Here are two big no-nos:

• You should never pre-pay 100% of the order before production starts. We have seen buyers make this mistake and deeply regret it. Once that’s done, what keeps the factory working hard on shipping good products to you on time? You will become their last priority…
• You should never wire the down payment before having a relatively high certainty that the factory knows what you expect of them. Most experienced buyers issue purchase orders, then receive a sample and confirm it is very close to what they want to receive (after mass production), and after that, they send the advance payment. In some cases, you might need

It might be true. Yes, it does happen. If possible, get all the information about that supplier, their product price, and so on.

In that case, you can usually negotiate the amount to pay at the time of that purchase. It is not necessarily 100%, but often is. And make sure you understand how much you will still need to pay later for the advance payment (before production).

Yes! Some hackers regularly collect payments from buyers who send wires to the wrong accounts. You can read 7 tips to avoid this scam here.

Ask for an invoice that calls for payment to their company account. If you send money to a personal account, it will be much more difficult to litigate against them if they let you down later.

If they insist on payment to a personal account, there might be several reasons:

• The amount of the purchase is very low (for example, 1000 USD), and it makes no sense for them to do all the paperwork for converting your USD into RMB and so on and so forth.
• They don’t want to declare it in order to avoid taxes. This is not reassuring, but it is still very common in China. Don’t expect this company to be a perfect supplier over time.

Not necessarily. Again, there might be several reasons. They might use a Hong Kong company to avoid declaring the sale in China (and pay taxes), they might not have an export licence, and/or they might find it much more convenient to collect payments and do all the export procedures under another company.

As I wrote above, this will make it harder for you to litigate against your supplier, since you won’t be able to show a trail of payments from your company to theirs.

What can you do? The very minimum is for you to ask both companies (your supplier — “A”, and the one collecting payments — “B”) to jointly sign and stamp on a declaration that B is collecting payments on behalf of A and that A is the supplier to your company.

Whether you found them on Alibaba, Global Sources, Made In China, or other similar directories, doesn’t change anything. If you pay them by telegraphic transfer, what I wrote above in this article applies.

At the very minimum, your supplier will send you their pro forma invoice and ask you to confirm it. Naturally, it comes with their own terms, which is why we suggest you issue your own purchase orders (POs).

However, a PO is not a contract. It is difficult to sue a rogue supplier on the basis of a PO. We are not legal specialists, but the China Law Blog covered the topic of contracts nicely in this post.

Both are usually fine (up to negotiation between you and them). The “standard” is to pay in USD, but more and more buyers have decided to remit RMB. This might make sense if your bank offers that possibility. I wrote here about the reasons why many companies pay their Chinese suppliers in RMB.

If you purchase products from a Chinese company, do like most other buyers — buy under the FOB (“Freight On Board”) incoterm. It means you appoint the freight forwarder (or directly the shipping line) that will handle international transport.

As we suggested above, you don’t want the supplier to ship the goods before a final quality inspection has taken place. If you buy FOB, the shipment can only take place after your freight forwarder has released the “shipping order” to your supplier.

You can find more information on this topic in this post about negotiation.

If your bank charges you 40 USD or more, and their transfers take 4-5 working days to be executed, you are working with a traditional bank that follows an antiquated system (SWIFT was developed in the 1970s). This should change in the coming years with cryptocurrencies such as XRP, but right now there are other solutions.

Some of our clients have used Transferwise and Payoneer and seem happy about these services. Depending on your situation, they might offer a better deal than your traditional bank…

I never heard of a transaction that got lost forever (i.e. never arrived, even after honest investigations), but I heard of many transactions that “disappeared” for a little while. The whole SWIFT system is a bit clunky. It would happen as follows:

1. Payer’s bank processes the application for payment
2. Payee’s bank doesn’t register the money coming in
3. Payee asks his own bank to investigate, and no information is found
4. Payee asks the payer to ask their own bank to investigate, and they find an issue that was holding the execution of the wire

Depending on the two banks’ reactivity, unlocking such a situation can take up to 2 months!

For three reasons:

• They know that it is a “standard” and they suspect that you, as the buyer, will have a hard time finding a better deal.
• They need cash to pay their suppliers who, for a good part, don’t extend any credit.
• They have heard many stories of buyers who played games and managed to underpay for their production, or even cancelled after production was completed without having paid anything — for good reasons (poor quality) or bad reasons (disappointing sales, low cash position, etc.)

If the supplier sees your project as interesting in the mid- to long-term, and if the manufacturer has sufficient cash on hand to order and pay the components, yes it is generally negotiable.

If your production is highly customized and (in the unfortunate event of order cancellation) difficult to sell to another customer, negotiating a lower deposit will be difficult. It is a measure of risk prevention.

It depends on the industry, on the business relationship, on their power on the market, and so on:

• Some always do.
• Some do if they don’t have any confidence, but extend credit (generally 10-30 days, or enough time for the assembler to complete production and ship the goods out) when they feel the risk is limited.

This is unfortunately quite common. Generally speaking, if you have had a quality assurance agency confirm the quantity and the quality of your goods, the risk of paying before shipment is relatively low. Few companies scam their suppliers after doing all the production.

I have heard of companies in the US or in Europe who have managed to negotiate that type of deal. Here is their situation:

• They buy relatively high volumes and are not very tough on pricing (in other words, they are attractive to suppliers)
• They buy standard products for which there is high competition
• They ask 50 to 200 potential suppliers if they’d be open to that type of deal; they keep talking to the 5% who say they might be interested; they do business with 1 or 2 of them