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Seminar recordings and other resources from the Spring 2017 China Sourcing Summit

Global Sources hosts a China Sourcing Conference twice a year at their China Sourcing Fairs in April and October.  I have the honor of speaking at their events.  In case you didn’t have a chance to attend, in this blog post, I’ll share the seminar recordings and related resources.

Where to find the conference notes & video recordings?

Event Topic Recording/ Related Videos
Global Sourcing Trade Show (HK) China Sourcing 2017: Best practices & common mistakes https://www.youtube.com/watch?v=ppFv9SjzrAg

If you liked the seminar, you may also enjoy the following:

  • China Sourcing Academy A great resource for professional training.  I am honored to be one of the online instructors at the academy.
  • The Essential Reference Guide to China Sourcing (available on Amazon) or learn more about my book here.

 

FAQ: How to ensure the seller is not a scam?

Search SupplierBlacklist.com

A Corporate Assessment (CA) report can provide viability into the stability, assets & reputation of a target company.

Red Flag Assessment (RFA): Risk, Scams & Fraud exposure on a given transaction/deal when buying from a Chinese company.

 

FAQ: How to find a reputable sourcing agency?

Option A: If your project is ongoing and you could benefit from having a team working full-time on your behalf in China, then check out PassageMaker as they set up and manage virtual sourcing teams and production lines.

Option B: If your project is one-off or you don’t need full time support, please check out my list of endorsed service providers for QC, Logistics, Sourcing Agents, Engineering, Consulting and much more at www.SourcingServiceCenter.com .

 

FAQ: Where to find an English speaking lawyer in China?

www.AsiaBridgeLaw.com  Affordable, Professional, English-speaking legal & business advisory services. I am on their board of advisors and recommend them with confidence for:

  • IP Registration

  • Bilingual Contracts

  • Dispute Resolution (including Loss Recovery)

  • Business Advisory Services

  • General Legal Counsel

 

If you have additional questions about China sourcing, feel free to contact me at your convenience and I will do my best to assist you.   Looking forward to being of service and wish you successful China Sourcing.

Best Regards,

Mike

Return the favor:

If the information was helpful to you, please consider returning the favor in any of the following ways:

  • Share this email with a co-worker or business associate.
  • Subscribe to my YouTube channel, hit the “like it” button and post some comments.

Your support is greatly appreciated!

 

 

 

China Sourcing at Trade Shows – Top Q&A, Tutorials and Resources

Are you looking to start your China Sourcing at Trade Shows?

With the April 2017 trade show season in China/HK just around the corner, I thought it would make an interesting blog post to share with you the resources offered to the people I met at a October 2016 trade show. I hope you find it useful as you get you ready for the 2017 buying season & doing some China sourcing at trade shows! Don’t forget to attend this year’s conference on China sourcing if you are in Hong Kong come April!

 

Where to find the conference notes & video recordings?

Event Topic Recording/ Related Videos
Global Sources Trade Show (HK) How to Protect Business Secrets and Intellectual Property Covered in this video playlist.
Global Sources Trade Show (HK) How to Manage China Sourcing Projects from Afar Entire seminar + Q&A at https://www.youtube.com/watch?v=bjhnX98LfNk&feature=youtu.be
FBA Seminar (HK) Moving from supplier’s design to your design IP protection, Engineering and Vendor Selection covered here.
Austrian Chamber of Commerce (Guangzhou) Workshop: Advanced Supply Chain Tactics Similar content at https://www.youtube.com/playlist?list=PL_04teO1jjt7dusC4OrYhwoXaHP3jJSEt

 

International Sourcing Expo (Melbourne) Keynote Speech: “Sourcing in Asia Today: Effective and affordable strategies for overcoming challenges old and new” Entire seminar + Q&A at https://www.youtube.com/watch?v=_x0zPGeKV-Y      Recorded in HK.

 

If you like my China Sourcing Seminars, you may also enjoy the following:

China Sourcing Academy  A great resource for professional training.  I am honored to be one of the online instructors at the academy.

www.ChinaSourcingInfo.org   My blog for small and medium sized buyers.

http://www.psschina.com/china-business-blog/ My blog for large buyers.

The Essential Reference Guide to China Sourcing (available on Amazon) or learn more about my book here.

Where to find professional and affordable help for China sourcing?

Here is my full list of endorsed service providers as mentioned in the seminars.  QC, Logistics, Sourcing Agents, Contract Manufacturers…

 

How to ensure the seller is not a scam? (3 recommended tools)

Search www.SupplierBlacklist.com

A Corporate Assessment (CA) report can provide viability into the stability, assets & reputation of a target company.

Red Flag Assessment (RFA): Risk, Scams & Fraud exposure on a given transaction/deal when buying from a Chinese company.

Now a word from our sister company:

www.AsiaBridgeLaw.com  Affordable, Professional, English-speaking legal & business advisory services.

I am on their board of advisors and recommend them with confidence for:

  • IP Registration
  • Bilingual Contracts
  • Dispute Resolution (including Loss Recovery)
  • Business Advisory Services
  • General Legal Counsel

 

Sorry for the long post but I wanted to give you as many resources as I could think of to help get you ready for the 2017 buying season! If you have additional questions about China sourcing, feel free to contact me at your convenience and I will do my best to assist you.

Looking forward to being of service and wish you successful China Sourcing.

Best Regards,

Mike Bellamy (LinkedIn Profile)

Celebrating 20 years in Asia!

Return the favor:

If the information was helpful to you, please consider returning the favor in any of the following ways:

Share this info with a co-worker or business associate.

Subscribe to my YouTube channel, hit the “like it” button and post some comments.

Visit www.PSSChina.com for a look at how my company may be of service to you.

Your support is greatly appreciated!

 

Stay out of jail by navigating product safety in China!

 

Product Safety in China: Is My Product Safe?

Physical SafetyOK

When people ask “is my product safe?” most of the time they are asking the question because they want to make sure the product won’t hurt anybody and to be sure they are not at risk of a lawsuit. We could call this “design safety”.

Meaning, for example, the product has no pinch points, sharp edges or dangerous materials. If your product is in the concept or design stages, it is very important that not only can your design engineers come up with something that appeals to the market place, but is also needs to be physically safe. Imagine spending thousands of dollars on a design only to learn that it is not fit for function or unsafe.

Regardless if you design in-house or outsource the engineering, make sure your design and engineering team are fluent in DFM and that they have a solid understanding of the regulations in your marketplace. And that brings us to regulatory compliance.

Compliance

Broken car 300x180
As mentioned above, not only should we be thinking about physical safety, but we also need to make sure that our product can be imported into our market with no complications. For example, the safety regulations for a toy, electronics, or piece of furniture can be radically different in Jordan, Jamaica and Japan. You risk wasting a lot of money if your product is not engineered from day 1 to meet those standards.

Who can you trust?

Since standards are constantly updated and vary from country to country, you are at great risk to simply take your suppliers word for it. They want your order, so of course they will say “sure it is safe.” But if the product is not safe from a physical safety or regulatory compliance point of view, and God forbid, somebody gets hurt….who are the lawyers and government officials in your marketplace going to come after? An overseas supplier in China? No way, they will come after the importer of record. And that means you.

So as buyers, it is our responsibility to confirm the product is safe. Assuming you had it engineered right, the next step is to take the prototype or sample and get it to a reputable testing lab. The big international labs stay up to date on the latest rules and regulations for all the major markets. As they have offices in China, you need not send your widget back home to be tested. Plus even the testing costs are less in China, generally speaking.

Most new importers don’t realize they can take their widget to a lab and say “I want to import this to X country, how much will you charge me to test that this product and packaging fully conforms with all standards?”. The sales guy at the lab will pull out a giant book full of protocols and prices and in a few minutes you may learn that it really doesn’t cost that much to confirm your product is safe.

Can I sleep well at night?

Well before you start patting yourself on the back for working so hard to make sure your product is safe. Don’t forget that at the lab, you simply confirmed that one unit was safe. Now you need to make sure that when full production is running, every unit that comes off the line is safe.

But it is not realistic to send 100% of production to the lab for testing, so as buyers we need to come up with a realistic factory audit, production inspection and product testing plan. The factory audit may take place once or twice a year to confirm that the shop is being managed with a Quality 1st mentality.

In other words, they are running their factory in a well-documented and “safe” manner. Production inspection should be taking place with every order before the goods ship out of China. You or an independent inspector will go to the site of production and verify what is coming off the line is safe. In this case, safe means that it matches the specs set by the master sample which was tested by the lab to be safe.

Unfortunately, you still can’t call it a day just yet. Because, unless the order is tiny, the inspection will not be 100%. It will be based on a statistically reliable sample size, using an AQL chart. While the inspector can easily check the physically properties of production pieces, it is hard for them to check the chemical properties. So some parts should be picked at random and send to the lab.

How many pieces to send to the lab each production run is a hard question to answer and there is no universal formula and if you ask that question to your government, your lawyer, a testing lab and the inspection partner you may get four different answers. But if something goes wrong in the market place and a person is hurt, you will certainly be called upon to show your audit, inspection AND testing records. So being able to show you have a plan in place is a big step in the right direction. Getting caught without a well-documented plan or recorded results will exposure you significantly if the case ever went to court.

Regulatory Compliance in China: Questions Importers Must Ask!

Regulatory Compliance in China Questions Importers Must Ask

One of my good friends is a compliance officer in the US headquarters of a major international brand. He is responsible for making sure the products his company imports are safe and meet corporate, market and governmental standards.

He is also the go-to-guy in his company when there are problems with quality and safety issues. He asked not to be mentioned by name, but was kind enough to let me share with you the following insider information about regulatory compliance in China.

Readers of my blog typically have two types of concerns when it comes to compliance:

Import/Customs Clearance and Compliance

Import/Customs compliance into US/EU/AUS to make sure they have all the right paperwork and forms filled out. That’s fairly easy to arrange but the next part is harder…

Regulatory Compliance & Safety

While importers may bring in all sorts of different product, from electronics to furniture, they all have concerns about regulatory/safety compliance. The labs are pretty good at saying “you need to test this product in the following ways to ensure the SAMPLE is compliant”, but these buyers are left in the dark when it comes to how to set up a Compliance Program to ensure that if, God forbid, some customer got hurt and the courts asked the importer to explain their compliance system, the importer would be covered. It’s not enough to say “I sent the sample to the lab” because the lawyers will say “that’s just one sample, how did you confirm there was not a change to form, fit, function that could impact safety of the product when production was taking place at the supplier or even sub supplier level?” So these importers need help setting up a comprehensive system that coordinates documentation, sample collection/testing and monitoring of the Chinese factories.

Regarding Import/Customs Clearance and Compliance

Importer should also make sure they get the legal requirements down to the country and even state level, especially in the US there are many state laws. For example, the product could get in to the country legally, but then be found to be illegal in a certain state.

Regarding Regulatory Compliance and Safety

This side of things is much harder since you have to make sure all the products coming off the production line in China are really the same as the approved sample. And most important, that approved sample need to be compliant!

The easiest option, but perhaps the more costly optional, is having a product certified compliant, that assumes an appropriate certification exists! Certification encompasses the product design (usually you need to provide the product specs and design), testing and also periodic audits and reviews. Again, it will cost more if the category is optional and there are many categories that don’t have any certification at all.

Without certification, the way to tackle it is to make sure you have setup a procedure on how and when products are tested and inspected. From the physical testing/ safety side you’ll want products tested on each design, and from chemical side you’ll want a test anytime the material changes and at a minimum once per year.

If you’re using factories where you don’t have full trust or transparency (meaning you can’t be sure about their material), you’ll probably want to have a product tested each production run at least on the chemical side. If you have full control of the material you’ll want to test in coming material and probably randomly select finished product since sometimes the manufacturing process can add restricted chemicals.

You should also look at how samples get to the lab. If the supplier sends the samples rather than having a buyer representative pick them up, then there is risk that the supplier will send a “golden sample” which is sure to past the lab test, but may not represent the quality of the products coming off the assembly line!

Regardless, at the very least, you need a well-documented process of what you do when, and make sure you follow it and keep all papers. God-forbid there is a recall or legal action, if you don’t have a well-written process, you will find it hard if not impossible to win a court case. This needs to be considered part of doing business, if the buyer wants to be in the import-export game!

How about product recalls?

It’s essential to understand the requirement for a recall. If you do get customer complaints about issues with the product, there are requirements with what you need to do especially if anyone gets hurt. So there should be a process in place for a recall, and you need to have good tracking of all products and where they are in the supply chain.

Any other things we should be asking about in terms of compliance?

One other item to consider is social compliance. Making sure the factories are audited and comply. More and more there are also environmental audits requested by major retailers. So you have to worry about that as well.

Regulatory Compliance in China: Questions Importers Must Ask!

Regulatory Compliance in China Questions Importers Must Ask!

One of my good friends is a compliance officer in the US headquarters of a major international brand. He is responsible for making sure the products his company imports are safe and meet corporate, market and governmental standards.

He is also the go-to-guy in his company when there are problems with quality and safety issues. He asked not to be mentioned by name, but was kind enough to let me share with you the following insider information about regulatory compliance in China.

Readers of my blog typically have two types of concerns when it comes to compliance:

Import/Customs Clearance and Compliance

Import/Customs compliance into US/EU/AUS to make sure they have all the right paperwork and forms filled out. That’s fairly easy to arrange but the next part is harder…

Regulatory Compliance & Safety

While importers may bring in all sorts of different product, from electronics to furniture, they all have concerns about regulatory/safety compliance. The labs are pretty good at saying “you need to test this product in the following ways to ensure the SAMPLE is compliant”, but these buyers are left in the dark when it comes to how to set up a Compliance Program to ensure that if, God forbid, some customer got hurt and the courts asked the importer to explain their compliance system, the importer would be covered. It’s not enough to say “I sent the sample to the lab” because the lawyers will say “that’s just one sample, how did you confirm there was not a change to form, fit, function that could impact safety of the product when production was taking place at the supplier or even sub supplier level?” So these importers need help setting up a comprehensive system that coordinates documentation, sample collection/testing and monitoring of the Chinese factories.

Regarding Import/Customs Clearance and Compliance

Importer should also make sure they get the legal requirements down to the country and even state level, especially in the US there are many state laws. For example, the product could get in to the country legally, but then be found to be illegal in a certain state.

Regarding Regulatory Compliance and Safety

This side of things is much harder since you have to make sure all the products coming off the production line in China are really the same as the approved sample. And most important, that approved sample need to be compliant!

The easiest option, but perhaps the more costly optional, is having a product certified compliant, that assumes an appropriate certification exists! Certification encompasses the product design (usually you need to provide the product specs and design), testing and also periodic audits and reviews. Again, it will cost more if the category is optional and there are many categories that don’t have any certification at all.

Without certification, the way to tackle it is to make sure you have setup a procedure on how and when products are tested and inspected. From the physical testing/ safety side you’ll want products tested on each design, and from chemical side you’ll want a test anytime the material changes and at a minimum once per year.

If you’re using factories where you don’t have full trust or transparency (meaning you can’t be sure about their material), you’ll probably want to have a product tested each production run at least on the chemical side. If you have full control of the material you’ll want to test in coming material and probably randomly select finished product since sometimes the manufacturing process can add restricted chemicals.

You should also look at how samples get to the lab. If the supplier sends the samples rather than having a buyer representative pick them up, then there is risk that the supplier will send a “golden sample” which is sure to past the lab test, but may not represent the quality of the products coming off the assembly line!

Regardless, at the very least, you need a well-documented process of what you do when, and make sure you follow it and keep all papers. God-forbid there is a recall or legal action, if you don’t have a well-written process, you will find it hard if not impossible to win a court case. This needs to be considered part of doing business, if the buyer wants to be in the import-export game!

How about product recalls?

It’s essential to understand the requirement for a recall. If you do get customer complaints about issues with the product, there are requirements with what you need to do especially if anyone gets hurt. So there should be a process in place for a recall, and you need to have good tracking of all products and where they are in the supply chain.

Any other things we should be asking about in terms of compliance?

One other item to consider is social compliance. Making sure the factories are audited and comply. More and more there are also environmental audits requested by major retailers. So you have to worry about that as well.

Any VAT rebate in China on tooling made here?

vat3

Claiming VAT rebate in China

A foreign buyer of Chinese plastic products asks:

I am aware that VAT is applicable for the tooling owned by the customer at the supplier’s location in China to product a plastic part and export to Japan. Is there any option is available to buyer (Tool owner) to recover the VAT? If we request, supplier to amortize the tooling cost as piece price on manufactured goods, who will get benefit by VAT?

vat3

Thanks for your question. If I understand it correct, the tooling will stay in China, but the product made from the tooling will be exported. If that is the case, then the tooling itself will not be exported and since it is not exported, there is no VAT rebate and thus no easy way to recover the VAT.

But, while it is in the gray area of tax code, sometimes the supplier will offer the tooling at a “w/out taxes paid and w/out official receipts” price. That could reduce the price a bit, and while it is common in China, technically it is not 100% legal as the supplier should be paying tax, but in practice, most suppliers don’t.

You should also be warned that it’s quite common that suppliers charge the overseas buyers for VAT, but they don’t actually pay the VAT and end up putting the money in their own pockets!

If you pay the supplier inclusive of VAT then they dance around and avoid showing you the receipts…then you know they are keeping the VAT. I’ve even seen supplier send fake receipts!

Why it’s a bad idea to amortize tooling and molds

BTW, you talked about amortization of your tooling. I would advise you to be very cautious. On my YouTube channel I explain why in more detail, but in short, if you amortize the tooling then technically you don’t own it. If something goes wrong and you need to pull the tooling from the supplier, you will find it very difficult to extract the tooling. In my contracts, I like to own the tooling outright from day one. You should also consider having the tooling looked after by a 3rd party. See Tool & Die steward service for reference.

Contract manufacturing in China: No need to set up a WFOE or JV

assembly line

Ben, representing a venture capital firm, writes PassageMaker to ask:

I’m trying to help a venture backed company whose supplier’s factory is missing some licenses that are imperative given that the product contains batteries.

These guys are 100% committed to doing everything above board – do you have any ideas for who could help them? Might need to set up a WFOE but I’m not an expert by any stretch.

Setting up a WFOE (wholly foreign owned entity) is certainly possible (I own 3 of them in China) but it takes time and investment to get all the licensing in place, as you have discovered.

The headache is that you can’t use the WFOE to import/export until all details of the registration are complete.

It’s a bit of a catch 22. On one hand, you want to do things in accordance with the law, and you want to set up a WFOE. On the other hand, WFOE set up takes significant registered capital and you even need to have staff trained up and on payroll to pass the audits to get the license to import-export. That process can take months to years (in some cases) and most investors don’t want to hire a team and set up a factory to have people sitting around on their hands for months at a time waiting for the paperwork to legally produce a product.

China Sourcing – Broken Down Into Straight Up, Actionable Advice

mike bellamy globalfromasia podcast2 v3

An informal one-on-one talk about China business adventures

My good friend, and serial entrepreneur, Mike Michelini is the host of the fun, information and informative “Global From Asia” podcast “where the daunting task of running an international business is broken down into straight up, actionable advice”.

For episode 71 of the podcast, we sat down for a 40 minute exchange of China business stories and advice.

Here is the link:

http://www.globalfromasia.com/how-to-avoid-being-trapped-in-a-chinese-factory-scam-order/

mike bellamy globalfromasia podcast2 v3

Topics Covered:

  • What brought you out to China in the beginning?
  • Today’s topic – China Sourcing Due Diligence Tactics, Can’t think of anyone with more experience than you
  • Can you share with us various types of China sourcing – wholesale/ off the shelf, tweaked versions of pre-existing products, and fully customized
  • Let’s focus on fully customized today – What are some MOQ amounts normally required to do these?
  • What are the other costs many also don’t factor in that are essential
  • I remember you mentioning you have worked with some Kickstarter projects and other crowdfunding projects – what is the normal process for these guys – should they start to source from China before they list on Kickstarter, or when funded, prototype? any tips?
  • Process of narrowing down the overwhelming list of suppliers in your hunt for the right Chinese factory and supplier relationship?
  • Ways to show you are serious buyer to a Chinese manufacturer
  • Some “buzzwords” or keywords you should know when talking to a factory- FOB, EXW, etc
  • Last tips or things I missed for buyers venturing into China for their procurement

How to Register, Protect, Monitor & Enforce Intellectual Property (IP) Rights in China

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Exclusive Video: How to Register, Protect, Monitor & Enforce IP Rights in China

Speaker: PassageMaker Founder- Mike Bellamy

As presented at Global Sources’ China Sourcing Fairs in Hong Kong (Oct 2014) and Johannesburg (Nov 2014)

If you are unable to open YouTube due to firewall issues, here are some related links for your reference: How to register, protect and monitor intellectual property (Part 1,2 &3 )

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“Pros to Know” award winners have provided the articles and video content listed above

China sourcing: Help creating a Purchase Order (PO) template

China business surprise 300x196

The importance of having a good Purchase Order (PO) in place when sourcing in China can’t be stressed enough.

The document sets the foundation for your relationship with your supplier. A buyer without a good PO/Contract gives too much leverage to the seller and allows them to manipulate the relationship to their advantage.

As part of PassageMaker’s Import/Export Management service, our account managers take our in-house PO/Contract templates then work with the local lawyers and project managers to create a robust document specific to the needs of our clients.

However, if you are not yet in a position to retain the services of a professional buying agent like PassageMaker, here is a behind-the-scenes look at how any buyer (large or small) can create an effective and affordable Purchase Order template that offers real protection in China.

Let’s start with the free stuff:

Here are some blog posts I wrote related to PO’s/Contracts:

7 ITEMS YOU PROBABLY FORGOT TO PUT IN YOUR CONTRACT WITH THE FACTORY

PURCHASE ORDER

Now let’s look at some very affordable options for getting professional help writing your PO.

On Amazon you can find guidebooks (do an Amazon search for China+ Sourcing) that offer templates and samples of key documents, including the all-important PO/contract.

For example, My guidebook is available for 58 USD and includes various templates and check lists. The PO template is also available as a standalone document in excel format. I recommend buying the book and templates together as a package because the book explains how to negotiate the terms and set up the PO in a way that protects the buyer’s interests.

While a template is a good start, much better would be having a custom document in bi-lingual format that is specific to your situation. An English speaking Chinese lawyer in China can provide this for a few 100 USD. Here is more information: AsiaBridge Law

Consider engaging an advisor to look after your PO’s/Contract as part of supply chain management. Here are 4 options for your consideration ranging from freelancers to large consultants:

OPTIONS FOR SUPPORT WITH SOURCING AND SUPPLY CHAIN MANAGEMENT

you can also visit www.SourcingServiceCenter.com for my list of endorsed service providers.

In summary, now that you know how to get help building an effective document, even on a tight budget, there is no excuse for not using a well-crafted PO when buying from China.