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5 good questions buyers should be asking

by Mike Bellamy in 'China Sourcing Information Center'

1. What are the best ways for a small buyer to avoid scams and find reliable suppliers in China?
2. How can I make sure my China supplier complies with local & international labour laws and regulations?
3. What is the normal practice for requesting samples from manufacturers in China?
4. I want to become a partner in a Chinese company. How can I safeguard my rights?
5. When ordering from a China supplier, do I need to pay the entire amount in advance?

 

ANSWER:

These questions are important to any buyer. Thanks for asking. I am happy to offer the following suggestions.

1. What are the best ways for a small buyer to avoid scams and find reliable suppliers in China?

Scammers do indeed target small buyers. So you are wise to be asking this question. This blog post I wrote a while back explains why the scammers target the small buyers and what you can do about it.

Genuine products from China?

A small buyer placing orders with Chinese Suppliers: contracts, travel, and other issues

 

2. How can I make sure my China supplier complies with local & international labour laws and regulations?

In my experience it is a three-step process. The first step is to select a supplier upfront that appears to be serious about these issues.  The second set is to conduct a social audit. I used www.AsiaQualityFocus.com for this type of work and it is 100’s not 1000’s of USD to get it done.  Assuming those two steps go well, if you are serious about compliance, you would be wise to get a feel for how the factory operates when they don’t know you are looking. For example, factories can prepare for an audit, but if you hire an investigator to visit the factory as a line worker looking for a job….they may see that the truth on the inside if different than what the audit shows.  www.CBIconsulting.com.cn is the firm I use.  I would be happy to make introductions to either company if you wish. Please advise.
3. What is the normal practice for requesting samples from manufacturers in China?

It is quite normal for supplier back home in N. America and EU to provide samples free of charge. However, it is not always the case in China for the following reasons:

The seller may not be familiar with the overseas buyer’s reputation or history, and not realize the opportunity they have to make a good impression by giving free samples.

Chinese companies operate on tight margins, even if they know the buyer is legit, they still may have corporate policy against offering free samples and/or free shipping.

I can respect a supplier that does all they can to keep costs down (especially if those savings are passed on to the customer), so when I am in a situation like yours above where samples are needed, I offer to buy the samples and pay for the shipping, but request that they give me a discount of the same value should the order be placed with them. Since I have done my research in terms of Finding Suppliersand narrowed the potential suppliers down to a handful, I don’t end up spending a lot on samples because I am getting them from 2 or 3 high potential suppliers and I have negotiated a credit to the order.

 

4. I want to become a partner in a Chinese company. How can I safeguard my rights?

That’s a tricky question to answer as it is highly dependent on the type of partnership you wish to set up (JV vs. Sales partner) and the type of rights you wish to protect (Intellectual Property like an engineering design vs. exclusivity).  But you will get some general pointing in the following blog posts I wrote recently.

Finding a manufacturer to produce and distribute worldwide

 

How to partner with a factory

Here is a video tutorial I did on Protecting your Intellectual Property

 

5. When ordering from a China supplier, do I need to pay the entire amount in advance?

Most medium and large buyers who are paying via TT (electric transfer) pay a deposit (often 30%) to get production started, then 70% at ship date.  If you have no leverage, for example, if you are a small buyer and it is your first time buying from a large factory, the supplier may ask you to pay the entire amount in advance.  But regardless of how much you have to pay before the goods ship, it is essential that you conduct an inspection of the goods BEFORE the goods ship.  You or a 3rd party (for 298$ I usewww.AsiaQualityFocus.com BTW) should do the inspection, don’t take the factory’s word for it.   Here is some more helpful content:

A)    This video tutorial is about 1 hour long and covers QC + payment issues.  If you have the time, you may find it of value:  Buying from China: What New Buyers Need to Know

B)    Here is what my lawyer has to say about payments: Payment tied to Performance = Protected Buyer

 

 

 

 


Answer written by Mike Bellamy, an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. Mike is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.

 

 

 

 

 

 

 

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