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7 Tips How to Properly Source Products Internationally

Top 7 tips: On how to properly source goods Internationally

September 2013 By Aidan Conaty

In today’s world you are putting your business at risk if you are not sourcing internationally. As barriers to international trade are being removed it has now become easier than ever to source product using websites such as Alibaba, Tradekey or Goodada  from any part of the world. In fact it is a must for your business to have a proper international sourcing strategy including Quality Control Inspections, International freight and logistics.

Businesses are often faced with a challenging requirement of how to put all the different pieces together when starting to source. For some people international sourcing is easy, however for some it might get really difficult to put all the different elements together. There are a lot of variables in the international sourcing. It is complicated and there are many different parties involved, such as manufacturers, quality control inspectors, international freight companies, customs and finally the customer.

Cultural issues, time zone issues and communication barriers can present problems which can slow down your progress specialist supply chain companies such as TCI China can assist you to quickly overcome any issues as they have the experience and knowledge to ensure that the process flows as smoothly as possible.

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There is a lot of information out there on the internet which while helpful can overpower the reader. So I have just noted key points and steps and put a simple narrative to each point. Always remember if you have any questions please do not hesitate to contact me directly.

The seven basics steps you need to know before sourcing internationally are as follows:

1. Fully know your product

While it sounds simple it is the most important part. You must know the materials used in your product, what are the national standards including health and safety standards, the packaging required. Think of it as baking a cake – you must know the recipe with all the ingredients before you can start to bake that cake.

2. Search for suitable manufacturers and have them independently Inspected and assessed

There are several ways to do this including contacting the trade desks of embassies, the internet and attending international trade shows. The key here is to really check out the potential manufacturers using quality control inspection companies to conduct Factory Audits. I would recommend using the inspection services offered by Goodada.com as they offer inspections for many countries.

Tip: Always try to avoid using commission only trading companies as they are not on your side and you will never get the best price. Think of this; Do they want 10% of $100,000 or 10% of $80,000.

3. Decide the country as it can affect the import taxes and duties

Export/import regulations often differ from country to country. While a certain country might be able to offer a product or material a cheap price other factors could dramatically affect the price. One story comes to my mind about a European company that was importing plastic bags from China into the EU. They had negotiated a fantastic cost price with the manufacturer but did not realise that the European Union applied anti-dumping duties on the product. The plastic bags ended up costing this company a lot more than if they were paying their local supplier!

Tip: Find out the products item’s Harmonized Tariff Schedule classification number and confirm the import tax rate with your local tax authority.

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4. Have a bi-lingual purchase contract drawn up between you and the Seller that is enforceable in the country of your Seller

If you are purchasing more than $50,000 per annum from a seller, you must have a purchase contract drawn up, which is in the local language of your seller and is enforceable in the courts of their country. This is one of the most important things that you should not forget. Sellers often hand a Pro-forma invoice and convince the Buyer that this is a suitable document – It is of little or no value if you have a dispute and go to court. You should always have this view point, I am the buyer and I will issue my buying terms to the seller, not the other way round!

Tip: Always think if a judge was looking at the document what language would he speak – this must be the language in your purchase contract

 5. Only pay a deposit of maximum 30% of the product value

A lot of Sellers will try to get you to pay full value of the product prior to manufacturing your goods. Do not do this. The reason is that you will still retain a lot of power over the Seller at a 30% deposit. If you walk away they will lose money as they will not any profit on a 30% payment. Only pay the balance AFTER the goods have had a Finished Goods Inspection and a Container Loading Inspection. Once you have these reports, are happy with them and have a copy of the Bill of Lading then you should issue the balance payment.

6. Always get the products inspected at the Factory

This is the most important piece of information that I can offer. My catch phrase is “Its far better to find a fault on the factory floor rather than at your door”. How many horror stories have you heard of people opening a container and the goods were faulty, incorrect or not even the goods that they ordered!  I bet you if you ask them had they the goods independently inspected at the factory before it left you will hear “No”. Don’t let this happen to you.

7. Use a logistics company from your country

People often think that they will save money but using a logistics company from the country that they are buying from. That is an incorrect assumption in-fact will may actually cost you more money in terms of cost, time and stress. What you want to do is make life easier for you and the process as stress free as possible. Having a person who you can talk to (no time zone issues) and understands you is vital. You will also save money as there are no additional mark up’s added by the sellers for organising the shipping company from their side. I would suggest that you refer to the logistics companies that are listed on Goodada.com. They are leaders in their field and are choosing by Goodada as a result of this.

Tip: Do not ship your goods last minute. This might cost you more than you need to pay.

 

About the author

Aidan Conaty is a co-founder of TCI China and a founder of Goodada.com. Aidan has spent over 15 years assisting companies to trade internationally. He founded Goodada so that it can provide the tools and services that can assist companies to trade internationally

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