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Outsourcing contracts

Exporters often outsource production to manufacturers in low cost countries to reduce costs and remain competitive. Key components may be manufactured offshore with final assembly carried out in New Zealand or production of the entire product may be outsourced.

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Exporters should consider a range of issues before entering into outsourcing arrangements including:

  • Scope of work and services to be outsourced
  • Price and handling of price changes
  • Payment terms
  • Milestones – delivery and completion dates and penalties for delays
  • Contractor’s relationship with customers
  • Capacity issues – including shortages and surpluses
  • Conflicts of interest and how to resolve them
  • Protection of intellectual property and ownership of new IP
  • Confidentiality
  • Quality control – standards, procedures, inspections, tests and audit
  • Liability and indemnity for product claims
  • Protection of property held by contractor such as raw materials, equipment and machinery
  • Term of contract

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