Some inexperienced buyers learn about letters of guarantee, and they think it is the best thing since sliced bread. It costs nothing and it puts pressure on the supplier to deliver acceptable quality! What does a letter of guarantee look like? It is a certification, with the supplier's letter head and company chop, that reads something like this: We (supplier company) guarantee that the shipment of (order reference) is conform to (importer company)'s requirements regarding product … [Read more...]
The problem of Chinese factories closing suddenly
I had an interesting conversation with a Chinese friend who works for local district’s government (in Shenzhen city). He explained to me how "the Chinese legal system does too little for society". No recourse against factories closing suddenly One of his examples was about factory owners who disappear with the cash, and leave millions of RMB of unpaid invoices and wages behind them. Some factory bosses are actually not the legal representative of their company—one of their employees is—so … [Read more...]
When are product recalls unreasonable?
All Roads Lead To China wondered in several recent posts what proportion of "product failure" is acceptable, and when a recall is justified. What Richard Brubaker calls "product failure" is actually an accident caused by the product (whether it be a design or a manufacturing mistake). What can Western consumers accept, and what can't they accept? One of his examples is a recall caused by 3 baby cribs that caused death, out of 1 million imported pieces. The proportion is .0003%. In these 3 … [Read more...]
What to know before booking a quality inspection
Many small importers start buying in China, and then end up feeling a need for quality control (QC). They haven’t gotten assistance from specialized QC firms. This article outlines what buyers need to know to take full advantage of product inspections. Defining clear expectations Arranging a QC inspection will force you to get organized and to define your expectations. The inspection company will ask for your requirements regarding the product itself (size, color…), its packaging … [Read more...]
The short term view of chinese suppliers
Foreign buyers are often shocked by the behavior of their Chinese suppliers. They are themselves often trying to grow their business by making unprofitable deals with new customers. And when they ask for some help from their supplier, they can't even extract a few cents off the price, or get a claim settled. They cannot convince their suppliers that making small efforts can lead to long-term benefits. Why are Chinese people so focused on short-term results? Many people invoke … [Read more...]
What to do with golden samples from Chinese suppliers?
The importance of samples to get new orders How do buyers select a Chinese supplier? Most often, they compare quotations and samples. Other considerations, such as reactivity or manufacturing capability, are taken into account by a minority of importers. Hence the importance of the sample. A bad sample will probably not help in getting orders. Chinese suppliers are famous for promising anything they can to get a P/O, and trying to figure out what to do with it later. I heard it is also … [Read more...]
Who takes the final decision to let the factory ship the products?
It is always amazing how some Chinese suppliers can take advantage of a situation, and then reject the fault on another party with a straight face. I just fell victim of it, because of a supplier that didn't wait for his customer's shipping confirmation. Under FOB terms (or the corresponding FCA for air freight), the buyer controls the shipment. He appoints the forwarder (or organizes the transport by himself). An advantage is that he decides when the supplier should bring the products for … [Read more...]
You have special requirements? Then write your own inspection procedure!
One of my clients systematically controls every shipment upon arrival in their warehouse. So they have a lady who has been doing this full-time for more than 10 years. They have honed a procedure for her work, little by little. It is based more on experience and "feeling" than on any sort of logic. The problem is, it’s all in their minds… Nothing is written. They have started sourcing from China 4 years ago. The first season, they wanted to do things their own way, so they sent some of their … [Read more...]
Confirming quality when paying by irrevocable letter of credit
In my last article, I explained how an importer can confirm his product's quality while paying by bank wire. The other very widespread mode of payment is the letter of credit (L/C), or documentary credit. Generally speaking, buyers should look out for the same risks, so I won't repeat most of them. But there are specific issues to be aware of, as listed below. First, how does a payment by L/C work? A bank is used as a third party to guarantee that a payment will be done if a number of … [Read more...]
Confirming quality when paying by bank wire (T/T)
This article will detail how an importer can confirm his product's quality while paying by bank wire (let's say the deposit is 30%). Important note: what I wrote below is relevant primarily for sea shipments. For air shipping, the remainder (usually 70% is paid before the goods leave the factory). First, how does this mode of payment work? A 30% down payment is wired (by telegraphic transfer) before components are purchased and production is launched. This step usually follows the … [Read more...]
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