A China Sourcing 'Power Move' - Tie Payment to Quality Control

At InTouch, we inspect and verify hundreds of shipments and factories every month. From our experience as the liaison between overseas buyers and Chinese suppliers, we know one thing well: whoever holds the money holds the power. When it comes to addressing quality issues with the product (i.e. having a factory re-work goods you found were defective during inspection), getting your product loaded and shipped correctly, and getting your supplier to be responsive and supportive during your shipment, if you have already paid everything you owe, or otherwise have not tied QC to the payment, you’re up "Mao's" creek to put it nicely. So, how can you ensure you don't end up in this unfavorable situation? Here are some tried and tested ways to tie product quality to what matters most:

Note: Most purchases from Chinese suppliers require a deposit of some sort before the production starts, and the remaining balance paid before you're shipped the goods. If you're an experienced buyer working with an L/C or with better payment terms, you can still implement the below suggestions with great results.

1. When buying an existing product (existing mold):
   1. Supplier Acceptance of QC Checklist - Before ever paying a cent of the deposit having a QC guideline drafted (bilingually) is an absolute must. A QC Checklist is a document which lays out all of your product testing, quality, performance, and safety requirements. You can hire a professional to create this for you, or even do it yourself if you're on a tight budget. This QC Checklist should be signed-off by the supplier as proof that they understand your requirements and will meet them.
   2. Statement on the PO - Write directly on the purchase order that acceptance of the purchase order indicates the factory's acceptance of the QC guidelines you've provided, and ensure that the factory signs the purchase order back to you.
   3. Balance Contingent on Inspection - In the purchase order state clearly that the remaining balance of payment is contingent upon you or your specified 3rd party QC firm's inspection of the merchandise, and a passing QC report issued by the appropriate company.
2. Additional steps to take when opening a new mold or engaging in new product development:
   1. Acceptance of Tooling Spec. - Have the supplier sign off not only on the quality requirements I mentioned above, but also on the actual CAD drawings and all other specifications for your new product. If there are certain tolerances that must be met in creating the new product, ensure you list these out clearly. Ensure this is done before any tooling deposit is made.
   2. Balance Contingent Upon Tooling Review – Initially only pay a deposit for the tooling, preferably 30% or less. Tie the balance of the tooling payment to the "inspection and approval of the tools and initial samples". That means that you'll check the tool and first samples made with the new tooling against the QC guidelines, and only pay the remaining balance if it passes your inspection.

One person has commented on this article.

 1. Product Mgr.
Bob Fields, Unregistered

Great guideline for those relatively new to sourcing in China. (Me, for example)

I will use the QC checklist from this day forward!

 Posted 2009-08-25 20:26:04

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