Doing business with China Wholesalers
Sooner than later, you may be thinking of following
others to China. Why? Of course, to import the dirt
cheap Chinese products for your manufacturing or trading
business. Is importing from China the same as importing
from other European or developed Asian countries? It is
and it isn’t! Unless one is experienced in importing
from China, he can expect plenty of trouble, delays and
unexpected expenses with practically no recourse to any
remedy. This is particularly true of small and medium
sized engineering companies. So, here are a few tips to
help you along. Follow them and you will be a winner
with genuine and economical products from China.
Where to start?
Internet is now the ubiquitous source for all
information and one can easily locate Chinese suppliers
for practically any product. You can also register
yourself freely and place enquiries for your needs on
Made-in-China.com. Offer will simply pour in and the
service of Made-in-China.com is excellent.
How do the offers read?
Most Chinese companies rely on non-technical secretaries
as translators who do a short job of making a
perfunctory offer. What you see in an offer conceals
more than what it reveals. There can be typographical
errors (not important, generally) as well as calculation
errors (can be quite important!). Offers are more in the
form of Proforma Invoices rather than the regular
structured offers that one is used to. An offer is no
more than the beginning of a bargain – bargain for
everything including price! If one remembers this, one
is sure to find good value for money from a reliable
supplier.
What steps are needed to insure a good transaction?
a. Courtesy and patience: One generally
corresponds with the English-knowing Office Assistant
who can be addressed on first name basis and she / he
does the same with you. They are very courteous and
prompt, their follow-up is excellent and they have the
ability to befriend you in no time. If your original
timetable to place an order for an item is one month and
if it stretches to one year or more, they do not lose
patience. But be sure that behind this culture of
courtesy and patience, there is a dogged determination
to secure business and it is here that you can expect a
pitfall. Their correspondence contains minimal
commitments. So what do you do?
b. Write it yourself! We all learn that the devil
is in the detail, which is not entirely true with the
Chinese offers. As I said earlier, most offers are in no
more than Proforma Invoice format, with very few
details. But a good commercial document must contain a
host of details like:
-scope of supply.
-detailed specifications of each and every
item/sub-item/component.
-itemized quantities of main supplies/spares for 2-year
operation/commissioning spares/insurance spares,
whatever you wish to buy.
-specification for electrical equipment/controls
(Chinese standards are of 380V, 3 ph., 60 Hz.) and it is
necessary to match with your needs with additional
equipment if needed.
-performance parameters including guarantees,
warranties, methods of demonstration and penalties.
-delivery terms.
-terms for pre-shipment inspection.
-price and payment terms.
-insurance.
-technical documentation in English for operation and
maintenance.
-after-sales help like supervision of installation,
commissioning, and training.
-dispute resolution mechanism.
It is unavoidable that the Buyer writes down these
details himself, submits to the supplier for negotiation
and binds him for the same, and establishes a link with
these detailed agreed terms to the Proforma Invoice.
This would ensure interests of both the buyer and the
seller and what you get is what you paid for. The
Chinese are not very familiar with such structured
offers and the language, and they generally appreciate
any help in this regard.
c. Payment terms: When it comes to payments,
expect plenty of suspicion from the Chinese buyers. They
are paranoid about security of payment and are prone to
insist on both advance payments, and full-and-final
payment before shipment. Their preferred payment route
is by Telegraphic Transfer (TT) through banking
channels. It is best that until business relations are
well established, one insists on a bank guarantee for
any advance payment. Similarly, one must insist on
securing the Original Bill of Lading and Packing Lists
before release of final payment. This is best done by
making the final payment through a Letter of Credit
(L/C), which is payable against the original bill of
lading and packing list documents.
d. Shipment and insurance: It is recommended that
contracts are entered into on f.o.b. Chinese port basis,
and the buyer arranges for shipment, marine / inland
transit insurance himself. This is cheaper and more
reliable. Many Chinese suppliers are prone to issue
threats of diversion of cargo, delay in release of
documents even after receiving payments etc. This can
lead to a lot of avoidable unpleasantness like delay in
delivery, customs clearance, demurrages etc.
e. Packing lists: This is one more area where one
can have a big headache if care is not taken in good
time. Description and quantity of goods in the packing
list must be in total conformity with the proforma
invoice and the bill of lading. Because of their
difficulty with the English language, more often than
not there is significant variation in the wording of
different documents and this leads to confusion, delays
and wrong assessment at the customs.
f. Price: Do not feel shy to bargain. The Chinese
can surprise you with your audacious demands for price
reduction!
g. Pre-shipment inspection: Whether you intend to
carry out this inspection or not, make sure that it is a
part of the agreement. Also, you can expect any number
of excuses for not showing the place of manufacture or
offering for inspection. If you persevere, it pays
dividends in the form of good products, complete
supplies and correct documentation.
These are a few of the important checkpoints and
suggestions, to ensure smooth transactions involving
Chinese suppliers.
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