Returning Defective Goods to a Chinese Supplier: Must the Refund Wait?
المقالات متاحة حالياً باللغتين الإنجليزية والصينية.
A Chinese supplier says: “Send the defective goods back first, then we will consider a refund.” Before shipping, separate the right to end the sale from the arrangements for exchanging the goods and the money. Returning stock without a clear arrangement can leave the buyer disputing its condition, the refund amount and whether the return was merely for repair.
This guide concerns business-to-business purchases from mainland Chinese suppliers, not consumer cooling-off rights. Legal sources checked on 16 October 2026. The contract, the governing law and any agreed settlement must be reviewed for the particular transaction.
1. Establish a right to restitution before arranging the return
A defect complaint, a request for a return label and a valid termination are different steps. If the CISG applies, Articles 25, 26 and 49 govern important aspects of fundamental breach, notice of avoidance and timing. A minor defect does not automatically justify a full refund. An agreed cancellation may instead set its own return and repayment conditions. The repair-offer guide explains why the availability of a proper cure matters.
Assess CISG applicability by reference to the parties’ places of business, the sale, contractual exclusions or variations and State declarations. The Convention entered into force for China on 1 January 1988; the mainland declaration concerning Article 1(1)(b) requires attention. Choosing Chinese law does not itself necessarily exclude the CISG. Domestic-law questions require separate analysis. Timely inspection and specific defect notices also remain important; see the inspection and notice guide.
2. Under CISG Article 81, mutual restitution is concurrent
After valid avoidance, Article 81(2) permits a party that performed wholly or partly to seek restitution of what it supplied or paid. Where both parties must make restitution, they must do so concurrently. The starting point is therefore not an unrestricted right for either side to demand the other’s entire performance first. Check whether the parties have validly agreed a different arrangement.
Concurrent restitution does not prescribe a universal international shipping or payment mechanism. Put forward a workable written proposal identifying the goods, the recipient, the refund and the coordinated handover and payment steps. If inspection at the supplier’s premises is proposed, define its purpose, objective criteria and effect on repayment, rather than leaving repayment entirely to a later discretionary decision.
Article 81(1) preserves relevant damages claims and provisions concerning dispute settlement or the consequences of avoidance. However, the scope of an agreed release still matters. A refund promise or remittance screenshot is not proof that cleared funds were received, and a transport receipt alone does not establish an agreed refund obligation.
3. Use, resale or dismantling can change the remedy
Article 82(1) can remove the buyer’s right to avoid or require substitute goods if it cannot return the goods substantially in the condition in which it received them. This is not a rule that every opened package or tested product defeats a claim. Article 82(2) contains exceptions, including where the inability is not due to the buyer’s act or omission, deterioration results from examination under Article 38, or ordinary-course resale, consumption or transformation in normal use occurred before the buyer discovered or ought to have discovered the nonconformity.
The sequence matters. Record receipt, testing, discovery, notice, use and disposal separately. Continuing to consume or resell goods after discovering the problem cannot simply be placed within the last exception. Explain what happened to each affected batch and retain evidence supporting any exception relied upon. Do not assume that a contractual reservation alone reverses the consequences of the buyer’s conduct.
Under Article 83, loss of avoidance or substitute-delivery rights under Article 82 does not itself remove the other remedies, whose own conditions still apply. For a buyer retaining defective goods, the price-reduction guide addresses a different possible route. Article 84 also requires attention: a seller bound to refund the price must pay interest from the payment date, while a buyer must account for benefits from the goods in the circumstances specified in Article 84(2). The article does not specify an interest rate; entitlement to a refund does not automatically mean repayment without any accounting.
4. Preserve rejected goods and evidence while the dispute continues
CISG Article 86(1) requires reasonable preservation measures where a buyer has received goods and intends to reject them under the contract or Convention. It permits retention until the seller reimburses reasonable preservation expenses; this is not an unrestricted right to hold goods for every disputed claim. Article 87 permits third-party warehousing where the expense is not unreasonable.
Article 88 provides conditional sale mechanisms where the other party unreasonably delays taking the goods back or meeting the relevant obligations, and for rapidly deteriorating goods or unreasonably expensive preservation. Notice requirements differ between those situations. Sale proceeds must be accounted for after permitted reasonable preservation and selling expenses. These provisions do not authorize arbitrary destruction or unrestricted resale of unsafe goods. Product safety, customs and local disposal rules need separate review.
Before a return, retain identifiable samples where feasible, photographs of condition and packing, serial-number lists, test records and the chain of custody. Allow a practicable opportunity to verify the complaint. Urgent safety or mitigation steps should be documented; preserving evidence is not a reason to continue dangerous use.
5. Where PRC domestic law governs, document the return arrangement
Article 566 of the PRC Civil Code addresses the effects of termination: unperformed obligations end, while restoration or other remedial measures concerning completed performance depend on the performance and nature of the contract; damages may also be claimed. It should not be treated as a verbatim import of CISG Articles 81–84. First establish the relevant termination or return entitlement, then address the particular goods, benefits, expenses and repayment obligations.
The following are points to agree or resolve, not automatic terms applicable to every return:
| Point | What the written record should establish |
|---|---|
| Purpose and goods | Return for refund, repair or inspection; order, quantity, serial numbers, current condition and the scope of any termination. |
| Handover and transport | Authorized recipient, place, carrier, packaging, customs arrangements, allocation of transit risk and responsibility for freight and storage. |
| Money and evidence | Refund amount and currency, treatment of interest and other claims, payment milestones, inspection criteria, and records proving handover and receipt of funds. |
| Failure and release | What happens if goods are refused or payment fails; which claims are resolved, when a release takes effect, and the applicable dispute-resolution mechanism. |
A factory address is not proof that the contracting seller has authorized that recipient to accept a return. Verify authority before handing over goods. A return can also require arrangements in both the country where the goods are held and China; a contractual promise does not itself establish customs admissibility or a tax refund.
6. Prepare a coordinated proposal with a verifiable record
For example, if a supplier offers repayment only after receiving and checking goods abroad, the buyer can first seek an agreed inspection record, defined refund conditions and a coordinated payment and release procedure. This is a negotiation approach, not a promise that the supplier must accept the buyer’s preferred mechanism. If no arrangement is reached, assess preservation, the governing remedies and the chosen court or arbitration process before taking irreversible steps.
For an initial discussion, provide the contracting seller’s legal name, contract and order, amounts paid, goods’ current location and condition, discovery and notice dates, any cancellation or settlement, and the proposed return instructions. These materials help assess the available route and practical recovery issues in China. Service scope and fees are confirmed before engagement; sending materials does not itself create a retainer or guarantee repayment.
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Official sources: CISG text, Articles 1, 6, 25, 26, 49 and 81–88; UN depositary status and declarations; PRC Civil Code, Article 566, effective 1 January 2021.
General legal information, not advice on an individual transaction. The cover is an AI-generated conceptual illustration, not an actual client, case or shipment photograph.
Jianxing Pan, Lawyer and Partner, Beijing Chang’an Law Firm · Beijing / Shenzhen.
