China Association of Automobile Manufacturers Issues Initiative on Payment Norms for Automaker Supplier Accounts

On September 15, the China Association of Automobile Manufacturers issued an initiative on the "Code of Payment for Accounts Payable to Suppliers by Vehicle Manufacturers."

In order to promote the implementation of the “Regulations on Ensuring Payment to Small and Medium-sized Enterprises” in the automobile industry and to support key automobile enterprises in fulfilling their commitments to supplier payment terms with high quality, the following standard recommendations regarding payment terms in procurement contracts between vehicle manufacturers and supplier enterprises are proposed based on full consultation:

I. General Principles

Adhering to the principles of equality, voluntariness, fairness, and integrity, complying with relevant national laws and regulations, implementing the requirements of the "Regulations on Ensuring Payments to Small and Medium-sized Enterprises," and not exploiting the advantageous position of large enterprises to infringe upon the interests of suppliers, we are committed to building a collaborative and mutually beneficial development ecosystem for "vehicles and components" to jointly promote the high-quality development of the automotive industry.

II. Key Steps

Order Confirmation

Party A (vehicle manufacturer) and Party B (supplier) confirm the order date, part names and specifications, quantity, delivery period, and other matters through the purchase order. If a valid purchase order needs to be changed or canceled, it should be agreed upon by both parties through negotiation. Party A and Party B agree on the delivery time, location, method, and other matters through the delivery notification.

(b) Delivery and Acceptance

Party B shall deliver the goods to Party A in accordance with the purchase order and delivery notice, and shall complete factory inspection of the goods before delivery to ensure that the goods are free from defects and that the packaging and other requirements comply with Party A’s requirements.

2. Party A shall promptly complete the inspection upon receiving the goods (in principle, no more than three working days). Upon passing the inspection, an inspection certificate shall be issued. If any discrepancies in the variety, quantity, or quality of the goods are found, Party A shall promptly notify Party B, who shall take corrective, replacement, or supplementary measures within the specified period. The liability for any resulting losses and related compensation shall be handled according to the contractual agreement between the parties.

(3) Payment and Settlement

1. The payment term by Party A shall be calculated from the date Party B delivers the goods and passes Party A's acceptance, and shall not exceed 60 calendar days (if the payment date coincides with a statutory holiday, it will be postponed accordingly). If Party B is a non-small or medium-sized enterprise that supplies continuously (more than twice a month), both parties may agree to consolidate the reconciliation within a certain period, with the payment term calculated from the date of reconciliation by both parties; Party A shall conduct at least one consolidated reconciliation each month to verify the quantity of goods accepted since the last reconciliation date and the corresponding payments.

2. If the unit price of supply has not been agreed upon by both parties, Party A shall make an advance payment based on a certain percentage of the amount calculated using Party B's most recent supply contract unit price or the development designated unit price. In principle, this percentage shall not be less than 80% of the supply contract unit price or 50% of the development designated unit price. After the parties negotiate and determine the price, any difference shall be settled with additional payment or refund based on the finalized unit price.

3. Party B shall promptly provide Party A with a standard and auditable invoice after Party A receives and completes the acceptance of the goods, based on which Party A will make the corresponding payment. If Party B fails to provide the invoice within the agreed time, Party A reserves the right to defer the payment.

4. Party A and Party B shall negotiate and determine the payment method, with encouragement to use cash (bank transfer, telegraphic transfer, etc.) or bank acceptance drafts for payment. If Party B is a small or medium-sized enterprise, it is advocated to use cash or bank acceptance drafts exclusively for payment.

(4) Term of the Contract

Advocate for Party A and Party B to establish a long-term and stable cooperative relationship, with each contract signed having a validity period of no less than one year.

The above proposed content constitutes the general requirements of the relevant contract terms between Party A and Party B. Other matters shall be separately agreed upon by Party A and Party B based on the actual situation.