March 6, 2009 — Do you want to import from China? Since most big retailers are now sourcing from China, smaller wholesalers and retailers typically wonder whether they should do the same, but these smaller players are often put off by the complexities of getting started. Like all businesses processes, the process of importing from China has a lot of steps, each of which has its own complexities. For folks new to importing, these steps can seem overwhelming. But there are real business benefits from learning how to import — building import knowledge and expertise gives you access to a broader range of products at a broader range of prices than your competitors, giving you more product options to offer your customers.
There are several key areas a new buyer needs to learn to import from China. These include identifying suppliers, selecting suppliers, paying suppliers, managing quality control and the logistics for getting goods shipped from overseas to your warehouse. While complicated, once you learn how to put the steps together and what to watch out for, importing itself is not that difficult a process.
There are many resources to help you find suppliers. Twenty years ago, you'd mainly rely on trade magazines to publish information about manufacturers and suppliers. Companies like Global Sources have evolved from such publishing roots to also provide information via the Internet and trade shows.
For example, the GlobalSources.com online directory provides information about thousands of verified China suppliers and hundreds of thousands of products from these suppliers. Product categories include both finished goods like handbags, MP3 players, patio furniture and motorcycles, as well as unfinished goods like car speakers or capacitors. When using online directories, check what steps the directory owner has taken to ensure suppliers are real. On Global Sources, for instance, suppliers listed as "verified" have been visited at least three times, so you can be comfortable they are real companies, with real people and real offices.
Trade shows provide another opportunity to meet suppliers face to face while looking at and touching their products; the U.S. and European trade shows have a small number of China manufacturers, while shows in Hong Kong and China have a greater depth of China suppliers. The China Sourcing Fairs, held in Hong Kong every April and October, include an electronics show with, typically, more than 2,200 booths of suppliers; the gifts and home show with 3,800 booths of suppliers; as well as the fashion accessories and an underwear and swimwear show. And traveling around Hong Kong is easy; the city is modern and English is spoken quite widely.
Like working with a manufacturer in your own country, the overseas manufacturers want to understand your business. If you're only going to buy 10 pieces, you're unlikely to get either domestic or overseas manufacturers' attention. You'll have to go through trading companies or distributors. If you have an established business that sells good volumes through your existing sales channels and have the potential to become a good long-term business partner for the manufacturer, you'll be able to get their attention.
When contacting the supplier, start by explaining your business and then request samples of the products you're interested in. You'll likely have to pay for shipping and the product, typically via a wire transfer. In reviewing the samples, don't forget to review the packaging and instructions in addition to the product itself.
Remember that, as the importer, you are responsible for ensuring the product you are importing meets all relevant regulations. Learn what these are, in part by asking suppliers that manufacture these products whether they've previously exported to the U.S. and what certifications are required for that market. You can also go to your local big box retailer and see what certifications are on similar products.
Finally, communicate frequently with the supplier about all details of the transaction — not just the product, but also lead times and manufacturing completion dates. If you're new to importing, think of your first order as a small initial trial that helps you learn how to import from China rather than as a big deal that will make a big profit. After you've learned how to import from China, start placing bigger orders that will generate more profit.
You'll need to determine the terms of trade. Typical would be "FOB Hong Kong," which means the supplier pays to get the goods to the port of Hong Kong, and you pay to get them from Hong Kong to your warehouse. More detail on FOB and other incoterms is available on the incoterms wall chart from the International Chamber of Commerce, available here or by clicking on the image to the left.
While everything is negotiable, common payment terms are 30 percent at time of order and 70 percent when goods are shipped. The 30 percent payment at time of placing the order gives the manufacturer the money he needs to purchase the raw materials necessary for your order.
Some buyers have negotiated other terms, like 30 percent at time of placing the order, 55 percent at time the goods ship, and 15 percent when the goods are received. The payment before shipping mitigates risk that the buyer won't pay, but then puts financial risk on you as the buyer. Understand and mitigate this risk through communications with the supplier (does the supplier seem professional) and by starting with a small order. Typical payment method is via wire transfer. Shop around — international wire transfer fees vary quite a bit from bank to bank.
When you write your purchase order or contract, make sure you have clear options, including outs and specific penalties if problems (such as delays) arise.
Having selected a supplier, placed an order and made an initial payment, you now have to decide what you're going to do to manage quality control. Quality control generally begins before manufacturing starts, so after having seen the sample, ask the supplier what steps he takes to ensure quality control. This can includes both the raw materials he's using in the product, and also any continuous improvement to the manufacturing process.
Once your order is ready, you have three choices for managing the quality of products:
- Rely on the supplier's quality control;
- Have someone in your company do it; or,
- Hire a third party to do it.
Bureau Veritas AsiaInspection
Shipping and Logistics
DHL TNT UPS FedEx
U.S. International Trade Commission online database of tariffs and duties World Customs Organization
Import from China: Getting Started
A Guide for Commercial Importers
About the Author Global Sources Online Directory sourcing fairs sourcing reports www.globalsources.com