Getting Products from China:  The Sourcing Process

The sourcing process for getting products from China is something you should get familiar with when running an online store, find out.

Photo by Egor Lyfar on Unsplash

China is an international hub for all sorts of products.  The sheer number of factories and availability of raw materials and labor make China an ideal location for manufacturing.

China has been shipping products overseas for many, many years.  The rise of online shopping and small, from home business opportunities means many people have taken up finding, ordering and importing products for sale.

Any orders coming from China start with reviewing the details and understanding the tariffs and duties on anything imported.  It is best to contact the customs agency via their website in your home country for information.  If you have questions, be sure to write them down, and ask.

There are two ways to order, pay for and import products.  You can do this independently via sites like Alibaba and negotiate the complex world of international trade, or you can contact a sourcing agent.

What is a sourcing agent?

A sourcing agent is your on the ground business partner in China.  They are your eyes, ears, mouth and hands for your products.  The sourcing agency will have access to a network of manufacturers across China and will find the most appropriate manufacturer for whatever products you are interested in carrying.  It can be anything from socks to coffee makers – your sourcing agent will find what you need.

How does the sourcing system work?

Once you decide on a product and make initial contact with the sourcing agency,  An agent, fluent in your language, will be assigned to you and your products.  The agent will then look for appropriate manufacturers for your products based on the factors you have selected.  The goal is to find three to four manufacturers for you to select from.

The selection of a single manufacturer comes from ordering samples of the products you want made.  Typically, you or a company will order a small number of products, two to three, and have them shipped from China.  You review the products, select the one you like, make any necessary changes to that product and inform your  sourcing agent of your decision and changes.  You are free, and recommended, to send your samples to an independent third party inspection service as well.

Negotiations

Your sourcing agent in China will take your product to the manufacturer and begin to negotiate with the manufacturer on the pricing.  This is a very important step.  The manufacturer will have a basic idea on their costs based on your sample and can make their price determinations based on that information. 

There are some, unfamiliar with Chinese business customs and practices, who will attempt negotiations on their own.  

This is a very bad idea and will result in your products being pushed down to the bottom of priority or passed to the lesser skilled employees in the factory.  Either way, you will not be happy with the eventual outcome.

The sourcing agent, familiar with Chinese business practices and often with the manufacturer itself, will be able to secure not only high priority but the most skilled trade workers.  Your products will turn out exactly as you envision in this way.

Pro forma invoice

This is the business contract for you and your Chinese manufacturer.  The invoice will detail all of the vital information on your product order: delivery, shipping, payment, quantity, requirements, packaging and other pertinent elements of your product.

The pro forma invoice doubles as a contract, meaning a second contract is not necessary.  You may request an NDA, non disclosure agreement, at this time if you want to keep your products proprietary and exclusive to you and you alone.  This is the time when such a request is made.

Before the production run will begin, 30 percent of the total invoice should be paid.  Your sourcing agent can make this payment on your behalf, and you will have detailed instructions on how to transfer funds to China.

The pro forma invoice is always written in your native language and Mandarin Chinese – the standard dialect of the Chinese language.  You may sign your invoice, while the manufacturer may use a stamp.  Do not worry – the stamp carries the same weight as a signature in Chinese business.

Production

Your sourcing agent will follow the production process for you.  Inspections, from a third party, are often also ordered at this time and from your pocket.  You will have previously made your initial payment on products, and the inspection will happen when approximately 80 percent of the order is complete.  If the inspection goes well and all looks good, you will pay the remainder of your invoice.  The sourcing agent will arrange shipping at that point as well.

Shipping 

Shipping from China happens either air, more expensive but faster, or sea, less expensive but slower.  Some products can be shipped across land, but this is a very rare occurrence.  Sea shipping is best for products destined for the U.S. 

The total time for shipping will depend on a number of factors.  It is a safe assumption to allow 30 to 90 days of total time, minus holidays in both countries, from the factory to your door.

Your products will arrive in your home country, and you will be assessed duties and tariffs based on the values of your products.  Keep in mind, your customs agency has broad powers for importing products from China.  They can search, inspect and seize products if they feel anything violates the country’s importation laws and ordinances.

It is strongly recommended if you are serious about starting a business selling products sourced from China that you find a quality sourcing agency to help you.  Sourcing Nova is one such agency that is uniquely positioned in the sourcing world because of their network of contacts in China and the U.S.

This brief overview is only the tip of the iceberg in the product sourcing industry.  For more detailed information on product sourcing, shipping and tariffs, click here.