Elksourcing：Factory, Trader, Sourcing Company Which is Better?

China Sourcing Agent

Elksourcing：Factory, Trader, Sourcing Company Which is Better?

Apr 10, 2021 , by 露露

There are many commonly held beliefs in the west about getting a factory to manufacture your goods in China. It is true that you can vastly reduce your production costs, even when you have to ship products halfway around the world.

But it isn’t true that dealing directly with factories is always the best way forward. Let me tell you the pros and cons of factory, trading company and sourcing company, so you may know which is right for you.

Factories are often seen as the best and only source for your goods. You can communicate your needs directly with them and, if they are the right factory for you, they will have a high level of expertise in the manufacturing process and you should be able to rely on this from order to delivery.

Factories will make your goods to your specifications and within the tolerances you demand. The factory you choose will have probably been making similar goods for some time – you wouldn’t want a smart phone case factory to build the smart phone itself!

Finally, cost is frequently the main reason people go to factories direct as it is often thought that you will get the best price by that route (this isn’t always the case, as will be discussed when we look at trading and sourcing companies below).

Where you have decided to go to a factory, you must be aware that in China it is quite common for trading companies to try to masquerade as manufacturers, and they often will try very hard to fake for as long as possible. Though there are good reasons to go for a trading company, particularly if they are upfront about being one, if you specifically want a manufacturer here are either ways to smoke them out:

Ask them outright if they are a trading company or a manufacturer. Often trading companies, particularly the ones you may wish to work with, will come out and say that they are immediately.

If they do say they are a factory, tell them you’d like to pay them a visit. Manufacturers will leap at the chance to show off their factory and try to set up a date to meet, where someone with something to hide may be evasive and not be too willing to let you pay them a visit.

Look at their product range. Manufacturers will tend to specialize in a much narrower range of goods according to their tooling and expertise. Trading companies will have a network of contacts so will have a far greater range of products on offer. Rather than investing their resources heavily in new lines, they can just pick up the phone to a specialist factory and get them to make the product.

Is their listed mailing address on the outskirts of a city or is it an office in the central business district? As with western cities, manufacturing areas tend to be on the outskirts where the land value is lower. A trading company however only needs an office and could well be in a central location of the city.

How much do they know about the production process? A factory boss will know his lines intimately and be able to give good answers to good questions. A trading company will give much vaguer answers. A very detailed knowledge of the product on your part will go some way to persuading them that you are a serious buyer as well.

Ask for a third-party factory audit. There are specialist auditors in China who will examine the contact’s claims and research the factory, as well as any certification they have, before you sign anything with them. A trading company might be evasive about this, as they would be reluctant to disclose their sources.

Trading Companies

Trading companies are sometimes seen as an expensive and unreliable way of getting your product made. This is not always the case, and despite what you may have heard the trading company route may be the right one for you if your circumstances are a good fit.

One of the important differences between sourcing companies and trading companies is that trading companies will have a high level of expertise in a specific field. With multiple importers wanting similar goods, and a number of factories that make those goods, the trading company may well have a level of expertise that is close to that of the factory themselves. They may be able to advise you as to how to customize your product and improve its salability, which again could boost your bottom line when it comes to selling the product.

They will act as middle men. The good ones will have a number of contacts with factories in their region, and may well be able to get your product at a lower price per unit than going direct to a manufacturer because they will be able to achieve economies of scale as they can bolt your order on to an existing line of very similar goods. This is one of the strengths of going to a trading company – they can get a far lower price per unit than you might be able to at the scales you want to order.

One of the issues to look out for is that unlike sourcing companies, trading companies should be considered as being on the side of the factory should any dispute arise. They will be your point of contact at the factory – not the factory itself. They will often seek to protect their manufacturer’s interests; the lines of communication will be longer and disputes harder to resolve.

Sourcing Companies

Sourcing companies, work on your behalf to source a manufacturer and deal with the issues that arise in China. Unlike trading companies their loyalty will be to you rather than the factory, so when a dispute arises they will represent your interests.

As with trading companies the sourcing company will have a number of existing relationships with factories. Though their position is more on your side of the line, they will deal with the same factories on a regular basis and like trading companies, will often be able to drive some economies of scale into the final cost per unit.

One of the main advantages the sourcing companies should have is their grip on quality control processes that can be applied to a great range of products. This should include contracts in Chinese, inspections, follow-up and putting together a QC system in place. They can ensure that your product matches the specifications you have set and tackle any disputes on your behalf.

Sourcing companies specialize in the supply chain (logistics) as much as the production process & understand international logistics as well as compliance requirements better in most cases. A good sourcing company should be able to take over your entire sourcing process, right from finding the factory, to Chinese contracts, inspections compliance and logistics to your door. This would allow you to focus on your sales & marketing operations through the significant time savings achieved. A trading company might be better at reducing the factory price per unit, but a sourcing company might be able to drive greater savings in your supply chain overall.

Which Type is Right for You?

So how do you decide whether you should be working with a factory, a trading company or a sourcing company?

This decision is unique to each importer and is based on several factors, such as:

Experience importing from China,

Knowledge of import regulations & processes,

Size of your order (Total order value, as well as order value per product and per supplier),

Resources available to manage the import process.

If you are a large buyer that can comfortably meet the factory’s MOQ, have a good knowledge of the import processes & compliance requirements and have the time & resources required to manage the back & forth communication and order follow-up with the supplier, including order follow-up, you may consider a factory.

If you have larger orders and can meet MOQ, but are short on experience, you can go to factory direct and still work with a sourcing company as your nominated representative on the ground to manage the operational process as well as your risk and quality requirements.

If you are looking to buy a wide range of “related products” within the same industry but your quantities are not large, a trading company can be a good option for you. Trading company’s specializing in a given industry would often develop a wide product range with their products being manufactured at several different factories, thereby giving you the choice to carry multiple products in the same niche and at the same time being able to import smaller quantities per product.

As above, you can also use a sourcing & QC company to manage your risks, due-diligence, project management, quality control and logistics requirements when working with a trading company.

Finally, you can use a sourcing company in most of the scenarios mentioned above, especially if your order QTY is not large and related to wide range of products. Sourcing companies are in a better position to find direct manufacturers and skip trading companies which often dominate B2B portals.

As sourcing, quality control & project management process is highly time-consuming and often requires presence on the ground (for example factory audits, inspections, manufacturing control, container loading, etc.), importers of all sizes often use a sourcing company to work on the entire sourcing process so they can focus on their sales & marketing endeavors.

China Sourcing Agent

Elksourcing：How to Find Quality Partners for China Sourcing?

Apr 10, 2021 , by 露露

Every year, thousands of startup companies turn to China sourcing in this factory of the world. However, not all Chinese partners are good to work with as some place quantity over quality, some are devious in their dealings, and others are simply too difficult to work with. Due to the number of hidden risks involved, it is prudent to follow specific guidelines when seeking China sourcing partners.

Following are some tips for finding good China sourcing suppliers.

Online Directories – Beware of partnering up with Chinese suppliers based solely on picks from online directories. Most of these websites do not effectively screen the companies before accepting them and suppliers usually have to pay a fee to be listed which doesn’t give the websites much incentive for ensuring their authenticity.

Background Checks – If you find companies online, or from other sources, ensure that you run background checks on them.

Request References – If a China sourcing company is legitimate then they will not hesitate to provide several customer references at your request. Once received, ensure that you check them out and find out the details of their experiences with Chinese partners. Companies that hesitate or do not provide references should be avoided.

Request Samples – Always request samples of products from any China sourcing companies you are interested in. The quality of the samples will reveal a great deal about their quality control measures. However, don’t rely solely on samples as most companies will send their very best, but still could supply you with shoddy products.

Visit Factories –If possible, you should personally visit the factory. On your visit, you should tour the factory, inspect various products for quality, take note of working conditions, as well as ask any questions you might have. If you cannot do it personally, hire a QC professional to do it on behalf of you.

Monitor Partners – Don’t make the mistake of taking a Chinese partner relationship for granted. The companies you partner with should be closely monitored, especially small factories which often do not have effective managing systems in place. Every shipment of goods should be inspected for quality as many suppliers will send quality products the first several shipments and then fail to control the quality later on. Get involved in production process as early as possible.

Refuse Subcontracting – Subcontracting should be avoided. Many China sourcing factories will subcontract orders to raise their profits, but have no control of the quality so it usually suffers greatly. A clause stating the prohibition of subcontracting should be included in your contract.

Employ Professionals – In order to get the best results, it is recommended to employ the services of professionals who specialize in assisting with China sourcing.

How To Import From China

Elksourcing：8 Tips for Your First Approach to Chinese Companies

Apr 10, 2021 , by 露露

There is a belief in the West that Chinese companies are competing very hard for your business and you’ve just got to send a mass email out to get a dozen competing responses, fighting to make your product.

The reality is very different. Chinese companies are often overwhelmed with emails from importers who (most of the time) are not serious buyers and will never place an order. Why spend hours dealing with impersonal emails that in most cases are just for price comparison? 99% of emails to Chinese companies are just that, and they know it.

The best way to make first contact is with a detailed and targeted email to the company. Then make a follow up call within a few days to confirm that they have received it and are dealing with it.

Here are eight tips to make sure that they pay attention to you when you make the first approach:

#1. Know your product

If you are approaching a manufacturer directly, they will pay more attention if you have a very detailed product specification. If you have clearly spent a lot of time doing your research before making the initial approach, they are more likely to give you the respect that your approach deserves. A general email covering just a few points is going to get little attention.

If you know the product well, they are also more likely to give you a better quote too. The more competitive you seem, the more likely that they will wish to compete for your business.

#2. Tell them your order volume

In your email, set out the numbers of units in your order as a whole. If you don’t they will quote for an MOQ (minimum order quantity) that could be significantly different to what you seek.

You may want much smaller quantities than they are willing to make, for example, and that will be off-putting for them. By being upfront from the start, so you should be able to find the right match more quickly.

#3. Specify compliance requirements

You should cover the legal and regulatory requirements for the goods in the country (or countries) you will be selling to. Some factories aren’t set up to meet these, while other factories will do it all the time and be better able to deal with your requirements.

#4. Stand out from the crowd

There are three essential requirements for a factory to consider you immediately:

You are ready to buy right now

You have the capital to buy at least the MOQ immediately

You have great “repeat potential”

Many factories operate on wafer thin margins, so the prospect of repeat customer is very important. You can make this look possible with your detailed product knowledge as well as having a professional company website with a business address. They are far more likely to do business with a company than an individual.

If you have done business with China before, say so in your opening gambit as this will signal that you know how things work there.

#5. Follow up

Give them a call within a few days of sending the initial email. In the West, this may seem impatient or rude, but in China personal contact is more important than “cold, impersonal” emails. The call will help them remember you and, in their eyes, start forming a personal relationship as you work on the product together.

#6. Communicate their way

Consider getting an account with QQ Chat, which is one of the best means of working day to day with Chinese businesses. An English version can be found here. As you build your relationship and get into the detail of the deal, you can get a lot of things done on QQ Chat. Many companies will also have Skype among other services.

#7 Visit China!

If you can’t afford to travel and spend time in China speaking face to face, then what are the prospects of you investing in the product and having it delivered to your home country? Businesses in China still hold great stock in face to face meetings.

#8. Work in their time zone

Consider working on Chinese time one or two days a week. If they can get an instant response from you during their 9-5 routine, then they will feel a lot more comfortable working with you. You will have invested a lot of time and money into this project, so it can be worth your while working around them too, as they are playing a significant role in your new business venture.

In Closing

Getting products manufactured in China is not simple.

There are factories, trading companies and sourcing companies, and either one might be right for you depending on your circumstances.

When you do work with Chinese companies, you are building a business relationship, not buying products off-the-shelf. In a good relationship, you need them and they need you. It’s not about dictating terms or demanding compliance, it’s about working together.

But you can make it work. Find the right company, give them a compelling business proposition, and treat them with as much respect as you expect from. That’s the way to do business in China.

How To Import From China

Elksourcing：Outsourcing from China in Right Way

Apr 10, 2021 by 露露

No business is completely self-sufficient. All companies require solutions and products from other vendors to better service their own customers. Outsourcing enables businesses to focus on developing its core competencies, while still benefiting from greater efficiencies and conveniences provided by their outsourced partners.  For example, a premium brand online selling business should spend more of its time developing new designs, working on promotions, or training customer service staff, while outsourcing production from China.

There are many suppliers that provide specialised solutions, and this can cause a huge headache for procurement departments. Furthermore, the range of options is getting more complex, with the availability of traditional services firms, freelancers found via word of mouth or from online platforms, purchased software with an upfront cost, cloud-based solutions on subscription basis and many more!

Unfortunately, for most companies, procurement policies are still stuck on a lowest cost bias. One might wonder why this is a problem, as lower costs are better, right? Not necessarily.

Just take a look at the recent Auditor’s General report, which revealed problems in the tendering and management of contracts. In some cases, the solutions procured were unused, possibly because when the lowest tender is chosen, it can lead to unsuitable vendors being awarded the contract and providing an incompatible solution.

It is far more important to take a holistic view and use a value-based procurement approach. Besides eliminating solutions that may simply be a waste of resources, looking at the total value add derived from each submitted quote creates an alignment with organisational goals and strategy and ensures integration with internal user needs. This enables organisations to reap more long-term benefits from their outsourced solutions that may require higher initial costs but result in much higher value add across its lifecycle.

Here are some tips on how organisations can implement a value-first thinking when it comes to outsourcing, especially from a remote area like China.

Confirm the need

Assessment of projects should be done before it even reaches the procurement stage. Preliminary questions should be asked such as: Why do I need this new solution? What is the underlying problem? What will happen if I do not procure this new solution? Do I have the capabilities to do this in-house? What are our alternatives? Based on these questions, the team will have some idea of the expected results (not solutions). This sets the initial scope and budget for the project.

For example, a company found that its sales team was unable to cope and had trouble following up with clients. This may seem like an obvious lack of manpower, fixed by hiring more salespeople. However, a deeper investigation could reveal different underlying problems, such as salespeople spending too much time filling up the paperwork. This could be solved by an enterprise solution that speeds up administrative work, which is more cost effective than additional hires.

Talk to users and experts

In some cases, you may not know what is the underlying problem. The best way to discover this is to talk to stakeholders and users.

Businesses can enhance this conversation by using in-house experts or independent consultants, who are knowledgeable about the issues. Their expertise and knowledge of technology trends can result in new solutions to reach the expected results. They can also provide feedback on feasibility of the project or budget expectations.

When it comes to the procurement and assessment, remember to include these users in the decision-making process. This ensures that the project remains focused on the needs of stakeholders and ultimately benefits the organisation.

Be clear on the purpose of your requirements

Once you know what type of solution you want, generate the requirements for the project. Where possible, tag each requirement to a specific business purpose/need, so your vendor can understand how their features will be used to meet your goals. In some instances, they may be able to suggest superior alternatives that still meet the requirements. For example, an inventor wanted to create a complete new silicone wine glass. Once their Chinese vendor understood this was to build a stronger user friendly and cool looking, they did minor tweaks to the existing design, make the bottom and corner smaller & rounder to save material cost and easy to produce. This achieved the same objective in a significantly faster, cheaper and more effective manner.

Outsourced projects often fail, not because vendors were unable to meet the requirements, but because they could not meet the actual goal of the company. This is especially true when businesses select the lowest cost vendor, who may reduce their cost by matching their offering against the stated requirements, while disregarding what the client actually needs.

When initiating a new project, it is advisable to determine if the project is to be a standalone and solely developed by the vendor or requires integration into existing systems. This makes a huge difference especially to IT projects and can make or break large automation projects.

Have an open discussion

With these requirements in hand, invite interested vendors for an open discussion. This should be done before calling for tenders or quotes, so you can tap on their knowledge and refine the scope of your project. This also prevents blindsiding them with new requirements or getting unpleasant surprises when they inform you that the project cannot be integrated into your existing system.

Multiple quotes are a must

It is essential to ask for multiple quotes, and typically at least three bids are recommended. While it may take effort to get three vendors, it could save you significant time and money later. This is where online procuring platforms or sourcing agents can help in the sourcing and matching process. These act as one-stop centres for vendors to find procurement opportunities and make their bids in a transparent and fair manner. They also provide access to a broader range of previously-unknown vendors and suppliers.

Ultimately, these steps should culminate in a value-based approach when your business purchases outsourced solutions. Done effectively, your business can better assess who is the ideal vendor to solve your problems and meet your goals.

How To Import From China

Elksourcing：Quality Control for Importing from China

Apr 10, 2021 , by 露露

When your business entails importing products from China, it’s vital to incorporate a quality control process at the factory you work with. Even the best managed factory might not always produce a perfect batch, so a robust quality control plan should be used to ensure your specifications and quality expectations are met within every order.

What is Quality Control?

Quality control can focus on both product specifications and manufacturing process specifications for any type of goods and is especially important for importing from China. The goal is to identify any problems, defects, and non-conformities in the product that doesn’t follow required specifications from the buyer, or from general international standards. When caught early enough, these issues can easily be solved to fix the initial batch and avoid any future problems.

Challenges for Importing from China

Import business owners face several specific challenges that can affect their return on investment as well as the delivery of goods. The first major issue to be aware of is that importers typically need to purchase goods in advance. Since payment is generally released to the manufacturer prior to the goods being shipped out, you run the risk of receiving low quality goods with few (and costly) options for sending them back or reworking the goods locally. Whether the factory’s mistakes are deliberate or not, the bottom line is that they impact your business. The expense for shipping and customs duties would be enormous, not to mention the amount of time it would take to send back products and receive a new batch. Since many smaller businesses don’t understand the intricacies of China’s legal system, it’s very unlikely a lawsuit would have any success. So, in this situation, the importer would take a financial loss if the goods’ quality was not at an acceptable level because there’s little to no recourse for the factory even if they don’t fix the problem. Even if the business decided to sell the product anyway, their brand image could be substantially damaged if customers viewed them as lower quality.

Quality control not only ensures the quality of the product, it can also monitor their timely delivery. Without a quality control plan in place, production schedules can fall behind and you might miss your sale season, resulting in low product turnover.

All and all, it is essential for an importer sourcing in China to check their goods before, during and after production. You should check your goods at pivotal points in the manufacturing process and communicate with the supplier to get any potential problems fixed before it’s too late. To do so, you can manage it all by yourself together with the factory or work with third parties.

Who Performs Quality Control in China?

There are a few different options for quality control when importing from China. The first is the supplier’s in-house review of the manufacturing process. However, it’s obvious that solely relying on the manufacturer presents a conflict of interest. At the end of the day, they are likely to be more concerned with their own financial interests than the quality of your products. To get a better idea of how the supplier operates, consider performing a factory audit prior to the confirmation of your order. This will give you a clear idea of exactly how they control the quality within the factory. You might also check the factory’s licenses and certifications, along with their production capacity, human resources policies, and more.

Another way to perform quality control is through your trading or sourcing partner in China. You could consider requesting that they add a product inspection to their other duties; however, this also carries a high conflict of interest. Intermediates negotiating with suppliers need to keep good business relationships with them, sometimes it is difficult for them to provide a neutral opinion.

You could also decide to have your own quality team. This strategy requires intensive training on your products, plus local human resources management. Travel time and costs could quickly add up if your suppliers are located throughout the country. There are additional risks as well. Because quality teams have a limited number of human resources, the same quality inspector will regularly be in charge of verifying goods at the same suppliers’ site. There is a high chance that QC and suppliers develop a friendship that will end up with risk of corruption or at the very least influence his point of view on the goods’ quality.

As an alternative, there is a wide range of reputable third party inspection companies who advocate on your behalf in China. The company’s sole purpose is to protect you and your financial interests by verifying the goods based on your requirements. They have a neutral relationship with the supplier or trader; in fact, their business relationship is on one side only: the importer. They can provide several QCs to visit a unique supplier to keep the opinion the most neutral. They are able to provide services all over China. Plus, many importers are surprised at how affordable professional third party inspections are, especially compared to the potential for loss if a low-quality shipment makes it to your door.

What Does Quality Control Include?

When you work with a third-party inspection company, the process is very detailed and specific to your products. You develop a detailed inspection protocol based on a checklist and your own product specifications and quality requirements. The inspection protocol sets up all the different verifications the QC may have to perform while controlling the goods on-site: it includes cosmetic verification, functional verifications as well as verifications to your requirements. It’s best to be as specific as possible to ensure every detail is controlled and evaluated as you want it. Provide clear details, otherwise the inspector and the manufacturer will use their common sense which may be different from yours. Also realize that your checklists should be constantly evolving as your own specifications change. You can even provide a reference sample to be used in conjunction with the specification sheet to get the best results.

Sourcing in China can be challenging, no matter how long you’ve been doing it. Quality controls are keys to protect your business. They are important for the first shipment concerned but also for the recurring orders. They can then help your factory prevents similar mistakes in the future while getting the current shipment out the door within an appropriate amount of time, and the guarantee that your goods are sellable. Thus, make sure to rely to the right quality control experts when performing product inspections. Having a third-party inspector is probably the most flexible and reliable option for small and medium companies, as they guarantee product expertise while sitting on your side to defend your interests. Not only that, they can quickly operate all over China, with a third-party inspection company, you keep control on your goods quality and benefit from their expertise regardless of location.

China Sourcing Agent

Elksourcing：Benefits of Working with a Verified Sourcing Company

Apr 10, 2021 by 露露

Nowadays, there’re so many B2B websites like Alibaba, Global Sources, Made-In-China, etc, it’s so easy to find factories for your sourcing needs. In fact, it’s TOO EASY! So, you will find dozens or even hundreds of factories, so you will be puzzled, who is the best factory to work with? It’s very difficult to verify them, quite often, you end up with working with a lousy factory, and suffer in quality, time, even money!

Therefore, lots of sourcing veterans recommend working with a verified China Sourcing Company, what’re the benefits?

1. Trust. This is the most important thing in business, especially when dealing with suppliers in ten thousand miles away. It’s safe to work with a China sourcing company which has been officially verified.

2. Better communication. Factories are strong in producing goods, but usually they are not strong in communications, as they lack of English speaking talents and the experience of dealing with foreign buyers.

3. Better payment terms. China factories usually work at slim margins, they cannot afford any risks in payment, that’s why they always ask for 100% TT before shipment. However, sourcing companies have more funds in business and better way of controlling risks, so they can offer better payment terms.

4. Better quality control. Sourcing companies will inspect goods during production, and before shipment, usually, their QC staff are more professional and independent from factory, so the quality can be better monitored.

5. No limit of product categories. They can work with many factories in China so as to provide you a vast range of products. This allows you to source different products and ship together in same container. You don’t need to find many suppliers to contact with and build relationship again if you plan to import different products, save lots of time and hassles.

6. Small MOQ. They work with factories flexibly. By using various sourcing channels, they can find domestic sources that you are hard to reach.

7. Easy to get samples. Most of them are willing to send samples because they are easy to get samples from factories.

8. Quicker lead time. When necessary, they can choose alternative factories who have better production capacity, so as to be flexible in lead time.

9. Smooth export process. As sourcing companies are experienced in export, they know export process very well, so the whole process is smooth and under control.

shipping FAQ

Elksourcing：Why Your China Sourcing Products Are Delayed?

Apr 10, 2021 , by 露露

You found a Chinese supplier at a trade show or online, which looks good and professional, you placed an order, sent the payment and now wait to receive the products. However, after a couple of months when your inventory is running out, the products are still not delivered, why?

I often receive emails from frustrated buyers, asking me to assist them to speed up delivery from their suppliers. To solve this issue, first we need to understand what caused the delay.

There are four main reasons why shipments are late.

1) The order is too small for the supplier.

Many buyers try to find big and established suppliers, despite their own business and orders being small. They do not realize that big suppliers are busy and often do not give importance to small orders.

One of my clients from Dubai has been buying car mats from a decent-sized supplier in Zhejiang province. They buy a 20’ container every month. The order size is not big, but not too small either.

The cooperation was good, until early 2015 when orders started being delayed. The situation went from bad to worse in subsequent months. The buyer became frustrated and puzzled by why all of a sudden, the supplier was unable to deliver orders in time.

My company did some research and found that they received a large contract from Kmart. Now all their production lines are occupied to produce the order from Kmart, and orders from small and medium sized buyers have to be postponed. The owner of the factory hopes to set up a new workshop to increase production capacity, but it cannot be done overnight. They need to buy land, equipment, and hire and train new workers, all of which might take months if not years.

2) The contract does not include a penalty clause.

Most buyers underestimate the power of a contract. Aside from being used in a lawsuit as evidence of agreement in all aspects of a transaction, more importantly, a contract can be used as a deterrent. The contract sets boundaries and limits on what is acceptable and what is not.

Here is a good example of a late delivery penalty clause:

“Should the Seller fail to complete the inspection procedure of the goods, the Buyer shall agree to postpone the delivery on the condition that the Seller agrees to pay a penalty which shall be deducted when the Buyer remits the payment of the goods.

The rate of penalty is charged at 1 percent for every 5 days, odd days less than 5 days should be counted as 5 days. But the penalty, however, shall not exceed 50 percent of the total value of the goods involved in the delayed delivery.

In case the Seller fails to make a delivery 30 days later than the time of shipment stipulated in the Contract, the Buyer shall have the right to cancel the Contract.

With the inclusion of such a clause in the contract, the supplier will think twice before they delay the delivery.

3) The supplier is a trading company with no control over production.

Recently we were inspecting kitchen products for a client. The client ordered six containers from the supplier, and the supplier bought the products from three or four factories. The order was delayed by two months.

At trade shows, many trading companies present themselves as factories. So, without visiting the factory, you cannot tell if they are trading companies or factories.

Trading companies and factories have their advantages and disadvantages. Good trading companies can manage the supply chain and production effectively and smoothly, but it is easy for a trading company to mess things up.

In our case, the trading company lost control of their associate factories, which caused the serious delay.

4) Goods are stuck in customs.

Getting products cleared by China customs before they are loaded on to the ship can also cause delays. Usually, products get stuck in customs due to the following three reasons:

a. Incorrect HS code

For most products exported, suppliers can get a tax refund of up to 17 percent from the government. The refund is based on the HS code of the products, because of which many suppliers use an incorrect HS code, just to get a higher tax rebate rate.

For example, door mats have a rubber back (70%) and a carpet top (30%). If we use the HS code for rubber, the tax refund rate is 9 percent, but if we use the HS code for carpets, then the tax refund rate is 17 percent. As the products are mainly comprised of rubber, we should use the HS code for rubber. However, many suppliers will use the HS code for carpets for a higher refund rate.

When such misleading classifications are caught by customs, they will detain products until the supplier corrects the HS code and pays the penalty. This procedure, as well as the investigation, could take months, during which time the products are stuck in customs.

b. IP infringement

Buyers should ensure all logos and brands they use on their products exported from China are accompanied by relevant certificates.

We exported gift products for an US baseball team. The logo of their sponsor, Toyota, was printed on the gift items.

During customs clearance, we were asked to submit a letter from the brand owner, Toyota, authorizing us to use their logo, and the products were detained due to suspected IP infringement.

We then contacted our client, a gift promotion company that got the order from a Toyota dealer in California. Our client in turn contacted the baseball team and the Toyota dealer association.

After 10 days, we got the authorization letter, which we submitted to customs. The products were released but we missed the delivery date.

You can access China customs’ website for IP records here: www.haiguanbeian.cn/applyrecord.

c. Incomplete or incorrect shipping documents

Shipping documents are prepared by suppliers and sent to shipping agents, who in turn send them to custom house brokers for customs clearance.

A mistake on these documents could delay customs clearance and therefore shipping. If there are inaccuracies, the supplier needs to correct and resend the documents, and it will cause delay.

China Sourcing Agent

Elksourcing：Finding Buying Agents in China Something You Should Know

Apr 10, 2021 , by 露露

When your business of importing from china grows, you need to find a buying agent to help you, but it is not easy. You do not know how and where to find an agent. There are questions such as should you sign a contract with them? If yes, what clauses to put on the contract? How can you tell if they are trustworthy? To use a buying office or a buying agent?

Here are 6 things you should keep in mind when selecting an agent:

1. Trust is everything

I think you would agree with me that to work with an agent, trust is important. Ideally, you need someone who is competent and reliable.

How can you tell if your agent or representative in China is trustworthy? In many cases, first impressions can misguide you. You can do some online research to see if there are any comments and feedback about them. Give them some trial tasks to gauge their performance. You can generally understand their work ethic by working with them for a few times.

2. Contract versus verbal commitment

Some buyers think a contract is not important so they work with buying agent and suppliers on verbal commitment, binding by morality and virtue.

We have a buyer in the US, for whom we act as a buying office. This client does not pay attention to their contracts. Unfortunately, their supplier delivered low quality products, and when their products failed to pass three quality inspections, the supplier refused the fourth inspection.

When we asked our lawyer to help, he asked to see the quality standard we had agreed to in the contract, which we did not have. The lawsuit is still ongoing. Without a properly written contract, an easy lawsuit becomes complicated.

My suggestion is to sign a detailed contract with your buying agent irrespective of how good your personal relationship is with the agent. Ask the help of a lawyer to draft and review the contract.

3. Buying offices versus buying agents

Buying offices normally have experience in more industries while buying agents often specialize in certain areas such as apparel and electronics. If your sourcing projects cover many industries, it might be better to use sourcing offices. If you deal with one product, you could work with individual agents.

Also, if your project is relatively big, it might be better to use a sourcing office as you will need many sourcing experts to work on your project at the same time.

Buying offices are normally legally incorporated companies, so if they breach the contract, you will have somewhere and someone to chase after.

A sourcing agent is often a one-man show. If bad things happen, the person might disappear. So relatively speaking, buying offices are more reliable than agents.

Agents might offer low rates compared with buying offices. For small buyers, a reliable agent might be a better choice.

4. Hidden commission

It is a public secret that many sourcing agents get a commission from suppliers. But this means your buying agent and supplier become allies. The agent will not push for the best price for fear that the supplier will not happily give him/her the commission. The agent might turn a blind eye to quality issues, might not recommend the best supplier to you, favoring instead a supplier that gives them the best benefit.

You pay your agent a decent service fee but the person presents to you a made-up sourcing report — the price is not real, the factory presentation is biased and the best supplier is disregarded. All these problems are caused by hidden commissions.

These commissions are so common that suppliers often offer to give them to agents without them asking.

So how can you make sure your sourcing agent will not betray you by taking a hidden commission?

First, you should sign a contract with your sourcing agent clearly stating that active or passive hidden commissions are not allowed.

Second, contact other suppliers randomly and see if you get a lower price for your product.

5. Hire an expert, not a secretary

There are thousands of products global buyers are buying from China, and each product is different. Sometimes it takes months or even years to understand the production mechanism of a specific product. A competent sourcing agent should be a product expert. If he/she does not know the product, he/she will not know how to plan quality control, will not know the costing, and cannot negotiate the price properly. He/she might not even know where to buy product.

That is why Li & Fung only hires sourcing experts with more than 10 years working experience in certain industries. The experience gives them the knowledge of quality control, price negotiation, product research and development. They can deliver a solution.

6. Communication is often a problem

First is the language. You should make sure your buying agent speaks your language well enough to understand your emails, and to draft and review an English contract. They should also be familiar with the product in your language (parameters, specification, parts and components, etc).

You need a buying agent who is well prepared to hit the ground running. If you are looking to build a long-term relationship with your agent, ideally the agent should be proficient in speaking, as in many cases, email is slow and you will need to call him/her to speed up the process.

But as a matter of fact, generally Chinese people do not speak English well, so for important matters, it is better to send an email to make sure your agent understands you, and will not miss your key points after the phone call.

The efficiency of communication is an issue to look at, especially when there is a time zone difference. Your agent should reply to your emails promptly. Instant messengers can be used to speed up communication while text messaging can also be used for urgent contact.