Sharing my lifetime experience in export/import. Product sourcing specialist.

[AG356]

Hey Walter!

Can you enlighten me on the different rates during the year? When will logistic providers raise the prices and when is the best moment to order? I am currently in the process of re-stocking for next spring. However even doe I most likely will order double if not triple the amount of my first order, the prices overall increased. DHL prices increased and my supplier arguments with the weaker dollar offering the same piece price as on my first order plus they mentioned that the transportation cost are increasing since it's peak season.

If I'am not directly in a hurry to restock due to a seasonable product which will probably not sell from mid-November till mid-February, would it be smarter to order in Q1 2018 instead of now?

Thank you and have a great weekend!

Steven

 

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[Walter Hay]

Hey Walter!

Can you enlighten me on the different rates during the year? When will logistic providers raise the prices and when is the best moment to order? I am currently in the process of re-stocking for next spring. However even doe I most likely will order double if not triple the amount of my first order, the prices overall increased. DHL prices increased and my supplier arguments with the weaker dollar offering the same piece price as on my first order plus they mentioned that the transportation cost are increasing since it's peak season.

If I'am not directly in a hurry to restock due to a seasonable product which will probably not sell from mid-November till mid-February, would it be smarter to order in Q1 2018 instead of now?

Thank you and have a great weekend!

Steven

Hi Steven,

International shipping rates are very volatile and largely unpredictable except for the fact that shipping volumes along with freight rates increase for importers when big shopping seasons like back to school and the holidays approach. Volume and rates tend to be lower between these types of seasons. Rates this year have generally increased regardless of the season.

If your order size has increased and you are not in a rush, it might pay to consider freight methods other than air courier. If you want to do this, you will need an EXW quote from your supplier, so that you can arrange the shipping yourself.

You then need to ask some freight forwarders to quote you for the lowest cost option, but beware! Sea freight on an LCL basis might appear to be the lowest cost, but it almost certainly won't be unless the quote includes all charges on a delivered to your door basis.

The same applies for consolidated air freight (not courier). In practice, the total cost of this freight method can often be less than sea freight. It's the total cost that counts.

Emphasize to your freight forwarder that there is no rush. Get the quote in writing.

An alternative is to ship a small part of your order via air courier and the balance by a cheaper method.

Walter

 

[AG356]

Rates this year have generally increased regardless of the season.

Do you know the reason for this? I was wondering already.

If your order size has increased and you are not in a rush, it might pay to consider freight methods other than air courier. If you want to do this, you will need an EXW quote from your supplier, so that you can arrange the shipping yourself.

Yes, I didn't use air courier because the costs would be way to high to keep my goal margin up. I realized that when I received the first quotations of my first order and I was quite shocked how expensive it would have been.

You then need to ask some freight forwarders to quote you for the lowest cost option, but beware! Sea freight on an LCL basis might appear to be the lowest cost, but it almost certainly won't be unless the quote includes all charges on a delivered to your door basis.

Thank you for the tip! This is indeed a problem and quite deceiving. I nearly fell for that but I've read about it before finally going through the process (maybe even in your book?)

The same applies for consolidated air freight (not courier). In practice, the total cost of this freight method can often be less than sea freight. It's the total cost that counts.
Emphasize to your freight forwarder that there is no rush. Get the quote in writing.

What do you mean by that? Where does air freight cut costs so dramatically to be cheaper than shipping the freight? I asked for a lot of different quotations when I placed my first order and the air courier would have cost more than twice as much as shipping it. Or is it because I import to Europe?
Now you've made me curious. I'll send a followup email to my forwarders asking for an additional quotation for the air courier.

An alternative is to ship a small part of your order via air courier and the balance by a cheaper method.

Walter

I will definitely use this method if I'm in danger of running out of stock! This seems to be the best solution where I'll reap the benefits of both worlds. I keep the costs in check and won't have to worry about an empty warehouse. Thanks!

 

[Walter Hay]

Do you know the reason for this? I was wondering already.

Yes, I didn't use air courier because the costs would be way to high to keep my goal margin up. I realized that when I received the first quotations of my first order and I was quite shocked how expensive it would have been.

Thank you for the tip! This is indeed a problem and quite deceiving. I nearly fell for that but I've read about it before finally going through the process (maybe even in your book?)

What do you mean by that? Where does air freight cut costs so dramatically to be cheaper than shipping the freight? I asked for a lot of different quotations when I placed my first order and the air courier would have cost more than twice as much as shipping it. Or is it because I import to Europe?
Now you've made me curious. I'll send a followup email to my forwarders asking for an additional quotation for the air courier.

I will definitely use this method if I'm in danger of running out of stock! This seems to be the best solution where I'll reap the benefits of both worlds. I keep the costs in check and won't have to worry about an empty warehouse. Thanks!

You should ask about air freight or air cargo. This is different to air couriers.

Cargo consolidators collect the goods from your supplier just the same as couriers do and also sea freight shippers do. They hold them until they have enough cargo to fill the air container space that they have pre-bought. This means you are sharing the cost of that space, but shipment might be slow - maybe even 2 or 3 weeks.

There are generally much lower costs at air terminals than there are at sea terminals, so if the consolidator has obtained a very low per kg rate, they can pass on some of that saving to you. When the air freight per kg and the lower terminal costs are all added up it is not unusual for the total consignment cost to be less than shipping the same amount by sea.

I will send you a link to the only Chinese freight consolidator that I trust. Their rates are very good and service as reported by their customers that I have spoken to is excellent. I will soon be sending out the link to all of my book buyers, but I am still doing my final checking on their references, so I don't want to publish it yet.

Walter

 

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[Atticus]

Hi Walter,

So I've managed to get a quote from a particular supplier I'm looking to work with, and compared to other suppliers they're quite pricey. I have no problem with paying this amount because I know they're reliable and produce good quality stuff. However, I'm afraid that if I accept this quote without any negotiation I may be seen as an easy target, and they could potentially increase prices in the future. Without haggling or shaming them, how do I give the impression that I'm not one to be taken advantage of?

I thought about sending them cheaper quotations I had from other suppliers, but this wouldn't be entirely fair as the other suppliers use cheaper components.

Atticus

 

[Walter Hay]

Hi Walter,

So I've managed to get a quote from a particular supplier I'm looking to work with, and compared to other suppliers they're quite pricey. I have no problem with paying this amount because I know they're reliable and produce good quality stuff. However, I'm afraid that if I accept this quote without any negotiation I may be seen as an easy target, and they could potentially increase prices in the future. Without haggling or shaming them, how do I give the impression that I'm not one to be taken advantage of?

I thought about sending them cheaper quotations I had from other suppliers, but this wouldn't be entirely fair as the other suppliers use cheaper components.

Atticus

If you are happy with the price, you can build some Guanxi by thanking them for their quote, and mentioning that although you have received lower quotes from X number of other suppliers, you have chosen to work with them. Add that although price is important, so also is being confident that you can build a good, long term relationship.

Walter

 

[Guest06196]

Last week I met someone working at Taiwan Trade Centre in Sydney. Couldn't believe they can be so helpful!

She invited me to visit their office in CBD and offered to tailor and coordinate a business trip for me, if I'm looking to buy from Taiwanese companies. (great help as my legitimacy will undoubtedly be enhanced if the meetings with manufacturers are arranged by a semi-official organization. I'd like to have a travel concierge too)

She also mentioned that if your company's annual gross sales revenue exceeds a certain amount, your accommodation will be paid for by them when you're attending their trade show. I asked her where their money comes from, she said the organization is supported and funded by the government. (I believe it's true.)

They publish a directory which contains all participants of their trade shows (so many niches so I believe most, if not all, trade shows in Taiwan are organized by them). I also asked how I could tell if the listed companies are genuine manufacturers, she said you can get a quick idea from the company's name. For example, a food manufacturer will usually include "Food" in their name, while traders usually use ambiguous words such as "Industries".

After reading the thread, I've always wanted to learn more about things on the manufacturer's side. Thought it was difficult because I don't have any factory experience and don't know anyone. One day it occurred to me that I could just search YouTube for "factory" and "documentary"! I found this documentary and not only is it informative but also entertaining!

View: https://www.youtube.com/watch?v=fDS8co75xFc

I hope this post adds value to this thread.

 

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[Walter Hay]

Last week I met someone working at Taiwan Trade Centre in Sydney. Couldn't believe they can be so helpful!

She invited me to visit their office in CBD and offered to tailor and coordinate a business trip for me, if I'm looking to buy from Taiwanese companies. (great help as my legitimacy will undoubtedly be enhanced if the meetings with manufacturers are arranged by a semi-official organization. I'd like to have a travel concierge too)

She also mentioned that if your company's annual gross sales revenue exceeds a certain amount, your accommodation will be paid for by them when you're attending their trade show. I asked her where their money comes from, she said the organization is supported and funded by the government. (I believe it's true.)

They publish a directory which contains all participants of their trade shows (so many niches so I believe most, if not all, trade shows in Taiwan are organized by them). I also asked how I could tell if the listed companies are genuine manufacturers, she said you can get a quick idea from the company's name. For example, a food manufacturer will usually include "Food" in their name, while traders usually use ambiguous words such as "Industries".

After reading the thread, I've always wanted to learn more about things on the manufacturer's side. Thought it was difficult because I don't have any factory experience and don't know anyone. One day it occurred to me that I could just search YouTube for "factory" and "documentary"! I found this documentary and not only is it informative but also entertaining!

View: https://www.youtube.com/watch?v=fDS8co75xFc

I hope this post adds value to this thread.

Thanks for posting this documentary. It will be a real eye-opener for many readers. I see one of the manufacturing processes shown is still using a product that I first exported to Taiwan in 1978.

I have commented in earlier posts about the clinical cleanliness of many Chinese factories, and the serious attention to safety concerns, for example, lines that must not be crossed by trollies or forklifts. One of my oldest contacts, originally manufacturing in Taiwan, moved his operation to mainland China many years ago and now has over 6,000 employees there in 3 separate factories. He is currently looking to set up in lower labor cost countries!

Taiwan is sadly overlooked by most new importers, but they are unaware that many of the best factories in mainland China have been set up and managed by Taiwanese companies. Most of those companies still manufacture in Taiwan, where technology allows for competitive pricing when high labor input isn't required.

The Taiwan Trade Center gave me a head-start firstly as an exporter, and they were invaluable when I started importing before the advent of the internet. I can highly recommend them. If traveling to China, a side trip to Taipei could prove extremely valuable.

Walter

 

[SquatchMan]

He is currently looking to set up in lower labor cost countries!

Vietnam? India? Central America? Africa?

I'm curious on your thoughts on what the "next China" will be. I've seen you mention in a Kak thread that sourcing outside of China was a growing opportunity.

I visited Vietnam a few years ago and more than a few people told me that it felt like China in the 90s and that lots of manufacturers were setting up shop because of the lower cost. I'm not a sourcing expert though. Just a casual observer.

 

[Walter Hay]

Vietnam? India? Central America? Africa?

I'm curious on your thoughts on what the "next China" will be. I've seen you mention in a Kak thread that sourcing outside of China was a growing opportunity.

I visited Vietnam a few years ago and more than a few people told me that it felt like China in the 90s and that lots of manufacturers were setting up shop because of the lower cost. I'm not a sourcing expert though. Just a casual observer.

Vietnam would be my first choice at present, mainly because that is where many Chinese and Taiwan owned companies are now setting up manufacturing.

India has a long way to go as an exporting country, apart from the big conglomerates like Tata, who have everything running smoothly.

Central American countries don't yet seem to make it very easy for importers to find what they want, but I am working on ways of making that easier for new importers. Watch this space.

Walter

 

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[Mal0ni]

Hi @Walter Hay,

First of all, I want to thank you for sharing your experience in this thread. I have also really benefited from your import direct book.
I have a question for you as I am discussing payment terms with a manufacturer in Pakistan. They already sent me 2 batches of good quality samples at this point.

This is what they require:

• WE WILL TAKE PAYMENT IN OUR COMPANY'S BANK ACCOUNT with a very known company in Pakistan. Advance payment at start by bank to bank method. 1 party to 2 party.
• THE 80 PERCENT PAYMENT WILL BE ADVANCE AND 20 PERCENT WILL BE PAID WHEN SHIPMENT IS READY.

I have mentioned that I wanted to use Escrow but he seems very adamant about his payment terms, saying all of his customers in US and Europe always work this way. He's also very strict about only accepting large MOQ, 1000 pieces...

What exactly is he referring to and what would be your advice?

Thanks in advance for your response.

 

[Walter Hay]

Hi @Walter Hay,

First of all, I want to thank you for sharing your experience in this thread. I have also really benefited from your import direct book.
I have a question for you as I am discussing payment terms with a manufacturer in Pakistan. They already sent me 2 batches of good quality samples at this point.

This is what they require:

• WE WILL TAKE PAYMENT IN OUR COMPANY'S BANK ACCOUNT with a very known company in Pakistan. Advance payment at start by bank to bank method. 1 party to 2 party.
• THE 80 PERCENT PAYMENT WILL BE ADVANCE AND 20 PERCENT WILL BE PAID WHEN SHIPMENT IS READY.

I have mentioned that I wanted to use Escrow but he seems very adamant about his payment terms, saying all of his customers in US and Europe always work this way. He's also very strict about only accepting large MOQ, 1000 pieces...

What exactly is he referring to and what would be your advice?

Thanks in advance for your response.

First, I would say that he is referring to normal T/T payment. This is not a completely secure method, but is far better than WU which is extremely risky.

I would have some concerns about dealing with this company.

The 80% deposit is most unusual and suggests that they might be traders and have to pay their supplier in advance. If that is the case there is an added layer of risk. Insistence on an MOQ of 1000 pcs might also indicate that they are traders. His statement about other customers always paying in the way he requires is not proof of the fact.

You need to investigate the company thoroughly to be sure of their trustworthiness. Do they have a DUNS number? If not, I would be wary.

Walter

 

[Mal0ni]

First, I would say that he is referring to normal T/T payment. This is not a completely secure method, but is far better than WU which is extremely risky.

I would have some concerns about dealing with this company.

The 80% deposit is most unusual and suggests that they might be traders and have to pay their supplier in advance. If that is the case there is an added layer of risk. Insistence on an MOQ of 1000 pcs might also indicate that they are traders. His statement about other customers always paying in the way he requires is not proof of the fact.

You need to investigate the company thoroughly to be sure of their trustworthiness. Do they have a DUNS number? If not, I would be wary.

Walter

Thanks Walter, this is really helpful. Would you suggest to ask for a reference as this point on top of the DUNS number? I have also requested a skype call with my "boss". He kindly refused and asked for an invitation instead as he will be travelling to North America in the next couple of months to visit his customers. Is that standard practice for a supplier or would that be another indication that he might be a trader, not a supplier?

Let me quote him on how he justifies the high MOQ as I requested my design pattern to be sublimated onto the product:

" When we use elastic in sublimating machine, our elastic is shrunk using this method and it produces a lot of waste. While cutting pattern for design and quality, a lot of elastic is also wasted"

It seems like it requires a lot of effort for them to be able to produce this customized piece, which they use to justify the MOQ. Now I will definitely investigate further to figure out whether or not he is a trader or a manufacturer. They have been able to quickly produce and ship high quality samples so I had a lot of confidence I was dealing directly with the manufacturer.

 

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[Walter Hay]

Thanks Walter, this is really helpful. Would you suggest to ask for a reference as this point on top of the DUNS number? I have also requested a skype call with my "boss". He kindly refused and asked for an invitation instead as he will be travelling to North America in the next couple of months to visit his customers. Is that standard practice for a supplier or would that be another indication that he might be a trader, not a supplier?

Let me quote him on how he justifies the high MOQ as I requested my design pattern to be sublimated onto the product:

" When we use elastic in sublimating machine, our elastic is shrunk using this method and it produces a lot of waste. While cutting pattern for design and quality, a lot of elastic is also wasted"

It seems like it requires a lot of effort for them to be able to produce this customized piece, which they use to justify the MOQ. Now I will definitely investigate further to figure out whether or not he is a trader or a manufacturer. They have been able to quickly produce and ship high quality samples so I had a lot of confidence I was dealing directly with the manufacturer.

From what you say it does seem more likely that he is a manufacturer. The heat process involved in dye sublimation can in fact shrink materials such as elastic.

The high MOQ is not a necessity resulting from the process. It is more likely due to their need to purchase a minimum amount of materials for the project. The 80% deposit might also be a reflection of their minimum material purchase.

His proposed visit is another good sign. I suggest you arrange a meeting at a reasonably up-market coffee or tea shop.

If you have his factory address, try viewing the location on Google Earth.

Walter

 

[Mal0ni]

From what you say it does seem more likely that he is a manufacturer. The heat process involved in dye sublimation can in fact shrink materials such as elastic.

The high MOQ is not a necessity resulting from the process. It is more likely due to their need to purchase a minimum amount of materials for the project. The 80% deposit might also be a reflection of their minimum material purchase.

His proposed visit is another good sign. I suggest you arrange a meeting at a reasonably up-market coffee or tea shop.

If you have his factory address, try viewing the location on Google Earth.

Walter

Thank you Walter, I really appreciate your help. I guess I will have to invest more on this first order.

 

[secondhanddog]

Hey Walter, Love the thread. Quick question - I had a sample from a supplier which didn't follow the requested details completely. Have you ever requested a partial refund via paypal for supplying an incorrect sample or just moved on to another supplier (sample was about $300USD to produce).

 

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[Walter Hay]

Hey Walter, Love the thread. Quick question - I had a sample from a supplier which didn't follow the requested details completely. Have you ever requested a partial refund via paypal for supplying an incorrect sample or just moved on to another supplier (sample was about $300USD to produce).

I don't think PayPal would process a request for a partial refund. You should move quickly to get your supplier to correct the problem.

It might be a case of them misunderstanding your requirements, in which case they will resist your claim that they got it wrong. You will need to be very precise about the specific issues where they made the mistake. Be very polite. Don't use angry words. Talk about your desire for a long term relationship that will benefit both.

If the failure is due to carelessness, they won't admit that either, so the same gently, gently approach is your best chance.

I am assuming you have no form of buyer protection from the B2B site where you found the supplier, but if you do, raising a dispute according to the rules is very urgent.

Walter

 

[secondhanddog]

Thanks Walter. Did try and correct it with them but they just suggested they would correct it after a order was placed. Not sure why I would order with them after they didn't follow the instructions.

(Actually placed the order with alibaba but the trade assurance was only before shipping).
Lesson learnt I guess.

 

[ALC]

Thanks Walter. Did try and correct it with them but they just suggested they would correct it after a order was placed. Not sure why I would order with them after they didn't follow the instructions.

(Actually placed the order with alibaba but the trade assurance was only before shipping).
Lesson learnt I guess.

It may be just a mistake from them, but to add from your previous post, no normally Paypal only refund the full price and not a part of it.

 

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[Walter Hay]

Thanks Walter. Did try and correct it with them but they just suggested they would correct it after a order was placed. Not sure why I would order with them after they didn't follow the instructions.

(Actually placed the order with alibaba but the trade assurance was only before shipping).
Lesson learnt I guess.

Suppliers offering to correct sample faults in a full production order is not rare. In many cases, probably most that I know of, they do fix the problem/s. Unfortunately though, that is a big gamble unless you know them well.

Relying on Trade Assurance is just a "feel good" exercise IMO. It only works for buyers if they arrange for it to cover delivered goods. Even then, inspection costs would be close to the price you paid for the sample, so it's not worth the bother for small amounts.

As set out on Alibaba's site, the rules on Trade Assurance have now been expanded substantially, from 2 pages to 24 pages, and it is now so complex that it takes me 2 A4 pages in the latest edition of my book to explain it briefly. The rules now incorporate stuff that is not found in the rules! You have to look in the site's Help section for those extra rules.

Sorry you have had such a bad experience. I am writing this reply to help you in future but also for other readers.

My best suggestion is to prepare precise specifications, drawn up by an engineer familiar with the particular type of product being ordered. Your precise specific requirements must be included in your order, and you place the order conditional upon those being met. For pre-shipment protection, have the products inspected before shipment, (cost $200 -$300) and that way you can have protection, but only for the deposit paid.

If you arrange coverage for Post Delivery protection, you will incur costs of inspection (about $300) at your delivery destination. The conditions for protection are so complex and contain so many ambiguities that I would not rely on Trade Assurance. Here are the concluding paragraphs from my book regarding the subject:

■ Before using Trade Assurance, it would be a good idea to carefully read all the Rules to be sure that you have dotted every i and crossed every t. You should also read the answers to all the questions about Trade Assurance found in the Trade Assurance Help Center. See link above.

■ Data recorded by One Touch, Alibaba, and Alibaba.com constitutes almost the only evidence admissible in dealing with a claim. This means it is imperative that you keep screen shots of every transaction, every page visited, every attachment sent to you or by you, every email to or from your supplier and to or from Alibaba and OneTouch. You can provide other supporting evidence, but it certainly appears that Alibaba will regard it as inconsequential.

Walter

 

[KeepGoin]

Hi Walter,

I appreciate all your insight. I have a question.

One single product, 10 different custom designs I've had made. The manufacturer wants me to order big I can tell. So I just say it's a trial order or something to that effect without offending them correct? I'm only planning on ordering 50 units of each design initially. The samples were good.

 

[Walter Hay]

Hi Walter,

I appreciate all your insight. I have a question.

One single product, 10 different custom designs I've had made. The manufacturer wants me to order big I can tell. So I just say it's a trial order or something to that effect without offending them correct? I'm only planning on ordering 50 units of each design initially. The samples were good.

Yes it's a good way to go if they will accept that, but a production run of only 50 pcs of a new product might be too small to be practical. If that is really the case, they won't budge.

Walter

 

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[Walter Hay]

CHINESE FREIGHT FORWARDERS
Having spent a lot of time over the past few months researching and checking up on a Chinese freight forwarder that had been recommended to me, I was on the verge of sending out to all my book readers a notice recommending them, but I still had a few more places to check before I was satisfied.

The very last one set off the alarm bells. What appeared to be an excellent record was not all that it appeared to be. I discovered that an associated company had been implicated in a freight scam. It was a totally separate entity, not a subsidiary, but I was able to identify common ownership.

I had been in frequent contact with what I had been told was a good company to deal with, but knowing now about their shady side, I obviously won't recommend them. This experience leads me to again urge caution in allowing suppliers to arrange freight for you, or to arrange it yourself through a Chinese forwarder.

I posted on this subject (Jul 25, 2017 #1358) previously, but my extensive recent research has found that the alarming incidence of shipments being held for ransom continues to grow. There have been so many cases over the past few years that it would make me very wary.

Some of the cases have involved the setting up of bogus shipping companies, who issue fake Bills of Lading. Those companies come complete with forged business registration certificates, and websites that appear to be aged. Fake testimonials naming genuine businesses, mostly in the USA give a good impression.

I checked out every testimonial provided by the forwarder I was assessing, and they were genuine, but when I found the website belonging to the other forwarding company with common ownership it was a different story. The first couple I checked were genuine, so they must have gone to the trouble of doing a couple of genuine transactions in order to get those testimonials. No doubt they expected that few people bother checking, and even less will check every testimonial.

The remaining US businesses named didn't exist!

Possibly the most common form that the forwarding scams take involves the issuing of a genuine Bill of Lading, a copy of which is sent to the importer, together with a commercial invoice and packing list. They say that the original B/L is in the mail, but by the time the shipment arrives in your destination port the B/L has still not arrived.

When you contact the freight forwarding scammer you find that they demand a payment that could be many times the amount you have already paid for freight.

Without the original B/L you cannot prove ownership of your goods, and Customs will not release the shipment without it either, so you either abandon the shipment you have already paid for, or pay up and hope they will send the B/L.

I suggest that it is not worth the risk involved in saving a few hundred dollars on freight by using Chinese forwarders. If any Fastlane members have had good experience with any, I would appreciate hearing from you.

Walter

 

[secondhanddog]

Thanks Walter. Interesting points on using Trade Assurance.

For all samples I use either paypal or Trade Assurance post-delivery for protection now. You have made me question using it for the full order, but I'll make sure everything is in the contract before ordering.

 

[Villain]

Hi Walter,

I'm in China just now and somebody has asked me to help them get some products from the West. She sounds pretty desperate for them so there may be an opportunity here if there are others like her.

What are the pitfalls of importing into China? I've read before that it's to be avoided!

The items in question are non-perishable but are reasonable bulky.

I imagine hurdles would include import tax, maybe needing to set up a Chinese company (which means a Chinese business partner - ugh), and actually receiving the goods in China - might require a Chinese speaking assistant to help with that.

 

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[Walter Hay]

Unless you are selling as an exporter and your contact is the buyer, you will have the headaches you mentioned.

This could be an opportunity for you to act as sales agent for the Western suppliers. To do this and be safe, you need to sell on a Letter of Credit basis, so that upon proof of shipment you can negotiate the L/C with your bank.

Your buyer has to obtain the L/C and you hold the original until the goods are loaded on board either an aircraft or a ship, with a negotiable Air Waybill or a clean on board Bill of Lading in your hands. This guarantees payment.

Walter

 

[Villain]

Do I need a business bank account to use an L/C? Is it viable for smaller orders? The value of this shipment is only around £200-£300.

 

[Villain]

I called my bank in the UK and the advisor said they don't deal with L/C's, and that other high street banks likely don't deal with them either. I just called Barclays as well and the guy had no idea what it was.

 

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[Walter Hay]

Do I need a business bank account to use an L/C? Is it viable for smaller orders? The value of this shipment is only around £200-£300.

That will depend on your bank, but many sole traders have been able to negotiate Letters of Credit. Bear in mind that you are receiving the money, so in effect having an L/C is rather like receiving a check that you can bank. It could be more difficult to obtain an L/C if you were buying.

You might need to finance the purchase from your Western supplier, and if the amount is large, you should be able to use the L/C as collateral for a loan to pay your supplier.

Walter

 

[Walter Hay]

I called my bank in the UK and the advisor said they don't deal with L/C's, and that other high street banks likely don't deal with them either. I just called Barclays as well and the guy had no idea what it was.

Yes, banks in the UK seem to still operate in the steam age. Try HSBC in Hong Kong or any of the 180 or so branches in mainland China. They operate in the UK also. They handle personal and business accounts.

Let them know that you just want to negotiate a Letter of Credit. Sadly many of the newer staff in banks are trained in sales, and are largely ignorant of long established banking practices, so it would not surprise me if they don't understand what negotiate means. You could explain to them that an L/C is a negotiable document like a cheque. It does entail more work for the bank because they have to check that absolutely every minute detail of the order for which the L/C is payment has been complied with. Their charges will reflect that extra effort.

Walter