Overview

The factory secretly slips counterfeit famous-brand goods into your legitimate order, or uses your brand to make unauthorized products for the grey market. You may not discover it until customs seizes your container or your brand appears on goods you never ordered.

How It Works

  1. Counterfeit smuggling — the factory hides fake luxury/electronics goods inside your shipment (to piggyback on your container and avoid its own customs risk).
  2. Brand misuse ("overrun") — the factory produces more units than ordered under your brand and sells the surplus ("factory overrun") through grey channels.
  3. Subcontracting abuse — the factory subcontracts part of your branded production to an unapproved subcontractor who leaks or copies the brand.
  4. Customs risk — if counterfeit goods are found, your entire container can be seized, and you (the importer of record) face legal exposure.

Why It's Harmful

  • Customs seizure / destruction — your legitimate goods are held or destroyed along with the counterfeits.
  • Brand damage — unauthorized "overrun" products dilute your brand and erode customer trust.
  • Legal liability — you can be sued for trademark infringement even if you didn't know the fakes were there.

Red Flags

  • The factory is vague about its subcontractors or refuses to disclose them.
  • They offer "extra" units of your branded product at a discount.
  • You find your brand on B2B platforms from unknown sellers.
  • Price quotes include items or brands you didn't request.

Solutions

1. Contractual prohibitions

  • Explicitly prohibit: (a) any counterfeit/infringing goods in the shipment, (b) overproduction beyond the order, (c) subcontracting without written approval.
  • State severe penalties for breach, including full liability for seizure, fines, and brand damage.

2. Control subcontractors

  • Require disclosure and written approval of all subcontractors.
  • Audit subcontractors if you allow them at all.

3. Supervise loading & inspect thoroughly

  • Have a third party witness loading and check the container's contents against the packing list to ensure no unauthorized goods are included.

4. Control quantities

  • Contractually cap production to the ordered quantity; require accounting of raw materials and finished units to detect overruns.

5. Protect your brand in China

  • Register your trademark in China and file customs recordal (海关备案) so customs can proactively seize infringing exports.
  • Monitor B2B platforms for unauthorized use of your brand.

6. Traceability

  • Use unique serial numbers, holograms, or QR codes on your products to distinguish authorized goods from overrun/counterfeits.

Key Takeaway

Your container is a vehicle the factory might use for its own fraud. Contractually ban counterfeits and overruns, control subcontractors, supervise loading, register your brand and customs recordal in China, and make every unit traceable.