Import from China best process: 5 parties (Buyer, Seller, Bank, Shipping, C&F)

In the process of import from China, 5 parties are involved; Importers, Suppliers, Banks, Shipping agents/freight forwarders and Customs clearing agents. We will know in details how to communicate and work with them to import any kind of products from China and do a profitable trading business. I will also share my practical experience of import trading.

The rule is simple, if you buy and import in a good price from China, you can sell the products in a high profit and earn good money in your business. I import directly from China electronic products, without using any agent and do not pay any big commission. In this write, I will clearly in a detail way share you my process of import so that you can also import in the most cost effective way and start your business and make a good profit and do the trading. So let’s start!!

Table of Contents

• 5 Parties are Involved in the Import from China Process
• Importer
• Getting Suppliers from China through Alibaba.com
• Banks
• Shipping agent/Freight Forwarder is used to transport the goods from China to your country
• Customs Clearing Agent in the Importer Country to release the Imported Goods from the Destination Country Customs

5 Parties are Involved in the Import from China Process

5 parties are involved in the import from China process for electronic gadgets import. You have to know the detail roles of these 5 parties.

1. Importer
2. Supplier
3. Banks
4. Shipping agent/Freight Forwarder
5. Customs Clearing agent

Importer

You are the importer and you have to decide what kind of electronics or products you want to import from China.  You have to do the market research and find out what is demandable in your market. This is very important because your decision in here will make you ready for all the expenses that will happen to import in the later stages.

So how do you do the market research?

1. You have to identify the problem that you want to solve with the products that you are importing from China
2. List the number of similar products you can get in the market
3. List the quality and the prices of the competing products
4. Visit the market and talk to the retailers and wholesalers
5. Collect as much data as you can and find out what are the similar products that you can import in the target segment
6. Organize the data that you got in a very clear way so that you can analyze it and find out the demandable products in the market
7. Buy and try all the similar and competing products of your segment so that you can test which products work best at what price range
8. Make sure to note, importing cheap products is not a guarantee that you can see huge sell and good profit. Quality is the king, so make sure you import a good quality product to sell in a higher price if it requires. So do the research on which product is demandable in the market and import that kind of quality product, rather than running after price.
9. See whether the segment you are targeting to import have a strong popularity of a brand in your local market. For example, you want to import a speaker and your market has a very famous brand which every consumer like with brand name ABC. This means it will be really tough for you to sell this similar product in this market as you have a famous brand existing. So, my personal suggestion from the experience is to go with the segment that does not have much of a strong brand existing in the market, so that you can sell your products with a less competition providing a quality product in a competing price
10. Analyze the data that you get after the market research in details and take a logical decision to import the segment you want to focus to import from China

So, after you have decided what electronic product segment or any products you want to import from China after the market research, you have to know the total cost that is needed to import the whole product in your country to your warehouse. Actually the overall cost you have to find out till you sell the product to your end consumer. The total cost to import till you sell the product to your desired customers.

You have to know the cost of the product that you will buy from the supplier. Further, you have to know the terms of the payment of the goods you are buying to the supplier in which payment terms you want to buy: FOB, CFR or Ex-Works. Let me go into details of these 3 terms. This is very important to know in the international trade.

FOB: Free On Board

FOB (Free On Board) applies to goods transported by ships and boats through seas, rivers, and canals. The seller is responsible for transporting the goods to the departure port and pays for all associated costs and risks. The seller acquires the necessary export permits and other documentation to export from the origin port. The seller also does the customs clearance in the seller port. The seller’s responsibility ends after the goods have been loaded on to the vessel, as shipped onboard, if the contract is free on-board Shipping Point.

CFR: Cost and Freight

CFR (Cost and Freight) is wherein it is the seller’s sole responsibility to arrange for the transportation of the goods to pay for transporting the goods by waterways, either by sea, river, or canal, to a destination port specified by the buyer. In addition to paying for the transport of the goods, the seller has to pay for delivering the goods to the agreed upon departure port. The seller must also pay for acquiring export licenses and for loading the goods on to the transport vessel. The seller does everything from making the goods, customs clearance in the seller port and shipping payment. The seller’s liabilities end here as the CFR contract does not require the seller to insure the goods for further transportation. The buyer will have to insure the goods if they think it necessary.

EXW: Ex Works

Ex Works contract, the buyer transports the goods from the seller’s premises to the buyer’s destination. The transport mode may be whatever is convenient for both parties, road, rail, air, sea, or waterways. The buyer is responsible for loading the goods for transportation, acquiring export and import licenses, getting security clearances, paying taxes and customs duties, unloading the goods at the destination, storing the goods at a warehouse at the destination, and all other costs and liabilities. The buyer is also responsible for insuring the goods while they are in transit. The only responsibility the seller has is to make sure that the goods are properly packaged and available for transport, and that all the documentation for customs and shipping are in correct order. In this payment term method, the seller only makes the product and the rest is done by the buyer.

Then you have to find out the payment system you want to use by LC or TT payment and communicate with the supplier accordingly to pay for the products you want to buy. So what is this LC and TT payment? There are many other payment system used in the international import system but these 2 system are very commonly used.

LC payment: A letter of credit, or “credit letter,” is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. So in here the bank is taking the responsibility of the payment against the buyer to the supplier. This is a bank to bank guarantee. The importer bank is giving the guarantee to the supplier bank, so the risk is minimal in this transaction.

TT payment: T/T payment stands for ‘Telegraphic Transfer.’ This is a payment method where the payment can be made in advance or in the middle of the production or at the end of the production to the supplier, as per the agreement between the buyer and the suppler. In other words, we can say TT payment is an international wire of funds from the buyer’s bank to the seller’s bank.

Next you have to communicate with the shipping agent to find the vessel to import the goods from China to your country. You have to know the cost of the shipping line and the different rates they will provide. Also know the time need to come the vessel from China to your country which is called the transit time. All these information and the cost of the transportation need to be keep in mind.

Then you have communicate with the customs clearing agent in your country to know the customs duty and VAT that you have to provide for different products to your country government while importing that product from China. There are many other costs in customs clearing in your country. Communicate with the clearing agent to know all the cost and calculate.

Getting Suppliers from China through Alibaba.com

You can get the best manufacturers and suppliers in China from Alibaba.com. When I imported my first consignment of electronics mainly mobile repairing tools. I searched through Alibaba.com to get the suppliers and imported from there. So how do you know which a good supplier is and why do you use Alibaba.com to get your suppliers?

• You get direct factory suppliers and their direct trading agents
• High number of suppliers to choose from.
• The suppliers are organized categories to find products fast.

There are many different types of suppliers in Alibaba.com but below 2 are very important. Let us go into details:

• Manufacturers: A manufacturer is a company that produces items for use or resale. The majority of AliBaba suppliers are manufacturers. Manufacturers are the direct creators of the products, they can offer very low prices on items. However, their minimum order quantities (the minimum number of products you can buy in one shipment) are often very high.
• Wholesalers: When you buy products from a wholesaler, you don’t have to buy in bulk. Wholesalers are able to house a lot of products for you which means, you’re getting products at a discounted price. In other words, the more you buy, the better the price! A manufacturer is able to pass on better prices to a wholesaler because they typically buy in bulk and have the storage space to house the goods until they’re sold.

Further, you can also filter suppliers and manufacturer with supplier filters that Alibaba.com supports, to avoid the scams and general low-quality suppliers, AliBaba provides some supplier filters you’ll want to use.

• Trade Assurance Suppliers: Trade assurance means you’re covered if…
  • The products you ordered aren’t shipped on time
  • Your products don’t meet the quality standards

If either of these happen to you, AliBaba will pay for the goods and you’ll get a full refund.

• Gold Suppliers: “Gold” is a premium membership for suppliers on Alibaba. Suppliers who pay the fee ($10,000 USD) are provided with comprehensive ways to promote their products which, in turn, maximizes product exposure and increases their ROI. Because gold suppliers have to pay such a large amount each year, it basically weeds out scammers who are only after your money.
• Assessed Suppliers: These suppliers are inspected onsite by a third-party inspection company. They offer all the information for Alibaba’s Factory Audits, including…
  • Assessment Reports
  • Verified Videos
  • Verified Main Products.

So after you have got your desired suppliers, ask them to communicate with you through mail or whatsapp or wechat. I personally ask them to chat with me in whatspp or wechat as this is fast communication with 2 way questions and answers in quick time rather than in email, which is a slow process. After you get a good supplier for your product. You can ask suppliers the questions listed below:

1. What is the minimum quantity you sell in a lot?
2. What are the different products you have?
3. What is the FOB price of the product?
4. How many days will it take to make the product?
5. Can you please provide me a sample of the product? You give me the sample free and I will bear the courier charge.
6. Show me video footage of your factory?
7. Share me the catalog of your products?

Banks

Bank to open Letter of Credit (LC) or Telegraphic transfers are also known as telex transfers (TT) payment system to pay to suppliers from importer’s bank in the import of Goods from China

Banks facilitate international trade by providing financing and guarantees to importers and exporters of the payments. In import, your bank which is importer’s bank guarantees the supplier’s bank which is the exporter bank that the payment of the export product will be done by your bank. So the supplier is guaranteed of the payment. Let us go into details of the 2 payment process we discussed before for the import from China of the goods.

Letter of Credit (LC) payment system process:

Step 1 – Issuance of LC

After the parties to the trade agree on the contract to buy the products and the use of LC is used in the payment system, the importer applies to the issuing bank to issue an LC in favor of the exporter. The LC is sent by the issuing bank to the advising bank. The latter is generally based in the exporter’s country and may even be the exporter’s bank. The advising bank (confirming bank) verifies the authenticity of the LC and forwards it to the exporter.

Step 2 – Shipping of goods

After receipt of the LC, the exporter is expected to verify the same to their satisfaction and initiate the goods shipping process. The LC guarantees that payment will be done to the supplier after exporting the goods. After getting the LC, the exporter starts the production of the goods.

Step 3 – Providing Documents to the confirming bank

After the goods are shipped, the exporter (either on their own or through the freight forwarders) presents the documents to the advising/confirming bank. All the docs like commercial invoice, packing list, Bill of Lading all the shipping documents are provided.

Step 4 – Settlement of payment from importer and possession of goods

The bank, in turn, sends them to the issuing bank and the amount is paid, accepted, or negotiated, as the case may be. The issuing bank verifies the documents and obtains payment from the importer. It sends the documents to the importer, who uses them to get possession of the shipped goods

Telegraphic transfers are also known as telex transfers (TT) payment system

Telegraphic transfer or telex transfer (“T/T”) is the electronic transfer of funds from a buyer/importer to a seller/exporter, via a bank or a similar institution.

You should never pre-pay 100% of the order before production starts, unless you know the supplier very well and have done a lot of business with him and trust him.

The best process for TT payment you can follow is:

1. You have the supplier develop sample(s) until you are confident they know exactly what you want.
2. You send a 30% or 20% or 10% as agreed by you and the supplier deposit (by T/T) before production starts.
3. Your supplier (the manufacturer & exporter) purchases the components and/or materials and arranges the production
4. You work with a quality assurance firm to inspect product quality (this is optional but usually a good idea).
5. Once the goods are on the ship, the supplier gets the Bill of Lading (B/L), and sends you a copy of it
6. If the product name, quantity, etc. are all fine on the bill of lading, you send the final payment to the supplier
7. Once the supplier receives the payment, they send you the original B/L to you to release the goods from your country port

Shipping agent/Freight Forwarder is used to transport the goods from China to your country

A shipping agent/freight forwarder is an agent who acts on behalf of importers, exporters or other companies to organize the safe, efficient and cost-effective transportation of goods.

A shipping agent manages all the shipping formalities on behalf of the supplier and the buyer in the international trade. The list goes:

• Managing freight costs
• Port charges
• Costs of a special document
• Insurance costs
• Terminal fees handling
• Managing transportation by air or sea despite the number of countries and manage multimodal transportation too
• Stand for customer’s interest while negotiating logistics agreement rates with carriers that can be NVOCC or and Ocean carrier
• Billing
• Offer distribution facilities
• Arrange inland transportation of the goods
• Completion and processing of the documentation required for the movement of goods such as Bill of Lading, custom related documents, port documents, etc.
• Booking or the confirmation the space on the ocean vessel
• Issuing approved HBL
• Arrangement of the transportation of cargo to the port by rail or truck
• Helping out their clients with documents like Incoterms, letters of credit. Assist the customers with bank clearance, and give advice about the most efficient way to move their cargo.
• Warehouse facilities for storing customer’s products before and after shipping.
• Arrangement of insurance on behalf of the shipper

Customs Clearing Agent in the Importer Country to release the Imported Goods from the Destination Country Customs

Customs clearance and the approval and co-ordination with the customs of the importer country of the regulatory authorities to affect the imports is done by the Customs Clearance Broker.

Customs Clearance agent who would know the working of all the Customs Rules and Laws and ensure compliance of the same in a speed manner so as to ensure that the import consignment is cleared within the allotted free period and does not incur demurrage.

On arrival of the import consignment in the buyer country port. The Customs carries out physical inspection as well as valuation of the import. Valuation of the import consists of ascertaining the correct description of the items, classification of the items under relevant Customs Chapter and Tariff, Ascertaining that there is no case of under invoicing and certifying the valuation of the consignment and arriving at the Customs Duty required to be paid. The clearance agency proceeds to advice and co-ordinate with the importer C&F to make necessary Customs Duty Payments and takes physical delivery of the Consignment and delivers it to the Importer at the designated place along with the set of Original documents.

You as an importer cannot be expected to spend his time on getting the consignments cleared after ensuring that he is compliant with all the processes. Hence the role of the Customs Clearance Agency comes into the picture for he undertakes to represent the Importer with the Customs Department and follow through the process.

Finally, we have seen the role of all the 5 parties in the import process of electronics or any other goods import from China. The 5 parties work simultaneously, depending with each other in the whole supply chain to move the goods from China to the importer’s country.

To sum up the steps while importing from China of any products to your country to start a business is.

Firstly, as an importer, you have to get the product you want to import and take the necessary import licenses to import in your country

Secondly, find a supplier from Alibaba.com platform with good profile background

Thirdly, after the negotiations are done with your chosen suppler from Alibaba.com platform, then open LC or TT to pay the supplier for the supply of the goods to be imported

Fourthly, Communicate with a shipping agent to transport the goods from China to the destination country.

Last, once the goods reach the destination port, communicate with your Clearing and Forwarding agent to represent you in the importer country customs to release the goods after paying all the duty.

Now after the goods are released from the customs, transport the goods in your warehouse or any other safe place and crosscheck all the imported goods from your end.

All OK. Now START you sales in your country and WIN the market.

Again, repeat the whole process to import with your next shipment in a very cost effective way and sustain in the market with a strong position.