s purpose. The English word “deposit” alone does not decide the issue.

Equally, a “non-refundable” label does not replace review of the clause, applicable law, termination basis and any question of validity. Where the contract is lawfully terminated, assess restitution and compensation under the applicable rules and settlement terms. The supplier cannot justify retaining the entire price merely by calling it a deposit; the buyer cannot assume an automatic 100% refund merely because nothing has shipped.

5. Test the supplier’s loss claim against evidence

Ask for an itemised account linked to the particular order: dated production records, committed materials, completed components, subcontracting obligations, storage charges and the basis for any claimed lost profit. Compare those claims with reusable stock, resale possibilities, cancelled purchases and costs saved by stopping work. Avoid adding the full contract price, all production costs and lost profit in a way that counts the same loss twice.

For breach damages, CISG Articles 74 and 77 address loss, including profit, foreseeability and reasonable mitigation. Civil Code Articles 584 and 591 address comparable issues under Chinese domestic contract law. This does not mean that the buyer’s maximum exposure is always the supplier’s cash expenses, or that every amount on the supplier’s spreadsheet is recoverable. Compensation following an Article 787 termination also requires its own legal and factual assessment.

Keep the timeline clear: when the buyer raised cancellation, when the supplier responded, when any suspension or termination became effective, and what spending occurred at each stage. Continuing production after a mere negotiation request is not automatically unreasonable; a mitigation assessment depends on the circumstances and the governing rules.

6. Put the exit and refund mechanics into a signed agreement

A workable termination agreement should identify the original order and parties, effective termination date, production cut-off, completed goods and materials, agreed deductions, net refund, currency, bank charges and payment deadline. It should also allocate remaining goods, tooling and confidential designs, specify any resale or disposal permissions, and preserve an effective dispute-resolution clause for unpaid settlement amounts.

Check bank-account details through an established contact channel before accepting changed refund instructions. If a release of further claims is intended to depend on actual receipt of the refund, say so expressly. Do not treat “we agree to cancel” as confirmation that the payment, property and liability issues have all been settled.

For assessment of a specific China-related order, prepare the contract and quotation, amendments, payment evidence, parties’ legal names, production updates, relevant correspondence and any cancellation or refund proposal. China cross-border business and dispute services explain the service scope. Send a concise description through the consultation page or email panjianxing46@gmail.com.

Source note: The Chinese Civil Code took effect on 1 January 2021; relevant provisions include Articles 562–563, 566, 584, 586–587, 591, 770 and 787. CISG references above concern Articles 1–4, 6, 29, 49, 53, 74 and 77. General information only; a particular contract’s classification, remedies and recoverable loss depend on its facts and governing law. Cover: AI-generated conceptual illustration, not a photograph of an actual client, case or shipment.