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Granted, in the past few years, China has become the most important exporting country for a variety goods seen in the American market. It is little doubtful that China is capable of supplying high quality yet low cost labor intensive products due to its low labor costs, richness of certain natural resources and fair workmanship that has increasingly been recognized by the international market.
There are many excellent manufacturers in various industries in China. However, a large portion of “made-in-China” goods have been imported to the United States by a large number of exporters in China, although they like to claim themselves as "factory direct". Among these exporters, some are large firms, some are one-man business and, some may not exist at all.
With fast growing of international trade, more and more distributors, resellers and even individuals have been ordering or trying to order goods and products in various categories, e.g., building materials, furniture and collectibles, directly from the suppliers located in China. Most people believe by doing so they would get much better deals comparing to buying from a vendor in the States. That might be right to certain extent. Nevertheless, this could expose a buyer to great financial risks as the buyer has very few leverages on a transaction conducted between two countries. I have heard of many bad experiences or even disastrous stories of ordering goods and products directly from China.
I am not trying to be scary. The situation is indeed real and the incidents are absolutely not isolated. Let's first review the ordering process that most international trades would follow.
As the first step, you search for suppliers in China that deal with the products you are looking for through Internet. You don't know anything about them other than whatever they advertised themselves as. Then you obtain a number of comparison quotes and decide to deal with one of them. Then you sign a sales agreement with the supplier and wire transfer a deposit (typically 30-50%).
After the deposit fund leaves your bank, the only things you can do are waiting for production to be completed in China and, praying for that your order will be shipped on time and in conformity with what you specified. Finally, you have to pay for the full balance before the shipment is delivered to your site.
The problem is right here - you virtually lose control in the ordering process right after the deposit is sent oversea. The lucky supplier in China that took your deposit may flexibly choose to do one of the following three things:
1, Produce and deliver your order as per the terms set forth in the sales agreement. This would be a perfect outcome for you with a really happy ending. You get what you need with great savings.
2, Produce and deliver your order in an inferiors way. This scenario happens quite often. I know a buyer who paid over $2000 to buy a precious "jade vase". When the shipment arrived, she discovered the vase was made in regular "onyx", which has a value of less than $200. When you receive the shipment and find out what you paid for is not what you get, what can you do? Basically nothing. The party that collected your money is thousand miles away in a completely different jurisdiction. They may choose to do anything or nothing. Even if the discrepancy is discovered before the order is shipped, you will still find yourself in a difficult situation. You may ask them to redo the order, but the chance is rather slim. You may cancel the order and demand a refund of the deposit, haha, canceling order is okay; getting money back? good luck.
3, They will grab your deposit, close bank account and disappear completely. They may change the business name and do the same trick again and again. But you will never be able to track them down. This group of "suppliers" are running scam businesses and have caused significant financial losses to American consumers.
Greed is a basic instinct of human being, which to certain extent explains why the laws are essential in every corner of the world to keep the society in order. Unfortunately, the laws that could govern ordinary cross-border activities like trade remain scarce and appear rather weak.
Therefore, buyers should be extremely cautious when ordering goods and products directly from the suppliers in China. Here are some important tips.
1. Always do some comprehensive researches on the background of potential suppliers in China. This may be difficult to do, but you must do. You may request trade references from their existing customers in America. You may also contact local chamber of commerce in the city where the supplier is located to validate their business nature and credit history.
2. If you order is large enough, you may want to have a trip to China before finalizing the order to meet the supplier(s) in person and to see their manufacturing facilities.
3. Make sure to have all specifications included in the sales agreement, the more detailed the better. Also make sure to state "no substitute materials and styles allowed" in the agreement.
4. Try to use "letter of credit" (L/C) as the form of payment. It is the fairest transaction method for both seller and buyer. Both parties are financially protected if they are determined to fulfill respective obligations as set forth in the sales agreement.
5. Stop and think again when you see a quote containing prices that are too low to believe. Most scam businesses tend to use extremely low prices to attract buyers or more accurately, the deposits.
6. When comparing the quotes you received, make sure to compare apple to apple. Suppliers in China like to use some vague pricing and delivery terms in their quotes so they can impose hidden charges, or in a plainer language - increase your costs, later.
Here is an example. You will surely be happy with a total cost of $3000 for shipping a container from China to Buffalo, New York, including ocean and land freights, duty and port charges. But wait, there is a line in small letters, saying "shipping costs are estimates only". As the commonly used international trade term is FOB, or Free On Board, you as a buyer are responsible for all logistics related expenses anyway; a supplier can quote anything to make their grand total appear competitive. How much truth in that $3000 estimate? Almost none. But I have seen this figure in many quotes sent out from suppliers in China. The average value of a container load of goods should not be under $30,000. The duty alone will be almost $1500 or higher depending on product category. Therefore, when comparing the quotes, make sure to compare the costs of goods only, unless what they quoted is "CIF" (costs, insurance and freight, in contrary to FOB) "to-door" delivery.
7. It is strongly recommended to seek professional consulting from an accredited international business firm or importer located in the States but dealing with manufacturers in China directly. Here is one China Business Consulting Firm in the US.
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