Importing - Getting It Right From China

Importing - Getting it right from Chinathe foreign currency at a sensible rate, they
How to evaluate the risks and best practice formisunderstood the costs and procedures for
importing goods from China. An insiders practicalexporting the goods through a Chinese Trading
guide to the opportunities and pitfalls.company including transport, customs clearance,
Sources for goods in Chinadocumentation, tax and duties etc. These things
First establish who the supplier is! It seemscan slow the transaction by weeks or it may
obvious but there are many routes to buyingbecome impossible to perform the contract at
products in China through agents, tradingthe price agreed and the transaction fails. But you
companies, wholesalers and factories or anyhave paid your money and either the supplier has
number of "back door" sources. Agents operateit or it is still with a Chinese bank who won't
on a commission basis whilst trading companiesrelease it.
include costs in the quoted price, mostAs attractive as you may think that buying from
wholesalers and factories do not have exportChina appears, the prospect of selling to the West
approvals so have to operate through aby inexperienced employees in China sounds just
registered agent or trading company to export totoo good to be true ! The end user prices
you at all.blazoned across the internet by Western retailers
In my experience almost every sales person thatare absolutely out of this world to a factory
I have met in China who is not the owner of theworker who receives probably no more than
business has shown interest in either setting up onUS$100 or a salesman on US$200 cash a month.
his own by "stealing" his employer's customersThe temptation to give exporting a try sounds
and product designs or simply doing his own dealsjust too tantalizing, it seems everything to gain
on the side through friends, contacts or family.and almost nothing to lose !!
On the internet there are many scams andQuality
dubious "traders". But accepting that you areISO 9000 in my view is about applying common
lucky or diligent enough to find a legitimate agentsense to the supply process of specifying and
trading company, you will find that Chinesechecking that what you order is what you get
business ethics are very different. Most Chineseand is the basis for best practice.
friends and contacts, that I have spoken to onIf you don't specify what you want your
the subject, believe that "cheating" is the name ofexpectations are unlikely to be met ..... crystal balls
the game for people in business.don't work too well even with the internet to help.
Negotiating the price is an art form poorlyEspecially so when one party speaks English and
practiced in the West in my view. Certainly inthe other is battling with Mandarin instead of his
street purchases in China you may well think thatlocal Chinese dialect probably through an
you have done well to reduce the price firstinterpreter and with a very different technical and
quoted by 20% or more (often the normalcultural background.
negotiating "add-on" is >50% in street markets)Products need to be specified in detail and cover
this figure can be very much higher for foreigners.such aspects as packaging and labeling, it then
Whilst the situation may be quite a bit differentmakes sense to get someone to check that
for more formal purchasing the principals arewhat you have specified is understood and
much the same.produced by the supplier before you release the
But then there are all the "extras" like packingfinal payment.
materials, printing and minor changes, inland costsSuppliers in China, like anywhere else, come in
etc which can be used to hike the price back up,many shapes and sizes, from huge State Owned
or a possibly a worse scenario is the practice ofEnterprises (SOEs) Joint Ventures (JVs) with
cutting corners on materials and quality to regainWestern and/or Asian partners, private
the lost margin.companies, Wholly owned Foreign Enterprises
Having a good feel for the all inclusive price from(WFEs) and family businesses. It's not going to
a number of suppliers for the specific product youbenefit you by going to the biggest state owned
want gives you the purchasing power togroup of factories in China if you intend to order
negotiate and buy the right product from youronly a few cartons a month. Likewise the small
selected supplier at a reasonable price hopefullyfamily business won't cope, though they may say
without any "extras".they will, with 20 or 30 containers a week.
Payment terms are more often than not 30%The Chinese Way
down payment with the residue on completion ofI have often been told "ah! but we do it the
manufacture. But beware the requests forChinese way here"
payment in full with a money order throughI believe that one of the greatest difficulties for
Western Union, these payments are to individualsnewcomers involved in importing from China is
and generally are not traceable once made. Nocoming to terms with the fact that doing business
terms, no security and probably no goods andin China is very different to doing business in the
only bitter experience to be gained !West. The thinking processes, ethics, morals, life
Are the prices quoted ex-works, FOB, CIF,experiences, expectations, culture, politics, laws,
delivered warehouse - what has been agreed andeducation, and government involvement in
who pays and at what stage ? Who raises theeveryday business life is very very different and
shipping documents, packing list and commercialnot at all easy to predict even by long in the
invoice and will these documents enable you totooth, experienced ex-patriates from the West
clear the goods at the port of destination,let alone newcomers.
assuming the goods exist in the first place neverHere is as an insight to some different thinking
mind whether they are of merchantable qualityfrom my personal experience.
when they arrive?In many factories in South and Eastern China
Developing long term relationships with a fewshop floor employees are mostly migrant
suppliers who you know well pays dividends.workers from poor rural areas. They speak their
Getting to this point with a new supplier needsnative language and may struggle to communicate
extreme caution no matter what their pedigreewith the city dwellers around them. Their living
until a personal relationship has developed butaccommodation, food, clothing, recreation and
even then be careful. The supplier's staff maywelfare, such that it is, will normally be provided
also be offering your products to your customersby the employer. The wages paid in cash are
or competitors at lower prices if they can find outusually very low as a result. Workers may only
who they are.travel home once a year. Normally there is no
Productsschooling available for migrant worker's children in
Is there a specification? Has this been agreed withmany of the big cities so money is sent home
your supplier. Do they actually understand thewhere the family is based.
specification ?Consequently the enterprise cost basis is very
What sort of things do you need to specify ?different to the West and would be considered
Have you included labelling, marks, packagingmore like an overhead than a variable cost in
including quality of cardboard etc as well asWestern accounting terms. It is likely that the
materials or components to be used, type andsuccess of the factory, if of any size at all it will
colours of paints and finishes, instructions in ahave direct government involvement, and may
language suitable for your client. Instructions inwell be measured by the number of people
Chinese don't go down too well in Europe. Alsoemployed rather than the financial performance.
consider the tests to be conducted duringSeveral Chinese friends have explained to me
manufacture and on completion. Do you need CEthat discarding litter in the street provides jobs
or RoHS approvals for importing electrical goodsfor those who have to pick it up and I sometimes
into Europe? If wood is contained in the productreally wonder if faulty product also creates those
or the packing are fumigation certificates requiredextra jobs too! A cynical viewpoint not to be
?taken too seriously but perhaps provides an inkling
Does the supplier own the intellectual propertyof possible different logic, value and thinking
rights of the product ? Don't believe you canpatterns.
import well known international brands unless youBranded Products
intend to buy them from the brand owner. Gucci,Many very well known, high quality Branded
Samsung or Philips or any owner of a well knownproducts are made in China. Some of the largest
brand certainly won't allow a Chinese supplier toand most successful manufacturers of Chinese
sell their branded products at low prices throughproducts that are best known in the World are
the back door! China is probably the world'soften made by Joint Ventures or Wholly owned
largest source of fake or pirated goods with wellForeign Enterprises.
known logos and branding on packaging that areThese products are manufactured to very high
simply copies or worse still just a logo stuck on astandards in factories with professional
similar looking product.management and high levels of investment in
Not only will there be little or no warranties butplant, people and processes. The products are
worse you risk serious legal action and possibly aworld class and sold and marketed by the Brand
criminal conviction if you cannot show proof ofowner.
ownership of the brand name or an agreementThese Branded products are not legitimately
exists from the brand owner when you import.available to non-approved importers and if they
"This is Hertfordshire online" reported that aare offered to you in China they are undoubtedly
Tolworth man has been ordered by Kingstonfake copies or stolen or simply similar product
Crown Court to sell his flat and car to pay backwith a famous logo attached. Chinese copyright
£55,000. He was jailed for 12 months inlaw exists but has not yet caught up with the
March after building up a criminal business bythousands upon thousands of companies that
importing fake designer clothes from India andcopy other's products either unsolicited for
selling them as genuine on eBay.domestic or export consumption or as requested
China exports to countries all over the world andby foreign importers.
to many third world countries and of courseDon't be fooled..... it is illegal to import or sell these
supplies the Chinese domestic market whereproducts in Europe and a criminal offence with
quality standards of the West are unknown orsevere sentences and penalties
irrelevant. The factory may be oblivious toSummary
relatively strict European Standards if they haveWhilst you may have got some very negative
never exported before or have not exported tovibes from this article that is not my intent. The
the EU before. So it may not be a matter offuture for manufacturing is in China. Business is
cheating you they may simply just not knowdone very successfully here by resourceful,
what is needed to comply with EU importcompetent very able and very willing business
regulations.partners that really want to make it happen for
Likewise if they have not exported before theyyou and themselves in the long term and on a
may have no idea how to comply with Chinesereliable and successful basis.
Export control regulations covering such things asMy intent is to add to your awareness of how
foreign exchange, tax, licensing etc so whilst theirdifferent things may be, just don't throw away
intentions may be good the transaction may failcommon sense with your enthusiasm. Others
as they are unable to perform their part of themake it happen so can you!
contract. This could mean that they can't convert