China shipping advice: Verify container loading before releasing payment

By Michael L. Hetzel

There are many articles and other sources offering information on how to negotiate the best price and most favorable terms when sourcing from China. Of course, you want to obtain the best price and terms if you source from the company next door, too. But there's one major difference between the two; you can't just drop by the factory in China to make sure the shipment conforms to your order when they load and ship it.

The quality of the product can be perfect, maybe even inspected (which I highly recommend) by your own personnel or a third-party quality (3PQ) firm and passed for shipment. But the wrong count, wrong mix of SKUs, improper handling during loading, inadequate dunnage and/or the shipment being loaded into a damaged container that will, say, flood en route, all still leave you with the same result on arrival; unusable product and a long delay to replace it.

Whether you paid for the shipment upon loading or prior to shipment, which leaves you exposed to long debates about who's responsible for the condition and conformance of the shipment, or you have open terms and the ability to withhold payment, you're still facing extra costs in the form of missed sales opportunities at best and client fines and/or lost clients at worst.

You have three basic options:

1) Rely on the factory or trading agent's assertion that all conditions of loading will be ideal. This is the highest risk level where many of the "China horror stories" come from. Remember, they're highly motivated to get the shipment out the door. They may load the wrong mix of SKUs and plan to sort it out with you later, or they may not refuse that leaky shipping container because they'd have to wait for a replacement. They may cut costs on dunnage, leaving you with a jumble of damaged goods when you open the container doors. Even those with the best of intentions may not have the time to witness the loading, telling you it's OK but leaving your business hanging on the actions of their dock workers.

2) Go there yourself and observe the load. You know your product best, but as a practical matter this is not possible with multiple shipments, multiple suppliers, and certainly not the best use of your time in any case.

3) Have someone who works for you, either an employee or a 3PQ, observe the load from pre-loading container inspection, staging of the load, count and condition verification of the products to be loaded, and the loading itself through placement of the seal. The loading report is often used to trigger the letter of credit (L/C) payment.

If your product isn't high unit cost, high warranty or recall risk, or time sensitive, you may have the luxury of using Option 1. Most shipments are at risk under one or more of the conditions that can occur. For Option 2 you have to travel, and you can't be in two places at once.

The 3PQ Solution
Yes, Pro QC is a 3PQ, and yes we offer container loading supervision. However the risk reduction is the same with any competent 3PQ so this isn't just a sales pitch disguised as advice. In most cases 3PQ is the best option to minimize your risks that the shipment will arrive with problems.

A good 3PQ will dispatch an engineer, not just someone with a clipboard and a camera, who will examine and photograph the product and shipping container prior to loading, document the container markings, confirm SKUs, packaging and counts, verify dunnage, witness the actual handling during loading, photograph the completed load and affix the seal or witness the seal being affixed and photograph the seal in place with it's serial number in view. The engineer will also order the factory to hold the shipment while you review the report if there are non-conforming conditions. If everything's OK you receive the report via the Internet and can immediately authorize shipment and/or payment.

As with any solution there are remaining risks. Your 3PQ has to employ well qualified and honest people to supervise and report on the load. They must not have business relationships with the factories and must represent only your interests in the conformance of the shipment. They must have control of the field engineer, not simply retain a franchisee or subcontractor without connection to the 3PQ's HR and operating policies. And they must have personnel near the locations where you need them.

Many 3PQs in China will charge you around US$300 for a day of container loading supervision by an engineer. The lower cost providers may not be using engineers or may be cutting other corners. Remember, any 3PQ must comport themselves as your agent on the scene, competently and without compromise, or the $100 you might save on the booking means nothing in the end.

Whether you select Pro QC or one of the other competent 3PQs, this is the lowest risk method to ensure that you're getting what you paid for at the point of departure. You can control your interests in quality and conformance anywhere in the world, and you don't have to leave your office.

© 2008 ML Hetzel

Michael L. Hetzel is Vice President/Americas with Pro QC International (www.proqc.com), a Taipei-based third party quality (3PQ) and engineering services firm in business since 1984. Pro QC has three offices in China (Shenzhen, Ningbo and Shanghai) along with engineers based in most major industrial cities, and offers services in over 30 countries. Michael is based at Pro QC's Chicago area US headquarters and has been engaged in Asian sourcing since 1993. He publishes articles and speaks worldwide on the subjects of global manufacturing trade flows, supply chain optimization and supply chain quality management. He has presented seminars at several Global Sources trade fairs in Hong Kong and Dubai and can be reached at +1-708-710-5935 or at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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