{"id":45812,"date":"2021-02-06T11:10:30","date_gmt":"2021-02-06T03:10:30","guid":{"rendered":"https:\/\/jingsourcing.com\/?p=45812"},"modified":"2024-05-29T10:59:36","modified_gmt":"2024-05-29T02:59:36","slug":"b-confirm-details-before-production","status":"publish","type":"post","link":"https:\/\/jingsourcing.com\/b-confirm-details-before-production\/","title":{"rendered":"Section 9: Six Things to Confirm with Chinese Supplier Before Massive Production"},"content":{"rendered":"\t\t
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Home<\/a> > Import from China Guide<\/a> > Section 9<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Supplier evaluation has helped you identify who you are going to work with. But before sending the money, there are lots of important details you need to take care of and have an agreement with suppliers.<\/div>
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You need to ensure, for example, the supplier will not leak your product and business information, products can be delivered in time, defect rate can be controlled to a low level, and the payment term as well as the payment method<\/a> you got, are the best. In the following content, I’m going to show you how to confirm the 6 things below one-by-one.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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  1. Proforma Invoice<\/a><\/li>
  2. Non-Disclosure Agreement (NDA)<\/a><\/li>
  3. Lead Time and Delivery Time<\/a><\/li>
  4. Quality Requirements. Solution for Defective Products.<\/a><\/li>
  5. Payment Methods<\/a><\/li>
  6. Payment Terms<\/a><\/li><\/ol>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    1. Proforma Invoice<\/li><\/ol><\/div><\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      When you decide to place an order, the first thing is to ask the supplier to send you a proforma invoice<\/a> (PI). It’s a preliminary bill describing all the product and pricing information. Typically PI also works as a sales contract, since most suppliers won’t provide a contract. If neither you nor the supplier has a solid sales contract, just put in everything that can guarantee you to receive the right product in time.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      So when you got the PI, make sure it includes product price based on which trade term, the quantity of each item, product size and weight, color, what materials are used, the packaging solutions, etc.<\/div>
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      Except for product descriptions, the PI will also contain the supplier’s bank information, payment term, the effective date of the price because the currency exchange rate between USD and CNY keeps changing.<\/div>
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      After checking PI, if the supplier received your deposit payment, they will help you prepare materials and start production. The lead time<\/a> starts on the day when they receive the deposit.<\/div>
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      When the production is completed, the supplier will create a commercial invoice (CI), which is the final version of the PI. After confirming the costs, you pay the balance according to the amount of the invoice, then the supplier helps you ship products.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      The invoice will also be used for import-export customs purposes, so make sure the amount on the invoice is consistent with what you paid. It doesn’t worth the legal risks to give the customs a lower value invoice, just for the sake of paying less import duty.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      2. Non-Disclosure Agreement(NDA)<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      If you have created unique designs, possess intellectual properties to develop new products. It’s important for you to confirm before production is signing NDA<\/a><\/span>, the Non-Disclosure Agreement. Because some suppliers might leak your product or business information by manufacturing more than you ordered, then sell the extra products to others.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      Most Chinese suppliers won’t offer you an NDA to sign, so you’d better prepare by yourself. In this agreement, you can specify what information the supplier can’t share with others, such as price and designs, or clarify that the supplier cannot showcase your product for their marketing purposes. You can also specify the amount of compensation if they breach.<\/div>
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      If you don’t have an NDA yet, I have a template<\/a><\/span> for you.<\/div>
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      However, not all Chinese suppliers are willing to sign the NDA once they see there’s a huge amount of compensation. They are afraid to be wronged as violating the NDA if other people got around them to copy the product. In this case, it’s better to stop considering these suppliers.<\/div>
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      So is NDA effective to protect the confidentiality of your products, to prevent people from copying your product idea?<\/div>
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      Yes, NDA works well to ensure the supplier won’t copy your product, or leak your product information from his side. If your supplier needs to find another factory to manufacture your product or just part of your product, they will also sign subsequent NDAs with each other.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      Take note:<\/b> Once your product is publicly launched, anyone would be able to access your product, and copy it, which is beyond the realm that NDA can help. So the most effective protection for your intellectual property is to register patents in the countries you want to sell.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      3. Lead Time and Delivery Time<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      Lead time is how long it takes since you place the order until the products are ready to ship. Double-check this with the supplier before placing the order, in case they change the production schedule temporarily. For suppliers, the norm is that nobody clarifies lead time by default in PI, which can bring troubles.<\/div>
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      When you’re tight on time, and cannot afford any production delays, don’t just orally tell your supplier about your lead time requirements. The wise choice would be putting your agreements into the PI. Breach clauses are necessary to specify the compensation amount if they failed to complete production before the time point as promised. You would not get a dime for delays if you forgot to put down detailed compensation clauses, only lead time instead.<\/div>
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      Then let’s talk about the delivery time<\/span><\/a>, it’s the amount of time that it takes for goods that have been bought to arrive at the place where you are wanted. If you need urgent shipping to arrive before a certain date, you need to sign an on-time delivery agreement with the supplier or the shipping company (if you use your own freight forwarder<\/span><\/a>).<\/div>
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      In real business, the primary purpose of signing the on-time delivery agreement is not to get paid if a delay occurs, but to urge the supplier to meet the deadline. The on-time delivery agreement only works if you’re able to hold suppliers accountable, otherwise, it’s just an empty promise. Because it’s difficult to sue them in China, especially when your order is small.<\/div>
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      So here’s my advice,<\/b><\/span> for old suppliers you have worked with before, you can restrict them by stopping future cooperations which is a big loss to him if he delays and rejects compensation duty. For new suppliers, it’s wise to hold some payment balance until you get the products in time, even if it’s not easy to persuade suppliers to accept this kind of payment terms.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      4. Quality Requirements. Solution for Defective Products.<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      It’s fine to have some defective products, as long as the defect rate is controlled under an acceptable level.<\/div>
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      The defect rate varies for different products, 5% is fine for most low-value ordinary products, but for high-value products sometimes the rate should be 0. So if you have concerns about the quality, you should confirm with the supplier about the acceptable rate for what type of defects before placing an order.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      You have three options for defect rate higher than it should be:<\/div>