AboutHank S Expertise Ask me about sourcing products in China, finding manufacturers in China, importing from China, developing new products in China, moving manufacturing to China, price negotiations with suppliers in China, and logistics-related issues.
Experience I lived in China from 1993 to 2003 where I learned Chinese and worked in the fields of logistics, marketing and manufacturing services. I have visited hundreds of factories in China. I am authorized by the NYS Unified Court System as an interpreter of Mandarin Chinese. I have an MBA in international business and entrepreneurship. I work in a U.S. company as product development and sourcing manager.
Education/Credentials MBA, International Business & Entrepreneurship, City University of NY
BA, East Asian Studies & Chinese, City University of NY
Studied international trade taught in Chinese at the University of International Business & Economics in Beijing
Chinese language study at Beijing University & Nanjing University
Question QUESTION: Hi there!
We are currently working with a great sourcer in China and have put in a few smaller orders with him that have worked out quite well ($5,000) or so. We received the order in good time and it was of good quality. We paid 30% when we placed the order and paid the remaining %70 when the order left China. We are now looking at putting in a very substantial order with our sourcing agent ($100,000+). We pay our sourcer direct, who then pays the factory. We have never met him in person and while we did get a couple of references and are very happy so far, our shareholders are very concerned if we pay this large amount on the same payment terms we did for the smaller orders. Is it customary to ask the sourcer to get bonded or engage an escrow agent? What happens if the money goes missing or the shipment is deficient? This is a lot to gamble.
ANSWER: Although your sourcing agent's past performance is a good indication that things will probably turn out fine, anything can happen. You and your shareholders are correct to be concerned.
There is no need to gamble, and never mind what's "customary" - do what makes sense and what puts you and your shareholders at ease.
First, you need some kind of written contract or agreement with your sourcing agent that spells out your and his responsibilities. The agreement need not be complex. It should address the main issues of payment, product quality and delivery. You can draft it yourself or ask your sourcing agent to draft it.
Next, you should utilize a safe payment method that assuages the concerns of your shareholders and protects you against the risks you mentioned. Which method you use is up to you. Good luck, Hank
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QUESTION: Hi Hank!
Thank you for your quick response! I agree- and plan on having a written contract with our sourcer, although he is in China and the ability to sue for breach of contract gets a bit more complicated. Are there types of "safe payment methods" you would recommend? I don't want to offend our sourcer by suggesting we don't trust him, but it sounds like getting an escrow agent to hold the balance makes sense (until such time as we both sign off). Alternatively, is there some kind of insurance our sourcer can get, under which we are the beneficiary if he takes off with our money? Any thoughts you have on safe payment methods would be so very much appreciated.
Answer I suggest you direct this question to another expert: Richard Barr. I don't know him personally but I've read some of his posts and he knows his stuff. He describes his expertise as follows:
My professional expertise is International Banking, concentrating on the areas of Money Transfers/Payment Systems and Int'l Trade Finance.
I have always used bank transfers rather than L/Cs or escrows because I have always worked with my suppliers face-to-face. If you are preparing to take your business to the next level then I recommend getting on a plane and flying to China to meet your sourcer. -Hank
