Legal Way of Sourcing Electronic Products from China

2021-08-18

插图1.jpgChina is known for producing maximum number of cheapest wholesale products. The country is recognized as the world’s factory. Even when you check Amazon or any other e-commerce website you will find that most products are sourced from China. Products like household gadgets, appliances, electronic items, clothes, tools, fashion accessories, etc. Most of them are manufactured and produced in China.

Often, I have heard people say that all electronic products are made in China. However, it is not true that all products are from here. Although most electronic products are from China, but Taiwan, Mexico and Malaysia are also part of it. We see a lot of innovative products made in the Chinese firms. Their improved quality system, material and industrial engineering capabilities create opportunities for importers to source different and unique electronic products from China into their market.

History of Explosion of Chinese Products in the Market

After Mao was executed, China was in a poor condition. People were starving, so Deng Xiao Ping decided to open China to the West by attracting them with low labour cost. The Chinese Government then made a clause for all the western companies to set up their base in China only in the form of a Joint Venture with a Chinese partner. The west will also have to disclose its technology to the Chinese partners. That is how the first-ever made in china electronics products was introduced.

Most western companies couldn’t resist the temptation of getting electronic products made in China at a low cost. That is how we got well-trained engineers and labour in China. Once the Chinese workers understood the trade, they all immediately started their small factories, making small components that benefit in some way. All factories produced unique electronic and other useful products and sold them at cheap prices, which were their USP. Of course, the low labour cost was still the strategy to keep western countries tempted.

Many Western companies followed the strategy of marketing and branding their products in their country and letting the other strategy of outsourcing the manufacturing part of their business remain in China under low labour cost. This is in return gave Western countries huge profit. The rise of Chinese electronics started with cheap labour cost, but now that is not the reason for sourcing electronic products from China.

Now the reason for high end made in china electronics products is its cost-effective ecosystem of components. For example, various parts are needed to complete an iPhone -

  • Camera modules

  • USB ports

  • Touch screens

  • Batteries

Many of these are customized in China. Other than China, there are no other suppliers in the US or Europe. The majority of parts are made in China so the western countries send the remaining parts to China and they all get assembled there.

Since the 1990s, China has been a dominant power in the electronics market. So, if you’re planning to source electronic products from China, you’re doing the right thing. Nothing is impossible in this digital era. You just need to research online for a B2B e-commerce platform for sourcing products from China. These platforms will pair global buyers with Chinese Electronics suppliers.

Maple sourcing is a China sourcing company that works as a bridge between the global client and Chinese manufacturer. The company was founded in 2012 by Aaron Li. He has worked in manufacturing and quality control for 15 years, which gives him tremendous knowledge about products.

It is difficult for start-up businesses to source from China because of the language barrier, cultural differences, legal difficulties, long-distance and business risks. However, maple sourcing is a verified sourcing agent that sources electronic products made in China successfully. Maple sourcing guarantees that all products exported from China should meet the standard.

Maple Sourcing uses only qualified manufacturers, they guarantee product quality, provide efficient communication and assure competitive price. They have QC inspectors that ensure that the products manufactured are according to the standards. They also ensure that all products manufactured are delivered on time with the quality you desire.

You can get a wide range of products like bottles and packaging, beauty and healthcare, daily hard goods, promotion items, metal hardware, prototypes, kitchen utensils, sports equipment and consumer electronic products made in China sourced through Maple Sourcing.

Guide to Sourcing from China

Search for Appropriate Supplier

Generally, people look into search engines to find an appropriate chain of sourcing. However, few special online sourcing platforms connect buyers to suppliers in China. Searching from these platforms is easy, but we should also remember that some of the searches in the list can be retailers and not solely manufacturers. It may be convenient to contact retailers when you’re buying products like toys, kitchen utilities, accessories and electronics. On the contrary, when you’re buying specific parts like metal stamping, injection moulding, then it is better to contact the manufacturer directly.

Online platforms also rate their suppliers which makes our searching process simpler. Still, it is also important to remember that those clients, who pay an annual subscription membership amount, are also rated superior in the category. Thus, don’t just trust the ratings, but look for other criteria as well.

Authenticate Suppliers

After shortlisting suppliers verifying their credentials is also important. You need to evaluate -

  • They are the manufacturer and not the middlemen.

  • If they have the technical expertise and capability to deliver what they commit.

To identify the supplier and its potential, you can ask for few samples. However, it may be possible that they send samples from other manufacturers, so the best way will be to identify the Chinese name of the factory, its location and which local government jurisdiction it comes under. The factory’s registration information can be used to verify details.

插图2.jpgQuality and Cost is Directly Proportional

As discussed above, the primary reason for sourcing electronic products made in China is low manufacturing cost, shipping charges, and duties which are comparatively higher in other Western countries. Thus, while negotiating always remember that manufacturers have a base price. To manufacture a product, it takes minimum cost. Thus,

Since you’re getting into the market of China, you must have done your homework of finding the cost of raw material and market price. Therefore, stick to that price with the supplier, also don’t go with a supplier who provides a price below this.

Purchasers with huge orders will try to beat down the supplier’s price because they’re ordering in bulk. If you want to use high-quality material then don’t place unreasonable prices.

Remember that, if suppliers go below the base price to attract buyers, they can compromise on other factors. They can reduce the quality of material, which can impact worker’s wages which will affect the work. They can also bypass the quality control check process. So do your research well and stick to the normal base price of the product.

Avoid Communication Gap

Often people face problems of language barrier and cultural differences while searching for suppliers in the Asian countries. Big suppliers know that they can get buyers from Western countries as well, so they learn the English language to eliminate the gap. However, small businesses may have misunderstanding due to communication gap. Often what people hear is not exactly what they meant.

This communication or language problem can create hassle among buyers and sellers. Although we know it is not deliberate, but if that can be avoided, then a lot of mistakes and delays can be eliminated. Communication gap can affect your requirement like product specifications, quality, type of packaging, logistics, etc.

Quality Check

Even if you have good relationship with the manufacturer, quality control inspection is also important. Never ignore this due to your relationship or good terms with the supplier. Professional and personal relation can be set aside. A quality check is necessary to assure that the product meets the standard. You may want to ignore the quality inspection once, but this can lead to costly mistakes in the future. If there are problems caught later, then it can lead to more costs.

For example, if a kitchen utility is dispatched without a quality check and after reaching the warehouse you find one of the items missing, you’ll have to send the entire package back to the supplier. Also, after adding that item back to the product the shipment is sent back through the same logistics. This can take weeks, which means your business is facing a huge loss during that period and your processing has paused for a while.

The above-mentioned points are good for inexperienced or novice businesses, sourcing from China.

Things to Consider Before Sourcing from China

Market Research

It is imperative to know what the market wants. You may know a particular category of product, its manufacturing and retailing, so it’s better to find a supplier for that product in China. For example, being an electronic engineer or from any technical department, you know how to manage supply and chain, arranging parts and items and retailing electronic products. Thus, it is wise to get into the electronic items business and find electronic products made in China.

It is also good to find suppliers from China who make such products and have experience of selling in Western countries. Novice businesses should not experiment with new suppliers who have little knowledge of import and export. If you’re a novice and have no clue how to start a business, then it best to do market research.

  • Check the online e-commerce platform to understand what all products are highly in demand. If it is fashion accessories, then check what is majorly searched online by consumers.

  • If you choose a popular category, it means you’re entering into a tough competition, thus your product should meet all requirement and should be a level up from the competitor.

Quick delivery with Good Quality

The Chinese market is supplying mechanical and electronic products to meet the demands of Western countries. If you’re interested in selling electronic products that need few technical specifications, then you can think of sourcing electronic products from China. You can look for suppliers in China after you’ve confirmed a specific product that you want to deal with and a price that you can afford. Always work with suppliers who specialize in that product or parts and can fulfil the order on time.

You can also connect with a sourcing agent. This will save time because once you provide them with a deadline, and they will ensure that product is dispatched from the factory before time so that they have enough time to inspect the quality. The most challenging part of sourcing from China is the delivery of quality products on time.

Payment

A letter of Credit or LC is the common financing tool that is used to purchase items from suppliers overseas. It is a document provided by the financial institution that agrees to be the arbitrator between purchaser and seller. It offers access to a credit line, which gives the supplier peace of mind that their payment will be done. LCs contains information about the transaction amount, and details of all goods supplied.

Most suppliers ask for a letter of credit for assurance. It is a good way of building trust in a business. When a supplier demands a letter, you should ensure that there is not a single error in the document, which can result in delay or extra cost which can lead to hassles. Apart from LC, there is purchase order financing where the bank or any other financial institution pays the company in advance on goods to the supplier. These funds help the supplier to buy material, but they are available for a short time.

Manage Price Increase

Once the order is placed, the suppliers can't increase the price unless there is any major price change in raw material or any event in the country that has impacted the production. To avoid major price fluctuation, it is better to ask your supplier to provide legitimacy of the quoted price. Generally, the quoted price is valid until 90 days and when the relation gets stronger, it is extended for a year, but to be safe, as a buyer, propose a validity of 180 days.

You can also:

  • Promise supplier to re-order once the first order is dispatched.

  • Check the price of the raw material in general in the Chinese market to justify the quote that was given by the supplier.

  • You can also add clauses in your agreement that will protect you against raise in price for the long term.

Quality doesn’t Match Expectations

Often people are scared of not receiving quality products in long-distance businesses. This often happens when the price has been stated too low which doesn’t meet the overall productivity or when you partner with a supplier who provides below the standard products. Sometimes communication gap also leads to misunderstanding where the supplier makes the wrong product which was translated incorrectly.

During such cases, if you ask for refunds for the wrong items, or ask the supplier to make necessary changes to the product they might ignore the request. This can lead to stiffness and you may want to undergo any of the two choices:

  • Choose an intermediary that settles the conflict out of court.

  • File a lawsuit in the Chinese court against your supplier.

In both cases, it too much hassle and time-consuming. Above all, it is difficult to handle a lawsuit against someone from a long distance. Remember that, the suppliers are in their homeland and you are overseas.

It is better to work with sourcing agents who handle disputes where the product doesn’t match the requirement. It makes matters less complicated because everything is handled by the sourcing agent within the same country. So, even if the product doesn’t match the quality or requirements, it is returned without facing the hassle of sending the shipment back from overseas and waiting for decades for improved shipment.

插图 3.jpgTips for Hassle-free Sourcing from China

  • Visit the supplier’s factory to gain information and to audit their manufacturing base. This way, you will be sure that you’re      dealing with a manufacturer and not a retailer.

  • Even though we have advance digitalization where video calls and chat forums can solve long-distance problems, but Chinese culture believes in face to face interaction. This is the best way of doing healthy business with the country.

  • Chinese manufacturers have the capability of working on small quantities so that they can deliver quality products in a set time. Thus, set a realistic estimate for a smooth business.

  • Do proper research on the cost of raw materials to prepare a decent base price for the product. This will help in negotiating better with the supplier.

  • Don’t provide a delivery time that keeps you nervous whenever the shipment is delayed for a day or two. Rather, keep a buffer of 2-3 weeks because it is an overseas delivery that can get affected due to unexpected events in the country or unavailability of raw material.

  • Most importantly, create a good and meaningful contract that mentions all conditions clearly to avoid any disputes at the last minute.

Any business is done with mutual consent. It helps in long term benefits. Often businesses seek the help of a sourcing agent to avoid any long-distance miscommunication. If you’re a novice, then first do your math, and then enter the market.


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