Importing - Getting It Right From China

How to evaluate the risks and best convention for importing goods from China. An insiders practical guide to the opportunities and pitfalls.

Sources for goods in China

Kingston

First institute who the supplier is! It seems inevitable but there are many routes to buying products in China through agents, trading companies, wholesalers and factories or any estimate of "back door" sources. Agents control on a commission basis whilst trading fellowships comprise costs in the quoted price, most wholesalers and factories do not have export approvals so have to control through a registered agent or trading enterprise to export to you at all.

In my perceive almost every sales someone that I have met in China who is not the owner of the enterprise has shown interest in either setting up on his own by "stealing" his employer's customers and product designs or simply doing his own deals on the side through friends, contacts or family.

On the internet there are many scams and dubious "traders". But accepting that you are lucky or diligent enough to find a legitimate agent/trading company, you will find that Chinese enterprise ethics are very different. Most Chinese friends and contacts, that I have spoken to on the subject, believe that "cheating" is the name of the game for people in business.

Negotiating the price is an art form poorly practiced in the West in my view. no ifs ands or buts in road purchases in China you may well think that you have done well to sell out the price first quoted by 20% or more (often the general negotiating "add-on" is 50% in road markets) this form can be very much higher for foreigners. Whilst the situation may be quite a bit dissimilar for more formal purchasing the principals are much the same.

But then there are all the "extras" like packing materials, printing and minor changes, inland costs etc which can be used to hike the price back up, or a perhaps a worse scenario is the convention of cutting corners on materials and potential to secure the lost margin.

Having a good feel for the all inclusive price from a estimate of suppliers for the definite product you want gives you the purchasing power to negotiate and buy the right product from your premium supplier at a inexpensive price hopefully without any "extras".

Payment terms are more often than not 30% down cost with the residue on completion of manufacture. But beware the requests for cost in full with a money order, these payments are to individuals and commonly are not traceable once made. No terms, no protection and probably no goods and only bitter perceive to be gained!

Are the prices quoted ex-works, Fob, Cif, delivered storage - what has been agreed and who pays and at what stage? Who raises the shipping documents, packing list and commercial invoice and will these documents enable you to clear the goods at the port of destination, assuming the goods exist in the first place never mind either they are of merchantable potential when they arrive?

Developing long term relationships with a few suppliers who you know well pays dividends. Getting to this point with a new supplier needs greatest caution no matter what their pedigree until a personal relationship has industrialized but even then be careful. The supplier's staff may also be contribution your products to your customers or competitors at lower prices if they can find out who they are.

Products

Is there a specification? Has this been agreed with your supplier. Do they no ifs ands or buts understand the specification?

What sort of things do you need to specify? Have you included labelling, marks, packaging including potential of cardboard etc as well as materials or components to be used, type and colours of paints and finishes, instructions in a language suitable for your client. Instructions in Chinese don't go down too well in Europe. Also reconsider the tests to be conducted while institute and on completion. Do you need Ce or RoHs approvals for importing electrical goods into Europe? If wood is contained in the product or the packing are fumigation certificates required?

Does the supplier own the intellectual asset proprietary of the product? Don't believe you can import well known international brands unless you intend to buy them from the brand owner. Gucci, Samsung or Philips or any owner of a well known brand no ifs ands or buts won't allow a Chinese supplier to sell their branded products at low prices through the back door! China is probably the world's largest source of fake or pirated goods with well known logos and branding on packaging that are simply copies or worse still just a logo stuck on a similar finding product.

Not only will there be limited or no warranties but worse you risk serious legal action and perhaps a criminal conviction if you cannot show proof of proprietary of the brand name or an deal exists from the brand owner when you import.

"This is Hertfordshire online" reported that a Tolworth man has been ordered by Kingston Crown Court to sell his flat and car to pay back £55,000. He was jailed for 12 months in March after construction up a criminal enterprise by importing fake designer clothes from India and selling them as genuine on eBay.

China exports to countries all over the world and to many third world countries and of procedure supplies the Chinese domestic shop where potential standards of the West are unknown or irrelevant. The premise may be oblivious to relatively spoton European Standards if they have never exported before or have not exported to the Eu before. So it may not be a matter of cheating you they may simply just not know what is needed to comply with Eu import regulations.

Likewise if they have not exported before they may have no idea how to comply with Chinese Export control regulations covering such things as foreign exchange, tax, licensing etc so whilst their intentions may be good the transaction may fail as they are unable to accomplish their part of the contract. This could mean that they can't convert the foreign currency at a sensible rate, they misunderstood the costs and procedures for exporting the goods through a Chinese Trading enterprise including transport, customs clearance, documentation, tax and duties etc. These things can slow the transaction by weeks or it may become impossible to accomplish the ageement at the price agreed and the transaction fails. But you have paid your money and either the supplier has it or it is still with a Chinese bank who won't publish it.

As appealing as you may think that buying from China appears, the anticipation of selling to the West by fresh employees in China sounds just too good to be true! The end user prices blazoned across the internet by Western retailers are no ifs ands or buts out of this world to a premise employee who receives probably no more than Us0 or a salesman on Us0 cash a month. The temptation to give exporting a try sounds just too tantalizing, it seems all things to gain and almost nothing to lose!!

Quality

Iso 9000 in my view is about applying tasteless sense to the supply process of specifying and checking that what you order is what you get and is the basis for best practice.

If you don't specify what you want your expectations are unlikely to be met..... Crystal balls don't work too well even with the internet to help. Especially so when one party speaks English and the other is battling with Mandarin instead of his local Chinese dialect probably through an investigator and with a very dissimilar technical and cultural background.

Products need to be specified in detail and cover such aspects as packaging and labeling, it then makes sense to get someone to check that what you have specified is understood and produced by the supplier before you publish the final payment.

Suppliers in China, like everywhere else, come in many shapes and sizes, from huge State Owned Enterprises (Soes) Joint Ventures (Jvs) with Western and/or Asian partners, incommunicable companies, fully owned Foreign Enterprises (Wfes) and house businesses. It's not going to advantage you by going to the biggest state owned group of factories in China if you intend to order only a few cartons a month. Likewise the small house enterprise won't cope, though they may say they will, with 20 or 30 packaging a week.

The Chinese Way

I have often been told "ah! but we do it the Chinese way here"

I believe that one of the most difficulties for newcomers complex in importing from China is arrival to terms with the fact that doing enterprise in China is very dissimilar to doing enterprise in the West. The mental processes, ethics, morals, life experiences, expectations, culture, politics, laws, education, and government involvement in daily enterprise life is very very dissimilar and not at all easy to predict even by long in the tooth, experienced ex-patriates from the West let alone newcomers.

Here is as an understanding to some dissimilar mental from my personal experience.

In many factories in South and Eastern China shop floor employees are mostly migrant workers from poor rural areas. They speak their native language and may struggle to chronicle with the city dwellers around them. Their living accommodation, food, clothing, recreation and welfare, such that it is, will commonly be in case,granted by the employer. The wages paid in cash are commonly very low as a result. Workers may only voyage home once a year. commonly there is no study available for migrant worker's children in many of the big cities so money is sent home where the house is based.

Consequently the enterprise cost basis is very dissimilar to the West and would be carefully more like an overhead than a variable cost in Western accounting terms. It is likely that the success of the factory, if of any size at all it will have direct government involvement, and may well be measured by the estimate of people employed rather than the financial performance.

Several Chinese friends have explained to me that discarding litter in the road provides jobs for those who have to pick it up and I sometimes no ifs ands or buts wonder if faulty product also creates those extra jobs too! A cynical viewpoint not to be taken too seriously but perhaps provides an inkling of inherent dissimilar logic, value and mental patterns.

Branded Products

Many very well known, high potential Branded products are made in China. Some of the largest and most thriving manufacturers of Chinese products that are best known in the World are often made by Joint Ventures or fully owned Foreign Enterprises.

These products are man-made to very high standards in factories with pro management and high levels of investment in plant, people and processes. The products are world class and sold and marketed by the Brand owner.

These Branded products are not no ifs ands or buts available to non-approved importers and if they are offered to you in China they are no ifs ands or buts fake copies or stolen or simply similar product with a celebrated logo attached. Chinese copyright law exists but has not yet caught up with the thousands upon thousands of fellowships that copy other's products either unsolicited for domestic or export consumption or as requested by foreign importers.

Don't be fooled..... It is illegal to import or sell these products in Europe and a criminal offence with severe sentences and penalties

Summary

Whilst you may have got some very negative vibes from this record that is not my intent. The future for manufacturing is in China. enterprise is done very successfully here by resourceful, competent very able and very willing enterprise partners that no ifs ands or buts want to make it happen for you and themselves in the long term and on a reliable and thriving basis.

My intent is to add to your awareness of how dissimilar things may be, just don't throw away tasteless sense with your enthusiasm. Others make it happen so can you!

Importing - Getting It Right From China