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Escrow Payments to Chinese Suppliers: A Complete Guide

excrow payment

Escrow payment solutions require the supplier to meet certain conditions (e.g., ship products) before the funds are released. In theory, Escrow payments ensure that the buyer is not scammed and that products are actually shipped.

In practice, however, Escrow payments are only as good as the ‘money release conditions’ the supplier is forced to comply with. Keep reading, and learn how Escrow payments in China work, and the various solutions available for importers.

What is Escrow?

Normally, a buyer transfers funds directly to the supplier’s bank account. This is risky, as the supplier could then disappear or deliver an insufficient product. There’s no ‘refund’ or ‘chargeback’ mechanism in place when paying suppliers by telegraphic transfers.

Escrow, on the other hand, involves a middleman receiving the funds from the buyer – only to release the money once certain conditions have been fulfilled.

These conditions can either be set by the buyer and seller, or by the Escrow payment services. Common ‘escrow payment conditions’ include the following:

  • The seller can prove that the documents are shipped (e.g., provide a tracking ID)
  • The products are approved by the buyer after delivery

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Freelance Sourcing Agents in China: A Complete Guide

Sourcing freelancer woman

Tired of endless Skype conversations with pig headed suppliers at 4AM in the morning? You’re not alone. Luckily, someone else can manage the more tiresome parts of your Ecommerce business for you – leaving you with more time to spend on making money.

In this article, you will learn how a sourcing freelancer can free up hours from daily schedule – for a price that anyone can afford. That said, things will go wrong, if you don’t manage your sourcing freelancer the right way.

What can a freelance sourcing agent do for my business?

A sourcing freelancer can act as your extended hand in China. They can do background checks on suppliers, gather quotations and other time consuming tasks that you rather leave to someone else.

They can also break down language barriers, and deal with suppliers in their own time zone.

Managed the right way, a sourcing freelancer can help you save countless hours on a weekly basis, for a fairly low cost.

However, sourcing freelancers are ‘everything experts’ that can help you with everything from product safety, to NDAs or patents. Yet, that is exactly what many Importers assume. Continue Reading →

Interpreter Services Providers & Freelancers in China: A Complete Guide

chinese Interpreter

An interpreter can be an indispensable partner while visiting manufacturers in China, if managed the right way. Managed the wrong way, they might communicate incorrect and conflicting information about your expected order terms, and product specifications – something that can result in disastrous quality issues further down the line.

In this article, you will learn how to prepare your interpreter, whether you should work with a freelancer or agency, and how much you should expect to pay.

What can Interpretation Service providers offer?

The role of an interpreter is to provide oral translation between two parties, for example during a negotiation. Translators, on the other hand, only deal with texts.

Importers often make use of Interpreters as representatives and assistants during factory visits and negotiations.

While most export focused factories have English speaking staff, an experienced interpreter can help buyer’s get their points across to the (often non-English speaking) factory boss, negotiate prices and prevent misunderstandings.

In addition, interpreters also tend to help their customers with booking hotels, trains and other transportation between factories – something that can be hard if you don’t speak a word of Mandarin Chinese.

As such, interpreters often work as all round assistants for people coming to China. Continue Reading →

Buying Product Samples from China: A Complete Guide

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Ordering Product Samples from a supplier is a key part of the import process. However, there are various types of samples, that each has a unique function.

In this article, we explain everything you must know about buying product samples from China: Including factory samples, pre-production samples and batch samples.

We also answer many of the most common questions we receive, related to sample development, including how you can protect your Intellectual Property, shipping methods and how much you should expect to pay for samples.

Types of Product Samples

product samples

a. Factory Sample

A Factory sample is a ‘ready made’ product sample that is not manufactured according to the buyer’s design or customized specifications.

It serves as the most basic form of ‘evidence’ of the manufacturer’s production capability.

Commonly, factory samples are purchased as part of the vetting process, as they can be obtained from a large number of suppliers rather quickly.

However, a factory sample doesn’t demonstrate a supplier’s ability to manufacture a customized product. As such, the factory samples serve as a first introduction, rather than a signal for final selection of a supplier.

In addition, factory samples can be divided into two main categories:

  • Material samples (i.e., fabric samples)
  • Standardized products (i.e., Machine parts)
  • Previous Batch Samples (i.e., Products manufactured on behalf of other buyers)

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VAT on Imported Goods from China: A Complete Guide

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Importers based in the European Union must pay Value Added Tax (VAT) on top of the Customs value. In this article, we help you navigate the complexities of ‘Import VAT’ when buying from China.

Keep reading, and learn more about VAT calculations, and whether or not Import VAT is deductible.

We also explain how and when you declare and pay VAT, and much more.

What is Value Added Tax (VAT)?

VAT is a consumption tax in the European Union. In B2C transactions, VAT is always included in the price. If you, for example, buy a product online from an EU based online store, the price you pay includes VAT.

The seller can then offset the VAT it ads on its sales, to the VAT it paid to other other EU businesses, when buying products or services.

Below follows an example:

  • Sales: $10,000 (Including VAT, 20%)
  • Expenses: $5,000 (Including VAT 20%)

This allows us to make the following calculation.

  • Sales VAT: $2,000
  • Paid VAT: $1,000
  • Total: $2,000 – $1,000 = $1,000

Thus, I would need to pay $1,000 of VAT. If I’d spent more on VAT than I added on top of my sales, I would instead get money back from the state.

Continue Reading →

Made-in-China.com Guide: Product List, Wholesalers & More

made-in-china.com

Made-in-China.com is a Nanjing based supplier directory, that some may see as an Alibaba.com clone. That is not accurate, as Made-in-China.com launched in 1998, one year before Alibaba.

That said, Alibaba is by far the largest supplier directory today, both in terms of suppliers and services. Still, Made-in-China.com remains a top 5 supplier directory, and certain buyer’s prefer to source suppliers on this platform.

In this article, you will learn more about their product categories, supplier verification, payment options and other services.

Made-in-China.com Product List

Made-in-China.com cover the same categories as most other directories, but with more of a focus on industrial and construction products, rather than consumer goods:

  • Machinery
  • Electronics
  • Industrial Equipment
  • Construction
  • Auto & MC Products
  • Sporting Goods
  • Furniture
  • Agriculture
  • Textiles
  • Bags & Cases
  • Packaging

Can I find Wholesalers on Made-in-China.com?

Yes, there is an entire section dedicated only to wholesalers. However, my impression is that the MOQ is as high as for ‘make to order’ products.

In other words, you will not be able to buy small volumes from listed wholesalers – which for most buyer’s is the whole point of even considering a wholesaler, rather than a factory. Continue Reading →

Bribery and Corruption in the Quality Control Industry: By Renaud Anjoran

quality control bribery

Importers rely on third party quality inspection agents to accurately report defects on every order.

Receiving a batch with a high defect rate can put you out of business. Especially if you’re an Amazon seller, as you must maintain a very low return rate.

Send a shipment to a fulfillment center with a 10% defect rate and it’s game over.

In other words, your business stand and falls based on the accurate reporting of quality issues and defects, from your QC partner.

Now, what if QC partner accepts payments from your supplier – in order to not report quality issues that can potentially shut you down?

That’s a nightmare scenario for everyone importing from China.

But there are things you can do to save your business, before it’s too late.

Renaud, why is bribes a problem in the QC industry?

Many buyers are quite afraid of this, because the inspector does not report all of his findings. As a consequence, a batch of products that presents a serious and widespread quality problem is accepted.

It means the buyer pays entirely for an order, and (in the worst case) might be unable to use or sell the products. A lot of money is lost, and credibility is lost on the market. Materials have been processed and shipped across the ocean but have to be thrown away. It is a huge waste!

To make matters worse, as the buyer, you likely have no leverage over the supplier. Typically, the order has been paid in full at that point. Not many buyers have a strong enough contract and accompanying documentation that allows them to sue the supplier for the loss.

More than 95% of Chinese suppliers actually use the fact that you did a quality inspection before shipment to their defense.

They will say ‘oh, but even your inspector hasn’t found about this issue, so how were we supposed to find it?’. That’s frustrating, to say the least. Continue Reading →

How to Find Chinese Suppliers Used by Apple, Disney, IKEA & Other Brands

brand name suppliers

Wouldn’t be great if you could just skip wasting your time on Alibaba.com or trade shows, and go straight to a supplier making goods for Apple or Disney?

Clearly, quality products are manufactured in China. If you could only get hold of a ‘big brand supplier, you’d be set for life. No more quality issues or delays. Quality goods, on time, every time. Just like Apple does it.

At least that’s what many buyers imagine. Reality is actually quite different, as I explain in this week’s article.

But first I’ll show how you can actually identify suppliers of major brands, or spy on your competitors – using online tools and other methods.

1. Official supplier lists

Some brands publish their supplier lists on their websites, while others operate databases with supplier details. Apple, for example, maintain regularly updated supplier lists on their website.

In the Apple Supplier List from February 2018, you can find hundreds of manufacturers located in China, such as:

  • AAC Technologies Holdings Inc.
  • Asahi Glass Co., Ltd.
  • Boyd Die Cut Co., Ltd.
  • CymMetrik Enterprise Co., Ltd.
  • Daikin Industries Ltd.

However, they don’t provide contact details, or information about which components they subcontract to listed suppliers.

2. Importgenius.com

Importgenius.com helps Importers access US customs shipping records, which reveal the following information:

  • Importer (in the United States)
  • Supplier (for example, in China)
  • Product type
  • Volume

In theory, this means that you can identify which suppliers your competitor is buying from – and large companies like Disney and Adidas. However, shipping records only cover goods that are imported or exported.

Big companies often use trading companies, with names that don’t resemble that of the parent company. As such, you can’t find data on many large companies, as they use completely unrelated company names on the importer of record.

As shipping records don’t track domestic transactions, it’s relatively easy for companies to keep their supplier network secret.

Notice that Importgenius.com only provides US shipping records. Hence, you cannot access records in the EU, Australia or other places.

Importgenius.com plans start from US$99 per month.

3. Panjiva.com

panjiva homepage

Panjiva.com home page

Panjiva.com is similar to Importgenius.com, in the sense that they provide shipping data. However, they go further than that, as they also provide detailed information about suppliers.

Shipment Data

  • Bill of Lading
  • Cargo Weight
  • Container Info (Value, etc.)
  • Product Classifications (HS Codes, etc.)

Supplier Info

  • Company Info (Revenue, location, etc.)
  • Contact Details
  • Parent Company & Subsidiaries

Location Info

  • Country Data
  • Part Data (Port of Loading and Destination)

Panjiva is not only providing US trade data, but also from other countries, including:

  • China
  • India
  • Mexico
  • Brazil

Their basic plan starts from US$150 per month.

4. Look for big brand references on Alibaba and Globalsources

Some suppliers listed on Alibaba.com and Globalsources.com advertise that they make products for major brands, such as H&M, Zara and Nike. It’s relatively easy to find such suppliers when sourcing online.

You can also contact suppliers and ask for buyer references. However, manufacturers that are not already sharing customer references on their websites are often reluctant to share such information.

Questions & Answers

Are ‘brand name’ suppliers generally better than others?

Big companies like Apple and Disney have high standards. They don’t buy from suppliers that cannot pass their social compliance audits, or manufacture unsafe products.

In that sense, the average ‘big brand supplier’ is more sophisticated than smaller manufacturers.

That said, many of these manufacturers are part of large international conglomerates, that only work with other large businesses.

You can’t go to Foxconn and pitch an idea for a new electronic widget, if you’re looking to buy a few hundred units. Suppliers of that size will not consider anything but orders counted in the millions of dollars.

Finding a ‘brand supplier’ is rarely even an option for startups and small businesses.

Aren’t there exceptions?

Yes, there are many smaller factories that do get orders from Wal-Mart and other big buyers. But, you are not Walmart.

You don’t have the same quality assurance processes as they do, or the buying power to make the supplier treat your orders the same as theirs.

A common misconception among smaller importers is that everything will work out perfectly once they find that amazing supplier.

But, the outcome is only partly dependent on the sophistication of the supplier. What matters more is, as I just mentioned, the quality assurance processes of the buyer.

A qualified supplier and an organized buyer can achieve great things together. However, even the best supplier will fail to live up to the expectations of a disorganized buyer.

6 Ways Chinese Suppliers Can Win Customers & Increase Profit Margins

chinese supplier improvement

I’ve spent the last few years, covering every angle of manufacturing in China, from a buyer point of view. Today, I turn things upside down, by seeing things from the supplier’s perspective.

After all, China is a top 10 country in terms of readers here on Chinaimportal.com, so it was about time.

I’ve spent almost 8 years in Mainland China, and ever since my first factory visit, I’ve seen suppliers make the same mistakes over and over.

Truth be told, not much have changed since I first set foot in Shanghai back in 2009. Most suppliers are still highly secretive, and believe transparency to be a weakness.

Their mentality also highly focuses on price competition, resulting in very low profit margins.

This may have worked for a while, but something that has changed, is the fact that Chinese factories are no longer as cheap as 10 years ago.

What worked in the past will not work forever.

Luckily, most tips I am sharing in this article are ridiculously easy to implement for most suppliers.

Suppliers that implement these methods can not only acquire (and keep) more customers – but also raise the unit prices above those of the competition, without losing business.

Trust me, I’ve tried this myself.

1. Standardize your product specification sheets

When buyer’s contact a new supplier for the first time, it can take weeks to to understand what the supplier can and cannot do.

Assuming that I’m looking for a watch manufacturer, I need to know the following:

  • Can you make 316L stainless steel watches?
  • Can you offer sapphire glass?
  • Can you provide Ronda movements?

In other words, basic information about the suppliers’ capabilities.

Still, most sales reps have a standard answer to every question. ‘Yes, can make’.

A few weeks later, the buyer will eventually find out the hard way, that their samples are not even close to matching their requirements. Continue Reading →

How to Return Goods to Your Chinese Factory

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You just received a new batch. You did everything right, including clear product spec sheets and a pre-shipment inspection. And still, the supplier manages to mess up your order.

Sometimes, quality issues slip through, and you need to know how to deal with situations that involve returning defective items to your supplier.

In this article, you will learn how the entire process works:

  • How to report defective products to your supplier
  • Why you should not even ask for a refund
  • How to write a ‘product remake action plan’
  • How to incentive your supplier to remake or repair the defective items

1. Check your products and report defects immediately

Defective or damaged products must be reported immediately. Preferably within 48 hours of receiving the shipment. The longer you delay, the harder it will be to support a claim that the supplier is responsible.

You don’t need to do a visual check on every single unit, but check at least 10% of the quantity.

If you find any quality issues, that are not in line with the pre-shipment inspection result, you must provide the following:

  • List of defects
  • List of defective units
  • Value of defective units
  • Images
  • Video

This must be sent by email to the supplier immediately.

Now, keep in mind that I always assume that you have ordered a pre-shipment inspection, and yet discover additional quality issues. An inventory check-up is not a substitute for a quality check. Continue Reading →