I have been in contact with an Indonesian importer who is in the following situation:
- He buys standard products,
- The supplier requests 100% payment before shipment,
- The factory has shown in the past that it can’t be trusted at all.
He asked me how he can have the products inspected and reduce his risks of receiving defective goods.
There is no perfect solution in this case, unless the importer starts working with another supplier who accepts better payment terms (such as a letter of credit).
First solution – cheap but risky
If you need to pay 100% before shipment, you can’t inspect on the day the goods are loaded in the container (i.e. after payment).
If an inspector finds a problem, he has no time to send you a report (remember, a third-party inspector has no authority to stop a shipment), and anyway the supplier won’t care about it because you have already paid 100% of the invoice.
The only benefit is that the factory workers will be more careful when loading the container, and you will have photos of the way they did it.
I already wrote about this problem here.
Second solution – safer but more expensive
If you insist on paying after an inspection is passed, then you need to check the goods several days before the goods are loaded. This way, if some quality problems are found, the supplier will have pressure to correct them. And you’ll probably be able to negotiate that the cost of the re-inspection (to ensure the problems were corrected) is deducted from the money to be wired to the supplier.
The problem is, the factory has time to substitute lower-quality products at the time of loading. So you need to pay for a second day of inspection, where a few cartons will be opened to make sure it’s the same products.
Third solution – not possible for everyone
If the importer purchases large volumes regularly, it makes sense to get the goods in a forwarder’s warehouse, check them there, pay the supplier for the quantity that is accepted, and load the goods. I already explained how inspections on a platform work.
However, if you purchase large quantities, chances are that you’ll find a cooperative supplier who accepts to structure payments differently.
In China, small buyers and large buyers have totally different experiences…