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Doing business with China Wholesalers

Sooner than later, you may be thinking of following others to China. Why? Of course, to import the dirt cheap Chinese products for your manufacturing or trading business. Is importing from China the same as importing from other European or developed Asian countries? It is and it isn’t! Unless one is experienced in importing from China, he can expect plenty of trouble, delays and unexpected expenses with practically no recourse to any remedy. This is particularly true of small and medium sized engineering companies. So, here are a few tips to help you along. Follow them and you will be a winner with genuine and economical products from China.

Where to start?

Internet is now the ubiquitous source for all information and one can easily locate Chinese suppliers for practically any product. You can also register yourself freely and place enquiries for your needs on Offer will simply pour in and the service of is excellent.

How do the offers read?

Most Chinese companies rely on non-technical secretaries as translators who do a short job of making a perfunctory offer. What you see in an offer conceals more than what it reveals. There can be typographical errors (not important, generally) as well as calculation errors (can be quite important!). Offers are more in the form of Proforma Invoices rather than the regular structured offers that one is used to. An offer is no more than the beginning of a bargain – bargain for everything including price! If one remembers this, one is sure to find good value for money from a reliable supplier.

What steps are needed to insure a good transaction?

a. Courtesy and patience: One generally corresponds with the English-knowing Office Assistant who can be addressed on first name basis and she / he does the same with you. They are very courteous and prompt, their follow-up is excellent and they have the ability to befriend you in no time. If your original timetable to place an order for an item is one month and if it stretches to one year or more, they do not lose patience. But be sure that behind this culture of courtesy and patience, there is a dogged determination to secure business and it is here that you can expect a pitfall. Their correspondence contains minimal commitments. So what do you do?

b. Write it yourself! We all learn that the devil is in the detail, which is not entirely true with the Chinese offers. As I said earlier, most offers are in no more than Proforma Invoice format, with very few details. But a good commercial document must contain a host of details like:
-scope of supply.
-detailed specifications of each and every item/sub-item/component.
-itemized quantities of main supplies/spares for 2-year operation/commissioning spares/insurance spares, whatever you wish to buy.
-specification for electrical equipment/controls (Chinese standards are of 380V, 3 ph., 60 Hz.) and it is necessary to match with your needs with additional equipment if needed.
-performance parameters including guarantees, warranties, methods of demonstration and penalties.
-delivery terms.
-terms for pre-shipment inspection.
-price and payment terms.
-technical documentation in English for operation and maintenance.
-after-sales help like supervision of installation, commissioning, and training.
-dispute resolution mechanism.

It is unavoidable that the Buyer writes down these details himself, submits to the supplier for negotiation and binds him for the same, and establishes a link with these detailed agreed terms to the Proforma Invoice. This would ensure interests of both the buyer and the seller and what you get is what you paid for. The Chinese are not very familiar with such structured offers and the language, and they generally appreciate any help in this regard.

c. Payment terms: When it comes to payments, expect plenty of suspicion from the Chinese buyers. They are paranoid about security of payment and are prone to insist on both advance payments, and full-and-final payment before shipment. Their preferred payment route is by Telegraphic Transfer (TT) through banking channels. It is best that until business relations are well established, one insists on a bank guarantee for any advance payment. Similarly, one must insist on securing the Original Bill of Lading and Packing Lists before release of final payment. This is best done by making the final payment through a Letter of Credit (L/C), which is payable against the original bill of lading and packing list documents.

d. Shipment and insurance: It is recommended that contracts are entered into on f.o.b. Chinese port basis, and the buyer arranges for shipment, marine / inland transit insurance himself. This is cheaper and more reliable. Many Chinese suppliers are prone to issue threats of diversion of cargo, delay in release of documents even after receiving payments etc. This can lead to a lot of avoidable unpleasantness like delay in delivery, customs clearance, demurrages etc.

e. Packing lists: This is one more area where one can have a big headache if care is not taken in good time. Description and quantity of goods in the packing list must be in total conformity with the proforma invoice and the bill of lading. Because of their difficulty with the English language, more often than not there is significant variation in the wording of different documents and this leads to confusion, delays and wrong assessment at the customs.

f. Price: Do not feel shy to bargain. The Chinese can surprise you with your audacious demands for price reduction!

g. Pre-shipment inspection: Whether you intend to carry out this inspection or not, make sure that it is a part of the agreement. Also, you can expect any number of excuses for not showing the place of manufacture or offering for inspection. If you persevere, it pays dividends in the form of good products, complete supplies and correct documentation.

These are a few of the important checkpoints and suggestions, to ensure smooth transactions involving Chinese suppliers.

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