How to Import from China
CREDIT: Dirk Ercken | Shutterstock
With 90 percent of the world's goods being manufactured in China and more than 80 percent of goods imported worldwide from China, it only makes sense for entrepreneurs and businesses to import from this high-growth country. Low labor costs and cheaper production inputs allow for a higher profit margin than if importing from other countries. Thanks to the high manufacturing capacity, the transit times of import products are much faster coming from China.
The first step to importing is selecting the imported products. Your business depends on the products it sells, so do some research and choose wisely. Some products commonly imported from China to the United States include:
- Toys and games
- Electrical machinery and equipment
- Optics and medical equipment
After the product has been chosen, find an import supplier that you can trust. Decide on whether you want to go with a manufacturer or a third-party supplier — there are pros and cons to both. While manufacturers are quicker during the product development process, third-party suppliers can meet a broader range of needs throughout the supply chain process.
It's important to vet potential suppliers by finding out as much information as you can about them. While you can communicate online, it's better to meet with suppliers face to face, assuming you can travel to China. Ask them about their companies, and get a list of other clients if possible. Once you've confirmed what they told you, ask for product samples to evaluate the quality of the suppliers. Though you may pay for transaction costs associated with samples, it's a good way to see how the supplier works and familiarize yourself with their shipping and payment terms. Don't rush into choosing a supplier — there is plenty of time. The product will always be available, and proper research may help you find a better deal.
At this point, you should start researching the landing cost, which is the sum of the cost of the goods' FOB (Free On Board), transport costs by forwarder, import duties, local transport costs, and cost of service providers, i.e. inspections, agents, etc. There are a number of hidden fees, and an import management company can help minimize the landing cost. Consult a freight forwarder for a cost breakdown.
The final (and often toughest) stage is negotiating trade terms with your supplier. Discuss shipping terms and payment terms with your supplier, as well as a down payment. Import management companies can help negotiate these terms, though a common arrangement is to pay 30 percent at the time of the order and 70 percent when the product ships. Never pay the full purchase price upfront — if there's a delay in the shipping or problem with the product, it is likely you will never see that money again. Walk away from any supplier who demands you do so.
Tips for importing from China:
- Inspect the factories if possible.
- Plan on a late delivery and higher landing costs, which are both likely.
- Check the import regulations and be familiar with the government agencies involved. Compliance issues may vary depending on the product.
- Check the quality of your product by appointing an inspection company.
- Keep your records and documents regarding all transactions, including transportation and customs clearance.
- Double check your shipments for damage or improper manufacturing.