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Small businesses and entrepreneurs often see a huge opportunity in importing from China, but for the uninitiated it can seem like a huge challenge.
How do you deal with exchange rates? Why do you have to pay for samples? What’s the easiest way to ship goods to your warehouse? How can you make sure you’re buying quality products?
We wanted to provide a comprehensive FAQ on the subject to help answer common questions raised on UKBF (for more information check out the New to import/export? Read these before posting forum).
Is there anything you think we’ve missed? Leave us a comment below or send me a Private Message, and we’ll update the article (you have to be logged in).
When thinking about how to approach manufacturers, it’s useful to start with the type of product you want to order first. Here are the main types (thanks to Import Expert for detailing these):
In each case, it’s crucial to brief your manufacturer correctly - if you’re not clear about what you’re ordering it’s also unlikely a supplier will reply to your questions.
The easiest way to do this is to ask factories for what they would need in terms of specification and work from this (an agent will be able to arrange getting this document) rather than inventing your own system.
It’s also possible to get product specifications by browsing Alibaba.com and even your competitors' websites, says Fredrik_Gronkvist. He adds: “You don't need to cover a product to 100% before you get started, but NEVER leave your supplier guessing what you want!”
Experienced importers stress the need to see what you’re buying before you order a large shipment. Getting samples is going to be expensive and will likely incur a loss (factories won’t send you items just to win business).
“At the start, to a factory, you are a nobody,” says UKBF member GraemeL who often imports office furniture from China. “You are one of a million people that have contacted them for quotes and products and things. If you start saying ‘I must make payment when it’s in my UK warehouse and I can check it over’ you’re on cloud cuckoo land.”
He advises new importers to inspect a product as delivered in the UK and treat the expense of buying samples as a crucial learning process.
As community member MRam pointed out, if you’re going on holiday the exchange rate you get isn’t going to be a huge concern. Yes, it’s nice to get a little extra spending money, but you’re not going to lay awake at night worrying about it.
However, if you’re making regular transactions for business purposes you need to consider your options, as you could save money and protect the business. The best exchange rates are normally available through currency exchange specialists.
Chinese manufacturers are contacted by a high number of UK buyers and they have no reason to provide terms that favour you when you’re starting out. You’re an unknown quantity and will be treated accordingly.
GrameL’s solution to approaching new manufacturers is to offer to pay once goods have been manufactured and have been quality checked by a local agent. This is normally done on a relatively small batch and there’s opportunity to try and get better terms once you build up the relationship.
It’s important to ensure the products have been checked before the shipping container has been sealed. Local agents will often use a statistical method, checking a certain number of the products depending on the volume of the order.
This will cost money and UKBF members recommend not to simply look for the cheapest option when it could be the difference between success and failure of the venture.
This also in part goes back to careful briefing - have you been precise about your technical specification for the order?
Reja Worldwide was kind enough to write out a complete list of relevant shipping terms, which we’ve summarised below (read the complete definitions here, which includes advice).
Ex-Works (EXW): This is where the seller of the goods has no involvement at all with the transportation costs or risks (ie. damage in transit). They simply make the goods available to the buyer for collection at their site.
Free On Board (FOB): This is where the seller is responsible for the costs and risks of getting the goods on board the ship. Once the goods are loaded on the ship, the costs and risks then transfer to the buyer. This means the buyer will pay the ocean freight from the port of origin, plus all of the other transport charges, customs clearance cost etc. to get the goods back to their site in the UK.
Cost and Freight (CFR): The seller is responsible for the costs (but not the risks) up until the goods arrive in the UK port. The buyer then has to pay all of the costs to get the goods from the port to their premises.
Cost, Insurance and Freight (CIF): This is like CFR but the seller also bears the risks up until the goods arrive in the UK port. Therefore, they insure the goods whilst they are on the ship.
Delivered at Place (DAP): The seller is responsible for getting the goods all of the way from their factory to a named place at destination (usually the buyers premises) but are not responsible for customs clearance or payment of import duty or VAT. The seller also bears all of the risks.
Generally, UK importers of Chinese manufacturers are asking for quotes of Full Container Loads (FCL) or Less than Container Load (LCL) of a product. If it’s LCL, you’re relying on a shipper to pack your stuff with someone else’s and the minimum size of the order will likely be a pallet.
GraemeL suggests asking for FOB prices and using a UK agent to quote you for the freight from the Chinese port back to the UK.
“This means you can have confidence that the process will be followed in the way that a westerner would follow it. And you’re in control of what’s happening.
“If you get quotes from the factory they will quote you much less than a UK forwarder, but once you’ve paid the factory for the goods it’s on the ship and you have no control over it because you haven’t organised the shipping. When you get to the UK you’ll normally find you have to pay an extraordinary amount when it gets to the port because something hasn’t been included,” he says.
GraemeL adds that while you can do your own customs clearance, it’s a complicated process and probably best left to the experts.
We want to keep this page as a living resource that’s updated regularly. Please leave a comment below (you need to be logged in) or send me a Private Message if there’s anything you think we should add.
Thanks, great article.