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Importing from China Suppliers – Managing your Risks

Discussion in 'China Sourcing' started by Global Sources, Mar 8, 2010.

  1. Global Sources

    Global Sources

    Joined:
    Dec 1, 2008
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    How to import effectively from China Suppliers

    Many buyers are still guarded about buying from China – which is understandable, since many of the country’s business practices lag behind those in more developed nations. However, your risks can be minimized by working only with qualified, above-board suppliers and by understanding all aspects of your import arrangement beforehand.

    If you can, visiting China is a good starting point for doing business there. If you can’t visit first, there are many online and print sources to help you find quality products and suppliers and minimize the risk of doing business there.

    Understanding the market

    Before deciding what to import, get as much information as possible about the demand for that product in your local market. Then learn as much as you can about the manufacturers of that product in China. Be vigilant and ask every detail you need to know. If you can’t obtain first-hand opinions, publications such as sourcing e-Magazines published by Global Sources are a good place to start your sourcing research.

    Global Sources' e-magazines are available for immediate download, free of charge. Sourcing professionals can choose from 14 industry-specific titles.

    Finding a trustworthy supplier

    This is perhaps the most important step in your import business. Dealing with a serious and dependable supplier allays concerns about quality and can help fend off disputes down the road.

    There are a number of websites where you can find suppliers. Narrowing down the choices can be a hard task, but your work will be easier if you use sites that screen the suppliers they’ve listed – like Global Sources Online. A good sourcing portal will also include contact names, numbers and e-mail addresses so you can easily get in touch with suppliers for answers to your questions on product pricing, minimum order quantity and more.

    Once you're in contact with prospective suppliers, address all your quality concerns with the right questions. Clearly state your requirements – like product warranties, key specifications and order terms. Alternatively, some companies will provide product samples if you ask, so you can test them yourself. If you're happy with the initial quality, you can order in bulk. If possible, try and attend a sourcing fair to test samples free of charge. Most fairs are organized around themes like "Clothing & Garments" or "Electronics", so you can meet specialized sellers who are best able to fulfill your needs.

    Factory visits and inspections

    Visiting a China factory can be an important part of making your buying decision. And it’s easier than you think – many suppliers even arrange transport for you. At China Sourcing Fairs, for instance, some exhibitors will take you from the expo hall right to their factory floors.

    There are a few reasons why you'd want a factory visit:

    1. To meet management and see if the company is competent
    2. To gauge the factory's level of technical sophistication
    3. To check if the factory complies with regulations and labour laws
    4. To see who else has placed orders with that factory
    5. To determine if the factory's production capacity is as claimed
    6. To see if the factory is subcontracting production to other factories

    If visiting in person is too difficult, consider appointing a local agent or third-party quality firm to inspect the factory on your behalf. Get someone who speaks the language and knows local business conditions well enough to make an accurate judgment. Most agents charge by commission and will also inspect the output before shipment.

    The shipping process

    Product quality can be found satisfactory during your factory visit, but issues can arise once products are shipped. Some problems include incorrect count, wrong mix of product types, improper handling, inadequate dunnage and container damage. You may be faced with unusable products on arrival and a long delay to replace them.

    You have three options:

    1.Rely on the factory or trading agent's assurances. This carries the highest risk since many suppliers and agents are highly motivated to get the shipment out. Even honest businessmen may not have time to witness the loading and inspect the goods. You can afford this if your product isn't high unit cost, high warranty or recall risk, or time sensitive.

    2.Observe the loading yourself. May not be practical considering the many shipments, suppliers and enormous amount of time it will take.

    3.Best of all, have an employee or agent inspect the goods and observe the container through the whole loading process. In fact, the loading report is often used to obtain the letter of credit (L/C) payment.

    Compliance issues

    You need to understand the relevant import compliance regulations before even placing your order. Different regulating bodies in your country may be involved, depending on what you import. Go to their websites for compliance details or to download required forms. Compliance issues can be very complicated for some products, so you might also want to contract a good customs house broker.

    Even with the help of a broker, you should track the process step by step. You may need to issue a power of attorney to your broker and purchase customs bonds – guarantees that you will abide by all laws and pay any additional fees incurred.

    Neglecting compliance can be costly, in the form of unexpected customs duties or clearance delays. But with adequate planning ahead of time, you can make sure the process goes smoothly.

    Landing costs

    Get a good estimate of the landing cost before you make your order. Landing cost is the sum of: cost of the goods up to loading on the transport, transport costs by forwarder, import duties, local transport costs, and cost of service providers (inspections, agents, etc.).

    Note that import fees vary depending on what you import, the country of origin and destination. Experienced exporters should know how much it really costs to ship to you, but do your homework nonetheless.
    There may be many hidden costs in getting your product from the China factory to your warehouse. To minimize those, you may want to consult an import management company for help. Or make a small order first to collect all costs involved and predict these costs for your intended order quantity.

    Delivery from the port of entry to your final destination is often an overlooked cost. To resolve this, contact the many "last mile" service providers in your home country. They’ll deliver from your local port of entry to your company grounds.
    With some good advance planning, you can import products from China profitably – and with very little risk to your bottom line. :)
    Sophia Liang and saahaodotcom like this.
  2. tvcmall

    tvcmall Banned Member

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    Dec 4, 2008
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    Understanding the market is the most important to business . All seller need to keep it in mind, so you can do business better and better !
    saahaodotcom likes this.
  3. TradeSparq

    TradeSparq

    Joined:
    Mar 4, 2010
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    246
    This is a good post which covers many of the basics regarding sourcing products in China. In addition to those tips listed above, I would add the following points.



    1. Build a network: Once you start sourcing from China, be sure to build a network of contacts that can help you to avoid problems in sourcing. You need a few potential suppliers for a given product, and you need to maintain these connections moving forward. Even if a certain supplier doesn’t get your order this time, they may come out with a new product tomorrow that gives you an opportunity. As you build this sourcing network, it will pay great dividends over time.

    2. Leverage your network for verification: Be sure to ask buyers in similar categories about certain suppliers. Ask manufacturers if they have references. For example, many suppliers are knowledgeable about competing suppliers. If they don’t have capacity you need, they can act as a trading company / introduction to a factory they trust. Remember, this is a supply “chain” and this extends into raw materials and components as well. Even service providers, especially inspection companies, know which companies have high standards in quality and service.

    3. Understand your retail price point and calculate sourcing price: You need a good calculation spreadsheet that starts with a retail price point and moves backwards to calculate the FOB price or supplier quoted price. There are literally a dozen factors that can go into the final retail price. Time and again, I’ve seen people source a product at a price that was too high for their retail markets to sustain and they end up with obsolete and expensive inventory. Add in retail margins, VAT, taxes, freight, insurance and currency differences to get a picture of what price you need to hit your retail price. Do this before you start sourcing, that way you won’t waste time with suppliers that can’t meet your criteria.

    4. Payment: This is always tricky and is essentially up to the two parties. You may want to start with a letter of credit (L/C) for first time volume purchases with a new supplier. As you build up trust with each supplier, you can move to a 30% -40% -30% arrangement – 30% upon initial order, another 40% when the product is “on board” and the final 30% when it clears customs in the destination country.
    In terms of researching specific industries and where they are located in China, etc., you can use printed media to gather data, BUT REMEMBER: in the most optimistic scenario, that data is at least 3 months old. It’s more likely one to two years old. Spikes in basic commodities like oil can drastically change the sourcing picture. This is where your network helps you – online social networks and groups, forums, people in the industry you know often provide information that you can’t get from magazines and books.
  4. oz-retailer

    oz-retailer

    Joined:
    Apr 20, 2010
    Messages:
    3
    that's really good.
    The hardest thing is finding a good supplier.
  5. gzbpro

    gzbpro

    Joined:
    Apr 28, 2010
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    133
    I started out in this business with a plane ticket to China, $200 dollars, only hearing about 2 cities, Beijing and Shanghai and not knowing a soul. Either you use alibaba, or global sources, not one will be full-proof. In any business, it's about relationships. Trusting the person your working with. The bigger the supplier is, the more reliable they are. But you have to pay a premium for their products that the same mom and pop shop provides.

    I'm currently in the mobile accessories and electronics industry. I advise you to find someone reliable that you can trust to source your products. Because there is a lot of things to look out for other than the price. Such as quality, shipping, lead time, credit, scams, damage control etc...

    I'm hoping to change the landscape of how people do business in and with China.

    One aspect to look into is, the better their English, the more reliable they are.
    saahaodotcom, Cody, lisa k and 3 others like this.
  6. hugotiger

    hugotiger

    Joined:
    Jan 26, 2010
    Messages:
    847
    Hello,
    There are many people confused about this.
    How to
    Importing from China? How to find the good supplier?
    Not everyone have the opportunity to cooperation with the good supplier at first.
    So we need to find the good supplier for a long time. Trust with each other.
    Of course, all the supplier want to find the good customers too.
    This is the interactive process.

    This threads show the details for Importing from China is useful.
    Wish all the people happy everyday. Good Luck!

    best regards
    saahaodotcom, Cody and hest like this.
  7. gzbpro

    gzbpro

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    Apr 28, 2010
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    133
    Really, I want to start a thread explaining all this from a first-hand foreigner experience. But this forum won't let me! So I don't know. Maybe after some time, I'll be able to start a thread, I'm also new to this forum thingy. So any help on what I need to start a thread is helpful.

    I'm willing to give you guys a ton of free information, secrets of the trade, and my own experience starting out.

    One thing I can tell you is... every time I order products from a trading or "so call" mfg direct company (without checking them out in person), I get defective products. Such as, bad packaging, scratches during product production, high prices for goods and especially shipping because they don't pack it right! They have to know, when you are shipping by air, you have to save space and pack it tight!

    Anyways, good luck. The only way you can manage risk and save on cost the way you want it, you'll have to meet them face to face or have a reliable person that can stand in for you that understand the whole process, especially on a westerner point of view. If not, you'll just be shooting blind, meaning... sometimes you hit, sometimes you miss.
    saahaodotcom likes this.
  8. Global Sources

    Global Sources

    Joined:
    Dec 1, 2008
    Messages:
    31
    Thank you all for your responses and support to Global Sources.

    Just wish to share some key highlights:

    Free Sourcing e-Magazine (New titles available now!)

    - We’ve added 3 new titles to our monthly sourcing e-Magazines line up: Machinery & Industrial Supplies, India Products, and Lighting & Electrical.
    - July issue out now! Download your free e-Magazine instantly!

    China Sourcing Fair (New tradeshow locations!)

    - In addition to Hong Kong, Shanghai, Mumbai and Dubai, we’re expanding our China Sourcing Fair show venues to Singapore, South Africa and the USA. The new locations allow more buyers to meet face-to-face with qualified China suppliers, worldwide. Plus, we've also launched India and Korea Sourcing Fairs, where buyers can meet personally with top quality suppliers from these nations as well. For details, visit the China Sourcing Fair homepage.
    saahaodotcom likes this.
  9. Frank Saddleman

    Frank Saddleman

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    Jun 23, 2010
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    33
    I decided to pay my supplier a surprise visit in China. After a lot of skype conversations, I felt good about them, and being one of the few American owned/operated wholesalers in China, I wasn't overly worried, but the idea of actually going to China and visiting them face to face was my wifes idea. We went. It was the most educational experience of my life. They took me to the factories they buy from on my first day there. They did not know I was coming so they could not prepare anything. They told us to visit any factory on any item and bring back a quote. Then they called the same factories I visited and the conversation was in English and on speaker phone to show me what they can do. They negotiate EVERY quote from 35% to 80% lower than I got. It pays to understand the culture if doing business in China. Now I buy everything through them.
    saahaodotcom, Cody, theocindy and 2 others like this.
  10. yuki

    yuki

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    Jul 24, 2009
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    17
    Wow, that's really good, thank you!
    saahaodotcom and Cody like this.
  11. traveler123

    traveler123

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    Jul 14, 2010
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    1
    I would just like to know if anyone has come accross a garden centre wholesaler in china or asia that I might be able to use to source outdoor clothing as well as garden centre products and outdoor related equipment such as bbq's benches and even tents for my online garden centre?
    saahaodotcom and Cody like this.
  12. rebecca005

    rebecca005 Banned Member

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    Jul 20, 2010
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    Nowadays when people mention about importing from China, parts of them are scared about being scammed as maybe they have no chance to contact their supplier face to face.

    As a chinese, i would like to say that Scammers are Everywhere, not only in China, but also in other countries. I want to say that most of us want to be treated kindly by others.
    saahaodotcom likes this.
  13. maryinchina

    maryinchina

    Joined:
    Jul 21, 2010
    Messages:
    3
    hi
    This thread i am interested in as i am here in china, i have been here 5 years. I came here to teach english after having been in sales and customer service for most of my life, teaching gave me a lot of insight as to how the chinese work.
    I am now sales manager of a company and i agree the trust issue is and can be a problem what i would like to say is that if you have doubts and can not make a personal visit you could use an independant agent to drop in and suprise the factory.
    If anyone out there would like me to do this then shout me i am free at weekends and enjoy traveling around, you can call me or i call you and you can check me out i will give you numbers in england of family, i would need to charge to cover expenses etc.
    if you need a QC agent i have know other people who do this as a living again i can put you in touch with them.
    thanks and if i can help let me know
    have fun
    mary
    saahaodotcom and YorkshireDave like this.
  14. cherrydla

    cherrydla

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    Jul 21, 2010
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    @ Frank. thank you very much for relaying a very positive experience in china. With all the bad experiences I came to know and all the warnings given, a ray of hope has been given me.:)
    saahaodotcom likes this.
  15. Frank Saddleman

    Frank Saddleman

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    Jun 23, 2010
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    for Rebecca, infact while in China, my supplier (who is American) has a huge file of known cheats and scammers. When he showed me how many were actually coming out of the USA, England,France and Australia, I was taken by total surprise. While the Chinese list was larger, he did explain that the number of suppliers in China are much greater and you should always use causion regardless of the country you are doing business in. But they did note that "Western" governments do play a much more active role in shutting down cheats and scammers.
    saahaodotcom likes this.
  16. marcinchina

    marcinchina

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    Jul 23, 2010
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    5
    Hello,
    I m in china...i came here strictly to work in business and its really hard work... within the time i spend here many things happend....always if you do order some stock make sure they provide you a correct sample.i have done alot of manufacturing in the past and to find my right supplier was a pain in the a.... sorry for my bad english.But i received samples from suppliers here for jackets were the sleeves had different lengths and so on.I received joblots on phones were 30% had problems in the first place.Now its getting better but still its like a jungle out here.I ve been very lucky that i do most quality control in china otherwise i could close down my business in europe.If anyone seeks advice in manufacturing in china clothes or electronics..you can contact me or if you need to verify a factory in the guangdong province please leave me a pm...i will have also joblots on items to offer for....I welcome any suggestions or needs i can provide pictures.. samples and goods.also can arrange local pick ups from my business partners in uk(london).
    :rolleyes:
    saahaodotcom likes this.
  17. hot_tamale

    hot_tamale

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    Jul 28, 2010
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    what are the implications for importing from China to the UK i.e. costs of import tax and duties etc
    saahaodotcom likes this.
  18. marcinchina

    marcinchina

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    Jul 23, 2010
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    it depends what kind of goods you want to import
    saahaodotcom likes this.
  19. pambright1970

    pambright1970

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    Jul 29, 2010
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    Excellent post. I would only add, a tour of a factory should not always be considered totally reliable. I know of MANY trading agents claiming to be factories, then getting the factory to back their story in order to get the deal.
    Also, nearly all the factories outsource most of their components to very small shops in local villages. Most 'factories' are basicly assembly plants and actually produce very little in way of components themselves.
    Determining a factory's ability to produce a given number of pieces or units per month is nearly impossible from an on site inspection, as their production count relies heavily on smaller shops having the ability to produce in high volumn.
    Factory inspections are great for quality assurance inspections if done without giving the factory prior notice. We have found nearly 3 times more 'unacceptable' samples during unannounced inspections compared to prearranged inspections.
    saahaodotcom likes this.
  20. Dantoo

    Dantoo

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    Aug 3, 2010
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    Very good tips. I also agree that to it will take some time to cooperate with a good supplier. And also recommended that dont buy items just rely on prices.
    saahaodotcom likes this.
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