Buyer’s Guide 2019 Electronics

Getting started

This document serves as a practical step-by-step guide to manufacturing and importing products in China. However, before you start, you must read and understand the following:

 

Using the Buyer’s Guide

This document is meant to be used as step-by-step guide. All tasks (i.e., 1.2 and 1.3) are presented in chronological order. Hence, you shall not skip any task or sub-part in this guide, if you wish to get the maximum value out of the process. We advise you to read through the entire Buyer’s Guide before you start the process, and use it as a reference as you go through each task, one by one.

 

Task Lists

Each part in the Buyer’s Guide includes a task list. This task list is a summary of all steps that must be taken to complete a certain part of the import process.

 

Table of Content

Part 1 : Create a Product Specification Document

  • Introduction
  • Research Product specification
  • Draft a product specification sheet
  • Create label files
  • Create design files
  • Research applicable product specification
  • Task list

Part 2 : Supplier Research

  • Introduction 
  • Create supplier RFQ (Request for Quotation) file
  • Create a supplier shortlist 
  • Contact supplier and send RFQ file
  • Contact supplier and product information
  • Final supplier selection
  • Task list
  • Attachment : Electronics trade shows
  • Attachment : Guide to communicating with Chinese supplier
  • Attachment : guide to price negotiation

Part 3 : Product Development

  • Introduction 
  • Product sample spec sheet 
  • Sample production
  • Task list

Part 4 : Production

  • Introduction
  • Sales agreement
  • Production
  • Quality control
  • Product compliance 
  • Balance payment 
  • Shipping
  • Task list 

 Glossary

 

Broken website links and outdated contact details

This guide contains links to other websites, and contact details to relevant authorities and service providers. Since websites are often updated, which is outside of our control, it’s possible that some links may become outdated. Please report any broken website links or outdated contact details to info@sino-shipping.com.

 

Source

The process described in this document is largely based on processes applied by our partners (both for Sino-Shiping , and on behalf of other companies). The methods described here apply broadly to many different product categories.

 

Always contact local authorities

Before you apply the methods described in this document, and import goods from overseas, we strongly recommend you to consult with your local authorities. All countries and markets have their own set of product safety standards, labelling requirements and customs procedures.

 

Limitation of our liability

This document shall not be considered as legal advice – and we do not offer insurance, or any other form of compensation, in case of loss, IP theft, damage, injury or death resulting, as a result of the information in this document being incorrect, erroneous, misleading, ambiguous, incomplete, outdated or modified. Regulations are subject to change, and it is within the limits of reason to assume that we may have misinterpreted one or more of the regulations, and processes, described in this document.

 

Part 1 : Create a Product Specification Document

 

1.0 Introduction

A Product Specification is all the information that describes your product. It may, for example, include the following :

  • Design drawings
  • Material specifications
  • Functional descriptions
  • Dimensions
  • Tolerances
  • Labels
  • Product safety standards
  • Physical reference samples and materials

In this part, your goal is to prepare all relevant product specifications, including datasheets, design files and labels. In Part 2, you will learn how to submit the product specification to various suppliers.

 

Why do I need a product specification ?

Manufacturers in Asia produce goods entirely according to the buyers specification. They themselves have very little, if any, investments into R&D of their own products.

It is critical that you don’t leave gaps in your specification. If you do (i.e., forget to specify the correct Pantone color), the supplier will fill in the gap for you.

Gaps in the specification is far more often the cause of severe quality issues, as compared to frauds.

The Product specification Document is the foundation of the entire process. Your product can only be as good as it is in the specification files.

 

Do I need a product specification if I buy private label (ODM) products ?

Yes. The difference, as compared to when you develop a custom (OEM) product, is that you must ‘reverse engineer’ a product.

That said, buying private label (or ODM) is rarely a shortcut, as you must :

  1. Buy product samples
  2. Research all relevant product specifications (i.e. list all components and dimensions)
  3. Confirm all quality options for all product specifications (i.e., all available materials for a certain component)

Even when buying private labeling products, you can never assume that the supplier will adhere to the quality of provided samples (most lack internal quality guidelines, as they are used to rely on the buyer’s specifications).

 

What is a Bill of Materials ?

A Bill of Materials (BoM) is a summary of all components, materials and the quantity per unit. Below follows a basic example :

  • Component A, 2 pcs
  • Component B, 2 pcs
  • Material A, 0.2 m2

The BoM helps the supplier to calculate units costs.

 

1.1 Research product specifications

First, you must identify the various product specifications, for your product. A product specification is any piece of product data that defines the design, quality and functionality of your item.

However, before you can create a product specification, you need to identify the following :

  1. Product Specifications (i.e., dimensions, components, materials, dimensions)
  2. Quality Options (i.e., all available customization options for each specification)

If you have little previous experience with your product, you may review product descriptions found on the following websites, to identify relevant product specifications and quality options :

  1. Amazon.com
  2. Ebay.com
  3. Alibaba.com
  4. Globalsources.com
  5. HKTDC.com

 

1.2 Draft a product specification sheet

The Product specification document (sometimes called Spec Sheet or Product Documentation) is the core the process. You need to keep an updated Product specification for all SKUs you develop or sell. In Part 2, you will submit the product specification to the suppliers.

 

Case Study A : GU10 LED Light Bulb Spec Sheet

Part Product Data

Sub Part

Sample Data

Technical Specs

  • Type : ODM (Factory Design)
  • Lamp Wattage : 7 Watts
  • Base Fitting : GU10
  • Voltage : 240 V AC
  • Dimmable : Yes
  • Power Factor : PF > 85
  • LED Chip Type : COB
  • LED Chip Brand : Sharp
  • LED Chip Model : Unspecified
  • CRI : Min. Ra > 80
  • Beam Angle : 60 Degrees
  • Lens Type : Anti-Glare clear lens
  • Body type : Aluminium
  • Color : 2700, 3000, 4000, 6000 Kelvin
  • Base Color : White
  • Product Size : ∅ 50 x 55 mm
  • IP : 63

Safety Requirements

  • Short Circuit Protection : Yes
  • Open Circuit Protection : Yes
  • Reverse Polarity Protection (RPP : Yes)

Bill of Materials

  • Component A, 2 pcs
  • Component B, 1 pcs
  • Component X, X pcs

Packaging

  • Material : Paperboard
  • Thickness : 420 gsm
  • Dimensions : 120 x 120 x 105 mm
  • Design : See Attachment

File Attachments

Packaging Design File

  • Packaging-layout.pdf

Print Files

  • GU10 Bulb Print : product-print.ai
  • Packaging Artwork : packaging-artwork.ai

Note : The table above is non-exhaustive and does not include all product specifications that are relevant for this product category

 

Case Study B: GU10 LED Bulb Light Quality Option


specification product

Note : The table above is non-exhaustive and does not include all quality options that are relevant for this product category.

 

Template 1A : Product Specification Document

Specifications product, supplier

Description : This template is used to list all relevant product specifications, list all components (Bill of Materials) and product compliance requirements (i.e., safety standards), and index all file attachments. Ensure that this document is always kept updated, in case you may need any changes to your product specification. Notice that you may modify this template to ensure that it suits your needs.

Formats

Colors

Most suppliers use the Pantone color system while others use the RAL color system. Withinthese two color systems, there are also series (i.e., Pantone Series C). Different suppliers work with different color series. Never refer to digital color systems, such as RGB.

Dimensions

Normally, all measurements shall be specified using the metric system (i.e.,, mm, cm and m) instead of the Imperial or the United States system of measurements (i.e., inch).

You don’t want your supplier to unknowingly convert inch into centimeters. However, the latter is used for certain products, such as screens.

Weight

Always refer to kilograms when specifying the weight or density of a product or material.

Print and label files

Most suppliers use the following file formats for print or label files :

  1. eps
  2. ai

3D / CAD files

Suppliers in China use different CAD file formats. While you need to create your CAD files before you start contacting suppliers (at which point you can confirm which file formats they use), you should, if possible, use a program that enables you to convert format to another.

Below follows an overview of common CAD file formats used by Chinese suppliers :

  1. dwg (AutoCAD)
  2. stl (3D Systems)

Note : You are advised to provide 2D design drawings showing the product from different angles, as a complement to the CAD file/s.

Design Drawings

A Design drawing must show the product and/or its components from all possible angles, and with specified dimensions and comments. While not mandatory, you may use any of the following formats for your design drawings:

  1. ANSI (American)
  2. ISO (World standard)

 

1.3 Create label files

Label files includes the following :

  • Logos
  • Prints
  • Engravings
  • Artwork

Label files must be provided ‘ready made’ to the suppliers. A label file shall include the following data :

  • Text / Graphics
  • Dimensions
  • Color

In addition, you must also provide the following :

  • Print / label position
  • Font file

Note : Most suppliers use .ai or .eps file formats for labels

 

1.4 Create design files

You need to provide the supplier with all relevant design files. This may include the following :

  • CAD files
  • Design drawings
  • Dimension tables
  • Photocopies

Before you send the files to your supplier, confirm which formats they accept for each design file.

Note : It is important to list all design files as attachments in the product specification. Ensure that the supplier cannot easily mix up the design files.

 

1.5 Research applicable product regulations

Most products are regulated by a set of safety standards, substance restrictions, document requirements and labeling requirements. In this section, we provide you with a regulatory overview.

However, notice that existing regulations can change, and new can be added. Hence, the information in this section may be outdated and is to be considered as for reference only.

To reduce your risks, you are equipped with both contact details to relevant authorities, which can offer additional guidance on the procedures, and a compliance checklist.

Product regulations are sets of standards and requirements aimed ensuring that a using a product is safe from a consumer, and sometimes environmental, perspective. Product regulations cover everything from safety standards and chemical restrictions, to labeling requirements used to signal compliance, and document requirements.

 

Product Régulations

Refers to a set of safety standards, substance restrictions, document, labeling and testing requirements. As an Importer, it is your responsibility to identify all applicable product regulations, and ensure that the goods are fully compliant.

In the case of Electronics, product regulations can often be grouped into two categories:

  1. Electrical safety
  2. Electromagnetic compatibility (EMC)

 

Substance Restrictions

Restricts chemicals (i.e., phthalates and AZO dyes) and other substances (i.e., lead and cadmium) in raw materials, components and paints. A substance regulation often lists hundreds of restricted substances.

A product may contain a restricted substance, if there is a set threshold. Products containing restricted substances in amounts exceeding the specified limits, may be illegal to sell – or must be labeled accordingly.

 

Labeling Requirements

Mandatory labeling requirements set standards for product unit and packaging labeling. May include country of origin labels, warning labels, product description and compliance marks.

 

Document Requirements

Certain markets require that the Importer provides a set of documents. This may refer to a self issued product certificate or declaration – or a test report issued by a third party. Such document requirements may or may not be mandatory.

 

Testing Requirements

For some products, third party testing is mandatory. Hence, you must collect and submit samples to a third party compliance testing company.

However, even if testing is not mandatory, you may still want to consider submitting samples for laboratory testing – as a way to verify compliance.

 

United States

FCC Part 15 (Intentional Radiators)

An intentional radiator is a device that is intended to emit radio energy. This scope includes any WiFi and Bluetooth Enabled device.

 

FCC Part 15 (Unintentional Radiators)

An unintentional radiator is, in 47 CFR 15.3, defined as any electrical device “operating at over 9000 pulses per second (9 kHz) and using digital techniques”.

This definition includes most consumer electronics containing a chip, such as USB enabled devices, even if not equipped with a WiFi or Bluetooth transmitter.

 

Underwriter Laboratories (UL) Standards

Underwriter Laboratories develops safety standards for electronics and components. While UL compliance is not required by law, most retailers will not buy products that are not UL certified / listed. UL compliance among Chinese manufacturers is very rare in most industries.

 

California Proposition 65

CA Prop 65 restricts more than 800 substances in consumer products. You must ensure compliance with CAProp 65 if any of the two following conditions are fulfilled :

  1. Your business is based in the State of California
  2. You intend to sell your products to consumers in the State of California

CA Prop 65 testing is normally not mandatory, if you attach a warning label. However, if you don’t wish to attach a warning label, you must verify that the product is CA Prop 65 compliant.

 

Federal Hazardous Substances Act (FHSA) / CPSC Regulated Substances

The FHSA regulates hazardous substances , some of which may be found in certain materials. Such substances include formaldehyde, and may be expanded to cover additional substances in the future.

Warning labelling is required, if the the buyer has reason to believe that the product contains more than 1% formaldehyde (or any other CPSC regulated substance).

 

FCC Labeling Requirements

FCC regulated products must comply with the applicable labelling requirements.

As with the certification procedure, different labelling requirements apply depending on the product, and whether it’s classified as an intentional or unintentional radiator.

Normally, the FCC label shall be permanently affixed to the product unit (i.e. no stickers or temporary labels).

However, recent changes to this rule will allow businesses to label the items digitally (e.g. in the software),rather than printing the FCC logo, or compliance statement , on the product unit.

On the other hand, items that are not within the FCC scope of regulations may not be labelled with the FCC logo.

 

FCC Document Requirements

There are various certification procedures. One of the following applies, depending on the type of product and its classification as either an Intentional or Unintentional radiator:

  • Certification : Must be submitted to a third party testing company and/or the FCC
  • Verification : Self issued certification based on the suppliers in house testing
  • Declaration of Conformity : The supplier must perform in house testing and submit a sample for further testing to an accredited third party

 

Other Document Requirements

You may need to issue a General Certificate of Conformity (GCC)

 

Testing Requirements

The Importer is, for certain products, allowed to issue an FCC Verification of Compliance based on their own compliance testing.

As said, this is limited to specific products, and not applicable to all items. Many other products must pass an equipment authorization procedure performed by an authorized third party.

 

General Labeling Requirements

Country of Origin labeling is mandatory (i.e., Made in China)

 

Contact information

The content provided in this guide is exclusively for an informational purpose, and shall not be relied upon as always accurate or up to date. Product regulations can change at any time. As such, it is critical that you contact the authorities in your market, to confirm all applicable requirements.

Agency / Authority

Products / Area

Description

CPSC

Apparel, Textiles,

Toys, Children’s

Products, Watches,

Jewelry, Accessories,

General Consumer

Goods, Other

The U.S. Consumer Product Safety Commission (CPSC) administers and develops product regulations and substance bans. It also issues recalls of products that have already been placed on the market.

 

On the website, you can find information about product standards and substance restrictions.

Small Business

Ombudsman (CPSC)

Apparel, Textiles,

Toys, Children’s

Products, Watches,

Jewelry, Accessories,

General Consumer

Goods, Other

The CPSC offers a free online advisory service for small businesses.

 

The Small Business Ombudsman can offer you quick and free guidance on all CPSC regulations.

FTC

N/A

The Federal Trade Commission (FTC) monitors business practices. On its website, you can find information about labeling requirements and other trade regulations.

CPB

N/A

The U.S. Customs and Border Protection collects import duties and enforce trade regulations. On its website, you can find information about labeling requirements and other trade regulations.

OEHHA

General

Consumer Goods

Office of Environmental Health Hazard Assessment

(OEHHA) is a California state department, which develops and administers CA Prop 65.

FDA

Food Contact

Materials, Food &

Beverage, Medical

Devices

The Food and Drugs Administration (FDA) develops and enforces regulations related to food contact materials, food products, medical products and other.

FCC

Electronics

The Federal Communications Commission (FCC) regulates electromagnetic compatibility (EMC) in electrical devices. This includes technical standards, document requirements and labeling requirements.

Other

  • CPSIA applies to infants and children’s electronics
  • Additional regulations may apply in your state. Contact your local authorities to confirm if any additional regulations or substance bans are in place
  • Beside Part 15, other Parts of FCC 47 CFR may apply to specific electronics devices. For instance, Part 18 covers industrial, scientific, and medical equipment (ISM) that emits electromagnetic energy on frequencies within the radio frequency spectrum in order to prevent harmful interference to authorized radio communication services.

 

European Union

Low Voltage Directive (LVD)

The LVD applies to electronics, and components, with an input, or output, ranging between 50 to 1000 volts AC, and 75 to 1500 volts DC.

As such, the Low Voltage Directive is not applicable to most handheld devices, but does cover, for example, phone and laptop chargers.

 

Electromagnetic Compatibility (EMC) Directive

The EMC Directive is applicable to fixed electronic appliances. The purpose is to ensure that electrical equipment don’t interfere with other electronics, and signals, in its proximity.

While the EMC Directive is applicable to a wide range of products, certification may not be mandatory for certain smaller devices, which are very unlikely to interfere with other electronics.

 

Radio and Telecommunication Terminal Equipment (R&TTE) Directive

The R&TTE directive is applicable to radio and telecommunication equipment. The scope of regulations includes both final products and individual components. Therefore, products with radio, WiFi and Bluetooth transmitters and receivers are required to comply.

Note : that the R&TTE Directive covers both the LVD and EMC Directive.

 

Ecodesign Directive

The Ecodesign Directives is applicable to ‘energy-using’ electronics (and other products, such as insulation materials), including LED light bulbs, water boilers and other home appliances.

 

Restriction of Hazardous Substances Directive (RoHS)

The RoHS directive restricts the amounts of certain substances in electronics, including lead, cadmium and mercury. A similar legislation is being implemented in other countries around the world, including Korea and India.

 

REACH

The REACH regulation restricts substances in all consumer goods. A product containing excessive amounts of restricted substances (i.e., lead and cadmium) cannot be legally placed on the market.

Third party REACH compliance testing is not required by law , as of today. However, compliance is mandatory. Whether or not you shall submit samples for testing is a matter of balancing costs and risks.

 

EU Battery Directive

Regulates heavy metals, such as mercury and cadmium, in batteries. We suggest that you instruct your supplier to only procure batteries from well known manufacturers, such as Samsung, TDK and Maxell – as their batteries are compliant with the EU Battery Directive.

 

CE Marking

The CE mark signals compliance with all applicable EN directives*, for example the EMC Directive, R&TTE and RoHS. As such, all electronic products must be CE marked. Normally, the CE mark is affixed to the product unit, the packaging and the manual.

*CE marking is not mandatory for all EU directives. A product that is not covered by an EU directive that requires CE marking shall not be CE marked. On the other hand, a product that is within the scope of a ‘CE marking’ EU directive must be CE marked.

 

WEEE Marking

Unlike the CE mark, the WEEE mark is not used to indicate compliance with any technical standard. Instead, the WEEE mark signals that the device must be handled within a producer recycling scheme.

 

Energy Labeling Marking

For ‘energy-using’ electronics (and other products, such as insulation materials), including LED light bulbs, water boilers and other home appliances, the Energy Labelling Directive may complement the Ecodesign requirements with mandatory labelling requirements.

 

Electronics Document Requirements

All products covered by one or more CE marking directives (i.e., LVD or RoHS) must also come with a technical file. These documents are ordered and/or created by the Importer, and held for at least 10 years.

The technical file may be required by the customs authorities, or other market surveillance authorities after the goods have been placed on the market.

The following documents are often included in a Technical file :

  • Declaration of Conformity (DoC)
  • Test reports
  • Bill of Materials
  • Design drawings
  • Circuit drawings
  • Label copies
  • List of applied directives and standards
  • Risk assessment
  • Other

 

General Product Safety Directive

The purpose of the General Product Safety Directive (GPSD) 2001/95/EC is to ensure that all products are safe, even if no product specific standard exists for a certain product. However, the GDSP is applicable to all products, including those that are within the scope of one or more (additional) EU directives.

From a seller perspective, this means that you must foresee how the consumers may use a product, and ensure that the design is not flawed in a way that may cause injury to the customer. Notice that you must consider the behaviour of not only adults, but also young children and infants.

For certain product categories, there are specific harmonised standards, as part of the GPSD. Notice that the list is updated regularly, it may not be complete and it does not have any legal validity ; only publication in the Official Journal gives legal effect.

Also note that the GPSD is not a CE marking Directive.

 

Electronics Testing Requirements

Whether or not third party testing is mandatory depends on the product. However, as third party testing is the only way to verify product compliance, you are advised to submit samples for third party testing – even if the applicable regulations don’t require that.

 

Contact information

The content provided in this guide is exclusively for an informational purpose, and shall not be relied upon as always accurate or up to date. Product regulations can change at any time. As such, it is critical that you contact the authorities in your market, to confirm all applicable requirements.

Other

  • You can buy a complete compliance requirements list, and create the CE Technical file, for your product on ProductIP.com
  • EN 71 is applicable to electrical toys and other children’s products.
  • Additional regulations may apply in your country. Always consult your local consumer goods surveillance authority, to confirm all applicable regulations and substance restrictions.
  • There are more than 20 ‘CE Marking Directives’, many of which also cover specific categories of products that are classified as electronics.

For example, medical devices must also comply with the Medical Devices Directive and machinery must also comply with the Machinery Directive.

Thus, if your product contains electronics components and is intended for a specific use, you shall confirm if it must be compliant with one or more ‘CE Marking Directives’. Such directives often apply “on top” of the standard Electronics directives.

 

Ensuring compliance when importing from Asia

Most suppliers in China cannot ensure compliance with European Union and United States product regulations. In fact, many of them are not even aware of their existence.

 

Always verify the supplier’s ‘compliance track record’

As such, a suppliers compliance track record is a critical factor when sourcing suppliers. For many products, previous compliance is the main supplier qualification factor.

You can judge a suppliers compliance track record based on existing test reports and product certificates. Indeed, these are not valid for your specific product, but serve as an indication that the supplier did at some point produce a compliant product.

 

There is no such thing as a ‘compliant supplier’

A previous test report is, as mentioned, only an indication of the supplier’s capability to ensure compliance.

It is not a guarantee for future compliance, but it helps to weed out suppliers that cannot manufacture compliant goods.

 

Always inform your suppliers of all mandatory regulations

Even if they have such a test report, you must still inform the supplier of your compliance requirements before you place an order. If not, the supplier may not manufacture a compliant product. In addition, you must also provide the supplier with all labels.

 

Ensuring product compliance is the Importers responsibility

Compliance is a lot more than just manufacturing a compliant product. There are also labeling requirements, document requirements and testing requirements to consider.

As an importer, it is your responsibility to create all labels and documents that are required in your country or market.

The supplier will not assist with these procedures, nor shall you expect them to provide you with legal advice.

 

Non-compliant products may be seized by the customs or subject to a forced recall

Ensuring product compliance is a core objective for every business Importing products from China, or other Asian countries. Unless all compliance requirements (see the Checklist below) are fulfilled, your product may be seized by the customs authorities upon arrival.

Due to limited resources, the customs cannot check every incoming shipment. However, products that successfully pass through customs may still be subject to forced recalls, if found to be non-compliant after they have entered the marketplace.

In such a scenario, you are required to recall all your non-compliant products, and refund all affected customers.

 

Not based in the United States or the European Union ?

Many countries, such as Singapore and Australia, base their product regulations on safety standards and substance restrictions in the US and EU. As such, the regulatory overviews and checklists are relevant to non-EU and non-US businesses.

However, you are strongly advised to contact your local authorities before contacting suppliers.

 

Compliance Checklist

Parts

Task List

Product Regulations

✔Are there any mandatory safety standards (i.e., and/or other product regulations that apply to the product ?

✔ Assess whether or not your product design is flawed from a safety perspective. Assess how the product could potentially be hazardous to adults, children and infants.

Substance Regulations

✔Which substance restrictions apply to your product ?

✔ Which substance restrictions apply to your product packaging ?

✔ Does the supplier have experience with manufacturing goods that comply with all applicable substance regulations? (or similar substance restrictions)

Documents Requirements

✔Are there any mandatory document requirements for your product ?

✔ Which information must be specified on the document ?

✔ Can the document/s be issued by the Importer ?

Labelling Requirements

✔Which labeling requirements apply to the product ?

✔ Which labeling requirements apply to the packaging ?

✔ Do you need to affix a warning label ?

✔ Do you need to affix a country of origin label ?

✔ Do you need to affix a compliance mark ?

Testings Requirements

✔Is third party laboratory testing mandatory ?

✔ Must testing be carried out by an accredited testing company ? (If yes, confirm which companies are accredited).

 

Compliance Process

Ensuring product compliance begins at the design stage, and is part of every step of the process. As such, it is important that you understand how product compliance procedures are managed throughout the process :

 

Part 1 : Create Product Specification

  1. Assess potential product hazards (design, functional or other) to adults, children and infants
  2. Research all mandatory Product regulations / safety standards
  3. Research all mandatory Substance Restrictions
  4. Research all mandatory Labeling Requirements
  5. Research all mandatory Document Requirements
  6. Research all mandatory Testing Requirements
  7. Create all label files (must comply with the applicable regulations)

 

Part 2 : Supplier Research

  1. Submit RFQ file to suppliers (to inform the suppliers of your compliance requirements)
  2. Verify all product certificates and company certificates (to assess the supplier’s capability to manufacture compliant goods)

 

Part 3 : Product Development

  1. Draft Sample order sheet (to inform the supplier of your compliance requirements=
  2. Optional : Submit pre-production sample for compliance testing

 

Part 4 : Production

  1. Draft all compliance documents
  2. Execute quality inspection (to verify that all labels are correct)
  3. Submit batch samples for compliance testing

Note : The process is for reference only, and may differ depending on the product and the applicableregulations.

 

1.6 Task List

1.1 Research product specifications

  1. Review external resources: Alibaba.com, Globalsources.com, Amazon.com, Ebay.com
  2. Identify and list all relevant product specifications
  3. Identify and list all relevant quality options (for each product specification)

 

1.2 Draft product specification sheet

  1. Review Case Study A
  2. Review Case Study B
  3. Download Template 1A : Product Specification
  4. Draft Product Data
  5. Draft Bill of Materials (BoM)
  6. List all File attachments

 

1.3 Create label files

  1. Create logo file
  2. Create product labels
  3. Create product packaging artwork

 

1.4 Create design files

  1. Create design drawings

 

1.5 Research applicable product regulations

  1. Assess potential product hazards (design, functional or other) to adults, children and infants
  2. Research all mandatory Product regulations / safety standards
  3. Research all mandatory Substance Restrictions
  4. Research all mandatory Labeling Requirements
  5. Research all mandatory Document Requirements
  6. Research all mandatory Testing Requirements

 

Part 2 : Supplier Research

 

2.0 Introduction

In this part, you shall identify suppliers and gather enough data to make an informed supplier selection. At the end of this part, you shall have at least a handful of supplier candidates available, from which you can order product samples (as described in Part 3).

 

2.1 Create Supplier RFQ (Request for Quotation) File

At this stage, you shall have already completed your product specification. Later, in this part, you will contact suppliers and submit your files to them. However, before you can do that, you must create a template for the suppliers to use.

The objective with contacting the suppliers can be summarized as following:

  • Confirm that the suppliers can conform to your product specifications
  • Obtain unit pricing, lead times, payment terms and MOQ requirements
  • Confirm whether or not the supplier can ensure compliance with applicable product standards
  • Obtain relevant documents

 

Why do I need a Supplier RFQ File ?

Chinese suppliers only provide the information you specifically ask for, which is why you must send a Supplier RFQ Template, together with your specifications.

The supplier is supposed to fill in the blanks in the RFQ File (Excel format), and return it to you by email.

 

How shall I keep track of all Supplier RFQ Files once returned ?

When communicating with a large number of suppliers, it is crucial to standardise communication. This is the very reason you send an RFQ file, instead of trying to keep track of hundreds of emails.

Hence, the Supplier RFQ file provides you with a micro perspective – one file for each supplier.

However, you must also keep track on a macro perspective, as you will communicate with a larger number of suppliers – all at the same time.

For this reason, you are equipped with an RFQ Overview Template.

 

How shall I modify the RFQ template ?

You must ensure that all suppliers reply on the same format. Hence, the Supplier RFQ file must be modified to ensure that they provide the data you need.

You may also add questions to the RFQ template, or request feedback on your product specifications.

 

Template  : Supplier RFQ 

Description : This template is sent out to all suppliers. It contains all your product specifications, and include fields for the supplier to specify the following information :

  • Counter Specification : To reconfirm your product specifications or highlight differences
  • Product Compliance : To confirm whether or not they can match your compliance requirements
  • Order Terms : Unit price, Sample costs, Lead times, MOQ and payment terms
  • Documents : The supplier shall provide the listed attachments (to the extent they can)

Notice that you may modify this template to ensure that it suits your needs.

 

Template : RFQ Overview

Description : This template is used to store supplier information, and keep track of the progress. In this part, you will need to process a lot of information, and manage communication between you and your suppliers. Notice that you may modify this template to ensure that it suits your needs.

 

2.2 Create a Supplier Shortlist

Alibaba.com and Globalsources.com (from now on referred to as Supplier directories) are the most comprehensive supplier databanks available on the internet. Unlike what many buyers think, there are no ‘hidden’ supplier networks or databanks.

The Supplier directories contain critical information about the suppliers, that you can use to create a shortlist.

 

  1. Why do I need a supplier shortlist ?

In each industry, you can find hundreds (sometimes thousands) of suppliers. It is impossible to contact them all. Hence, you need to reduce the number that you actively engage with to something more manageable.

We advise you to identify at least 10 to 15 suppliers for the shortlist.

 

How many suppliers should I review ?

As many as possible. The actual number depends on how many suppliers there are in a given industry. You are advised to review at least 50 to 70 suppliers, from which you select 10 to 15 suppliers – based on the factors described below.

 

How shall I select suppliers for the shortlist ?

Indeed, you shall not randomly pick suppliers for your shortlist. Instead, you need to review the suppliers based on the data that is available in the Supplier directory. Below follows an overview:

Company Overview: First Step of the Supplier Vetting Process

  • Company Name : Virtually all company names in China includes a location identifier. Companies with province names are larger, and more well capitalised, than those with city names. As such, a province based company name is therefore one such factor. Below follows an example :

– Shenzhen Company Co., Limited (Smaller)

– Guangdong Company Co., Limited (Larger)

  • Product Scope : This lists the suppliers ‘main products’. For clear reasons, you want your product to be mentioned here. Suppliers listing a very diverse range of products are mostly buying agents or trading companies, as manufacturers have far more narrow product scopes.
  • Product Compliance : Suppliers listing overseas product standards and certificates (i.e., REACH, Low Voltage Directive and CPSIA) are more likely to be experience manufacturing goods in compliance with EU and US product regulations.
  • Quality Management System & CSR / Social Compliance : Specifies whether the supplier is certified according to a Quality Management System (i.e., ISO 9001:2015) or complies with a Social Compliance Protocol (i.e., BSCI).

Notice : The suppliers are free to edit their Company introduction as they wish, and compliance and QMS documents must, for obvious reasons, be verified.

 

Verified Company Information :

  1. Registered Capital : The Registered Capital indicates the suppliers scale of operations. A supplier with a very low capital (i.e., RMB 100,000) is most likely a trading company, while a supplier with, say, RMB 20,000,000, is likely a manufacturer.
  2. Year of Registration : Albeit not the most important criteria, a supplier’s history has some significance.
  3. Registered Address : The suppliers, registered, operational address. However, these often tend to be outdated.
  4. Supplier Check Tool : Shortlist Assessment

To help you assess whether a supplier is qualified enough to be added to your supplier shortlist. The supplier assessment is based on the following factors (all of which can be found online, see points e. and f. below ) :

  • Registered Capital (RMB)
  • Year of Registration
  • Company Name
  • Product Scope
  • Product Compliance
  • Quality Management System
  • Social Compliance / CSR

Based on the input above, the system will give each supplier one of the following ratings :

  • Excellent (Add to shortlist)
  • Qualified (Add to shortlist)
  • Average (Do not add to shortlist, if better supplier options are available)
  • Not Qualified (Do not add to shortlist)

After you have filled in and submitted the form, an automatically generated Supplier Check Report (PDF) will be generated and delivered by email.

 

How can I find supplier data on Alibaba.com ?

  • General information : Supplier page > Company Profile > Company Overview
  • Verified company information : Supplier page > Company Profile > Company Overview > TrustPass Profile
  • Contact Details : Supplier page > Contacts

 

How can I find supplier data on Globalsources.com ?

– General information : Supplier page > Company Information

– Verified company information : Supplier page > Company Information > Verified Business Profile

– Contact Details : Supplier page > Contact Us

 

2.3 Contact Suppliers and send RFQ File

At this stage you have drafted a supplier shortlist, consisting of 10 to 15 options. You will now contact the suppliers, and submit the necessary files.

 

Contact suppliers and send product spécifications

It is critical to present yourself as a serious buyer. Manufacturers are flooded with enquiries, and the vast majority of inquiries are not serious requests. In addition, a supplier must invest considerable resources to calculate pricing data and provide feedback on buyer specifications.

In short, a supplier must be selective. Many suppliers reply to less than 5% of the enquiries they receive on a daily basis. Simply sending an email, and expecting a supplier to spend hours, calling their subcontractors for material quotes, is not realistic.

Instead, you must establish a more personal connection with the supplier from the start. With this in mind, we advise you to follow this sequence when establishing contact with the supplier :

Step 1 : Use the chat function in all the major supplier directories to obtain the supplier’s email address, Wechat, Skype and phone number

Step 2 : Schedule an introductory call, to present your company, your position and the product

Step 3 : Send an email containing supplier RFQ file and all product documentation.

 

Communication tools

Most suppliers in China use the following communication tools :

– Wechat : The largest chat application in China. Wechat is used by essentially everyone in the country, and the best way to follow up on your suppliers. This is the application that gets the most attention by suppliers. Wechat can be downloaded for free from Google Play or the Apple App Store.

– Email : Chinese sales representatives tend to use their personal email accounts. Hence, it is not unusual to receive emails from sales reps using @hotmail.com or @163.com domains. For various reasons, English language emails sent to Chinese email accounts often gets filtered out as spam. Hence, an ‘email only’ communication approach is impossible (or at least extremely difficult to succeed with). Contact your supplier by Wechat or by phone, after sending an email, to ensure that it’s received. Also, avoid sending emails that contains web links or large files.

– Phone : You can expect your contact person to be available by phone during local (Chinese) office hours, evenings and even weekends. Hence, you should request their cellphone number, when establishing contact. You can use Skype, and other VOIP applications, to make calls abroad. You must add the Chinese prefix +86 to the phone number, before making the call.

– Skype : Many suppliers use Skype to communicate with clients. Hence, you should request the suppliers Skype account ID when establishing contact.

– QQ : A desktop chat application used by suppliers for day to day communication and file transfers

 

Sending large files

Manufacturers in China, and many other developing countries in Asia, are limited by very slow internet connections. Avoid sending large files by email, as this can either result in the email being classified as spam – or being impossible for the supplier to open.

For large file transfers, you should use a file transfer service or QQ, a Chinese desktop chat application.

 

Work hours

China has established the same time zone over the entire country, GMT+8. Most companies operate between 9 AM to 5 PM. You may, however, request permission to call your contact person until 8 PM (local time) and on weekends.

 

Email Template #1 : RFQ

Hello,

I am the Purchasing Manager of ( INSERT COMPANY) in ( CITY, COUNTRY). We are interested in your products and would like to receive a quotation.

Please see the attached file and follow these steps:

  1. Download the file attachment and fill in the colored fields (product specs, pricing and order terms)
  2. Provide your contact details so we can follow up with you in the future :
  3. Wechat ID
  4. Cell Phone (China)
  5. Skype ID (If any)
  6. Reply the questions in this email

 

Question : Are your products manufactured in compliance with ( INSERT CERTIFICATION STANDARD)?

– Please reply here

Question : If your products are compliant with (INSERT CERTIFICATION STANDARD), could you please provide us with a previous product test report?

– Please reply here

Question : Are you manufacturing this product yourself or purchasing it from another factory?

– Please reply here

 

We would prefer if you reply with a quotation within 7 working days.

Feel free to ask further questions about our company, in case you have any. This is a serious enquiry and we are keen to start working with you.

If you have further questions, I suggest we arrange a Phone call or Skype call.

Best Regards, ( INSERT NAME), Purchasing Manager of ( INSERT COMPANY)

  

Description : This email template is used when contacting the suppliers for the first time by email. Its purpose is to present you as a serious buyer – and explain how the supplier is expected to participate in the RFQ procedure.

 

Follow up on suppliers 

Completing the RFQ process can take 1 to 4 weeks . The time it takes depend largely on the number of calculations the supplier, and its subcontractors, must make.

Hence, a simple product can be quoted rapidly, while a customized product can involve multiple contractors that all must calculate their price.

The supplier expects you to follow up during this process. We advise you to contact the supplier by Wechat and Skype every second day, until they have filled in and returned the Supplier RFQ file (and provided the necessary documentation).

As mentioned, never use email for follow ups. Most suppliers consider their email as a secondary communication tool.

 

2.4 Process Suppliers & Product Information

You can expect 30 to 50% of the candidate suppliers to fully respond to your RFQ. In most cases, this means that you will process information from 3 to 7 supplier

 

Required files

Each supplier must submit the following :

  • Supplier RFQ file (Mandatory) : Must be filled in according to the pre-defined format in the template. You may need to request multiple resubmissions and clarifications.
  • Product Compliance Documentation (Recommended) : This includes test reports, product certificates and other documents that can help you assess a supplier’s capability to ensure compliance with relevant safety standards.

Note : A previously issued test report or product certificate cannot be reused for new products, as such documents are only valid for the specific batch of products. In many cases, such compliance documents are tied to the buyer, and can only be issued and held by the buyer.

Hence, previously issued test reports and product certificates are used to assess the supplier’s capability to manufacture products in compliance with a certain standard or regulation.

  • Company Documents (Optional) : Quality Management System (i.e., ISO 9001:2015) and Social compliance Audit Reports (i.e., BSCI) that can help you assess a supplier’s qualifications.

 

Verify the supplier documentation

Company Details (Business License Data)

Company details are verified by Alibaba.com and Globalsources.com. Hence, you may not need to verify the supplier’s business license (even though it is recommended).

You can obtain additional company information (and in same cases a more updated overview of the business license) on the official company registry.

 

Compliance Documents

You must contact the issuing company (as specified on the document, such as SGS or Bureau Veritas) to request verification. The website and/or contact details can always be found on the document.

While a product certificate may be verified as authentic, you must also assess whether it’s relevant for your manufacturer, and product. Review the following:

  • Owner / Applicant / Held by : The certificate should be issued in the name of the same supplier company. If not, you cannot assess if the supplier has the capability to manufacture products in compliance with the relevant standard or regulation.
  • Product name / Article ID / SKU : The product certificate should be valid for a product within the same category as yours. Otherwise you cannot assess the supplier’s ability to manufacture products in compliance with the relevant standard or regulation.

 

Company Documents (QMS / CSR)

You must contact the issuing company (as specified on the document) to request verification. The website and/or contact details can always be found on the document.

Even if the document pass verification, you must check the following:

  • Owner / Applicant / Held by : The certificate must be issued in the same of the same company, as specified on the supplier directory. Otherwise, they may have submitted a document owned by another company
  • Scope : The product scope must be relevant for the products you intend to buy

 

2.5 Final Supplier Selection

At this stage, you have at least a handful of supplier candidates. But, you may still not fully understand how to interpret all the data you have gathered via the Supplier RFQ document. This part explains how you can better understand whether a supplier is not qualified.

 

Electronics Industry Overview Table

 

Criteria

 

Description

Industry Situation

Registered Capital

The Registered Capital indicates the suppliers scale of operations.

A supplier with a very low capital (i.e., RMB 100,000) is most likely a trading company, while a supplier with, say, RMB 20,000,000, is more likely to be a manufacturer.

Most sophisticated Electronics manufacturers can show a Registered Capital of at least RMB 5,000,000 . When possible, avoid suppliers with less Registered Capital.

Product Compliance

Electronics, for both domestic and commercial usage, are regulated in the US, EU and many other markets. Most Electronics manufacturers (80 – 90%) in China cannot ensure product compliance. Hence, it’s an important selection criteria.

Consider only supplier that can provide compliance documents for at least two of the following standards and regulations:

EMC Directive (EU), LVD (EU), RoHS (EU), FCC (USA), UL (USA). Exclude all suppliers that for any reason fail to provide such documents.

Quality Management System (QMS)

Specifies whether the supplier is certified according to a Quality Management System, such as ISO 9001:2008 .

Most sophisticated, exporting oriented, LED manufacturers are ISO 9001:2008 certified. Hence, ISO 9001:2008 is strongly preferred.

Corporate Social Responsibility (CSR)

Specifies whether the supplier is certified according to a CSR standard, such as BSCI and SEDEX.

Very few, if any, Electronics manufacturers are CSR certified. Hence, you should not disqualify suppliers without CSR certification.

 

Description: The table above is used to manage expectations on the suppliers. If you set the requirements too high (i.e., expect every supplier to hold compliance documents and be CSR certified) you may not be able to find a single manufacturer. On the other hand, it is critical that you don’t settle for subpar suppliers.

 

What is a qualified supplier ?

The key characteristics of a ‘qualified supplier’ is largely the same in all industries. You want to work with the top 5% of the suppliers, that are exclusively focused on your category, and with major export volumes to developed markets (i.e., the United States and the European Union).

The top suppliers must not be the largest in terms of production capacity, nor do they necessary quote the highest prices – or demand the highest MOQ.

 

What is an unqualified supplier ?

An unqualified supplier can normally be placed in the following two categories:

– Domestic manufacturers: Factories that mainly produce goods for the local Chinese market. These suppliers tend to lack experience working with overseas customers, or ability to ensure compliance with applicable product regulations.

However, these suppliers can be large and well established companies. This is why we cannot only look at the amount of registered capital, the year of registration of product scope when we select suppliers – but also product compliance documents.

– Agents and Trading Companies: There is normally no benefit to buying via an agent or trader. Instead, it’s a major liability. If you buy from a middleman, you are not only paying more than you should. You don’t know anything about the actual manufacturer and its capabilities.

This category of suppliers is often ‘given away’ by their low amount of registered capital.

 

Case Study A : Supplier Comparison Table

Description : The table above shows three examples of suppliers of different qualification levels.

 

Supplier Check Tool : Final Assessment

You can use the 2nd Supplier Check Tool to assess whether a supplier is qualified for the next part of the process (Part 3: Sample Order). The assessment is based on the following factors :

  • Supplier RFQ File Returned
  • Product Compliance
  • Quality Management System
  • Social Compliance / CSR
  • Design Capability
  • Minimum Order Quantity
  • Payment Terms
  • Production Time

Based on the input above, the system will give the supplier one of the following ratings :

  • Excellent (You may order product samples)
  • Qualified (You may order product samples)
  • Average (Do not order product samples, if better supplier options are available)
  • Not Qualified (Do not order product samples)

After you have filled in and submitted the form, an automatically generated Supplier Check Report (PDF) will be generated and delivered by email.

 

2.6 Task List

 

2.1 Create Supplier RFQ File

  1. Update Template : Supplier RFQ

2.2 Create Supplier Shortlist

  1. Reserach suppliers on Alibaba.com
  2. Research suppliers on Globalsources.com
  3. Use the Supplier Check Tool: Shortlist Assessment to filter suppliers
  4. Add suppliers to Template 2B: RFQ Overview

2.3 Contact Suppliers & Send RFQ File

  1. Contact all suppliers and send Supplier RFQ files (Use Email Template 1)
  2. Follow up every 2 – 3 days until you have received all files

2.4 Process Suppliers & Product Information

  1. Review Supplier RFQ files
  2. Verify all product certificates and company certificates
  3. Verify company details (business license data)

2.5 Final Supplier Selection

  1. Use the Supplier Check Tool: Final Assessment to filter suppliers
  2. Make your final supplier selection based on the result

 

2.7Attachment : Electronics Trade Shows

Prefer to meet suppliers face to face than sourcing online ? If that is the case, you might want to consider visiting one or more of the following trade shows.

Overview

templates product supplier

 

FAQ

Mainland China

How do I get to the Canton fair ?

The Canton fair is held in Guangzhou, in Guangdong province. You can fly directly to Guangzhou – or to Hong Kong, from where you can travel to Guangzhou by train or bus.

 

Do I need a visa to enter Mainland China ?

Yes, most nationalities are required to obtain visas before entering Mainland China. You can secure a business visa by requesting an invitation letter.

 

Do I need an invitation letter ?

Invitation letters are generally not mandatory for trade show visitors. However, they can help you obtain a visa (if you cannot obtain a visa any other way). Hence, you are advised to pre-register on the trade show website, and request an invitation letter.

Before doing so, you must contact your local Chinese embassy to confirm which documents they require, in addition to the Invitation let

 

Hong Kong S.A.R

Do I need a visa to enter Hong Kong S.A.R ?

No, most nationalities can remain in Hong Kong S.A.R for 30 to 90 days per entry. British citizens can stay for 180 days per entry. However, some nationalities need to obtain a visa, so confirm before booking your ticket.

 

Do I need an invitation letter to attend a trade show ?

No, you are not required to obtain an invitation letter when attending trade shows in Hong Kong.

 

Do I need to pre-register before arriving in Hong Kong ?

No, pre-registration is normally not mandatory. While you can normally register at the trade fair venue, you are guaranteed admission to the trade show if you are pre-registered. In addition, it also tends to guarantee free admission.

 

2.8 Attachment : Guide to Communicating With Chinese Suppliers

Communicating with suppliers in China is one of the biggest challenges for importers. Especially those who don’t have previous business experience dealing with the Chinese. In this attachment, you will learn what you must know about communicating with your suppliers.

 

Be overly clear and brief in your communication

Do not send long paragraphs or use slang, when providing the supplier with information. Always keep your writing short and on point. For example, product information and quality requirements must only be provided as brief bullet points – not as paragraphs.

When you ask questions to your supplier, you must provide them with a fixed format for their reply. Instead of asking your supplier an open ended question, you shall give them a multiple choice question – therefore framing their reply.

 

Focus on your business only

Do not get personal with your supplier, and do not give praise unless necessary. Keep your focus strictly on the business, and to not stray into irrelevant topics.

 

Never use moral or emotional arguments

Try to keep your cool as much as possible. Trying to convince a supplier that they have done something wrong, by using moral or emotional arguments, is pointless when dealing with Chinese (and largely, other Asian) suppliers.

 

Always require the supplier to confirm details

The Chinese are generally not proactive in their communication. They will not take the time to explain that your specification is missing important details.

Instead, they may rather take advantage of such gaps. It is therefore extremely important that you always get confirmations from the supplier – in writing – on everything from technical details to the production time of a certain product.

 

Keep your supplier informed

Don’t stop replying your supplier, or put the project on halt for several months. Just as you don’t like to be ignored by your supplier, neither do they. If you decide to disqualify a supplier, you must also inform them of your decision.

 

Expect fierce resistance at times

The Chinese will always try to get extreme benefits for themselves. They are tough negotiators, and will often make a fuss over small things to make their customers think twice before asking for some sort of benefit.

For example, a supplier may pretend to be upset about a customer’s demand to sign a Sales Agreement – before an order.

Never give in to a suppliers demands, and never let them dictate the terms for your business relationship. You must be fair, but hard.

 

Refer to a ‘superior’ whenever you meet resistance

The Chinese are familiar with strict hierarchy. If a supplier attempts to reduce your leverage (i.e., refuse to sign a contract before an order) you shall refer to ‘company policy’ or ‘instructions from the CEO’ – as this can quickly deflect their demands. This kind of argumentation also is often used by the suppliers themselves.

 

Your are the project manager

The supplier will not drive your project forward. Their role (and mentality) is to only respond to their buyers instructions. Such is the nature of contract manufacturing.

They will not actively inform you of how the process works, from sourcing to production. Neither will they have standardised procedures to follow, but adapt to the processes of their customers.

 

Never show yourself as small or weak

Always pretend that you are bigger and more experienced than you actually are. Even If you are a small startup with limited funds, you should make them believe that you are an established player.

 

2.9 Attachment: Guide to Price Negotiation

Price negotiation is extremely risky if you are not a product expert. A supplier can quote you basically any price. The question is not low they can go in terms of pricing, but rather in terms of product quality.

Keep track of your product spécifications

It’s typical that inexperienced buyers put immense pressure on the suppliers to offer a rock bottom price.

Eventually, the supplier may give in and offer a lower price. But, what the buyer is not aware of, is that the new price is due to a reduction in product quality.

As the Chinese are rarely proactive in their communication, they will not bother to explain to you that they will use inferior materials and components. This will only be revealed much later, when it is already too late.

Never attempt to negotiate the price, unless you have a broad understanding for the product specifications and quality options for a certain product. In addition, the product specifications must always be reconfirmed by the supplier, if they agree to lower the price.

 

Refer to company policy or instructions from a Superior

You can deflect a suppliers attempt to refuse price reductions by referring to factors that are outside of your control. This can be done, even if you actually are the most senior officer of your company.

Always get quote from many suppliers

You cannot tell if a price is accurate, unless you have samples from multiple suppliers. Hence, we involve 10 to 15 suppliers in the RFQ process. Again, it is also of extreme importance that each supplier provides a product specification as part of the quotation. If not, you don’t know what you’ve been quoted.

Don’t expect extreme price reductions

Contract manufacturers have low profit margins, and they are not operating as charities. If you want your supplier to get something out of doing business with you (especially as a startup client) they must make money too. Don’t try to price them below the market price. If you can get a reduction of 5%, you have succeeded. Do not expect huge discounts.

Part 3 : Product Development

 
specifiacation product, supplier

 

3.0 Introduction

At this stage, you shall have selected at least one supplier to be put through the first practical test of the process: making a pre-production sample. In this part, you will learn how to prepare your sample order, and manage revisions.

The goal of this part is to obtain a fully approved pre-production sample, thereby assessing the supplier’s ability to manufacture the product according to your product spec sheet.

 

Why do we need product samples ?

Producing a product samples achieves two things :

  • It tests the suppliers ability to manufacture your product, while they also go through a learning process
  • It enables you to test the design and functions of your product

You are advised to order pre-production product samples, regardless of whether you intend to buy custom designed (OEM) products or private label (ODM) products.

 

How much should we expect to pay for a product sample ?

The cost depends on the type of sample, and whether new tooling (i.e., injection molds) are required to produce its components.

When ordering a factory sample, for example, you normally only need to pay for shipping.

However, when ordering customized product samples, you may end up paying anything from US$10 to tens of thousands of Dollars – all depending on the cost of tooling (if any).

 

How can we keep costs down when developing a new sample ?

Additional tooling is the main cost, when developing new samples. As such, reducing the need for new tooling can help to keep costs down.

However, this requires that you choose existing components, rather than customizing parts according to your own design and functional requirements.

This approach also requires that the supplier owns such tooling, which is not always the case.

While many suppliers tend to showcase a large number of “catalog products” (i.e., on their company website), they are rarely willing to let importers use tooling owned by other buyers.

Thus, it is not always possible to “reuse” existing tooling.

 

How do I communicate my product specifications prior to buying a product sample ?

The main document is the Product specification document (sometimes called Techpack), which may include the following information :

  • Design drawings
  • Material specification
  • Bill of materials
  • Photocopies
  • This is the document that the supplier will use, during sample production.

As this document will be passed between engineers and subcontractors (i.e., material suppliers), it is crucial that the product specification is extremely clear and simple to understand.

Do not leave anything open to interpretation, as this can easily result in misunderstandings.

 

What if a supplier refuses to send a sample ?

While you cannot expect a supplier to give away or produce samples free of charge, you should always be able to get samples as long as you pay for them.

Suppliers that come up with excuses for providing samples normally have something to hide. You shall not consider doing business with such suppliers.

 

What if the manufacturer fails to produce a sample according to our specification ?

As mentioned, a pre-production sample is made to test the suppliers’ ability to manufacture your product.

It is to be expected that many suppliers are unable to comply with your requirements, and deliver a non-satisfactory pre-production sample.

If a supplier keeps failing, after two or three sample revisions, you shall not waste your (or theirs) time. Simply move on when a supplier can’t manufacture a product the way you want it.

 

Can the final (mass produced) product differ from the pre-production sample ?

Yes. It can go both ways.

Making product samples enables the supplier to invest considerably more time per produced unit, than for a mass produced unit.

In addition, the higher pace of mass production can give rise to previously unforeseen quality issues.

When placing the order for very first batch of a new product design, you should consider minimizing the order quantity as much as possible.

You are also recommended to have the products inspected, prior to shipment. However, that is not limited to the first batch, but all orders.

 

How can we get the product sample delivered ?

Product samples are normally delivered by airmail.

Basically, all manufacturers can ship samples via their freight forwarders. However, you can also arrange your own forwarder to collect and ship product samples.

 

Do we need to pay import duties and other taxes when importing product samples ?

It does depend on the order value.

In many markets, there are minimum thresholds. If the sample is valued at below the threshold, you do not need to pay import duties or other taxes.

However, if the customs value of the sample is above the threshold, you must pay import duties (and possibly other taxes), according to the applicable duty rate.

Notice that this can result in significant amounts, as tooling is considered as part of the customs value.

Thus, you cannot decide to only declare the value of the product sample, and leaving out the cost of the tooling. The latter can cost several thousands of dollars

 

3.1 Product Sample Spec Sheet

The Sample Order Sheet communicates the product specifications and sample order terms to your supplier. This document must be confirmed (with the company stamp) by the supplier, before you pay them.

 

Note : You may skip this procedure if you buy very simple product samples, such as ready made components or basic materials.

 

Sample Order Sheet Template Overview

Product Specifications and File Attachmentsorder templates, product specification

The Spec Sheet, including its attachments, is the most essential part of the Sample Order Sheet. The product sample is manufactured entirely according to the specifications. Hence, you must ensure the following:

  1. The specifications and quality options must be tweaked according to the supplier’s capability
  2. All attachments (i.e., design drawings and logo files) must be final.

 

Molds and Tooling
Mold / Tool Description /Requirements
Insert here Insert here

 

Product Compliance
Applicable Safety Standards & Regulations 

If you intend to submit the sample for compliance testing, you must specify this, to prevent the supplier from using materials and components which renders the product non-compliant.

Many suppliers considers pre-production samples as for reference only.

Hence, they may not consider your compliance requirements for the samples, unless explicitly instructed to do so.

 

Standard / Regulation Description
Insert here Insert here
 Product Unit Labelling

List all product label and other graphical files that are affixed on the sample, including the file attachment name and the position of the print.

Logo / Label Name File Name Print Position
Insert here Insert here Insert here
Product Packaging
Packaging Spécifications
  • Design file 
  • Material 
  • Add additional specifications here
Packaging Labelling

If you buy product packaging from tour supplier, you must add all relevant packaging specifications. Including logos, labals and artwork.

 

Order Terms

Samples seldom come out perfectly on the first try. Depending on the product and its complexity, you should expect two to three sample revisions.

However, you don’t want to end up in a situation where the supplier is asking you for additional payments, because they failed to get your approval on the pre-production samples. For this reason, include the following terms:

General
  1.  supplier must produce an unlimited number of sample revisions (in case the previous sample batches don’t comply with the product specifications and quality requirements in this document).
  2. The seller may not request additional payments from the buyer, unless the buyer makes changes to the product designs, materials, quality requirements or compliance requirements.
  3. Pre-Production Sample Revision Time 
  • 1st Sample: XX days
  • 2nd Sample: XX days
  • Nth Sample: XX days
  1. If the supplier fails to produce an acceptable sample after X revisions, the buyer may request a full refund ($XXX) from the supplier
  2. If the supplier fails to produce samples within the time limits set under ‘Pre-Production Sample Revision Time’, the buyer may request a full refund ($XXX) from the supplier.

As you may already understand, the main purpose of these terms are to put pressure on the supplier to :

  1. Comply with all design requirements and product specifications
  2. Limit the number of revisions needed (as they end up on the losing side by neglecting your requirements), and thereby speed up the development process.
  3. Limit the time spent to produce each sample revision

Note : These terms are void if you change the specification, after the supplier starts working on the pre-production samples. Again, get your spec sheet right before you move forward.

 

Mold and Tooling Ownership

When buying custom designed products, injection molds and other tooling are generally required. Tooling is always paid for by the buyer, and can make up a large share of the product development cost. As such, you want to avoid any of the following situations :

  1. The supplier is using your tooling for other buyers
  2. The supplier is refusing to transfer the tooling to you or your new supplier

The first scenario requires more than just a written clause. As for the second scenario, add the following two clauses to your Sample Order Terms:

  1. All tooling (as listed below) is the property of the buyer, and may not be used in production, for the seller (supplier) itself or its other customers (domestic or international) without the buyer’s written approval.
  1. The tooling may be transferred from to the buyer, or its representative in China, at any time. Upon such a request, the seller must send the tooling to the buyer within 3 working days. The buyer must pay for all transportation costs (Maximum $XXX).
Subcontracting

The whole point of buying pre-production samples is to test the manufacturer’s capability to produce your design. What if the manufacturer contracts sample production to another factory?

That is a major issue, as you have no indication of the supplier capability to actually make your products.

Thus, new quality issues, that you thought were already corrected during the sample development phase, may arise.

  1.  The seller may not subcontract the sample production to any other party or company, entity (excluding procurement of components and materials).
  2. The pre-production sample must be made in the supplier’s production facility at the following address: [Insert Address]
  3. The buyer, or its representative in China, may inspect the seller’s facilities without prior notice, to verify that sample production is made at the specified address.
  4. Failure to comply with the subcontracting terms shall result in an immediate refund ($XXX).

 

Payment Terms

If the sample costs are counted in the hundreds of dollars, product samples are usually paid for 100% upfront.

However, more complex developments, for example OEM electronics and custom plastic parts requiring injection molds, can result in costs counted in the thousands – sometimes tens of thousands – of dollars.

When the stakes are higher, risks must be managed accordingly. For these situations, we advise you apply the following terms:

 Deposit before production of tooling and pre-production samples.

  • 60% Balance after the buyer’s written approval of tooling and pre-production sample.

 

Compliance Requirements

If you intend to submit the sample for compliance testing, you must specify this, to prevent the supplier from using materials and components which renders the product non-compliant.

Many suppliers considers pre-production samples as for reference only.

Hence, they may not consider your compliance requirements for the samples, unless explicitly instructed to do so.

Template 3A: Sample Order Sheet

product specification detail

Description : Add all relevant sample product specifications and attachments to this document template. You may also modify the order terms as you request.DOWNLOAD TEMPLATE 3A: SAMPLE ORDER SHEET

 

IP Protection

You must share product information, such as logos and design files, with the suppliers before they can make a sample.

Many importers are worried that the supplier will steal their designs.

You may require the supplier to sign an NDA, before you share any product information. Still, such agreements are hard to enforce. At least without professional legal assistance, that is out of reach of most startups and small businesses.

And, even if you succeed in enforcing an NDA, you may not be able to secure proper compensation from the supplier.

In addition, it’s also possible to circumvent NDAs by passing on the product design to a new company, that is not bound by the contract

The only way to be “safe” is to patent the products design and functions in all major markets, including within China. All trademarks should also be registered, in your target markets (i.e., the USA and the EU) and the manufacturing country (i.e., China or Vietnam).

Then again, this is expensive and time consuming, and not a viable approach for most startups and SMEs.

Unfortunately, there are no quick, cheap and simple ways to protect your IP when buying product samples from China, or other countries in Asia for that matter. 

Note: An NDA template is provided as part of the Buyer’s Guide. While it shall not be relied upon as a long term IP protection, it may make the supplier reconsider (or delay) the manufacture of replicas.

Also notice that this is only a serious risk if you hand over new designs to a supplier. They are rarely interested in using unknown brand names or logos.

 

Template 3B: Non-Disclosure Agreement

Description : This NDA template stipulates penalties for using your Intellectual Property, such as design drawings, artwork and logos.

 

Email Template #2: Sample Order Sheet

Hello,

We are satisfied with your quotation.

Therefore we would like you to provide us with product samples. It’s very important that the samples you send us match our product specifications.

As such, we have prepared a simple sample order term sheet. Please see the attachment and follow these instructions :

  1. Download the file attachment and read the terms
  2. Confirm if any changes must be made to the product specifications
  3. Confirm if you approve the order terms
  4. Print the document and stamp each page (using your chinese company stamp)
  5. Scan the document and send to us for approval (via email)

When this is done, you can issue the Proforma Invoice, and we will pay you for the sample.

If you have further questions, I suggest we arrange a Phone call or Skype call.

Best Regards, ( INSERT NAME), Purchasing Manager of ( INSERT COMPANY)

Description : Use this email template when you submit the Sample Order Sheet to the supplier. It explains why you require that they sign this document.

 

3.2 Sample Production

A product sample normally takes 30 to 90 days to manufacture, depending on whether or not new molds or other tooling are needed. However, sample production can be delayed indefinitely, as additional sample revisions are often required – especially for more complex products.

As such, it is critical that you follow up on a regular basis with the supplier, to verify that they have fully understood your product specification.

 

Sample reporting

By the time you have paid the supplier for the sample, you should already know the estimated completion date. Follow up with the supplier on a regular basis, via Wechat and phone calls – to remind them of this deadline – and for them to report any delays.

Notice that delays are to be expected, as many subcontractors tend to be involved in the sample production.

 

Reporting defects and quality issues

You need to expect design and quality issues, especially on the first and second samples. This is part of the learning process for the supplier.

To ensure that sample issues are resolved efficiently, you must identify and keep track each defective unit, and suggest a corrective measure. For this purpose, you are equipped with Template 3C: Sample Revision Overview.

 

Sample approval process

The sample must match the final (mass produced) product to the extent of what is possible. You shall not agree to abort the sample development process, as is often suggested by unreliable suppliers.

Before the final sample is delivered to your address, you should request sample photos from the supplier (preferable according to a photo checklist provided by you).

This way you can verify the sample before it is sent by air to your address, which can help you to avoid unnecessary return shipments (in case the sample turns out to be defective).

 

3.3 Task List

3.1 Product Sample Spec Sheet

  1. Update Template 3A : Sample Order Sheet
  2. Submit Sample Order Sheet to the supplier for confirmation (Use Email Template 2)
  3. Obtain stamped scan copy from the supplier (Sample Order Sheet and all Attachments)
  4. Pay for the product samples

3.2 Sample Production

  1. Request regular updates
  2. Obtain sample images after reported completion
  3. Approve or reject sample revision
  4. Approve product sample image and request delivery
  5. Final sample approval

Part 4 : Production

 

product electronics , specifaction suppliers

 

4.0 Introduction

At this stage, you shall have approved the pre-production sample. As such, you can now move forward and place a test order. This is a critical moment, as you must know wire your first payment – and ensure that the supplier manufactures your product according to specification.

If you fail to manage this process well, you might end up losing your entire investment.

 

4.1 Sales Agreement

Misunderstandings between the supplier and the buyer are the main cause of quality issues. Imagine receiving products of the wrong color, or with the wrong labeling. The latter could, for example, make your products worthless, as selling items that are non-compliant (with local labeling requirements) is illegal.

To reduce the risk of such disastrous misunderstandings, you need to sign a Sales Agreement with the supplier, before wiring the money.

There is also another, almost as important reason, to sign a Sales Agreement. There are many things to consider when importing goods. This includes, for example, payment terms and shipping terms. You don’t want to negotiate the basic order terms for every order. Instead you want one agreement that is valid for many years.

Finally, you want to communicate to your supplier that you have the means to :

  •  Verify that they manufacture the products according to specification : The supplier is made aware of the fact that you intend to send a quality inspector before making the balance payment and/or submit samples for compliance testing.
  •  Let the supplier understand that you will withhold the balance payment if they fail to comply with the agreement : A contract is useless without a method to enforce its terms. Hence, the agreement must state that you will not settle the balance payment until the quality and compliance of the goods is verified.

 

Template 4A : Sales Agreement

sales agreement, production

Description : The Sales Agreement template must first be modified by you, and then submitted to the supplier for review. Notice that you may also need to add additional terms.

 

Email Template #3: Order Confirmation

Hello,

We would like to place a test order of XXX pieces. However, before we place the order we need to sign a Sales Agreement with your company. Please see the attached file.

This is why we need a Sales Agreement prior to placing an order:

  1. Our company has certain rules regarding product quality, product certification compliance, payment terms and freight terms. It’s very important that we avoid misunderstandings.
  2. The Sales Agreement must be signed by your company’s Legal Representative and stamped with your official company stamp.
  3. Notice that we cannot accept any sudden price increase. Our company expects the previous quotation to still be valid.
  4. (INSERT CERTIFICATION STANDARD) compliance is required in our country. We are likely to visit your factory (after the production) and collect at least one product sample that will be sent for compliance testing.
  5. We may also conduct an unannounced Quality Inspection, during or after, the production. Of course, we will only verify that the products are produced in compliance with our product specifications.

We don’t keep any product specifications or quality requirements secret. Everything is clearly specified in the Sales Agreement.

Please sign, stamp and send the Sales Agreement to the following address:

Company : INSERT

Address : INSERT

Zip Code : INSERT

City : INSERT

Country : INSERT

Phone : INSERT

If you have further questions, I suggest we arrange a Phone call or Skype call.

Best Regards, ( INSERT NAME), Purchasing Manager of ( INSERT COMPANY)

Description: This email template is used when sending the Agreement draft to the supplier, for initial review and approval. It explains why you require them to sign a contract, before placing your order.

Agreement Terms Overview

Part

Terms

Sample Data/ Descritpion

Header

Date

Contract Date

Buyer

Company Name, Adress

Seller

Company Name, Adress

Choice of Law

People’s Republic of China

Court of Arbitration

Specify Arbitration Court Mainland China

Contract Language

English

 

 

 

Product Specifications

Products Specifications

1.All relevant technical details, material specifications, colors, functions ans other information that defines the design, quality and functionality of the product.

2.Relevant Attachements

Applicable and Regulations

1.Product Safety Standards/Technical Standards

2.Required Documents

3.Labelling Requirements

4.Substance Restrictions/ Maximum Amounts

5.Relevant Attachements

Defects

Definition of Defective Products

1.A list of defects, for which the buyer is eligible for compensation. This shall include both functional defects and cosmetic defects(i.e, holes, dirt, marks).

2.Defects may be classified in different categories : Minor, Major and Critical.

Accepted Defect Rate

1.The buyer is normally required to accept( pay for and not request compensation for° a maximum number o defective units.

2.The Accepted Defect Rate (ADR) is normally set between 0,25% to 1,0%. Defect quantities above the ADR is subtracted rom the defect rate.

Compensation Terms

1.Specifies under which conditions a supplier shall compensate a buyer.

2.Options include money refunds, repairs and remakes. These terms must also specify in detail how, and within which time frames, the transaction shall be executed.

Intellectuel Property (IP)

Brand Ownership

1.Defining the Intellectual Property held by the buyer

2. Stipulating penalties that apply if the seller would use the buyer’s Intellectual Property (without permission).

Payment Terms

Payment Method

1.Telegraphic Transfer(T/T)

2.Letter of Credit (L/C)

Deposit Payment

1.The payment made prior to the production start

2.Normally set a 30%

Balance Payment (70%)

1.The payment made after the production is completed.

2.Specify that the buyer can wihhold the balance payment until the quality inspection and cmpliance testing arecomplete, and successful.

3.Normally set 70%      

Beneficiary Account Details

1.Beneficiary name

2.Beneficiary adress

3.Country

4.Bank name

5.Bank address

6.SWIFT/BIC Code

7.Currency (USD)

Freight Terms

Transportation Mode

1.Options : Sea Freight, Air Freight

Incoterm

1.Options EXW (EX Works), FOB (Free on Board), CIF 5Cost Insurance Freight), DAT (Delivered at Terminal), DAP (Delivered at Place).

2.port of loading and Port of Destination

Export Packaging

 

1.Outer Cartons

2.Inner Cartons

3.Pallets/Plastic Cover/Other Protection

4.Freight Remark Print

Document Requirements

1.Bill of Landing

2.Commercial Invoice

3.Packing List

4.Country of Origin

5.Fumigation certificate

6.Other documents

Cargo Insurance

1.Covered value

2.Covered transportation

3.Insurance company

Lead Time

 

Production Time

1.The specified (maximum) production time

2.Counting from date of deposit payment, until the production is 100% completed and ready for inspection.

Late Delivery Clause

Stipulates a daily deduction (set amount or percentage) from the balance payment, for each day of delay.

Quality Assurance

 

Quality Control

1.Specify that the buyer, or a representative, has the right to perform a quality inspection in the supplier’s production facility.

2.Specify that the buyer can withhold the balance payment until the quality inspection is performed,and successful.

Compliance Testing

1.List of product safety standards/ technical standards or which the produc twill be tested.

2.Required Documents (Which the supplier must provide)

3.Specify that the buyer can withhld the balance payment until the product testing is performed, and successful.

Other

Attachment List

1.Product Photocopies

2.Design Drawings

3.Color Samples

4.Technical Standards

5.Datasheets

6.Labels/Graphical Files

Validity

1.Valid from 20XX-XX-XX until 20XX-XX-XX

Signature

1.Buyer signature

2.Supplier signature (Legal representative)

Stamp

1.Supplier stamp

 

Important notice : It’s recommended to write a Chinese language Sales Agreement, with help from a lawyer, trained Chinese commercial legislation. However, if that is not an option, due to budget constraints, an English language contract is still highly recommended for the following reasons:

  • The contract communicates all your product specifications, quality and compliance requirements. This is reducing the risk for misunderstandings , which is the most common cause of quality and compliance related issues.
  • The contract communicates that you will verify the quality and compliance of the products, prior to making the balance payment. This is reducing the supplier’s incentive to use cheap and substandard materials and components.

 

Payment Fraud Prevention Checklist

Below follows an overview of various types of bank accounts, and their respective risk level. We advise you to request a review of the bank account details via the Online Advisor system before paying your supplier.

Bank Account Type

Criteria

Risk

Description

Company Account

Matching Beneficiary

Account beneficiary is matching the supplier’s company name.

Account address is matching the supplier’s registered address.

Account is held in Mainland China.

LOW

A company account, held by the very company you intend to do business with, may be taken for granted in most countries.

However, in China, far from all suppliers offer this setup.

 

Export Agent Account

Account beneficiary is not matching the supplier’s company name.

⊗Account adress is not matching the suppliers registered address.

Account is help in Mainland China.

 

   LOW

Some suppliers outsource all export related procedures to specialised export agent companies. In these cases, the payment is made to the export agent account.

 

 

 

HK Offshore Account

Matching Beneficiary

 

 

 

 

 

Account beneficiary name is matching, or related to, the supplier’s company name.

Account address is not matching the suppliers registered address.

Account is held in Hong Kong.

 

AVERAGE

Many suppliers use offshore companies, registered in Hong Kong, to receive payments from overseas. As such accounts cannot be directly linked to the manufacturers, which are always based in Mainland China, the risk is therefore higher.

Company  Account Not Matching Beneficiary

Account beneficiary is not matching the supplier’s company name.

Account address is not matching the suppliers registered address.

 Account is held in Mainland China.

 

 

 

 

   HIGH

 

 

 

Avoid payments to company entities which are not related to the supplier’s company name.

 

 HK Offshore Account

Not Matching Beneficiary

⊗Account beneficiary name is not matching, or related to, the supplier’s company name.

Account address is not matching the suppliers registered address.

Account is held in Hong Kong.

 

   HIGH

Avoid payments to Hong Kong registered accounts, if the beneficiary is not matching, or related, to the company registered in Mainland China.

Private Account

Account beneficiary name is not held by a registered company.

   HIGH

Never make payments to accounts held by individuals.

 

 Deposit Payment Checklist

The beneficiary details must be correct, as the receiving bank in China will otherwise return the money. To avoid such waste of time, you need to know the following:

Beneficiary Name : It shall be as specified by the supplier. Chinese company names are often quite long, and you cannot cut it in half, even if your bank doesn’t allow you to enter the full name. If that is the case, enter the remaining characters in the message field.

Beneficiary Address : Same goes for the beneficiary address. Don’t leave anything out, or the payment may be returned by the Chinese bank. If the address is too long, try to shorten it a bit (i.e., 333 Hao Zhang Yang Road can be shortened to 333 Zhangyang Rd).

Bank Account Number : Same as specified by the supplier. Chinese bank accounts just have one account number, for both international and domestic use (unlike, for example, the EU which use IBAN for international transactions).

Beneficiary Bank Account : You may either input the SWIFT code or Bank name combined with branch and bank address.

 

4.2 Production

The mass production phase begins at the very moment the supplier confirms the arrival of the deposit payment. The supplier is now to execute the steps outlined in its production plan.

The process varies depending on the product, but this is what it might look like :

  • Purchase Components & Material : 10 – 20 days (from subcontractors)
  • Process Components & Materials : 10 – 15 days (in house)
  • Batch Sample Completed : 1 – 3 days (recommended for the 1st batch)
  • Assembly : 5 – 8 days
  • Packing : 1 – 2 days

While you should have received prototypes before you decided to go forward and place an order with the supplier, it’s still highly recommended, at least for the first batch, to require the supplier to first produce a number of batch samples, for your approval – before mass production proceeds.

Indeed, this may put production to a halt, especially if such samples are to be delivered to your office (rather than approved on site by an inspector). Yet, misunderstandings and neglect are common, and this is your last chance to prevent quality issues from spreading further.

You may also request general status updates, and photos, on a weekly basis. When the batch is nearing completion, you need to get a confirmation on the inspection date.

Such dates are prone to change, but notify your quality inspection well in advance, and start working on inspection checklists as early as possible.

Note : The production plan assumes that all tooling (i.e., Injection molds) is already completed prior to mass production, as this is required to make pre-production samples.

 

4.3 Quality Control

The purpose of a quality control is to verify that the products are manufactured according to specification, before you make the final balance payment. It is critical that you do not pay the supplier until the quality inspection is preformed, as you will have very little leverage once the supplier is paid in full.

In manufacturing, there are always quality issues. Hence, you should expect the inspection company to find quality issues. What matters though, is that the number of defectives are below the accepted defect rate.

A Quality inspection can be booked online, and is normally executed in the factory once the products are ready for shipment.

 

The agent can, for example, do the following :

Type

Description

Sample Checks

Visual Inspection

Shall identify visible cosmetic defects on the product and its packaging.

a.Dust

b.Dirty

c.Visible marks

d.Scratches

Functional Testing

Shall verify if the product is fully functional.

n/a

Dimensions

Shall verify the product’s dimensions, and whether it is within the set dimensional tolerances (if any).

a.Height

b.Width

c.Length

d.Diameter

Performance Testing

Shall verify various usage and quality aspects of the product.

a.Fire retardancy

b.Wter pressure/ absorption

c.Dust resistance

d.Mechanical testing

e.Weight

f.Drop test

Product Packaging

Check the quality, dimensions and labelling of the product packaging (if any).

a.Dimensions

b.Artwork and labelling

c.Material

Export Packaging

Check the quality, dimensions and labelling of the export packaging.

a.Outer cartons

b.Inner cartons

c.Protection

d.Pallets

e.Freight remarks

Note : Make your supplier aware of the coming quality inspection as early as possible. This way you put pressure on them to ensure that your products match your specifications and quality requirements.

 

  1. Prepare QC Checklist

The Inspection agent is your eyes in the factory. That said, you are the expert of your product. Hence, you must provide the Inspection agency with a checklist.

For this purpose, our Quality Control (QC) partner (Sofeast Ltd) has provided you with a Checklist template (see below). In addition, they can help you to draft a Quality Control Checklist.

However, it is up to you to approve the checklists, and add additional (highly specific) instructions if deemed necessary. The Quality inspection agent will only follow the predetermined checklist while in the factory.

What is not on the protocol will simply not be part of the inspection.

 

Template 4B: Quality Control ChecklistProduct control supplier

Description: This template lists suggestions for various quality checks for your products. You must not add all tests on the checklist. You can also add your own items to the checklists, or modify it as you wish. The document, once completed, is submitted to the quality inspection agency.

 

4.4 Product Compliance

You may submit samples for compliance testing before or after production – or even both. However, many regulations require that the test is conducted on a sample collected from the batch of mass produced products.

 

Laboratory testing

Laboratory testing is not always mandatory. However, it is the only way to verify that a product is compliant.

Below follows a step by step guide :

Select an accredited testing company

The compliance industry is largely dominated by the large European firms, many of which were founded back in the 19th century. In recent years, they have seen increased competition from younger firms – some of which use modern IT infrastructure to modernize an old industry, while others are less reliable and experienced.

Note: Under no circumstances shall you let the supplier select a compliance testing company for you.

Instead, you must handle all communication. This also applies to payments. You shall not let your supplier handle bookings and payments. Doing so increases the risk of corruption – both in terms kickbacks paid to the supplier, and non-compliant products being falsely approved.

 

Booking

You should contact your testing company at least 2 weeks before production completion, to notify them about incoming batch samples. They will then provide you with the following:

  • Required sample material quantity (they may need more than one unit)
  • Delivery address for batch samples and contact person
  • Booking number / Sample ID number (must be affixed to the incoming batch samples)
  • Suggested laboratory tests / applicable regulations
  • Estimated costs (note that they cannot provide a final quote until the batch samples are delivered)

 

Sample Collection

Preferably, the Quality inspector collects batch samples and submits them to the testing company. You should, to the extent possible, not allow the supplier to submit samples.

There is a risk that they will, in self interest, submit compliant samples (made for passing lab testing) – while your batch is in fact non-compliant.

Also ensure that they affix the Booking ID / Sample ID on or inside the envelope. Otherwise the testing company cannot identify the samples as yours.

 

Payment

Once the samples have arrived at the testing company, you can request a final quotation. If accepted, the testing company will issue an invoice. Most likely, they will demand that you pay them before they perform the lab testing.

 

Result

Within 1 to 2 weeks, you will receive the test report via email. If your products pass the testing, you can use this document as proof of compliance. It can be submitted to authorities and customers.

 

Compliance Documentation

The test report is not the only document you may need. Depending on the applicable regulation/s, you may need to draft additional documents, such as a design drawing, bill of materials and declaration of conformity.

You need to ensure that you have all required compliance documents in order, before you pay the supplier and before the cargo is shipped. If not, your product may be refused entry in the port of destination.

 

4.5 Balance payment

There is no return after you’ve settled the balance payment. At this stage, you must be sure that the products match your quality requirements , and are made in compliance with all applicable regulations in your market.

However, if there are any issues that must be corrected, hold on to the balance payment until said corrections has been made.

Once settled, send a ‘payment proof’ and follow up until the payment is confirmed by the supplier. Most suppliers require payment before the ship to the port of loading.

However, the specific terms depend on what you’ve negotiated in the contract. Some suppliers may also accept balance payment after sending the bill of lading copy, but not the original document (which is required to release the cargo).

 

4.6. Shipping

After you have paid your supplier, the cargo will be forwarded to the port of loading (i.e., Shanghai or Hong Kong) for shipping. The actual process depend on the Incoterm, and your shipping arrangements with the supplier and your forwarder.

This process is covered in detail in a separate guide, which is included in the Buyer’s Guide Package (excluding Basic Packages).

 

4.7 Task List

4.1 Sales Agreement

  1. Draft Sales Agreement (Use Template 4A: Sales Agreement)
  2. Submit Sales Agreement to the supplier (Use Email Template #3)
  3. Obtain stamped scan copy from the supplier (Sales Agreement and all Attachments)
  4. Approve or reject the Sales Agreement
  5. Request delivery to your location
  6. Obtain and approve printed and stamped Sales Agreement
  7. Review bank account details and make fraud assessment risk (Submit ticket to Chinaimportal.com if deemed necessary)
  8. Pay deposit (30%)
  9. Send transaction record to the supplier

4.2 Production

  1. Require the supplier to confirm the transaction
  2. Require the supplier to reconfirm the est. production completion date
  3. Inform the supplier of upcoming quality inspections and laboratory testing
  4. Follow up with the supplier to request regular status updates

4.3 Quality Control

  1. Prepare quality control checklist
  2. Book quality inspection online
  3. Approve or reject inspection protocol

4.4 Product Compliance

  1. Submit samples to testing company
  2. Approve or reject test report

4.5 Balance payment

  1. Pay balance (70%)
  2. Send transaction record to the supplier
  3. Require the supplier to confirm the transaction

4.6 Shipping

  1. See the Shipping, Taxes & Customs Guide for further details and task lists

 

Glossary

General

Bill of Materials (BoM)

A BoM lists all components and materials, and their respective quantity, on a per unit basis. The BoM helps the supplier to calculate production costs, and procuring the right components and materials in the right quantity. The BoM is an essential part of a product specification.

 

Product Specification

Any kind of product data that defines the design, quality and functionality of a product. Includes, for example, dimensions, materials and file attachments.

 

Quality Option

The various quality alternatives that are available for a certain product specification. This may include a certain thickness or material options for a component.

 

OEM

An Original equipment manufacturer (OEM) product is a custom designed product. An OEM manufacturer manufactures OEM goods according to the buyer specifications.

 

ODM

An Original design manufacturer (ODM) product is designed by the manufacturer, not the buyer. However, few proper ODMs exist in China.

 

RFQ

A Request for Quotation (RFQ) refers to the process of gathering price data from existing or new suppliers.

 

MOQ

The Minimum Order Quantity (MOQ) is the lowest quantity of goods a supplier is willing to sell on a per order, product or color basis. For example, an MOQ set at 500 pcs means that the buyer must buy at least 500 pcs – or the supplier will not accept the order.

 

Product Compliance

Product Régulations

Certain framework (or umbrella) regulations apply to specific product categories and set substance restrictions, safety requirements, labeling requirements and document requirements. Such regulations are often mandatory.

 

Product Standards

A mandatory or non-mandatory standard that defines technical aspects of a product. Substance Regulations. Usually a mandatory regulation that prohibits restricted heavy metals and chemicals, in amounts above the set limits.

 

Document Requirements

Some regulations require importers to maintain a set of documents, for example test reports, design drawings or other relevant compliance documents. Such documents may often be self issued by the importer, but in some cases, a third party is required.

 

Labeling Requirements

Mandatory labeling requirements set standards for product unit and packaging labeling. May include country of origin labels, warning labels, product description and compliance marks.

 

Testing Requirements

Third party testing is mandatory for some products. Some regulations also set requirements for testing frequency and reporting.

 

Compliance Track Record

Refers to a suppliers ability to prove (via verifiable documentation) previous experience with manufacturing goods in compliance with a certain product standard or regulation.

 

Suppliers 

Alibaba.com

The world’s largest supplier directory, base in Hangzhou, Zhejiang. All Gold suppliers are verified as registered companies.

 

Global Sources.com

Established as early as the 1968s (print format), Global Sources operates the world’s 2nd largest supplier directory and hosts trade shows in Hong Kong. All non-free members are verified as registered companies.

 

Supplier Directory

A databank of suppliers, together with contact details and product listings. There are many supplier directories in Asia, but Alibaba.com and Globalsources.com are considered the most relevant options.

 

Supplier Location

The city and province where the supplier is registered and operating.

 

Registered Address

The official place of operations. This may be the address of the office, rather than the production facility.

 

Registered Capital

The amount of share capital, which may include liquid and non-liquid assets (i.e., machinery). When sourcing suppliers, the registered capital can help you determine the scale of operations, for a certain supplier.

Companies with very low registered capital (i.e., RMB 30,000 – 100,000) are almost always trading companies or agents. Suppliers with more registered capital (i.e., RMB 5,000,000<) tend to be manufacturers.

 

Registered Business Scope

Defines the scope of operations for a company, which can be used to determine whether a supplier is a manufacturer in the relevant industry – or a trading company.

 

Business License

All registered companies in Mainland China have a business license, which includes critical information about the company (i.e., Business license number, chinese company name, registered capital, business scope, legal representative, year of registration and operational address).

The same data can also be obtained on gsxt.saic.gov.cn. However, this requires that you have the business license number or chinese company name of the company you want to check up.

 

Quality Management System (QMS)

A QMS is a set of business processes intended to prevent and manage the occurrence of defects throughout the production process.

 

Corporate Social Responsibility (CSR)

A CSR Certificate / Social Compliance Audit report indicates that the supplier operates according to certain standards, in terms of labour and workplace conditions.

 

Finance and payments

Telegraphic Transfer (T/T)

A standard wire transfer payment

 

Letter of Credit (L/C)

A credit letter that withholds the payment until the supplier has fulfilled a pre-determined list of conditions.

Once these conditions are fulfilled, the money is automatically released.

 

Renminbi (RMB)

China’s national currency, which is sometimes called Chinese Yuan (CNY).

 

Hong Kong Dollars (HKD)

The HKD is only used in Hong Kong S.A.R.

 

Shipping

Incoterms

A standardised system for division of responsibility for transportation, between the buyer and the seller. For example, FOB (Free on Board) only includes shipping to the local port of loading (i.e., Shanghai) while DAP (Delivered at Place) includes shipping (and all incurred fees) to the buyer’s address.

As a price is always quoted based on a specified incoterm, it affects the price quoted by suppliers. Hence, a DA quote is always more expensive than an FOB quote.

 

FCL

Full Container Load (FCL) refers to container shipments that are booked by one importer.

 

LCL

Less than Container Load (LCL) refers to container shipments that are booked by multiple importers (i.e., containers with multiple small shipments owned by different importers).

 

Freight Forwarder

A company that administers the shipping and logistics procedures on behalf of their customers.

 

Bill of Lading (BL)

A document issued by the shipper to confirm that the cargo has been loaded. Includes information about the goods, the shipper and the importer.

 

Commercial Invoice (CI)

A document that specifies the value of the goods. This document may be used for customs clearance.

 

Packing List (PL)

A document that specifies the quantity of goods.

 

Country of Origin Certificate

A document that states the origin of certain goods. This document can be used when applying for reduced import duty rates.

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