Challenges For Importers
By sourcing your products and importing from China, you can create a competitive advantage in the business environment. Importing products from this Asian country allows you to keep the investment costs low, score high returns and enjoy healthy profit margins.
However, there are many challenges in this plan which affect business owners importing from China. These challenges can affect the return on investment and delivery of the goods too. Read on to discover more about them.
The importer makes payment before the products are released by the manufacturer
When items importing from China, the regular way of conducting transactions is that the business owner must pay for products in advance before they can receive them.
This exposes the business owner to a number of risks. Firstly, they run the risk of receiving products which are of low quality. Moreover, the options for sending back these products are few and often costly.
Moreover, the business owner may consider the option of adjusting or reworking the products that they have received. This is often time-consuming and expensive as well.
Whenever the products which you receive have design and construction mistakes, the factories in China are responsible. In some cases, the errors are accidental while in other cases they are deliberate.
Regardless of the motive, returning a batch of products to the manufacturer due to errors in design or construction results in massive expenses and tremendous time wasted.
You can take the legal route and serve the manufacturer with a lawsuit(Related: How To Sue A China Company: what are some of the challenges of litigating against Mainland Chinese companies?). However, the legal environment n China is very complex. Therefore, small and medium companies would experience great difficulty in navigating it or winning any sort of compensation in their lawsuit.
Therefore, the business owner is left with no other option but to absorb the loss. Moreover, if they decide to proceed and sell the defective products, this would impact negatively on the brand image. This is because their customers would notice the lower construction quality and most likely shift to a competitor’s products over time.
Therefore, these are some of the risks that pose a challenge to business people importing from China.
Difficulty in performing quality control before importation
Many business people make a fatal mistake when they importing products from China. They fail to specify the product specifications that they expect in their merchandise. Every importation form contains a space for product specifications. This is where an importer is supposed to comprehensively indicate the sort of product quality that they expect. Sadly, many importers leave this space open.
By doing this, they allow the Chinese supplier to fill in this space on their behalf. In most cases, they fill it in with specifications that lead to cheap, low-quality items. For example, you may want to import some stainless steel appliances but when you leave this space open, the manufacturer can ship some cheap zinc alloy appliances to you. Therefore, you should always make sure that you fill in the product quality specifications space as comprehensively as you can.
Regarding importing products from China, you can successfully fill in the quality specification space and still get low-quality products. This is because the manufacturers can ignore them to keep their operations costs low and net a bigger profit.
Therefore, you need to make your supplier believe that you will check the quality of your products before they leave China.
This will also be before you make your final payment. Normally, a Quality Inspection is a very expensive affair. Thus, you may not have the funds to perform one. However, it is still a good idea to indicate that you intend to perform it. This is in the effort to make the supplier believe you and honour your product quality specifications. As such, when importing from China, make sure you demonstrate that it would be too risky for the supplier to cheat you.
How to control the quality of the products which you import from China
The most effective way to ensure that the products which you get from China are of high quality is to sign an agreement with your supplier. This can be an official document which you and the supplier of your products can commit to prior to any business transactions occurring. In the agreement, you can communicate some crucial factors about your business transaction before it is conducted.
Contents of your business agreement
This document contains details about the specifications of the products which you want. Ensure that this information is accurate and reflects exactly what you desire to receive from your Chinese supplier. In addition to that, make sure to indicate what you will not accept under any circumstances in your transactions with your supplier. This can be related to the product or behaviour during negotiation. You should also indicate that neither you nor the supplier should make any attempt to cheat the other.
This clause in your agreement binds you both to a code of ethics. Remember, this agreement can be admissible in court in both your home country and China. Therefore, that particular agreement should be honoured to the letter.
Last but not least, your agreement should contain the payment plan which you intend to apply in your transactions with the supplier. The payment plan protects your interests and also tends to the revenue of your supplier. There is a special way to structure your payment plan which ensures that you protect yourself from getting cheated. Read on to learn about it.
Your agreement should indicate a 2-step payment program. This is where you deposit 30% of the total payment when you make an order to your Chinese supplier. After that, you clear the balance of 70% when you receive your products and confirm that they are of good quality.
By doing this, you can commit to the transaction using your deposit. After that, you can pay the rest only if the product reaches your quality standards. This payment plan is an incentive for your supplier to provide you with a good quality product. This is because they want to get your 70% balance payment. Therefore, they will ensure that all products provided are of the quality which you specified.
Chinese manufacturers operate with a small profit margin of 4% to 7%. Therefore, they cannot run the risk of having you refuse to pay the balance due to low-quality goods. This obliges them to stick to the specifications which are indicated in the agreement.
Products importing from China can help you to save money and boost your profit margins. However, it is a risky endeavor. Only by applying these China Inspection Service Agency will you get the product you specified on time. They are reliable guidelines on doing business with Chinese suppliers today.
September 1, 2016