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

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Walter Hay

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This Q & A requires a short preamble. The new importer chose to go against my book’s recommendation to use a local freight forwarder and has engaged a Chinese forwarding company to save money on the sea freight.

Q & A. 8

Q. The documents from my forwarder in China say CFR Long Beach CA. So do I need a Customs Broker to clear Customs here?

A. You will need more than the services of a customs broker. There will be a variety of charges once the container reaches Long Beach and from there to the point where you take delivery.

You have a couple of choices to make now, but each will cost you quite a lot.

1. Appoint a customs broker to clear the shipment. Arrange with a trucking company to collect the container and deliver to you. Make sure the trucking company regularly does port pickups. If they are not regulars, the driver will possibly have to sleep overnight in his truck before being allowed entry to load because he will be treated as an outsider. They should quote you for payment for port charges on your behalf and then they will collect those from you as part of their service.

2. Appoint a local freight forwarder to clear the shipment using their in-house customs agent, and arrange to have your container collected from the port and delivered to you. This would be my preferred option rather than try to synchronize clearance by one party and pick up by another. A freight forwarder also knows the importance of quick clearance and pick up to avoid extra costs.

I expect that the big cost saving on sea freight will be eaten up by these extra charges. Because your supplier has quoted you FOB Shanghai, I recommend that for future shipments you arrange shipping on a DAP (Specify your address) basis, because that will cover all of those costs from Shanghai to your warehouse.

See Chapter 3 for how to find a local freight forwarder.
 

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Walter Hay

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Q & A 9. This is part of a question put to me by a Fastlane member and I have expanded on my answer here because I think it could benefit all members.

Q. Is it safe to deal with unverified suppliers?

A. Yes, just because they are unverified does not disqualify them. They may be testing the waters for exporting or they may be small businesses. In fact it may be possible to get a better deal from them than you could elsewhere.

It will often be the case that free advertisers (unverified) have products that are not being offered elsewhere, and this can be a huge benefit to you because of the lack of competition, so the extra work could be very worthwhile.

You will need to search for their names in every possible way in order to get as much information as possible about them. If they have their own website, that can be a good place to begin your research on them.

Do a Google search first and be prepared to go past page 1 if necessary. I would search to at least page 5.

Once you are satisfied that they are a genuine manufacturer, and there are no bad reviews recorded against them, you can then start communication. Slow and steady is the best way, so that you can build up a good relationship and also satisfy yourself that they really are a business you want to deal with.
 

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Is there a way to make sure your supplier/manufacturer cannot raise the prices for you when you start making more sales and are dependent on them?
 

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Hi Mike,

Your memory has served you well.

China Post is subsidized even more than HK Post, so will be a little cheaper.

If you don't need them urgently, the cost saving on using postal delivery is substantial, but many suppliers don't like using it because it means going to the post office to send the parcel. They will make all kinds of excuses, but if you persist they will usually give in.

Walter
Followup - As I mentioned before, my item is the about the size and weight of an empty soda can. I am getting shipping quotes ranging from free to $75. When they give me a high quote, I explain I do not need express shipping and request China Post. They usually come back with higher quote. It appears they go and get a quote for express shipping.

Is there some special phrase I need to use to make them understand I want regular shipping? I thought mentioning ePacket would help but it doesn't.
 
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Walter Hay

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Is there a way to make sure your supplier/manufacturer cannot raise the prices for you when you start making more sales and are dependent on them?
This is a very good question because this situation happens often.

Your best protection is to avoid having all your eggs in one basket. Always try to have more than one supplier that you know is capable of supplying the product. Obtain quotes and keep them on file.

You can then respond to notices of price increases by saying that you have another supplier who has quoted you $.... You will need to send a copy of the other quote but I would advise hiding all identifying print such as company name, address, phone number and product ID numbers. If the quote is a year old, the date may be a problem, so you may need to get a new quote.

You can flatter your supplier a little, saying how pleased you are with their product and service, and that you would prefer to continue to deal with them, but then say that such a price increase is not acceptable.

Bear in mind that costs may well increase over time, so you may have to accept moderate increases. Inflation in China is low, but labor costs can be increased due to the government gradually requiring better working conditions for workers.
 
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Walter Hay

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Followup - As I mentioned before, my item is the about the size and weight of an empty soda can. I am getting shipping quotes ranging from free to $75. When they give me a high quote, I explain I do not need express shipping and request China Post. They usually come back with higher quote. It appears they go and get a quote for express shipping.

Is there some special phrase I need to use to make them understand I want regular shipping? I thought mentioning ePacket would help but it doesn't.
They possibly won't want to tell you the real reason they don't want to use China Post and will therefore use the common Chinese tactic of avoiding the issue. This will often seem as though they don't understand.

I have always simply said that I prefer to have the sample shipped by ordinary airmail. This can be very inconvenient for some suppliers if it involves a long and slow bicycle ride through heavy traffic to the nearest post office, so you may have to yield in order to avoid having them lose face by admitting that it is inconvenient or too costly in employee's time.
 

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So I finished the book - and as someone who has already taken a course on how to source/use fba/ do what ecom mans doing.. I've got to say I still liked the book! It goes very in depth in terms of the technicalities of sourcing and importing which for someone like me who is trying to take this business seriously, is great! I'd definitely recommend it.

One thing I have to ask (which may have been answered elsewhere in this thread - i'll check as soon as I'm done posting) is where you find the products that you want to import. At this point all that I've been doing is scour Amazon Best Sellers which has helped me find a few good products - but I know there HAS to be a better way.. I mean you can't even see past item 100 in any given category. Any tips?
 
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Walter Hay

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So I finished the book - and as someone who has already taken a course on how to source/use fba/ do what ecom mans doing.. I've got to say I still liked the book! It goes very in depth in terms of the technicalities of sourcing and importing which for someone like me who is trying to take this business seriously, is great! I'd definitely recommend it.

One thing I have to ask (which may have been answered elsewhere in this thread - i'll check as soon as I'm done posting) is where you find the products that you want to import. At this point all that I've been doing is scour Amazon Best Sellers which has helped me find a few good products - but I know there HAS to be a better way.. I mean you can't even see past item 100 in any given category. Any tips?
Thanks for your review!

I am not an internet marketer, although the corporate website used by my franchisees when I was running my importing business did morph from a strictly online catalog style to a sales site where people could order online. That applied mostly to the small range of consumer products that been acquired as a result of satisfied B2B customers asking if we could supply such products.

In answer to your question specifically, let me just say that I don't like competition. I can hear all the free market exponents groaning now! "Competition is good for business" etc.

I must say that my competitors were always my best salesmen, because of their poor attitude to customer service, mean attitude towards replacements/refunds etc. Few seem to understand the potential value of making a loss on a sale even if the claim is unwarranted.

Example: I once repaired at our cost a number of faulty items that a competitor had supplied to our customer. The products looked alike, but when I personally delivered the repaired items along with one of ours that had been faulty, I was able to show the difference. The result was that we had a customer for life because we went the extra mile and gave more than could possibly be expected.

Now back to your question .... I always looked for products that were either not subject to a large amount of competition, or where the market was dominated by suppliers who could not care less about their customers, or where product improvements were possible.

Generally you won't find such opportunities among the Amazon Best Sellers list, although if you look at that list from the perspective I have outlined, maybe you will.

There is a big benefit in browsing printed sourcing magazines. You will find some offered on a couple of the sites that I have listed in my book. Quickly flicking through the pages can give you ideas that might not otherwise occur to you. They offer online versions but unless they have flip pages, you should opt for the print version, because browsing page by page is quicker than searching categories.
 
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Walter Hay

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Misinformation is a Wealth Hazard.

Reviewing some “information” websites, eBooks, and posts on various forums relating to importing.

I don’t intend naming names, but if anyone is seriously interested in checking some of the “information” sources I am reviewing I will provide details privately.

Many of the people who publish misinformation rely for their income on those who would believe it if you told them that Webster’s had removed the word gullible from their latest edition. They tend to accept what they read because the person is an “expert.”

I have looked at some of the “success” stories of people selling exciting books teaching “how to import” and I have found not just exaggeration, but plain old BS. But then, a lot of people adopt the approach: “Why let the facts spoil a good story?”

You know how it works…. They give you a free teaser that contains pages of stuff about how they made a fortune importing small quantities, usually from China, and selling on eBay, Amazon, etc., then, when you are all excited they throw in a special offer to upgrade to the paid version.

But what have you been reading? Mark-ups of thousands % on items that they have been able to sell like hot scones.

Do yourself a favor, and before buying the special offer up-sell, do some checking. I did that for you because I know a lot of people never bother, they just accept what is written.

Let me give you a real example from a popular free eBook, offered like so many are, on an “expert’s” blog.

Here’s what was being taught: Buy X00 units of product XYZ from sites such as Alibaba, Aliexpress, etc., and pay only $0.75 each including postage from China. Sell for $13.50 and you will have the lot sold very fast, so you can order more and repeat the process, with a mark-up of about 1800%.

Here’s the reality: The product XYZ was clearly identified and I easily found it on Aliexpress, now slightly cheaper than what the free book said. I then went to eBay, and found the identical product selling, not for $13.50, but $1.95 with free postage. Mark-up 278% but that does not take into account the reseller’s selling costs which could include eBay or Amazon costs, PayPal and postage. A huge amount of work and risk for such a poor return when those costs are deducted.

I know that I have written in an earlier post that there were some products on which I and my former franchisees were happy to accept as low as 250% mark-up, but that was when we sold the items B2B by the hundreds or by thousands, not one at a time on eBay. I encourage new importers to look for high margin products and not stop their searching until they find something that will give them those margins.

Some of these free eBooks I have looked at contain some very good information, but they also contain some very bad advice. A lot of the information in some of them is obsolete too.

It is not only in eBooks that you find misinformation that is not only wrong but potentially hazardous to your wealth.

Here are a couple of items from posts and blog articles by “experts” I have found on forums and from How to Import information sites:

“I mainly use Aliexpress although I have used dhgate before, they are basically the same website.” .......
That is plain ignorance. Those sites are totally unrelated.

“Even better, they…. have onsite inspections from Alibaba.” .......
Every verified supplier has had an onsite inspection and it just proves that the business exists, so that is not better in any way.

DON’T buy from non-gold members. Just following this rule will help you to avoid 98% of the scams and bad suppliers.” .......
I will soon post an article about gold member scams, because dealing with gold suppliers is no guarantee you will not be scammed.

“Another option is AliExpress.com, Alibaba’s site for smaller orders.” .......
Aliexpress is a retail site. It is not Alibaba’s site for small orders. With the right approach you should be able to buy small quantities on Alibaba at lower prices than you would pay on Aliexpress.

“If the company has a verified profile on Global Sources, chances of it being a scam are reduced to an absolute minimum as unlike Alibaba, Global Sources takes it’s verification process very seriously and there are stringent requirements for authentication. So depending on the number of stars a supplier has on Global Sources, you can be sure that you’re dealing with a real company.” ........
See my recent article about GlobalSources. They do not take their verification process any more seriously than Alibaba do. Stars are bought, not earned.

I could quote a lot more, but I don’t want to seem too negative. The main point of this post is to warn that people calling themselves experts who publish eBooks, run training courses, host webinars, post on forums are often (to me) obviously not experts at all, so do your own research to the best of your ability, don’t just rely on experts unless you can be very confident that they do really know what they are talking about.

That applies to me also. Before you take as gospel everything or anything I say you should check out some of the information I have provided. Have I been able to answer every question or have I avoided the issue? Have you checked at least some of my answers to see if they are correct? Bear in mind there will be differences of opinion but there cannot be differences of fact.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Alibaba and the 2236 Thieves.
■ Sourcing from countries other than China. Is it worth it?
■ Part 2. Traveling to source supplies. Visiting factories in China.
■ Parallel Imports USA.
■ Do your suppliers use child labor or slave labor?
Inspection Services.
■ Sourcing Agents and Quality Control.
■ Q & A 1,2,3,4,5,6,7,8,9
 
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LinorCG

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So I finished the book - and as someone who has already taken a course on how to source/use fba/ do what ecom mans doing.. I've got to say I still liked the book! It goes very in depth in terms of the technicalities of sourcing and importing which for someone like me who is trying to take this business seriously, is great! I'd definitely recommend it.
I'd also like to add that I too have finished the book and in parallel going through the steps outlined in the book itself. As I have never done any sourcing/importing before I am really satisfied with the knowledge I gained. Along the way, I added new information (through constant communication with the suppliers and manufacturers) which I'm sure wouldn't know if I went ahead on my own. I'd really recommend it!

So far, I'm waiting for my samples from manufacturers/suppliers and enjoying the process along the way. Thanks @Walter Hay! :)
 

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Followup - As I mentioned before, my item is the about the size and weight of an empty soda can. I am getting shipping quotes ranging from free to $75. When they give me a high quote, I explain I do not need express shipping and request China Post. They usually come back with higher quote. It appears they go and get a quote for express shipping.

Is there some special phrase I need to use to make them understand I want regular shipping? I thought mentioning ePacket would help but it doesn't.
Hi @miked_d, hope this would help, I did have 3 manufacturers who also quoted me with express shipping but I always come back to them saying thanks for the quotation and then telling them that "our company had a successful transactions with China Post before and would like to use them for sample orders." I had to reply back with the same statement a couple of times though and then they replied with the reasons why they couldn't ship with China Post.
 

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miked_d

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Hi @miked_d, hope this would help, I did have 3 manufacturers who also quoted me with express shipping but I always come back to them saying thanks for the quotation and then telling them that "our company had a successful transactions with China Post before and would like to use them for sample orders." I had to reply back with the same statement a couple of times though and then they replied with the reasons why they couldn't ship with China Post.
Thanks for the feedback. I have doing exactly that. Let them know it is "company policy" not to pay for express shipping on samples. Sometimes they budge, sometimes not.

Products with multiple manufacturers are not an issue. There are usually enough manufacturers willing to send samples with favorable term that I can get what I need. The products with few manufacturers occasionally require me to pay.

I look at this as the barrier to entry.
 
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Thanks for the feedback. I have doing exactly that. Let them know it is "company policy" not to pay for express shipping on samples. Sometimes they budge, sometimes not.

Products with multiple manufacturers are not an issue. There are usually enough manufacturers willing to send samples with favorable term that I can get what I need. The products with few manufacturers occasionally require me to pay.

I look at this as the barrier to entry.
Persistence pays. When sourcing, I would never stop at one or two possible suppliers.

If you contact enough of them you must eventually find the best in relation to prices, service, payment terms etc.

The barrier to entry may be your willingness to do the work in getting the best deal.
 

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Hi Walter I have a question for you that might benefit the rest.

lets say you have identified a product to sell on ebay/amazon with good margin. ordered a sample of 10 units to test the market.

at what point do you feel confident in reordering large quantities of that product? when the sample units of 10 sold out in a day? a week? or a month?
 
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Walter Hay

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Hi Walter I have a question for you that might benefit the rest.

lets say you have identified a product to sell on ebay/amazon with good margin. ordered a sample of 10 units to test the market.

at what point do you feel confident in reordering large quantities of that product? when the sample units of 10 sold out in a day? a week? or a month?
I am not shy about admitting to my weaknesses. In this regard it is that I am not an online marketer. My experience in that area was very limited because almost all the sales when I was running my importing business were B2B.

Maybe another member with online selling experience will help us out.
 

vinisterz

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I am not shy about admitting to my weaknesses. In this regard it is that I am not an online marketer. My experience in that area was very limited because almost all the sales when I was running my importing business were B2B.

Maybe another member with online selling experience will help us out.
so for B2B sales, you actually found the demand (pre sell to the customers) first before sourcing the supply?
 
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Walter Hay

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so for B2B sales, you actually found the demand (pre sell to the customers) first before sourcing the supply?
It is difficult to presell on a B2B basis. That is what is known in the importing world as "indent selling". What you do is first locate a good supplier and then offer the product to businesses that use that product. When you get an order, they must pay you in advance, usually by L/C. You can then use that L/C as collateral with the bank to obtain your own L/C to pay your supplier.

I know it sounds like an ideal way to do business but it is hard to convince people these days to buy on indent because doing their own importing is now much easier for them. There is also a risk that they will bypass you for repeat orders, so you only get one-off sales.

In my post Oct 7 in answer to a question by Simon Ashari, I described how I started my 2 main businesses. Business #2 is the one that might interest you most.
 

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In my experience, I've never been scammed by anyone. Most suppliers are also really friendly with awesome support.

My biggest issue is quality. I've tested dozens of different products and plenty of different suppliers. It doesn't matter what the product is, the industry, whether it's electronics or furniture, I've always had issues with the quality control. It does get frustrating, especially when blowing cash on samples with 7-8 suppliers per line of products and all are junk. These are also Gold members on Alibaba with onsite checked and assessed, all the certs are there, some 7-10 year members. There are no clear indicators prior to sampling which would lead me to believe that the products would not be of good quality.

The support is good though. If there's a mistake, they will fix it immediately, but it's not enough. I recently was testing a product and the 2 samples which came in, 1 was faulty. The other worked great and the price was bang on (cheaper than everyone else). So I ordered 8 more samples. 6/8 were defective. They fixed 5 of them and the 6th is still trying to be fixed. It's a waste of my time to be fixing products as they arrive. If I had shipped them out to customers without testing or had a fulfillment center handle my orders, I would have a pretty pissed off customer base. This doesn't work for me, even though they had the product I wanted at the price I wanted. They promise the next order will be fully inspected each and every one of them but I've lost trust in them.

That's my small rant...I find it takes time and money to find a good supplier, regardless of what badges, certs, yrs of experience they have under their belt.

Walter, if you have a better strategy in terms of quality is concerned when looking for a supplier which saves me time and money, would love to hear it :)
 
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In my experience, I've never been scammed by anyone. Most suppliers are also really friendly with awesome support.

My biggest issue is quality. I've tested dozens of different products and plenty of different suppliers. It doesn't matter what the product is, the industry, whether it's electronics or furniture, I've always had issues with the quality control. It does get frustrating, especially when blowing cash on samples with 7-8 suppliers per line of products and all are junk. These are also Gold members on Alibaba with onsite checked and assessed, all the certs are there, some 7-10 year members. There are no clear indicators prior to sampling which would lead me to believe that the products would not be of good quality.

The support is good though. If there's a mistake, they will fix it immediately, but it's not enough. I recently was testing a product and the 2 samples which came in, 1 was faulty. The other worked great and the price was bang on (cheaper than everyone else). So I ordered 8 more samples. 6/8 were defective. They fixed 5 of them and the 6th is still trying to be fixed. It's a waste of my time to be fixing products as they arrive. If I had shipped them out to customers without testing or had a fulfillment center handle my orders, I would have a pretty pissed off customer base. This doesn't work for me, even though they had the product I wanted at the price I wanted. They promise the next order will be fully inspected each and every one of them but I've lost trust in them.

That's my small rant...I find it takes time and money to find a good supplier, regardless of what badges, certs, yrs of experience they have under their belt.

Walter, if you have a better strategy in terms of quality is concerned when looking for a supplier which saves me time and money, would love to hear it :)
Your experience is probably close to average, but there are ways to minimize the QC problem.

The most effective way is not cheap, and is not viable for samples. It involves paying for a good inspection service, so that is really only suitable if your order value is at least $2,000. An alternative is to require that they accept payment by escrow, but beware of the time limits and intricate rules of Alibaba's escrow system.

In the case of samples, I believe it is important to let every supplier know at a very early stage that quality is important to you. That may result in them just carefully testing the samples, but that leaves the risk that they will not do the same for a larger order quantity.

To minimize that risk you speak plainly but very politely when preparing to place your larger order. Tell them that provided their QC continues to be as good as it was with the sample order they can expect long term repeat business. As your experience shows, the support is usually good, so most suppliers will make that extra effort to keep you happy.

Although you may have escaped being scammed I would still avoid using Alibaba because of the verification system's deficiencies. Gold membership is worthless as an indicator of reliability or capability. Onsite Checked likewise. I just now did a random search for bicycles, limiting the search to Assessed Suppliers. Here is what I found:
  • The business is a 9 year Gold Supplier.
  • The business has two Assessed Supplier reports, both are out of date.
  • The reports identify the supplier as a trading company, with premises being 130 m. sq. but in their own profile the company claims to be a manufacturer, with premises between 10,000 and 30,000 m.sq.
  • On their website they claim that they have been manufacturing for 24 years, but on the same site they say the business was established in the year 2000.
  • In their Alibaba profile they claim sales 20 times greater than the figure they claim on their website.
  • Their .cn website does not display an ICP number, and that is illegal.
I assure you this search was truly random. I have never before heard of this company. When a supplier has such conflicting claims and reports on a 9 year Gold Supplier who has had Onsite Checking and is an Assessed Supplier, it gives little reason to be confident in the verification system used by Alibaba.

Regardless of how you locate your suppliers it is vital to build a good relationship with them. For the benefit of all who read this post, don't miss out on sending "Season's" greetings, Western New Year greetings and later, Chinese New Year greetings to your suppliers, as part of the relationship building and maintaining process.

A good relationship is often the best QC you can get.
 
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Freight Options

When getting quotes, importers should look at various freight possibilities. Sea freight, air freight, door to door courier are all options to consider. Suppliers will invariably quote FOB, but therein lies a possible trap.

FOB is a universal shipping term. These are commonly known as Incoterms. FOB means Free On Board at the port of shipping, but the term is widely misused in China, sometimes intentionally, and sometimes out of ignorance. You must have the terms clarified before committing to an order.

If a supplier states FOB works or FOB factory, that is not a proper use of the term. They should say Ex Works (EXW). The cost difference can be huge because inland charges in China from factory to port of loading can be very high. I would never accept a quote FOB factory or EXW. FOB quotes are very often FOB factory, so watch out for that trap.

Door to door courier service can be organized for you by the supplier, or you can arrange it through your own courier. Often you will find that suppliers in China can get much better rates than you can get, so always get a quote from both ends. Suppliers may quote a high courier rate for a sample, but for continuing orders they could usually offer a much better rate.

For the other freight options, sea freight and air freight, I would strongly recommend only working through your local freight forwarder.

Depending on the type of product, its weight, and dimensions, it may pay to use air rather than sea freight. Serious importers will take into account the opportunity cost of having their money tied up in a container at sea for weeks compared to days by air.

I teach my own version of a "Just In Time" ordering system which involves the use of door to door air courier services. This depends for success on several factors. Buying at the right price so that courier costs can be covered. Getting your suppliers to agree to repeat small orders. Getting the best courier rates. Keeping track of sales and your own sales trends so that you can re-order in time.

"Just In Time" allows you to minimize inventory, and in the process it also minimizes the risk of having a lot of dead stock if the market suddenly changes.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Alibaba and the 2236 Thieves.
■ Sourcing from countries other than China. Is it worth it?
■ Part 2. Traveling to source supplies. Visiting factories in China.
■ Parallel Imports USA.
■ Do your suppliers use child labor or slave labor?
Inspection Services.
■ Sourcing Agents and Quality Control.
■ Misinformation Is A Wealth Hazard.
■ Q & A 1,2,3,4,5,6,7,8,9
 

miked_d

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For the other freight options, sea freight and air freight, I would strongly recommend only working through your local freight forwarder.
How does one find a reputable freight forwarder?

I am in the Los Angeles area. I did a web search for freight forwarders and got thousands of results. A search on the online yellow pages came up with 400 results. That is a lot of choices!
 

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Walter Hay

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miked_d

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Thanks for that. I will contact hem in the morning.

I was going to ask for tips on finding a forwarder so that others could use the info, but I am thinking that freight forwarders are a bit localized. Is that true? I would want whoever I use to have experience with the incoming port.
 
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Walter Hay

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Thanks for that. I will contact hem in the morning.

I was going to ask for tips on finding a forwarder so that others could use the info, but I am thinking that freight forwarders are a bit localized. Is that true? I would want whoever I use to have experience with the incoming port.
A good forwarder will be able to handle consignments to any port in the country, but yes, there can be some advantage in local knowledge.

Because of the international character of this forum, here is a link that will enable members to locate forwarders in many different countries: http://www.effa.com/
 
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Walter Hay

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Q 10 I have posted this question from another forum because it shows how people blunder into buying overseas without having a clue what they are doing. I try to help such people avoid the almost inevitable consequences of their folly, but I can’t post 83 pages. This newbie is totally confused, and in addition to my published answer I have sent him a PM to try to rescue him because he is about to lose a lot of money.

Q. Hello all, I am new to importing and will become an import expert with time.

I am starting a company and importing a product from China (Shenzhen). The market responds well to this particular product so that's not the problem. I am not sure of the exact process for importing and I've read all the threads on this forum, but experience is always better than reading tons of info.

My question is with the big importing companies out there, DHL, FedEx and UPS. Which of these supplies the best value and simplicity for importing a product from China? From getting the product to getting it to my company location?

The manufacturer is FOB: Port Shenzhen. I would like to get this product sooner than via ship since it's almost the holiday season. Since their terms are FOB, can I use an agent of some sort to go from FOB Shenzhen to Air? I live in Cincinnati Ohio and would like to go FOB Shenzhen to Air Hong Kong to Cincinnati Ohio. I believe I will be using DHL for this but wanted ideas to make this easier and cost effective. Product is only about $1500 USD at most.

I have not requested other means of shipment with the supplier due to the quote being FOB. I will ask door to door. With DHL, will they cover all the customs clearance, and everything else logistically speaking once I give the manufacturer an account, I will update the quote from them and see if they are able to air express via door to door.

A. Relying only on information found on forums can lead you to learning by very expensive experience. There are many publications available online (not only mine) to teach you what you need to know. If you are willing to risk $1500 to gain experience; that is up to you, but for a few dollars you might be able to learn by other people’s experience. Let someone else make the mistakes and bear the cost of those mistakes. For your own sake, please get some real help from someone - anyone - who actually knows something about importing. You could probably get more valuable help from DHL, FedEx, or UPS than you will find on forums. Give them a call and ask what should you do.

DHL, FedEx and UPS are not importing companies, they are carriers. They can pick up your goods and deliver to your door, but before you commit to an order, get proper quotes first. It is quite possible that freight on your $1500 shipment could be more than $1500!

You do not want an agent to “go from FOB Shenzhen to Air Hong Kong….”. You either want to have a freight forwarder organize the whole process from the point of collection at the supplier’s factory through to delivery to your address, or you want a courier company to do the same.

You do not have to accept the supplier’s standard quote of FOB Shenzhen. Ask them to quote you for door to door air courier, but the quote must include Customs clearance. Once you pick your jaw up off the floor, you can then ask your local freight forwarder to quote you for air freight door to door (Not air courier door to door). This quote must be in writing and must include Customs clearance. It will be cheaper than air courier, but a bit slower.
 
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Xel

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Hi Walter, thank you for doing this AMA it has been very helpful to the community.

I have been pondering trying my hand at importing products from afar. Specifically I am interested in cloth type products. I have read that the duty on textiles coming into the USA are rather high. I remember reading that there may be countries that the duty would not apply from due to trade agreements. Do you happen to know to which countries this would apply? And how does one go about sourcing manufacturers in countries not named China? I see a lot of sites to find manufacturers in China, but not say Mexico or other Latin American countries.
 
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Walter Hay

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Hi Walter, thank you for doing this AMA it has been very helpful to the community.

I have been pondering trying my hand at importing products from afar. Specifically I am interested in cloth type products. I have read that the duty on textiles coming into the USA are rather high. I remember reading that there may be countries that the duty would not apply from due to trade agreements. Do you happen to know to which countries this would apply? And how does one go about sourcing manufacturers in countries not named China? I see a lot of sites to find manufacturers in China, but not say Mexico or other Latin American countries.
Textiles and clothing would be product categories that I would find least attractive commercially.

The textile industry and the clothing industry are very heavily protected. Free trade agreements tend to be weighted heavily in favor of the US textile manufacturing industry.

For example, duty on clothing is lowered and in some cases waived, if the clothing is manufactured using US made textiles. You will find that duty rates on textiles will still make life difficult for you as an importer.

B2B sites that cover Mexico and other Latin American countries tend to be offspring of Chinese or Indian sourcing sites with all their attendant risks. I list 25 B2B sites in my book. Several I identify as safe to use, and for the others I identify the possible risks and how to minimize them. Unfortunately, for many of those sites that I refer to as offspring of Chinese or Indian sourcing sites, there is no way that I can suggest using them that is not without significant risk.
 
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Walter Hay

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B2B Scams.

The popular B2B sourcing sites attract not only legitimate businesses but also many professional scammers from various countries, not only China. Scamming is big business, with thousands of scams being reported every year.

The biggest problem from my point of view is that most B2B sites are not providing realistic verification of suppliers and this leaves great opportunities for those who know the simple procedures that are needed in order to look genuine. Here is a comment on this subject by Mr Yulin Yuan, the owner of a well-established inspection service in China: “Normally the scammers cannot obtain a real Business License or Export License from local officials, but they can obtain some license samples online in China, then they will use Photoshop or other technics to change the names, business scopes or registered captial etc. They can even 'make' an official Stamp or Chop easily. This is why you can see there are so many scammers online worldwide. The license look exactly the same as the real one, you can hardly check them out without professional knowlege in Chinese. A Business License can tell you whether they are real manufacturer or not in China ( their business scope, registered capital, legal representative, history and address etc. ) Good luck, everybody!

There are some sites where verification is thorough and real, but I consider it irresponsible to send people to those safe sites unless I know they have an understanding of safe sourcing practice. From my experience in dealing with many hundreds of newbie importers I know that very few really understand the risks. Many are lucky, but a greater number make costly mistakes.

Most would-be importers still flock to Alibaba for product sourcing, so that site gets the lion’s share of my criticism, but when you read through this post you will see that other sites are just as bad.

In an earlier post I wrote about a news item “Alibaba and the 2336 thieves” dealing with Gold Supplier scams admitted by Alibaba. Well, the system used by almost every big B2B site is very similar. The purpose of this post is to alert Fastlane members to the fact that there are risks in using the popular sites for sourcing.

Rather than rely on the fact that so many people say Alibaba or some other site is great, why not do some checking for yourself?

I will start with Alibaba: There are many places to look and get the stories from people who won’t recommend Alibaba and I will mention one of them later, but there is no place better than Alibaba itself !

Alibaba have their own very extensive forum. Below is a link to the section of Alibaba’s discussion forums where Alibaba staff and buyers post comments. Please note that some of the posts with various user names are obviously posted by Alibaba employees.

When looking for comments from buyers I suggest you scroll down the threads list until you find threads with numerous replies. http://resources.alibaba.com/discussion_board/88/Safe_Trading_Basics.htm

The thread THREE SIMPLE SIGNS OF B2B SCAMS in the Forum section: “SAFE TRADING BASICS” begins with a much too basic introduction by admin and includes this: "Just because a company has a professional-looking website or has set up shop in an online marketplace like Alibaba.com doesn't automatically make them legitimate."

Then a potential buyer new to Alibaba posted in reply to that point: “And Alibaba claims these suppliers have been verified. How do you reconcile this contradiction?”

Like almost all critical comments posted on the Alibaba forums, this one went unanswered. The reason must be that it is unanswerable. The verification process is clearly intended to make buyers believe that the verified supplier is legitimate.

Tradekey also has a community forum at http://community.tradekey.com/forum-88/Report_Suspicious_Companies/0/1320.html There you will find many posts by Tradekey buyers complaining about being scammed by suppliers found on that site. It is necessary to start at Page 133, because the first 132 pages are full of spam. As is the case with Alibaba, Tradekey staff post a lot of replies.

Here is one post from a UK Tradekey user, minus the last two rather offensive paragraphs: ”Its a typical situation that tradekey makes money from, GOLD MEMBERS a lot of the gold members pay to get there Gold membership and tradekey does nothing to verifiy the legitimacy of these companies
1. so eventually a GOLD member scams and makes alot of money from unsuspecting buyers,
2. buyer complains to trade key
3. the GOLD member gets shut down
4. All complaints get logged, BUT THE SELLER IS NEVER FOUND BECAUSE HE/SHE IS USING A FRAUDLENT ADDRESS AND COMPANY DETAILS (tradekey.com fault becasue they fail to check and verifiy if the seller is legitimate) the same seller then PAYS FOR ANOTHER GOLD MEMBER PASS, NEW COMPANY NAMES MADE UP (tradekey.com MAKES MONEY)


EC21.COM has a community forum here: http://community.ec21.com/forum/viewforum.jsp?forum_id=90000006 This is a link to the Report and Verify Fraud forum. Note, EC21’s Gold Supplier equivalent is Trade Pro. Here is one of the posts. Sorry it is all in caps, but the buyer is clearly very upset.

“EC21 DOES NOTHING TO STOP FRAUD - AMITY SAMCO TRADERS FRAUD


THE SELLER THAT RIPPED ME OFF STILL HAS AN ACTIVE PROFILE THAT SAYS TRADE PRO VERIFIED SINCE 2014. THESE SCAMMERS HAVE THE ENDORSEMENT OF EC21. EC21 HAS DONE NOTHING ABOUT THIS FRAUD EXCEPT TO CONTINUE TO LET AMITY SAMCO TRADERS KEEP A PROFILE UP WITH THEIR ENDORSEMENT, THIS IS TOTAL BULLSHIT. YOU CANNOT RELY ON EC21 TO DO ANYTHING ABOUT FRAUD.”


Most B2B sites don't have a community forum, but with little effort you can find comments posted online by buyers unhappy with the sloppy verification process used by most B2B sites.

http://alibabascam.com/ As of today’s date there are 738 denunciations of Alibaba suppliers on this site. If you go to the site tomorrow you will find more complaints added. Many of the suppliers mentioned are Gold Suppliers.

http://www.sitejabber.com/reviews/www.dhgate.com This site has recorded 1483 reports on dhgate and they rate 2.9. Over 600 people gave a 1 star rating and many lamented that one star is the minimum allowed.

I hope this rather depressing post does not deter entrepreneurs from entering the high profit world of importing. There are many who have succeeded, some without mishap.
 

Xel

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Textiles and clothing would be product categories that I would find least attractive commercially.

The textile industry and the clothing industry are very heavily protected. Free trade agreements tend to be weighted heavily in favor of the US textile manufacturing industry.

For example, duty on clothing is lowered and in some cases waived, if the clothing is manufactured using US made textiles. You will find that duty rates on textiles will still make life difficult for you as an importer.
OK I'm trying to wrap my head around this. Say I want to import cotton T shirts.

http://hts.usitc.gov/ Chapter 52 Cotton, of the Harmonized Tariff Schedule of the United States. There are so many sub headings that I can't make sense of what would qualify as a T shirt. But assuming I could identify a sub heading, duty owed would be in column 1. Column 1 is broken into General and Special. If a special agreement is in place with a country, you pay the special rate not the general rate. Column 2 looks like it only applies to North Korea and or Cuba. Do I have that right?

I see rates of anywhere from 3% to 16.5% in general, but if you import from one of the special countries its free or very low. I'm just wondering why you would steer completely free of textile products. The duties don't look overly aggressive and they can be avoided by sourcing from the right country. Am I missing something?
 
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Walter Hay

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OK I'm trying to wrap my head around this. Say I want to import cotton T shirts.

http://hts.usitc.gov/ Chapter 52 Cotton, of the Harmonized Tariff Schedule of the United States. There are so many sub headings that I can't make sense of what would qualify as a T shirt. But assuming I could identify a sub heading, duty owed would be in column 1. Column 1 is broken into General and Special. If a special agreement is in place with a country, you pay the special rate not the general rate. Column 2 looks like it only applies to North Korea and or Cuba. Do I have that right?

I see rates of anywhere from 3% to 16.5% in general, but if you import from one of the special countries its free or very low. I'm just wondering why you would steer completely free of textile products. The duties don't look overly aggressive and they can be avoided by sourcing from the right country. Am I missing something?
Yes you got it right. The HS code for T Shirts is 6205.30.0000 and the duty rate is 25.9% plus $0.291 per kg. There is also a "Merchandise Processing Fee" to add to that, and that fee is not usually quoted in advance.

One of the the biggest problems I see is the very thing you could not make sense of: Definitions. The two best ways around this are:
1. Get a ruling from USCBP in advance of placing an order. Those written rulings are like money in your pocket if the ruling favors you. No matter what the USCBP officer assessing your shipment had for breakfast that day, that ruling stands. (Even if it was actually incorrect!)
2. Get advice from a licensed customs broker. This will not have the standing of a USCBP ruling, but it could save you going to a lot of trouble and finding that your research has led you to believe that a product has a certain HS code or tariff rate etc., but the assessing officer thinks otherwise. Unless it is big money involved you don't want to try to dispute their decision.

I am not a licensed customs broker and for years I have preferred to pay one to do the donkey work for me, so don't rely on my assessment. I know how it all works, but the rules and regulations, including definitions are continually changing. That is why paid advice is worth it in my opinion. I prefer to spend my time doing more rewarding things.

Your reference to items from some countries being duty free is no longer applicable. The Generalized System Of Preferences (GSP) expired in July last year in the US, and now MFN rates apply. This is a good example of the constant changes taking place and the need to keep up to date. I generally don't and if I was still importing I would not bother because it is so time consuming. I would pay a broker.

Walter
 
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