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Who is Alex Ryan? My cousins importing business How I Got Started?

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1 Who is Alex Ryan? My cousins importing business How I Got Started?

2 Who is Alex Ryan? And much more!

3 Who is Alex Ryan? About 4 years ago founded and created one of Australia’s first importing coaching companies, had two offices in China, sourcing for clients, trade tools, fencing, fishing equipment, segways and housing materials and more..

4 Experienced and handled many importing problems on a daily basis such as: containers not showing up, asbestos in containers, non-delivery of goods, fumigation issues, storms in South China Sea delaying goods, many other logistic issues

5 Hire a professional to do all this for you as it’s VERY time consuming and is NOT worth your time fussing over. Your focus should be: 1.New Products 2.Testing products (what sells and what doesn’t) 3.Going to the canton fair twice a year 4.Marketing At The End Of The Day

6 Introduction To China

7 Importing from China will remain viable for decades to come for three reasons: Still the lowest manufacturing wage rates: On average monthly wage rates in China are 104 US dollars, which is still very competitive and low compared to USA, Mexico, and other low-income countries. Rural migration: About a hundred million Chinese workers from rural and country districts help keep wages down in industrial parts of China. Chinese supply chains are strong: Labor cost in India, Indonesia, and Vietnam are lower than China. However, when importing from China, take into account the infrastructure of China and the existence of more supplies. China has more transport, infrastructure, and availability of supplies, creating a better supply chain compared to other sourcing countries. MANUFACTURING IN CHINA

8 Use the table supplied and find out whether it’s feasible and viable to source directly from China. [Sometimes, it may be cheaper to source locally.] eg sauna cabinets Complete specifications of the items you wish to import. Arrange funding or take out a loan. Does your product need a prototype? It’s generally easier and faster to have this made locally. Ensure that time frames work for you and your customers; allow a minimum of three months to receive your goods from the factory, if this is your first time importing. Find if any product standards, permits, licenses, approvals are needed for your product. Usually, these are not applicable to many products. However, check with the Customs broker whether your product is restricted or prohibited from import. SUMMARY OF FEASIBILITY

9 China is full of resources: As China is so large the diversity of products available is huge. Some products may be cheaper and more available than in other countries such as Vietnam and Thailand. However, the range will never be as large and diverse as in China. High quality products are in China. For the last few years, quality control in many factories has improved. When you are sourcing from China, not only do you get the lowest prices around compared to Western countries, but you also get very high quality as well. Improving English: English could be considered as the second language in China, it is taught in most schools. Most factories in China have an English-speaking person to speak on behalf of the company and to help assist in your sourcing needs. WHY IMPORT FROM CHINA

10 China is rapidly growing: this creates a huge opportunity for Western countries to prosper with Chinese factories. Importing from China is still very cheap: It will remain cheap for many years to come. This is because of competition, rural migration and minimum wage; resources are cheap in China, high integrity logistic channels available in China, and much more. Develop good relationships with Chinese factories: Relationship is very important between a Western buyer and a Chinese importer. Be sure to at least head over there for karaoke and vodka, and get a price reduction. This is more important than you think. (bring little gifts & piggy backing) WHY IMPORT FROM CHINA

11 Shortage of skilled labor Electricity stoppages and power downs Flooding Capacity issues [Important to do a capacity audit] Storms and logistic issues It is important to know that Chinese suppliers may not always be openly communicating with you regarding the issues to the problems in production or delivery of products. Keep in mind that Chinese companies do not want to lose face and this, in many times, could be the reason. WHAT YOU NEED TO KNOW ABOUT CHINESE FACTORIES

12 Chinese people love bargaining, so let’s make a good deal and bargain hard with factories; Chinese products and resources are very cheap. You get what you pay for. Chinese product is cheap; however, with cheapness comes the trade off of quality. Chinese supplies have an issue saying “no” to potential customers, so they would always say “yes”. This is because suppliers do not want to lose face. Example, if you ask a factory to produce your product for 50 cents cheaper than their bottom price, they will say yes. However, in turn, you will compromise the quality of your products and get cheap materials. Bargaining in Asian countries is usually fun and most of us had done it. However, the opposite occurs in China, and is rarely done with Chinese suppliers. Chinese suppliers will generally start quoting low to attract your interests and impose increases over time. Many Western businesses weaken relationships, get bad treatment, get low-quality and standard goods because they went in hard on price negotiations at the beginning of the relationship, even often long before they’ve seen a sample! FACTS FROM FICTION

13 (CONT) To sum up, when negotiating, get at least ten quotes to determine a fair market price. And when negotiating, rather negotiate on getting the lowest price. Negotiate for things like quality better materials, better production time, free shipping, or something else. When something goes wrong, the best way to deal with Chinese suppliers is to call the supplier or jump into a plane and visit the factory; the best way to avoid relationship breakdown is to address it by , the next stage is the fax [Most Chinese factories have a fax machine.], and this is more formal and serious, then if it gets out of hand further, call the factory. A visit to the factory is the last resort and should only be done in extreme circumstances. Also remember that when dealing with the factories, avoid personal accusations; do not blame anyone. When dealing with Chinese people, please understand that the Chinese will always do and copy what you want, but it is your job to tell them specifically and exactly what you want or need. Therefore, it is best to do it in writing, as their English reading is better than English listening. My product is very simple and standard. Therefore, it should be quite easy to import; this is true in many cases. However, as China is such a large country with a diverse market, there are many different product types, specifications, and requirements; therefore, a standard product in, let’s say Australia, will mean very little to a Chinese supplier. It’s very important to understand you have to be very clear when dealing with specifications of your products with Chinese products.

14 Timing: Many Western people are driven by deadlines and don’t want to adapt to Chinese standards when discussing business. Therefore, understand that when dealing with Chinese factories and when negotiating, take your time, consult internally, and slow down. This will develop a better relationship with the Chinese factory. Chinese negotiators are usually like chess players. They know how long they have to wait or how fast they have to move in order to have a good deal. Building a relationship will result in a better deal, in most cases. In the western world we normally start off building transactions, and if they are successful, a relationship will result. However, the Chinese are the other way around. They build a relationship first and the transactions follow. Cultivate guanxi: In most cases, relationships with guanxi will result in better deals, lower price, fast production time, and better dealings overall. Consider this example: Big USA importer compared to an Australian importer with lower ordering power. However, they have a good relationship. Who do you think the Chinese will deal with? DEALING WITH CHINESE FACTORIES – Things you must know

15 Contract creation in China: Always ensure that a contract is both translated to English and Chinese to ensure there are no vague matters. If there is a legal matter or issue with Chinese suppliers, ensure you get a Chinese lawyer to represent you as usually they are way cheaper, and decisions and judgments are usually carried out faster when solicitors are from the same country. Having the contract in Chinese also does help considerably. The early appearance of a legal contract in a relationship is seen inappropriate, irrelevant, and can destroy a relationship with the Chinese supplier because you were doubting trust. To them, a contract is proof that the relationship has grown to a trusting level. However, more is needed to ensure sustainable import future. Translators  fiverr.com and odesk.com

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17 Using local people on the ground in China: Using translators, Asian inspections, sourcing agents, Chinese colleagues or even friends. It’s a good idea to ensure the Chinese factories take you seriously, as well as help you understand the complex parts of these negotiations. They will assist in cultivating the relationship, handling and smoothing over the any problems with the importing process and much more.

18 Know the tricks of the trade when dealing with Chinese factories: Control the meeting place and the schedule --- the Chinese know that you have travelled the great distance to be there and you do not want to go home empty-handed. Therefore, the Chinese may put pressure on foreigners just before they return, which can result in a better deal or benefit for the Chinese factory. They may draw out the negotiation as Chinese negotiators are very patient or stretch out discussion, to ensure they get deals on their terms. You may also experience excessive hospitality the evening before the negotiation as this can also wear down foreigners. Here’s how to deal with Chinese negotiations: Be prepared and know everything there is to know about the product, give a lengthy detail presentation to show the negotiating party that you know your business and your product. This would generally prevent them from pulling one over you. Mention their competitors; if the going gets tough, reveal to the Chinese that they are not the only factory in town, as competition between factories is increasing; there are generally offers that can be sought. Be patient, as Chinese people know that Westerners are in a hurry, and they want to rush things, be sure that you have adequate time in the country to review contracts and product details. Be prepared to cut your losses and go home empty-handed. Reveal to the Chinese negotiators and let them know that failure to agree is an acceptable alternative to making a bad deal; this will put pressure on them and show that you are willing to walk away. Ensure every detail of the contract is understood before you sign it; go over the contract with a fine toothcomb and discuss it with the Chinese side. Be sure that the interpretations are consistent, hire your translators, never be vague with delivery times and product specifications, and make sure everyone understands their duties and obligations.

19 As you would hire an accountant to prepare your tax, you may need assistance while in China, including Chinese legal representatives, Chinese translators, trade tour operators, sourcing agents and freight forwarders, not to mention Customs brokers. Don’t be afraid of spending money with these professional teams. Not only could they make your importing journey smooth, they can reduce many headaches for you, as well as ensure that your importing is productive and profitable. GETTING PROFESSIONAL ADVICE

20 Something you know or something you will enjoy importing. Eg electrical fittings, or specialized appliances for electricians. Fishing gear for fishing enthusiasts, custom built trampolines, golf segways. Use the suggestions we have provided. Start off by wholesaling in small quantities to test the market. Do this via ebay. Once it makes a profit arrange your own online website and start the import process. What To Import?

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28 Since 2009 Annual turnover 25 million per year Only 23 years old Did what no other trampoline company was doing, he introduced and mastered the “add ons”. Like the nets, tents, basketball hoop (their bestseller) SAFE trampolines for KIDS Over a million dollars turnover in the first year 300% growth in the 2 nd year

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32 Bar fridge- Wal-Mart His friend bought online and was delivered at half price He realized people will wait (even up to 45 days) for a product if it’s cheaper than retail. They understand this trade off. 100,000 TVs quoted and then changed it to 80 TVs Was already selling the TVs when the china factory rejected the order. PayPal and eBay froze his account Got 5 credit cards to pay his factory as the factory needed to get paid… Brought an audio recorder to the factory negotiation tables … uploaded online and within 30 minutes had a translation of what factory had said to each other (in front of him) and their B/E point … Flew to China got into a taxi and followed the truck and container to the port to ensure its safe… Provide social proof - Expedia - 13 orders just placed for this… Helicopters - cousin wanted to play with it... Suddenly crowds of people come and then it attracts more people then he sold out.... Guy selling the mop at the shopping centre 2 people come and then 4 people come... Crowds of people form

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34 Manage them, not them managing you. Always be patient and persistent. Be the nice guy. Know exactly what you want in great detail. Lets go into more detail… Dealing with Chinese Factories

35 Always have proper documentation; prepare formal documentation from the very beginning. Ensure that you fully understand before you seek to be understood; when there is a problem, always ask the factory, “What options do I have?” Never assume that once you sign the contract or purchase order that the process will run on autopilot. You must always maintain order and look after the process throughout the entire production cycle. Prepare to be involved in constant and consistent micro management of the Chinese factory; if you’re not continually checking, or managing the factory, early warning signs will go unnoticed. And only when there is a complete shutdown in the order that’s when urgent action needs to be taken. By this stage, it’s usually too late. Manage them, not them managing you.

36  At the beginning stages of importing and selecting a factory, usually there are a lot of questions. You may send many questions and only half of them being answered in return. Behind every reason why they can’t answer your question, there is a excuse. Sometimes, excuse is real, but many times, excuse is just an excuse. For example, some factories need to consult with a third party or another factory. If you know this, then you could help the factory find another factory. However if you establish the factory just doesn’t want the extra work or a business then a totally different approach is necessary. Always be patient and persistent.

37 They don’t know the answer themselves: Sometimes, factory needs to query or get advice or consultation from other factories, authorities, or suppliers. For example, on some electric or motorized vehicles, complaint reports and safety reports need to be generated. However, this can take some time. Sometimes, using a sourcing agent, or having somebody on the ground on China, can assist these matters to push reports and evaluate them and send them to the factory. Your questions are unclear: If a factory didn’t answer your question or request, partly you are responsible for making your question not clear enough for them. I advise using bullet points throughout your import correspondence, and at the end, provide summary or action list. Therefore, that ensures you are not vague in your communication. Factory is disorganized or doesn’t care: Simply, the factory is inefficient or the person you’re dealing with isn’t bothered in your order. (Maybe your order is too small.) Here are the five main reasons the factories don’t answer your questions:

38 Your question is too complicated or not easy to answer: If the contact in the factory is a low-level employee, sometimes questions go over their head, either than they don’t understand, they don’t comprehend, or don’t have the technological background to answer the question. Factories, sometimes, provide quotes just to get your business initially. Once you have paid the factory for a sample, they may reveal to you they don’t have the technology to carry out the order. If this happens, simply move on immediately to a different factory, and only choose factories with good workmanship and have the right outlook and attitude to work for you. To avoid such factories, always ensure progress diary is set up and there is one in the handouts.

39 Business between the East and the West are very different. When Chinese factories say yes, it actually means “I heard you”, rather than “I agree with you and will action on it.” Therefore “yes” is more of an acknowledgement. Never take a fingers-crossed approach to importing from China: It’s important to make immediate and corrective action and never make the factory lose face. Mention at the beginning of the relationship all things that can go wrong and what action will result if it does go wrong. Eg what happens if there is a strike? Or power down? Is there a penalty? Get a scapegoat if you have to: “Sorry if I have to follow you up on this, but my boss is pushing me for an answer.” Always be the nice guy.

40 Here are the some of the things that can be your starting point for your specifications: product name, description, color, material, dimensions, finish, weight, volume capacity, standards, accessories, other special specifications, description, and packaging. It’s sometimes necessary to tell the factory why your product must be manufactured this certain way. If you do not do this to Chinese factory, may just assume that you’re a crazy Westerner who doesn’t any better, and decide it’s better doing it another way. Always have photos and artwork as this will ensure and increase the chance of getting what you want in a much more powerful. Ever heard a picture tells a thousand words? FLIP Video Have a DETAILED Product Sheet drawn up for each product. (see example) Know exactly what you want in detail.

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42 Good to understand the exact and specific process of importing Understand where your strengths lie and what you should be doing! (checking fumigation reports is not my idea of fun) Seek and use professionals from agents, local assets, and forwarders always. Your time is better spent finding new products and selling those products as this is what makes the money. The Importing Process

43 Prepare a Request for Quote document. Research potential factories. Send quotes to potential factories. Obtain quotes and evaluate offers. Qualify and shortlist appropriate supplier. Prepare reports. (we will look at these closer in a minute) Taking a buying trip to China or going to the Canton Fair is also a great way to speed things up. Research and Tender

44 Send your samples to suppliers. Arrange suppliers’ samples to be sent to you. Receive samples. Negotiate terms, conditions, prices, logistics. Arrange branding. Create purchase order. Finalize purchase order with factory. Sampling and Negotiation

45 Place the purchase order. (also see two other examples to send them) Monitor the order and its progress. Perform quality check and inspection. Order Production and Inspection

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48 Organize delivery. Organize Customs Clearance. Create a Factory Quality Assurance List.(example) Organize product delivery to your door. Receive products at your door successfully. *We’re going to break down each part, so you’ll better understand this. However we advise to outsource this task. Delivery Management

49 Prepare request for quote documents. Research potential factories. Send request for quote to factories.(see example) Obtain quotes and evaluate offers. Qualify and shortlist factories.(See example quote comparison report) Prepare the following reports: suppliers’ summary report, quote comparison report, landed cost report. Let’s go into each of these tasks now individually. Research and Tender (Week 1 and 2)

50 Provide as much detail as you can for what you are looking for. Include the item name, material, components, labels, whether you require branding and different colors required. OEM (Original Equipment Manufacturer) Specify the quantity that you require. Some clients overestimate their order to get a better price or deal from the factory, as well as attract the factory’s attention. However, we do not recommend the strategy. It is much better to give a realistic estimation of what you order. Otherwise, when you put your initial order, the factory may lose interest in your order and become irritated. Also remember that a factory normally will adjust price for the order that you placed. So using this technique, in most cases, will not work. Minimum order quantity would depend on factors like product value, product type, tooling requirements, product dimensions such as how many you could fit in a container, frequency of purchasing, etc. Which is why it’s good to let the factory know the BIG picture of your business. Request for Quote

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52 Size chart: There’s no such thing as standard sizes in China so you need to be giving the factory as much detail as you possibly can. Even exact measurements (eg don’t use M medium, L large etc) Information that you need to provide later: Some information is not critical at this stage, but you will provide later on. For example, logo artworks, patents, sample pieces, etc. Questions to ask the supplier: The supplier’s experience and track record, previous countries supplier has exported to, product quality, pricing of products, shipping and production, workmanship, professionalism and managing project staff, willingness to provide quality standards, necessary reports required for that particular product. Also ask for references. Other questions

53 Speaking English: Most factories in China speak English. However, it is not sophisticated English but plain English. To ensure you get the best results, keep your language simple and straight. I’ve had 3 way conversations before while on the phone with China businesses … I hired a translator for $11 USD. Very simple to do. I used ODESK. Other questions you can ask: “Do you have a license to export?”, “Have you exported this kind of product before?’, “Do you have any suggestions for packaging and transportation?”, “Please send a photo of your current similar product.”, “Please send a one-page introduction about your company.”, “Do you have a quality control system?”, “What is your MOQ or Minimum Order Quantity?”, “Can you please provide the best quote for FOB and CIF?”.

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55 Request for Sample: Requesting a sample proves the factory’s workmanship. Most suppliers are okay to do this. You just have to pay for the freight normally. Sometimes it can be quite costly (DHL).. Never give factory your DHL account! Standards, Import Licenses, and Permits and Approvals: Please be aware of any product standards, import licenses, permits, or approval of your products. Most basic products do not require any of these. However, please check with your Customs broker to see whether or not these are restrictive or prohibitive imports.

56 Use sites like madeinchina.com, and other similar sites, to locate factories. Be sure to do prior research on the factories online. There are videos on this in the mentorship videos online that we have created. Casually mention sending an inspection team. (pets gone wild) Prepare capacity inspection. Ask references of their exporters. Google Map ->> HK city.. Trading company! Call them on the phone. Research potential suppliers.

57 Once you have identified suppliers, then send request for quotes; always choose ten quality factories and narrow it down from there. Try different provinces within China and different categories, as sometimes, factories misplace themselves accidentally in incorrect categories. Alibaba now has a “Blast” function.. They contact 10 factories for you saving you time Send request of quotes to potential factories

58 Prepare a “factory contacts” form, as this will ensure your factory selection is organized. (See example) Obtain quotes and evaluate offers

59 Prepare a “factory contacts” form, as this will ensure your factory selection is organized. (See example) Factories generally quote lower initially and have a price increases, as your relationship progresses. So ensure you understand the full market knowledge of the product, and ensure you negotiate a fair price. Factories do research too!: Factories will get online and research the margin you’re going to make so they’re not afraid to make price increases in negotiation with you. So, understanding your product and the materials will give you more leverage in negotiations with factories. Obtain quotes and evaluate offers

60 This report gives you an ability to determine margins, set your prices, approach potential customers to get their interest, enable you to pre-sell your products, get a sales forecast, and enable you to budget for the project. Fixed costs: There are fixed costs that are going to be incurred, such as port service charge, terminal handling charge, LOLO which stands for Lift On Lift Off, carrier documentation, port security, sea cargo automation, delivery order, Customs clearance fee, cartage. Usually these are bundled into clearing agent charges. Prepare a Quote Comparison Report

61 See the report attached.

62 Your goal here is to shortlist only three factories out of ten. Request to see a copy of their Organization Code. This also ensures that they are a legitimate Chinese company. You can check yourself at: Qualify and Shortlist Appropriate Factories

63 Narrow it down: Do your research, factory audits and inspections, speaking to the factory over the phone, order samples. From the samples then you decide which factory. Are trading companies bad? They are simply wholesalers with a license to export, and sometimes they misrepresent themselves to be factories. If you are unsure, then ask outright if they are a trading company and mention that you plan on getting the factory inspected, this usually makes them be honest to you. If you don’t speak Chinese or have little importing experience, then sometimes it’s easier dealing with trading companies, as they have generally more Western experience than the factories. Choosing Your Factory

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65 It’s not wise to let your customers or wholesalers know where you purchased your goods from, so ensure that there are no marks or branding in the box or the individual products. Price changes and currency fluctuations: Ensure you request the factory confirms the prices are fixed and firm for minimum term of twelve months, and is free from exchange rate variations. You can also include the clause that say “The importer shall agree upon any increase in normal cost no more than 3% for up to two years. This may not always work. However, it sets the term and is a good point to start. The key point to any negotiation is to anticipate what may happen. If you know the factory’s way of thinking, you already own one-half of the game. Most factories quote low initially and increase the quote upon receiving the sample and specific quality expectations, so initially that will provide you a good price, and in the second order, they will increase the price, maybe 30%, and most importers take it, because they are not skilled in the process of importing. Therefore, it is very important at all times, to set the term, so there is a full understanding of each other’s position. MARKS

66 Payment terms: Sometimes, it’s common practice to pay 30-50% deposit upon signing the Purchase Order. However, in some cases, you can pay as little as 10% or even 5% once you have a good relationship with your factory. The remaining balance is normally paid upon the presentation of the Bill of Lading. Usually, payments are by Telegraphic Transfer or Letters of Credit. Never pay via western union … Who owns the moulds?: It’s important that the factory understands that you paid for the moulds and that it needs to remain your property. You have the right to ask for the moulds to be return to you within seven days, to an address and freight to be paid by you. Be sure to include the clause to include in the contract that they may not use or sell your moulds to another importer.

67 Penalty for late delivery: Always imply “There will be penalties for late delivery, as we have paid marketing costs and customers are expecting the goods on time.” Packing requirements: If the goods contain straw, rice, cereal, or any unprocessed plant materials, or even if the packaging includes crates, pallets, timber, the goods need to go to quarantine, costing money and causing delays. Always remind the factories under no circumstances to use any straw packaging, preferably not timber either in the container. If timber has to be used, ensure a fumigation certificate is created in China, as it is much cheaper. Intellectual property protection: Ensure that the factory signed a nondisclosure agreement. This ensures that no information regarding the product is revealed on the factory’s website, leaflets, or advertising or promotional activities, including selling prospects and third-party examples of the work.

68 The first sample is usually not what you expect. Expect back-and-forth until you are 110% happy? Why not 100% happy? (eg I was importing stationary from US on Just in time ordering) Die or mould construction: Sometimes a die or mould needs to be created by the factory, which can cost anywhere from a hundred dollars up to 500 dollars. It can take up to 20 days to produce. If you wish to save effort, expense, and time, the factory may use an existing die or mould to produce a sample for you. If they have an existing die or mould, you’ll be charged very little or nothing to produce the sample. Sourcing material: If possible, provide the factory with the material you wish to have, to be used in the production of the imported item. Sampling and Acquiring Samples

69 A supplier will only source the exact material if it is a large order, or if they think you’re going to order more with them, or if they think you’re a serious importer. Example, you have signed the purchase order, or if they received your deposit. They may even ask you to purchase a minimum quantity for the sample, simply because their material supplier puts a MOQ on the factory. Material colors and dying: If your imported product requires material, simply provide a piece of the material for the sample or a pantone color number. If the factory does not have the right material or the correct color in stock, they usually will provide a color sample dip for your approval. If the factory needs to dye the material in exact color, this could be quite costly, and will only take place if you’re ordering a substantial amount of product from them.

70 When the supplier is satisfied, you’re not wasting their time, and if there’s a safe commitment, for example, payment or deposit, then they will usually make an exact sample to your specifications because they know with certainty that you’ll proceed with the order. Sample-making can take time: This is why it’s a lot easier to actually send a sample to a factory to replicate and to produce, rather than have a complete sample produced within a factory. Never give a factory your DHL number account unless you make it clear with the factory not to send you unsolicited materials or items. If ordering samples from various suppliers and factories, it is best to have a contact in China to amalgamate samples for you before sending them to Australia. This will save shipping costs for you. Production

71 Ensure that this factory provides photos before sending samples to you, as there may be obvious signs of defection or errors. If you’re using an inspection team in China, you’re best to get them to use videos which is much better and have the videos sent to you instantly. Use the Sample Progress Table attached, to ensure all defects are addressed with the factory. Improving On The Sample

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73 Who should go?: Anyone and everyone wanting to start importing from China; if you want to see the latest China has to offer, then this is the right opportunity. Try to time the trip to coincide with inspection of the factory and signing the contract. Hiring translators for the Fair Hire Chinese trade assistants to ensure you avoid the pitfalls of doing businesses in China and act as your guide and translator, as well. The Canton Fair is not a time to negotiate: Your objective is simple information gathering. The person at the stand usually doesn’t have the authority to negotiate. Going to the Canton Fair

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78 Wholesale markets are great if you cant meet the MOQ or the Minimum Order Quantity of a factory; however it’s good to at least fill a 20-feet container, even it’s from different factories or suppliers. Your relationship with wholesale suppliers is very different from factory suppliers, with the relationship being short, instead of being long-term. There are wholesale markets for every industry including furniture, building materials, lighting, kitchen supplies, ceramics, fabrics, clothing, hotel apparatus, leather, gifts, toys, stationery, watches, beauty and cosmetics, glasses, and many more. Wholesale Markets in China

79 Funds are usually paid in two installments: deposit and balance. Paying via deposit usually requires at least 30%-50% upfront in Chinese currency: Most wholesalers will only accept payments this way. Deposit will be organized using a number of methods including carrying cash. However, cash is limited to 10,000 dollars if leaving from Australia and entering into China. You can transfer money into a foreign exchange company’s bank account have it transferred to the China office bank account, or you could just use your credit card or debit card with your money. However, beware that there are high fees and low or poor exchange rates. How to get a good exchange rate: We have a specialist speaking at this very topic. Planning for wholesale markets

80 Supplier’s summary Prepare a Quote Report Sampling and Negotiation

81 I’m just small-time. Is it viable for me to import from China? Yes and depends on product too, but usually yes. How much money will I save by importing directly? Usually 30-50% How long do buying trips take China? Allow 2-3 weeks When should I time a buying trip? Around the canton fair is good however they are many on throughout the year. Is there a MOQ for buying trips? No The quality of goods in wholesale market: Is it good or guaranteed? As good as you see it Can I re-order from wholesale markets when I return to Australia? difficult Warehousing issues? How can I ensure that they are stored correctly in Australia? See your freight forwarder Common FAQ for Chinese buying trips

82 Create a Purchase Order where you need to ensure the following areas: quality control, terms of payment, who owns the mould or die, packing and packaging requirements, penalties for quality issues and delays in delivery. Creating a Purchase Order

83 Ensure you use your Purchase Order and not the factory’s: Some factories tend to use a standard Chinese domestic ‘supply and purchase’ agreement, which may not be suitable for your needs. It is most beneficial for you to ensure you create your own Purchase Order. If the factory insists to use their format, tell them, “This is from my lawyer, and I can’t change the format.”, or, “…do not have the authority from my employer or boss to change the format.” Ensure also that the Purchase Order is translated into Chinese to minimize your importing risk. Negotiation Points

84 Include specific things in your Purchase Order such as logos, certain marks or numbering such as packing requirements on the outer carton; ensure that the “Made in China” sticker is on the carton, as well as individually on the products. This ensures they comply with Australian Custom requirements. (What happens when you don’t have the sticker?) Other instructions may be to ensure the factory provides a photo of the finished prototype? A photo of the packing, and a photo of loading into the container, to ensure good peace of mind. The product completion date and shipping date should be specified clearly in the purchase order, so that both parties are aware. Inspection: Ensure at all times that an on-site inspection is conducted. These are relatively cheap and ensure that the goods are up to a specification. Purchase Order Information

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86 Delivery time Quality requirements: Ensure that any breaches in quality are followed up with a penalty to the factory. Make sure this is in writing in the Purchase Order and the Contract. Purchase Order Conditions

87 Trademark and Copyright: Some factories have duplicated products and machines that are seen somewhere else and want to sell them to you. Before purchasing anything, be sure it’s not subject to trademark, copyright, license under a different name. It’s best in the Purchase Order to have a request that the factory product they produce is not subject to any intellectual property rights and have not been used before. Therefore, they are fully responsible for all penalties in that case. Standard requirement: Ask the factory for the product if there is a particular standard that they have to produce it too. For example, in Australia, food and health safety standards apply, for machinery Australian standards apply, for chemical and dangerous products, the Australia Dangerous Code applies. More information on this at Acts of god: Sometimes in China, there may be seen forces of nature such as strikes, civil rights, war, or any disruptions, and you may not be able to ship your goods at this time. Be sure you don’t have to pay any additional cost to the factory or damages as result to this. You can include the clause like this in the Purchase Order. Qualities and Returned Stocks

88 Get a freight forwarder Ensure that there’s open communication with the freight forwarder and the supplier, and they have at least spoken over or the phone once. See shipping booking (example) Sometimes you can share containers or LCL with other clients of the forwarder. This is done on request. Arranging Delivery and Logistics

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90 Ensure that you carry insurance on your goods and containers. If there are storms, accidents, delays, freight insurance protection against damage, theft and loss. There are many freight insurance companies out there for international import and export. After the factories send the goods to the port, and the products are on board, you will need the factory to provide the following documents: commercial invoice, packing list, bill of lading, packing declaration. A commercial invoice is simply a bill for the goods from the factory to the buyer or importer which is you. These invoices are utilized by the Customs to determine the value of the goods for Customs, GST, and duties.

91 Packing list: The packing list is an extension of the invoice and usually matches the invoice. The difference is the packing list does not show the value of the Order, only the details of the volume. The Customs broker or freight forwarder will reserve shipping space based on the weight and the measurement of the goods as shown on the packing list. Therefore, it is essential in terms of weight and volume. The Bill of Lading: Bill of Lading is simply a document to acknowledge your ship and the shipment of goods. The Bill of Lading indicates the particular vessel; it shows the intended destination, the terms of transport, and the shipping to the final destination. Packing declarations: Australian requirement is to fill a packing declaration. Be sure to ask the factory to fill this in for you. Balance payments: After saving the bill of lading, it’s the time for you to make the balance payment, either 50% or 70%.

92 There are four major defects to understand such as Class S, Class A, Class B, and Class C. Major defect Class S means safety or critical. Major Defect Class A Minor defect Class B Incidental defect class C Understanding Defects

93 This is hazardous to the user and is a major defect. If fails to meet requirements for product safety, it is therefore class S. One such defect under this classification may constitute rejection of the entire shipment. This includes faulty electrical appliances, electrical items, and other products not meeting standard safety requirements. For example, incorrect electrical marking, leakage of current from accessible parts, or when electrical installation is missing or improperly installed. Defect Class S

94 This is a major defect, usually created from poor workmanship. For example, reduction of mechanical performance, thus rendering the unit unsalable to the customer. Example is a socket in the lamp is loose, which therefore reduces its performance. Another example is a stereo which has excessive buzzes, inferring the volume quality, or possibly dials not working. Major Defect Class A

95 This is a minor defect. A Class B qualification is usually on products that are unsalable to a discriminating customer. For example, if an operating manual is missing. Or if the product arrives and has dust or dirt on it, it is considered a Class B. Minor Defect Class B

96 These are seldomly objectionable by the customers, therefore, minor and incidental. For example, finger marks on a product that are easily removed, or a paper label on a product is placed invert position. See inspection report attached. You or the inspection company will fill this out. Incidental Defect Class C

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98 Production completion: The date of completion should be emphasized in the contract and the Purchase Order; also arrange the freight forwarder to contact the factory regarding delivery. Usually, have the freight forwarder contact the supplier between 7-10 days before product completion. Arrange photos and videos: To ensure production deadline, make sure standards are met. Ensure preferably a third-party inspection company take photos and videos. Don’t Use a FACTORY INSPECTION [Flip videos]. You want photos of the following: each individual product, packaging of the product either in a box, or protective packaging, and the product being loaded into pallets. Preferably, the inspection team will follow goods from the factories to the port, to show photos and videos, or both, of the goods being loaded onto the ship. Product progress report: Ask the factory to provide you a progress report every two weeks. It’s best to draft the report in a basic and easy- to-understand format so the factory could fill this in. This way, you’re always in control and you receive the information you want. See the report attached Ordering and Production

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100 Factory audit: Does the factory exist? Can they complete capacity? Check out the quality and procedures; ensure that the representatives that you are dealing with are in fact real. During production inspection: This ensures the goods to be produced in time, if the goods do not have defects or deviation. Pre-shipment inspection: Carry out this inspection when either the goods are completely packed and ready for shipment, or at least 80% of the products are packed. The inspectors check the quantity; they test samples based on statistical random sampling; they will verify the quality, style, workmanship, size, shipping marks, packing, and other specifications. Ensure the factory provides your inspection team a packing list or if you plan on heading over there to check it out yourself, make sure you have a packing list. That way, inspection will be carried out with the utmost efficiency. Look at the Quality control Checklist attached. Product Inspection

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