Negotiating payment terms with foreign suppliers, and procedures for defects.

[Free Radical]

Hi all

I am on the verge of making my first order. My supplier say they want cash upfront via t/t or western union as they are a small business and cannot offer credit terms.

I am a new customer and have no references, so am on the back foot. But then they are a small company desperate for sales.

I am very anxious as I am taking on all the risk. I know that there are Western companies that visit and verify Chinese companies but of course funds are tight so I'm looking to negotiate good terms to reduce my risk instead.

Can you tell me what kind of deals you have managed to negotiate. Perhaps cash on delivery, or 50% upfront?

And what procedures do you have in place for defective items. Clearly sending them back to China isn't economical so what do you do?

Thanks

 

[Geoff T]

Could you not do some form of letter of credit from the bank? they hold the cash, and pay it immediately on receipt of goods... have you researched international credit options?

 

[Free Radical]

Thanks Geoff. My business bank acc is with the Alliance and Leicester, and they only offer international credit when turnover exceeds 1 million.

Still, the A&L do a pretty good overdraft at 6% so perhaps that's my best option.

Do you have any experience with managing defects from abroad? e.g. if there is no local acc manager to pass on defects to, then how does this work?

 

[leonyu]

30-40% advanced payment, pay the residual against copy of B/L. this is what I usually do with my clients.

I am a Chinese, if there is anything I can help, pls feel free to contact me.

 

[Free Radical]

Hi Leon, are you based in the UK? Actually, could you point me in the right direction of the Wenzhou bureau of industry and commerce, all websites are in Chinese and are difficult to navigate. I need to check my suppliers registration number with them.

And as above, how are defects handled? In the UK you would hand over defective products to a local sales manager who then will credit your account, or send replacement product with the next order.

Cheers

 

[Herandu]

In the case of defects you would normally be expected to send them back if they occur within an agreed time frame. Some companies might replace them and send them with your next order. Others might put a ceiling of 1 or so percent as a level of acceptable defective products.
I suggest that you come to an agreement with the supplier. If he or you can't agree on the terms of defective goods, then you'll need to find a different supplier.

 

[Tony_Round]

Might be worth looking what Grants are available for your company to enable you to source suppliers - there are normally travel grants available (China seems to be quite big at the mo) to promote business between countries, so you may be eligable. This way you can go over a visit/source a number of suppliers and agree terms etc.

Depending on the size of you business it maybe worth looking into, if not its definatley worth keeping at the back of your mind for future reference.

 

[Free Radical]

Surely the cost of shipping just a few defects back will outweigh the value of the items themselves. A defect level agreement seems the only reasonable way forward.

I'll contact them tonight and see what they say. Cheers Tony.

 

[leonyu]

Hi Leon, are you based in the UK? Actually, could you point me in the right direction of the Wenzhou bureau of industry and commerce, all websites are in Chinese and are difficult to navigate. I need to check my suppliers registration number with them.

And as above, how are defects handled? In the UK you would hand over defective products to a local sales manager who then will credit your account, or send replacement product with the next order.

Cheers

I am located in Qingdao City, China.

I have searched the website and got no result on Wenzhou bureau of industry and commerce, pls advise the URL and I will check.

Also, you can contact me regarding your suppliers' name and I can help check with the authority.

Regarding the defects, I agree that you need to have agreement on this issue with suppliers, and, if your order quantity is comparatively Ok, you can ask someboday help check the quality before shipment.

Thanks.