I recently answered this question from a people looking for information about how to import goods from China. Here is the answer I gave:
“It all depends on your order configuration. Do you plan to buy from a single supplier or from several one ?
Below is a typical process flow to import goods from China:
1./ Source and contact a manufacturer
You can do so by browsing the Internet: Alibaba, Globalsources, Made in China or some other websites.
2./ Get some samples to verify the product you want to buy
This will give you a quick taste of the product you want to buy and will also be an ideal time to review potential defects which can appear on your production. I usually establish my quality control check list at the sample time reviewing. You would be amazed of how many times suppliers will send you some defective samples. Bad you think ? Well, yes and no. No because you can already understand what kind of problem may appear later on mass production. If you have a bit some experience on manufacturing process, you can quickly understand what can go wrong…
3./ Perform a quick supplier evaluation with an on site audit
Once you have validated your sample, I highly recommend you to perform a supplier audit (usually cost between 288 USD and 488 USD in China depending on the type of audit you need) to verify if :
- Your supplier is not a scam
- Your supplier is not a middle men / trading company
- Your manufacturer really has capability to produce your product properly
- Your sample was defective, so you can understand the manufacturing process and manage with risk by anticipating what can go wrong and include those risks in your contract.
4./ Prepare your contract and documentation
You asked a PO to your supplier, they returned you a cheap simple excel or word file with almost nothing in it.
Why not take it and rewrite it your own way including all the necessarely clauses (in bilingual) which can protect you a minimum, stating who pay what in case of X. For your information, should you go to a court case in China, if your document is not in Chinese, your chance to win the case are equal to 0.
Attach your quality standard requirement, your quality control checklist which they should follow and what they should pay attention to before telling you “Order is ready, please pay we ship”. Indeed, what is considered as a defectives in reality … everything is relative… yet you can make a table with defect type classification by criticity : critical, major, minor.
Believe me, it doesn’t cost more to do so and it doesn’t cost more to anticipate for worst case scenario. Then make a PDF file, and send it to your supplier, ask them to print it, to sign and to stamp it on every page. If they contest, then tell them : “ I can not edit, this is our company policy, I have no power on it”.
If you can, try to get a copy of the ID card of the business owner (matching the name on their ID card with the name on the business licence)… in case they run away with your money you can still find them.
Preferably make sign your contract by the general manager, not by the 20 years old sales girl who may leave the company next month to get a new job, as the company may decline having signed such terms and conditions.
5./ Perform payment for your deposit
When doing so, make sure the account beneficiary name match the company name. If it doesn’t, then watch out… particularly make sure the beneficiary name match the name in the PO they gave to you. I heard some dirty stories where some suppliers were receiving some payments on bank account with different beneficiary name but were claiming their email server had been pirated, client had to pay two times…. If you have any doubt, make them write a old school fax to confirm bank details.
Most of time, your supplier will ask you to pay 30–50% upfront order and the balance remaining at the end of the production and before shipment.
6./ Keep monitoring your production on a regular basis
Most of people will just wait the end of the production to start wondering about it. Well most of the time, it is too late to discover problem and to correct them. Main drawback of physical goods manufacturing is reworking for correcting them is costly, difficult and time consuming (contrary to correct some code in a digital goods for example). Every reworking will cost money to your suppliers and will diminish its margin, so they will do as much as they can to avoid this.
It is much easier to ask your supplier to correct some mistake and to implement a corrective action plan when only 5% of the production is done than when 100% of the production is over because reworking 5% of an order is much easier than reworking 100% of it.
To do this follow up, you should perform some quality inspection . For example, you can use a production monitoring or a during production inspection. The company performing it will send a quality inspector in your manufacturer facility to verify your production status and the quality of the goods which have already been produced so far. Then, they will send you a quality inspection report within 24 hours about the status of your production and even can send you some mass production samples by express carrier for you to review them.
If any problem is found, you can ask your supplier to correct the part of the production which has not been produced yet. Pricing usually cost 288 USD per man-day of work. A lot you think ? Well if you consider an order of 40000 USD, this 288 USD only represent 0.7% of your order amount. Quite cheap. Also, it can save you a lot of hassle in endless negotiation with a supplier who doesn’t want to rework your defective goods while holding your 30% deposit. Prevention is better than curing.
5./ Final Quality Control before payment and shipment
Whatever it happens at the beginning of the production, you should ALWAYS ALWAYS ALWAYS perform a quality inspection at the end of the production via a Preshipment Inspection to make sure that what you are about to pay and ship is in conformity with what you have planned to buy. As soon as you pay your supplier, he will not hear and listen to you the same way. He has his money, he has power. Before this final payment, you have the money, you have the power to be listened.
The Preshipment Inspection is typically a quality control watchdog where a quality inspector is sent on site to randomly sample goods from your product order batch. He check the goods based on your standard and instruction then send you a report within 24 hours. Price is usually around 288 USD per man-day. The number of man-day needed usually depend on your order quantity and other parameters.
If the preshipment inspection report reveal some quality issue or non conforimity, then you will have only a few options:
- negotiate with your supplier to get your goods being reworked
- negotiate a rebate with your supplier to ship the goods as it
- decide to not pay the goods but you will loose your deposit
If they propose to rework the goods, then I highly advice to perform again a preshipment inspection to make sure they really reworked the goods and not just open and close some cartons. Of course, in order to avoid paying again and again some inspection fees, you will have negotiated via your contract that the first pre shipment inspection is paid by you, but any further one will be paid by the supplier… 😉
6./ Final Payment
If your preshipment inspection report indicate that everything is fine, then you can afford to pay your supplier. In this case again you wire them the 50% or 70% remaining to their bank account.
In exchange you will ask them some documentation: packing list to make sure the quantities sent are the right one, and commercial invoice for your accounting and potentially for your VAT and taxes declaration in your own country
One you got payment and document done, you will contact your shipping agent to pick the goods and bing them to the port and to manage with custom clearance and and other documentation processing.
Normally they should give you the bill of lading, which is a document which allow you to get access to your container or goods when received at destination.
Oh wait, I forgot one small things: your goods are fragile? you are not sure the supplier will load properly the container and will load only 950 pieces instead of 1000 pieces? Or you are anxious they load it in a dirty way making all your goods being damaged during transportation? Or may be your container is not sealed properly and rain during transportation may destroy all your goods ?
Contract a Container Loading Inspection , an inspector will be sent during the loading to make sure the right quantities are loaded properly and that your container is in proper shape. If any problem, you have a proof to claim compensation to your shipping agent or manufacturer.
I hope this small process will help you.”
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