MADE IN CHINA … Is Sourcing Overseas Right For Your Company?

Sourcing overseas has become so common that it’s almost impossible to not consider it when selecting new suppliers for your business. Thousands of companies offer every product and service under the sun, and it’s hard to imagine the good ol’ U S of A could ever compete. There are definitely downsides though, so arm yourself with knowledge to ensure you make the right decision for your business.

1.) US standards do not apply … so go overboard on details and specs for quote requests.

The tiniest detail left unspecified can easily translate to a quote that’s for something close to – - but not exactly what – - you want. If your requirements are flexible, you can get some amazing deals. If not, you might find yourself extremely frustrated. The grade of material may be different than what’s considered standard here, a plastics plasticizer used might be something ok in China but banned under CA’s Prop 65, or your Pantone color match might be a few shades off. ALWAYS get samples before making a production order, to ensure that you really know what you’re buying. Ask plenty of open-ended questions to be sure you’re fully understood, and even ask for photos of the factory if your product would require specialized equipment. It’s very common for people to farm work out to others without telling you, which adds another layer of potential problems and miscommunication.

2.) It takes thirty to forty-five days to get my stuff? And then I have to go through Customs??

Logistics and transportation are no small matter when electing to purchase offshore. Ocean freight is cheap, but it generally takes 30-45 days. Your shipment will have to go through US Customs after it arrives, requiring a whole host of paperwork and fees. You’ll probably have to hire a company to act as your Freight Forwarder and Customs Broker unless you’re really adventurous and want to try to navigate through US Customs yourself. Even with a Broker you’ll be juggling details like whether your supplier is sending the original Bill of Lading by air, or if they’re doing a Telex release. If the details aren’t ready in time, your shipment will sit in Customs indefinitely while you pay storage fees. Air freight (like UPS) is much faster (2-5 business days), and they’ll handle all that paperwork for you … but you’ll be paying at least $4/kg. It is not at all unusual for airfreight to be more expensive than the products being transported. Yikes!

3.) This whole transaction looks shady … is this really the norm for China/Taiwan/India?

A lot of oddities that might indicate fraud in the US really are just the norm overseas. Yes, the person you’re emailing will probably call themselves by an English name that you’re pretty sure they made up (Paul, Salina, Alex, Tiger, Coke … I’ve heard a lot of interesting ones!). Yes, their email address is often hotmail, yahoo or gmail. No, their English isn’t all that great (I send lots of pictures along with any specs … with plenty of arrows, circles, comments, etc.). Yes, they’ll want 30-50% wired to them before they begin work. No, their banking information does not seem in any way related to the name of their company, and may not even be in the same town. Yes, they’ll want the remaining balance before they release anything for shipment … and if what shows up on the boat 45 days later doesn’t look like exactly what you want, you’ll probably have a very difficult time getting any type of resolution.

Side note: On large amounts, you may be able to negotiate a Letter of Credit rather than just a cash wire transfer – - highly advisable if at all possible, as it brings a bank’s oversight into the equation. The money is still effectively gone from your account as soon as you set it up, but you do at least have some recourse if issues arise.

Bottom line … there are great opportunities available in China, Taiwan and India for the wary buyer who puts in the extra work to mitigate potential risks. Weigh the pros and cons, do your homework, and you’ll be ready for success.  If you have any questions feel free to give us a call or email us.

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