How to buy from China like a pro – The ultimate guide

In general, there’s quite a bit to learn when it comes to buying from China. I’ve been in the industry for 24 years now and I still learn to this day. If you’ve ever been wondering what you need to learn when you buy from China – you are in the right place. This post describes the process of how to buy from China in larger quantities with the intent of re-selling with your own shop or (online) business. 

I like to describe the process in a 6-step process:

• Find a product
• Define your product
• Find a supplier
• Proper order placement
• Find a freight forwarder and customs broker
• Monitor your shipment and have an inspection!

So, let’s look at each one in detail. If you already have a product in mind, you can simply skip to Step 2) Define your product.

Disclaimer: Some of the products may contain an affiliate link and we may make a commission if you click on it at no additional costs to you.

So, let’s look at each one in detail. If you already have a product in mind, you can simply skip to Step 2) Define your product.

1) FIND A PRODUCT

The right product makes or break your business. Chose the wrong product and you won’t get very far if there is no demand for it. Choosing the right product is difficult and you may not end up with the right product on your first try. This guide is not a “how to find a product” guide but having the right product plays a role also in finding the right supplier as well as determining the laws and regulations your product has to meet, so let me try and give you my way of finding a product.

I won’t go in details here in this guide on finding a profitable product as this post is about how to buy from China and I’ve covered it extensively here.

So if you don’t have a product in mind or want to find a profitable product I recommend you check out above guide.

2) DEFINE YOUR PRODUCT

Now that we spoke about finding the right product you need to define it. And by that I don’t mean what colour or packaging but rather what legal requirements your product has to meet. Before you find a supplier, you NEED to know what regulations and laws your product has to meet. Let’s take electronics for example, one of the most difficult consumer products areas when it comes to regulations.

Importing electronics from China is a delicate and tricky venture. I choose electronics in this example because I’ve been in this category for nearly 17 years so I feel confident importing/exporting them.

Many “gurus’ will tell you to shy away from electronics because of the regulations, high returns and what to do with defective items. While I do agree that a beginner should stay away from electronics I do encourage you to import electronics at one point because the margins are higher than your standard household product.

Especially if you have it OEM manufactured products (your own design/software/application). However manufacturing an electronic OEM item requires profound technical knowledge (or at least a knowledgable factory and engineers) and financial pre-investment in most cases.

Most suppliers won’t offer free services to help develop the product unless you commit with a certain order quantity, have yearly agreements or previous (mostly large) business with the factory.

Why is it so difficult to find manufacturers who comply with regulations already?
Most suppliers that develop a new product do not invest in the certifications in the beginning because they don’t know yet if the product actually sells so why invest in certifications that can run into thousands of dollars?

Try to work and find suppliers who mainly work with larger European and US customers or retailers that did the work for you already. Because when retailers look for electronics they will absolutely make sure that they comply with the law.
You will want to buy from factories that are either compliant already or are willing to work together with you to get the product compliant.

Dismiss suppliers who aren’t interested in making the product compliant if the response is something like: “all the other buyers also don’t need it”. Ideally you can convince the supplier to invest his money into certifications and making the product compliant for different markets and regulations because it also benefits him. The more clients he can sell his products to (because they are certified) the better for him too.

So what regulations does your product actually need to fulfil?

Ideally you already know this before you send an inquiry to your supplier. It is best to have a Product Requirement Profile (PRP) ready to be sent to your supplier. A PRP is basically a technical sheet that includes all the regulations and laws your specific product has to comply with in your country. 

I have prepared a fully comprehensive Profile Requirement Profile for all products that I send to my suppliers. It took my 8 months to prepare these for the most common product categories. 

So I take this PDF and send it to my supplier when I first inquire with them. I attach it with my other product requirements (e.g. material, colour, quantity etc.). If you do not know where to find your country’s regulation or what certificates you need you can look it up on government websites. Unfortunately these are often a maze and its never clear. Shameless plug at this point, I have prepared PRP’s for 27 different product categories for you to purchase here.

You can also find a detailed guided on import regulations HERE.

Many small importers in Europe or the US illegally buy from China hoping not to get caught (or not knowing there are regulations to be met). Basically playing with fire just to save a couple hundred dollars on certifications and compliant products.
Also paying for a certification report doesn’t mean your supplier can comply with the regulation. Before you place an order with the factory make sure to ask him that the material and components will actually pass a testing for example, otherwise you waste money on a certification and the product may not even pass the requirements.

One thing that I recommend beginners is to have the certifications from the supplier verified by a third-party. If you work with a third party inspection company like QIMA, TUV, SGS or others they are usually open to check certificates for you. That is if you already do business with them otherwise they charge a small fee. You can simply ask your contact at the third-party inspection company to look over the documents that the supplier sent you.

Do not engage with a supplier or product that cannot comply to regulations otherwise your products might be seized by customs or even have to be withdrawn from the market if an authority finds out you do not comply with regulations.

If a supplier tells you he doesn’t have the necessary certification and “its ok his other customers also don’t need it” stay away or be prepared to invest a couple hundred US$ for a certification (e.g.: a FCC or CE usually goes from 400-600US$).

Yes, it is sometimes a grey area, especially in the US if you ship things by Air directly to Amazon for example that you do not get caught, but I do not recommend going this way.

If a supplier doesn’t have a certificate or is unwilling to invest in it move on to the next supplier. However if you are willing to invest yourself in the certification (make sure to ask the supplier if the product can pass first) I would recommend to do so. Furthermore if you invest into a certificate you will be the holder of the certificate and the supplier is not allowed to sell the product with certification to anyone else but you. This applies to all certificatio

Self-declarations

In some cases it doesn’t make sense to certify a product because your quantities are low or the product is so cheap that the certification cost don’t justify certifying it. In that case you may ask the supplier to issue a self-declaration which is in some cases accepted by authorities. Please note that you cannot issue a self-declaration, it has to be done by the manufacturer.

You would at least need to be compliant with basic requirements like raw material being certified or tested and according to regulations. However most countries in Europe only allow CE or RohS self-declarations for several items, mainly low voltage or battery powered products. Check with your supplier what he can offer you.

If you are still unsure what you actually need or if you need help on this topic you can have a look at my Certifications Course here. You can also contact me at: [email protected] if you have more questions.

3) FIND A SUPPLIER

I know it’s a lot to take in already and as I said in the beginning if you want to avoid the many pitfalls it can bring when importing a product from China I urge you to take in all the information you can get. Which brings us to one of the most important factors when it comes to import from China – finding the right supplier!!

It’s actually not difficult to find a supplier. But it’s difficult to find the RIGHT supplier. One that is proactive, communicating, honest and reliable. So let me help you find the right supplier in this section. Let’s spilt this in 2 sections:

How to find a supplier

How to verify a supplier

1)How to find a supplier

Before we talk about the obvious elephant in the room (Alibaba) I would say exhibitions are the BEST and most effective way to find suppliers and products since you meet face to face and can also see the products. As a first step Internet sourcing is fine, but maybe try to arrange your next China trip around an exhibition. I learned, after many disappointments, that you don’t want to place a large order (more than 100 pieces) without knowing what you will get. You wouldn’t want to place an order with someone you never met and transfer a lot of money to him. So going to exhibitions helps a lot.

Insider tip:

Even if you can’t go to an exhibition (COVID-19, travel costs etc) you can still find out about all the suppliers exhibiting there. How? Simply go onto the exhibition’s website. For example, the lighting fair in Hong Kong:

Once you are there, click on “Exhibitor List” and there you go. You have all exhibitors exhibiting at this fair. It’s a bit of a lengthy process but you can check all websites of the suppliers, look at their products, and contact them directly without even going to the exhibition. As I mentioned already, in this section we focus on the exhibitions in

Asia. I would say there are three major organizers and hosts that cover EVERYTHING that you need. You need to preregister with all three organizers and it’s FREE of CHARGE.

Main Exhibition Organizers in China/Hong Kong:

HKTDC

HKTDC covers most of the fairs held in Hong Kong. All exhibitions are held at the Wan Chai convention center on Hong Kong Island. Hong Kong exhibitions will also be the most important ones for you (apart from Canton Fair). They cover everything from jewelry to food to electronics, gifts, optical, maritime, and much more. Click on the link and see all the upcoming events. HKTDC’s events usually have the big names exhibiting. That’s a good way to spot trends and innovative products. But eventually you want to buy from the factories with lower prices.

GLOBALSOURCES

Globalsources is the second organizer in Hong Kong. They exhibit at the Asia World Expo Hall at the Hong Kong International Airport. But they also hold other events around Asia (Korea, China, Thailand, India), which are usually a lot smaller and deal mostly with local industries. They also cover the most product categories (electronics, jewelry, textiles, and more). The events are usually smaller in size and the exhibiting suppliers are mostly cheaper than at HKTDC. This can be positive and negative, as in lower prices but less innovative products. I have actually exhibited at the Globalsources how in 2015, you can find my own experience here

CANTON FAIR

The Canton Fair is the holy grail of exhibitions. This event is so large

that it is held twice a year and each time runs over a span of 31⁄2 weeks in three different phases. Each phase comes with different product categories. As of 2014 there were over 22,000 exhibitors. This exhibition is a must for me and it should be for you too. You will find a lot of innovations, big brands, small factories, or the product you have been looking for so long. Plan at least 2, or better 3, days for your product category/phase. Sign up once and get a badge that will be valid forever. Don’t throw away your badge. You can use it for your next visit without paying 100 Yuan for a replacement card. I’ve written a very detailed blog post about all you need to know about the Cantonfair here.

CONTACTS:

Last but not least, contacts that you already have can be very helpful. Ask around in your friend circle, relatives, and so on. You never know, your sister’s cousin might have a contact that you didn’t know about. Sign up on business networks such as www.linkedin.com or www.xing.com if you haven’t already. You can find a lot on there and can ask around if anyone has any contacts to suppliers for your products.

There are also professional groups on those two websites with lots of suppliers offering their services. Simply search for a group that could meet your needs (e.g., consumer electronics suppliers / textile suppliers, etc.) and post your inquiry to this specific group.

If you aren’t on any business networks or have no contacts, I recommend that you start with Alibaba/Aliexpress. Usually, government agencies in your country will also provide you with supplier contacts. But be aware, most of these contacts will likely be importers themselves. You will want to cut them out and go to the source.

ALIBABA

Now onto Alibaba.com, the biggest website in the world to buy from China. When it comes to Aliabab, the most asked question I get are “how to avoid being scammed by a supplier” or “how do I make sure this supplier is legit”? Especially on platforms like Alibaba – the biggest of its kind. This begs the question, is Alibaba safe? 

The short answer would be, YES, Alibaba is safe. Alibaba has been around for 2 decades and when i first used it back in 2004 things were very different from now and it was easy to get scammed. However, things have certainly changed since then and Alibaba itself has done many improvements to the site and is making sure, the consumer is safe. 

It is easy to get overwhelmed with the selection of suppliers on Alibaba and I can understand how you might have difficulties figuring out if it is safe to transfer your money to a supplier you’ve never met. 

To be honest with you the easiest way to make 100% sure if a supplier on Alibaba is safe is to go visit the factory but I realise that most of you won’t be able to do so.

The goods news is there are ways to figure out if a supplier is legit or not without going to China. The bad news is that some of these options will cost you some money. Many people will tell you just to go for a “Gold-supplier”. But that means NOTHING. Anyone can buy that “badge” from Alibaba. The questions shouldn’t be “is Alibaba safe”. Because yes, Alibaba as a platform is safe. There’s escrow payments, third party inspections on site etc.

The real question should be: is the supplier you found on Alibaba safe / legitimate? So I’ve come up with a different approach over the years. Alibaba research is free of charge and these days it is quite safe to manoeuvre on Alibaba. Alibaba itself works constantly on improving buyer’s safety and trust. So here are a few things you’ll want to look out for: 

How long have they been in business?

Have they been around for 2 years of 20 years? Would you buy something from someone who has specialised making hair dryers for 2 years or 20 years? 

What are their main markets?

Under the section company profile, you can look up what their main markets are. Are they mainly delivering to Egypt, Vietnam? Or is their main market the US or the Western European area? Make sure to choose someone who has experience with your market. You don’t want to have a supplier who you’ll have to explain all the quality requirements for your country. 

Does their assortment match up?

Meaning do they have many different categories that are suspicious or don’t make sense? Do they sell bathroom furniture, lawn mowers and kitchen appliances? Or are they specialised in 1 product assortment? Chose someone who makes 1 or maximum 2 product groups. You also won’t be going to the Greek restaurant around the corner and order Pizza from the just because they have it. 

Is the address a small office address or an actual road address?

If a factory prides themselves with a turnover of 10MilUSD and their address is for example: Room B, XYZ Office building, something is off. Also see if you can find a website outside of Alibaba – just Google the company name. Is the address you find on there different? Make sure they match. 

Third party assessment reports 

You can get copies of the reports that Alibaba saves on its database and you can look into the reports. These could be a ISO or a BSCI audit report. That means the factory has been audited at some point for manufacturing compliance. If the factory doesn’t have any, its not a good sign. 

Product certifications

Does the factory have product certifications such as FDA approvals, FCC, or for Europe things like GS, LFGB certification? Are they visible on the Alibaba profile? Does the product number or name match up with the product you are interested in? If a factory has no product certifications its a sign that they aren’t into safety and quality regulations. Hands off!

Gold suppliers/Pre-assesed suppliers/Onsite Check/ Trade assurance filters

While I initially said anyone can buy a Gold-supplier badge, these do help to make a decision. After all, a scamming factory wouldn’t spend money on getting a Gold supplier badge (it still happens however). Be weary of non or 1-year Gold suppliers. See if the supplier has been checked by Alibaba or if they offer Trade Assurance. If for example a factory does not have any of the above checks I would be very suspicious. Because why wouldn’t they want Alibaba or a Third-Party to inspect their facilities? Simple, they know they would be uncovered as either an expensive agent or a scammer.

Skype/Zoom call

Still not convinced of your supplier? Something off in your conversations? This research option is free if your supplier has Skype/Zoom and most suppliers usually do. Request a video call with your supplier and prepare yourself with a few questions. Ask anything that would make you feel more comfortable in working with the supplier. Ask about the factory, how many workers, etc. Basically anything that gets the supplier answering your questions so that you can develop “a gut feeling”. Ask them to show you the sample (of your interested product) in the video call.

If he doesn’t have a sample in hand, arrange another time for a Skype call. If he refuses or finds some excuses you will quickly see that something is off.

Factory audits

Finally, you could conduct a factory audit. A factory audit is where you hire a Third-Party Inspection Company to conduct an audit at the factory’s facilities. I wouldn’t recommend this in the early stages of your communication. Check all off the above first and if for some reason you want to stay with the supplier but want to have him audited anyway, you could arrange a factory audit. This way you can make 100% sure your supplier is legit. Be aware that not all factories allow you to perform an audit at the location which is in turn already a huge red flag.

If they are willing to undergo an audit straight away it is a good sign already. You don’t necessarily need to perform an audit but announcing to a supplier before you order that you will conduct an audit already gives you some idea on what your supplier is up to.

There are many Third-Party Inspection companies out there and I mention them in a few posts (TUV, SGS, Bureau Veritas etc.) but I always use QIMA because they are efficient, cost effective and reliable. There are companies out there who charge half the price but you don’t have a convenient interface/dashboard online that lets you do the booking trough their system. Most of the cheaper Inspection Companies have only email/phone conversation bookings available. 

You can create a free account anytime and book online at your convenience. What’s more, QIMA has many other services that come in handy. Such as product inspections, product testing etc. I’ve written on product inspections previously here. I never ship from China without an inspection! This is how their interface looks like:

I admit the price (629US$) is pretty steep and it only makes sense to perform an audit if you have larger orders and continuous business with a factory. Another reason could be that the factory you are planning to order from is the ONLY factory producing the item you are looking for but for some reason you have a feeling you would rather have the factory audited or inspected before placing an order.

Based on the audit report a factory actually also can benefit. The audit points out things to be improved from the factory’s side and it will help the factory to get more customers if they are audited by a Third-Party. You could even ask your factory to share half of the costs and pointing out to them that they will benefit from this audit in any way.

Conclusion

Even with many years on my back in this industry I can’t always know for sure that a factory is legit or not trying to scam me. Unless of course I send an inspection or go to see the factory myself.

A student told me a story recently about an absurd encounter via Skype with a supplier in hope she don’t mind me telling the story here 

He looked like he was at a house rather than work. He looked like he had just woken up and recovering from a hangover. There was a child screaming and running around in the background…then a second guy came up to give him a cigarette, which he then proceeded to smoke during the Skype session….he then told me that the factory is “moving” so 100 pieces in a custom packaging would take about 2 months. It was a bit comical at times. 

Now I would think twice ordering from this factory but apparently everything went well (this time). It’s like in poker. You have a certain amount of “tells” available on your opponent and depending on how he makes his moves, you call (place an order) or fold a hand (eliminate the supplier).

Even when you know you did all you can do to protect your money sometimes there is no guarantee you can win, but having the above tools and research options available you can at least make a decision knowing you did your best.

Now, I do hope the above gives you some idea and help to safely select a supplier in China on Alibaba (or other platforms). 

How to verify a supplier

Now we’ve already spoken about a lot of things above how to find reputable suppliers. Let me give you a few more things on the way to help you verify your supplier. I like to divide this into three parts: 

1) “Developing a feeling”
2) Background research you can do for free
3) Background research you can pay for

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 1) “Developing a feeling”

It all starts with communication. When I reach out to a supplier I keep a professional approach. Meaning I explain who I am, what I do, even attach my company presentation to my initial inquiry. If you don’t have a presentation don’t worry, it’s not necessary. But you should explain in your email with a few sentences what you do and who you are. This gives the supplier an image of you and won’t make him think that you are just some random person who has no idea about importing from China. 

I also look for suppliers who respond to all my questions in detail. Ever emailed a supplier with lots of questions and all you get was partial answers and cryptic replies? You are not alone. I immediately eliminate these suppliers in my selection.

If he can’t reply to a few questions in my initial outreach imagine how it will be like down the road. You usually filter from 10 suppliers down to 3. Once I have these 3 suppliers that have somewhat answered all my questions and are reasonably priced I start digging into their background. For this I use a “vendor profile report” that I created. It looks like this:

In this report I collect a lot of information from the supplier such as:

– Contact name, telephone number, email address, fax number etc. 

– Bank name, beneficiary etc. – I use this information to make sure the bank account name matches the company name. Often times suppliers have a bank account in Hong Kong due to its ease of financial transactions. For example if the suppliers name is: Shenzhen Toys Import and Export it should match the bank acount name. If a supplier uses a Hong Kong bank account it often differs slightly. It could be: Shenzhen Toys Import & Export Hong Kong Limited. This would be ok; however if I receive a name that is completely different than the original supplier name I will ask questions. This could be a first red flag!

– Year of establishment, turnover, production capacity. This gives me an indication if the supplier has some experience in his industry. E.g. it’s a good sign if I look for a vacuum cleaner and the supplier has 20 years of experience. I may not want to go with a supplier who has only been established 1 year ago. I will want a supplier who has had at least some years of experience in the certain product industry. 

– Customers, main markets. This will tell me if my supplier has experience working in key markets like the US or Europe. If his main customers or markets are in Arabia, South America or Russia for example he may not be the right supplier for me. Reason being that these countries have totally different quality requirements than the US or Germany for example. I will want a supplier who at least has had some experience in my markets. Makes it easier for me to explain my quality and other standards. 

– Does he exhibit at trade shows like the Cantonfair or in Hong Kong? This gives me an indication if he had exposure to international customers and if he is actively looking to branch out into other markets. The more exposure a supplier has to international buyers the better. 

– Factory address, quality management system at the factory, how many workers, in house R&D etc. – This gives me an idea of the capacity and general standard of the factory. Has the factory been audited by a third party before? Can the supplier send me this audit report? These things will tell you how well a factory is equipped with machinery and if they are actively improving their standards. 

Once I collected above information I can get a pretty good feeling with who I am dealing with. If a supplier isn’t willing to share this information with you he either has something to hide or he isn’t really interested in cooperating or working with you.

If you feel this is all a little too much just to find a supplier, think twice. This is someone who you’ll send money to and hopefully be your partner for many years. A supplier who understands this and cooperate with you sending you all this information should be the supplier you choose. 

Pricing really is just a secondary decision maker for me. Say I have narrowed down to 3 suppliers but I am having difficulties communicating with 2 of them. Even tough the 3rd supplier may be more expensive than the others, if he is the one whom I communicate best with I will go for the more expensive supplier. 

Consider also, if you have any problems with your product on Amazon you’ll want a supplier who can help you with refunds or replacing defect items. If you went with a supplier that was just cheap and not really willing to work with you in the first place you’ll have a hard time getting any money or replacements down the road. It’s also wise not to squeeze every cent out of a supplier. If he can’t properly pay his staff and workers what good does that for me when he won’t be around anymore next year. Live and let live.

2) Background research you can do for free

Apart from the above, as a next step before placing an order I will ask the supplier to provide me with the certificates that he claimed to have. For example if he claimed to have a CE or FDA certificate for a specific product I will want to see a soft copy (PDF). 

Sometimes suppliers won’t be able to send you a full test report/certificate because it was applied and paid for by their customers. Fair enough, but he can blur out some information and send you a screenshot. 

But in many cases the test reports/certificate are in the name of the supplier. Once you’ll receive these soft copies you can then contact the issuing third party. Let’s take a look at below example:

As you can see above this was a FDA report for one of my items. Once I receive the report I can contact the issuing third party (SGS in this case), quote them the test report number and ask for its validity. You’ll also find contact details on most test reports. 

Normally a third party will do this for free (confirming a validity). Once they’ve confirmed the validity I can somewhat safely move forward with the supplier. However, many suppliers fake their certificates and test reports and it’s not uncommon that once you contact the (supposed) third party that they never heard from this test report. Steer clear and eliminate this supplier immediately.  

This also goes for factory audit reports. Again, often times audits are done by other customers and suppliers can’t send you the full report. However a screenshot with blurred out areas will do. If they can send you a full report look for details such as:

• when was the factory audited?
• what were the findings or main issues?
• did the supplier improve these issues since then? 
• where there any major critical findings? (such as child labour) 

Once you’ve concluded your research of the audit report you should have a pretty good picture of the supplier. Then it really is up to you to move forward with all your findings, place an order or go to the last and final step:

3) Background research you can pay for

As a final step if you are still not 100% convinced you can perform a third party audit at a factory. There are many providers who will go to the factory and perform a standard audit. 

These audits are a paid service. During these audits the third party will conduct a thorough research of the factory based on criteria that you can help determine. 

For example once you’ve booked an audit you can tell the third party that you plan on selling in the US and the factory would need to be up to those standards. The third party will also perform a standard audit based on their experience. 

Costs are usually from 500$ upwards for an audit. That includes travelling to the factory, one full day of auditing and sending you a report. I always use QIMA.COM (formerly known as Asiainspection) and they charge 649$. There are cheaper services of course. I suggest to do your own research. Bigger companies like TUV or SGS usually charge 800$ upwards. 

So whether you want to do an audit is really up to you. Often times I’ve developed a pretty good with feeling on a supplier with 1) & 2). It does make sense to perform 3) if you have no other suppliers and want to make 100% sure everything’s ok. 

After I’ve gone trough all of the above I should get a really good feeling about the supplier. Sometimes I look more than 2 months for a supplier if I feel the ones I found aren’t right for the job. 

It really is not a sprint, its a marathon on finding and building a relationship with a supplier. 

Paid services are obviously one of the most fool proof ways however they cost quite some money and if you were to pay for each audit at every factory you want to start working with it will surely cost a lot of money in the long run.

Bear in mind that larger companies (such as the one I used to work for) usually has an office in Asia and they send a team of their own people to investigate every factory before they place an order there. But if you don’t have your own team in Asia you may want to hire the following:

Third Party Audit (SGS, QIMA, TUV, INTERTEK etc.)  

It’s also important to note that I am willing to work with more in-experienced and “new to the market” suppliers. Reason being that these may not have the experience but they are willing to accept smaller order quantities or work with smaller customers.

You can then grow with these suppliers. Imagine you grew a supplier along the way. He’ll always be grateful and he’ll be supportive and helping whenever you need him. 

I have two of these suppliers among my portfolio. We share a lot of information from the market, I get the best prices out of all his customers, the newest items are always reserved for me, they’d help if I have a lot of returns and on top of all I have payment terms that allow me to keep a great cash flow (usually I pay 90 days after the products have been shipped). 

So you see, building a relationship with a supplier is very important and can benefit you in so many ways. Yes, sometimes I see suppliers who may offer cheaper prices but it simply isn’t worth it to switch a supplier just because I save 0.2$ on the product cost. I’d also have to explain the whole workflow to this new supplier. Me and my suppliers are practically a well-oiled-team which helps me immensely. 

So I guess I recommend taking your time when selecting a supplier. Don’t rush things and filter properly. 

4) PROPER ORDER PLACEMENT

So why is it so important to lay out terms and sign contracts with your supplier? Quite simple actually. You want to have safety nets and agreements in place if something goes wrong.

And trust me there can always be something that can go wrong. It could be a failed inspection, it could be that the item produced is severely damaged during transport, it could be that the material used is completely different from what you wanted and so much more.

You might ask yourself for what kind of order value should I have agreements in place? Because maybe you only have an order value of 1000US$, do I still need all this? Yes! At least you should have agreements in place that bind the supplier to pay for a re-inspection. However to be honest not many suppliers sign agreements or terms if your order is very small. But you should at least give it a try.

Just recently I heard from a student of mine that the inspection was fail and 25% of the products had faults, were damaged or not properly manufactured.

In this case the supplier wanted to ship out what was OK and wanted to re-work the other 25% later and ship it later. He even didn’t agree on paying for a re-inspection but simply said “ don’t worry, it will be ok”.

Well I wouldn’t worry if the original 100% would have been a pass results but how does he even have the nerve to tell me not to worry and blindly trust him when 25% of the order is screwed up? Not only did the customer have to pay for re-inspection (the supplier wouldn’t budge) but he had higher shipping costs because he now had 2 shipments!

Agreements

You need to have agreements in pace that state clearly how each situation is to be resolved – to your benefit.

Sometimes it might be a minor issue such as that he forgot to put the labels on the carton. In that case it doesn’t make sense to send an entire re-inspection but you could rather have him issue you an LG (Letter of guarantee) stating that all items have been re-worked and if you find that what was promised was not kept he has to pay for any costs. E.g. he promises that he will label all cartons and then send it out and once you got the order you find out he hasn’t done it. You could charge him the label costs (as agreed on the LG).

So how do you make sure that your supplier follows each of the steps you want him to do? You clearly state things in your order email and in your purchase contracts and agreements.

Due to popular demand and because I was asked for it many times here is an example-email of how I place an order to the supplier (bear in mind to fill in the details of your own product here):

Supplier email template for order

Hi xxxx,

As discussed I would like to place a trial order of xxxx pieces of product X to you.
If my calculations are correct I will re-order 2,000 pieces every 2-3 months.

Details as discussed and herewith laid down:

– Product requirement for particular item (FDA approved)
– accessory for this particular item (FDA approved)
– 1 accessory (in acrylic)
– Material; Stainless Steel and Copper
– extra screw on the handle in copper plating as discussed (little detail that you agreed on could be here)
– Color box packaging. To be provided by me in a short time. (You dont need to have the packaging design ready when placing the order. If you have a white box then there is no need anyway)
– Insert card to be provided by me in a short time.

Price: In order to support this first order and in view of all future potential business that we discussed please confirm price of xxx as agreed on during our last phone call. Again please confirm and I will make payment right away. (It is difficult for the supplier to say no here. You are ready to place the order and he smells the money )

Sample costs: Please deduct the sample cost of Sample Invoice No.12345 of 150$. This was agreed on when I sent you the sample order on xxx.2016.

Please send PI based on above details with your bank acccount details so that I can make 30% T/T deposit to you.

1) I am also looking at an exclusivity deal. Since this model is more or less OEM in nature (modification and custom packaging). I would like you to sign the attached Exclusivity Agreement.
It means that anyone wanting the exact same specifications and is selling on Amazon United States is not allowed to buy from you.
You can still sell this model to other Amazon countries and customers but not with the same specifications like mine. (custom made file that he has to sign)

2) Please sign attached Purchase Order (a custom made file with all details again in a Word document.)

3) Please sign attached Purchase Order contract (a custom made document he needs to sign in Word file)

4) Please advise shipment date. Again, please check if you can ship out before xxxx.2015. I could send you the giftbox and all other order details within Monday next week so you would still have 30 days for production.

5) PLEASE ADD “FRAGILE-HANDLE WITH CARE” STICKERS TO ALL EXPORT CARTONS (my product had glas in it so I wanted this warning on the shipping/export carton)

6) Please advise inspection date (when 70% is finished). Inspection to be conducted trough: Asiainspection (I will pay for the inspection). If there is a fail inspection you have to re-work the goods and pay for re-inspection (this is also mentioned in the Purchase Order contract)

Please provide address, contact details and telephone number and contact person in both English and Chinese for the Inspection company.
I will also need these details so that I can give you the shipment labels from Amazon Seller Central with the actual factory who delivers.

7) Shipment to be conducted trough:
Please contact my freight forwarder to arrange pick up of both AIR and SEA shipment
John Doe
Made up name logistics (SHENZHEN)
TEL:+86-12345678
Fax:+86-12345678
E-MAIL: john [email protected]

8) 100% shipment by AIR to following address. Please add the address in the commercial invoice and packing list.
FBA: Mandarin-Gear Limited
Amazon.com.dedc LLC
560 Merrimac Ave
Middletown, DE 19709
United States

The following is for the documents:

Importer of Record:
Mandarin-Gear Ltd.
xxxxx adress, Hong Kong
Tel: +852 12345678
mail: xxx
EIN: 123455678

Ultimate Consignee:
FBA: Mandarin-Gear Limited
Amazon.com
4255 Anson Blvd
Whitestown, IN 46075
United States

Notify Party for customs:
Mandarin-Gear Ltd.
xxxxx adress, Hong Kong
Tel: +852 12345678
mail: xxx
EIN: 123455678

9) Labels for for export carton as attached.

10) Please send full certificate of FDA and Borosilicate glass for this item.

11) Please find attached logo to be printed by Silk-Screen on the item. Logo to be put at the bottom of the product.

12) If there is a polybag included it needs to have the attached suffocation warning printed on the polybag.

13) Products need to be packed very very well especially around the glass as you know the glass can easily break.

If you have any questions please do not hesitate to contact me.

I am looking forward to building a long term business-relationship!
All the best,
Manuel

So you see there is quite a few things you have to consider when placing an order. Usually I sit 2-3 hours when writing the order email and terms up to each supplier. Since I want to take my time and think of everything that I want the supplier to do. Make sure you attach all files and documents you want him to sign.

Since I am a supplier and manufacturer myself I am sometimes surprised at how I receive orders from customers. Sometimes I get an email just stating the order quantity, delivery place and not much else. If anything goes wrong I could blame the buyer “well you haven’t specified anything” and there is nothing he can do.

Obviously I am not that kind of supplier but many Chinese suppliers work that way… You as the customer have the right to demand certain terms and if the supplier doesn’t agree to them well then you should move on.

5) FIND A FREIGHT FORWARDER AND CUSTOMS BROKER

This part is essential if you have a larger order that needs sea-shipment.Here are some notes on how to contact your logistics company andwhat information YOU need to provide:

• container volume (your goods in volume, calculated by the supplier)
• estimated order quantity in cartons and units
• number of SKUs (how many different products)
• average dimensions and weights (if you have more than one product)
• labelling requirement (this is covered in labelling and packaging)
• visibility requirement (where do the labels and stickers go)
• delivery points and address (pick up and destination address)
• what material do you provide (labels, boxes, seals?)

If you are unsure of any of the above information ask your supplier to provide this for you. They usually have good experience dealing with logistics companies. Every factory should have a shipping department.

After you have received the logistics provider’s quote you should also ask your factory’s logistics provider about a quote, just to compare and make sure you are not getting ripped off and your prices are competitive.

Take the shipping costs into consideration with your customs and tax duties and you have your landing price.The most viable option of shipment is sea-shipment. What does that mean? There are two different shipments by sea:

FCL – Full Container-Loading

That means that you order a full container from a supplier only packed with your goods. Some items may have a large quantity per container, especially when they are very small.

LCL – Low Container-Loading

You ordered a quantity lower than a full-container-loading and it will be packed with goods from other customers and other suppliers in one container.

When you start off with importing you will probably have an LCL shipment because your quantities will be low. A FCL shipment can easily be a few thousand pieces of your product. You don’t need to arrange anything for the loading and unloading. Your logistics provider will handle this part. Logistic costs will decrease the more items you order and can fit into a container.

Here is a calculation example:

A 20’ container holds 28 cubic-meters. My product (Bluetooth speaker for example) fits 11,636 pieces into a 20’ container. A 20’ container to the US typically costs 2,000USD. If I would order different quantities the costs would be as follows:

FCL of my Bluetooth speaker 11,636 pieces. Container cost: 2,000USD

Calculation: 2,000USD / 11,363 pieces = 0.17USD cents per piece of logistic costs (excluding insurance, customs, tax, etc.)

LCL of my Bluetooth speaker say 1,000 pieces. Total CBM of 1,000pcs

Bluetooth speaker are roughly 3 CBM. LCL by CBM usually around 100USD Calculation: 300USD / 1,000 pieces = 0.3USD cents per piece of logistic costs (excluding insurance, customs, tax, etc.) You see the price per piece halves if I go for FCL. But of course if I start small I will go for the LCL option.

6) MONITOR YOUR SHIPMENT AND HAVE AN INSPECTION!

You noticed how the last 2 chapters have gotten smaller. That’s mostly because while important things to notice, they aren’t as important as this last chapter. I can’t stress enough on how important it is to have an inspection. I know I said earlier an inspection is up to you, but I NEVER ship without an inspection. Here’s an example of one of my shipments and why I am so glad I had an inspection:

https://importdojo.com/why-you-always-need-inspections-in-china-and-europe-trip-report/

There are several third-party inspection companies in Asia. Some of the big names are: Buereau Veritas, TUV-SUD, TUV RHEINLAND & QIMA to name a few. The first three are usually expensive but also very thorough. QIMA is a simple and cost efficient service that should work in the beginning for you. QIMA is also my preferred inspection company so lets take a look at them:

QIMA has an easy to use Dashboard and Interface. As soon as you register someone will call you to ask if you are in need of any service. They are very helpful and efficient. You can book several types of product inspection, send them a sample that you would like to have tested, or have them conduct research and an audit at your supplier.

Types of Product Inspection

• Pre-Shipment Inspection / PSI (Inspect the products after they are fully produced)
• During Production Inspection / DUPRO (Inspect your products during production making sure everything goes well)
• Initial Production Check / IPC (Inspecting your products at a stage when ~20% of the products are finished)
• Container Loading Check / CLC (Checking proper loading and quantity count during container loading)
• Production Monitoring / PM (Simple monitoring of your products during the production)
• Lab Testing:You can send AsiaInspection your sample, or even better, ask the supplier to send a sample for testing.

What needs to be tested depends on your market and requirements. But they will give you an idea what they can do and what you should have tested.

• Factory and Social Audit:

While I recommend that you have the factory audited, many factories are already audited by either Alibaba or some other third-party for other customers. Simply ask your supplier to send you his latest factory audit report or look on Alibaba.

If your supplier is on Alibaba it is likely he has a factory audit that was performed previously. Therefore, you can skip this step if the factory has a valid and positive report. If you are unsure and your order is large have the factory audited. Their prices go from 309USD negotiable (full inspection) to 649USD for auditing and more. If you are purchasing from China for the first time AND the amount is over say 2,000USD it makes sense to have at least a pre-shipment inspection.

This covers basics such as function test, checking the production, and making sure the products are made according to your order requirements. You can choose either one or all at the same time, it really depends on how much you trust your supplier and how sensible your product is. Either way, you can simply do this entire process through the online booking system. They can also give you a call to discuss details.

Once you have your test or inspection booked and performed they will send you a report on their findings. Depending on the findings you can now decide if you want to place an order to your factory or if the product needs improvements.

As for the other big names such as Bureau Veritas, TUV, SGS, and others I only recommend them if you have business in China in excess of 500,000USD. They are usually more thorough, with more detailed reports and so on. But they also come with a high price tag.

7) CONCLUSION

There you have it. This is the general outline of the whole process. I know it may seem like a lot to take in or digest and there is a lot more to it than what I mention in this “mini-guide”.

I do recommend that you also get my bestselling book: “The Import Bible” here (ITS FREE!!) where go even more in-depth on this topic. Or you can head on over to my ImportDojo Masterclass here in where I teach importing from China and much more in over 120 video modules. Alternatively you can also book me for private consultations. Reach out to [email protected] if you have any questions.