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3 essential steps to protect yourself when buying from China

by Mike Bellamy

We are getting close to making decisions on large quantity and large dollar value transactions with several companies in China. We are concerned with protecting ourselves financially to send full payment before we receive our products. We are concerned about fraud as well as quality control of the product. What ways can we protect ourselves?

Put simply, if buyers take the following three actions, they will avoid 90% of the common problems.

ONE: At the supplier selection phase:

Make sure the supplier is legit.  “Legit” meaning that it is a real business (not a scam) and “Legit” meaning the seller has the capabilities to product the given item you want at the quality and lead time you expect.

Here is a detailed look at how to do perform this initial due diligence. The good news is that it is affordable and effective:  Essential sourcing skills: Supplier Verification

 

TWO: When you are negotiating payment details, make sure the name on the bank account matches the name on the contract. And that the name on the contract is the “legit” supplier confirmed in step one. The following blog posts explain why this step is so critical:

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

How to place an order with a supplier in China while living somewhere else

 

THREE:   Link your payments to the supplier’s performance.  Here are the details:

Payment tied to Performance = Protected Buyer

Payment terms in China

Best Practices : paying Chinese suppliers

If you don’t have time to fly to China for an inspection, engage a 3rd party for a few 100 USD.  List of providers here for your reference.

Let me know how things work out for you! Glad to help.


Question answered 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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