Importing from China? Avoid These 6 Costly Pitfalls
Importing goods from China can be daunting and risky, particularly for businesses new to the process. Here are six common pitfalls to avoid.
Importing from China can offer significant cost efficiencies and access to a vast supplier base. However, the process is fraught with complexities, from language and cultural barriers to navigating complex customs regulations.
Having a reliable import partner can be invaluable in helping you avoid these costly errors:
Pitfall 1: Not having a trusted import partner on the ground in China
China is a manufacturing powerhouse with cutting-edge infrastructure and a highly adaptable workforce known for fast turnarounds, low pricing, and high quality, provided you find the right suppliers. This extensive product range makes China a one-stop destination for businesses looking to source multiple products.
"Many importers are put off by China’s steep language barriers and complex regulatory environment. Other importers are sourcing Chinese goods, but they do so through multiple intermediary agents or countries, which adds to their costs," explains Sithembile Dlamini, Head of Africa-China Banking at Standard Bank.
"When you work with our trusted, on-the-ground Chinese import partner, Guomao, you’ll get assistance with sourcing products directly from the manufacturers, customisation of products, help with negotiations and contracts from their English-Mandarin-speaking team, end-to-end travel arrangements if you want to meet with suppliers in China and assistance with shipping and clearing of your goods through Chinese customs," says Dlamini.
Pitfall 2: Googling Chinese Suppliers
“We still find many of our customers use Google to find Chinese suppliers. The problem with this is that unless you travel to China to meet a supplier, you can’t do thorough vetting or be sure it’s actually the manufacturer you’re dealing with and not a third-party agent,” says Dlamini.
“A further challenge concerns naming conventions. For instance, if you google our import partner Guomao, you’ll struggle to find them because their official trading name is ZheJiang International Trading Supply Chain Co. Ltd. These are the kind of nuances you’ll face trying to verify a Chinese manufacturer online,” explains Dlamini.
When you work with a trusted import partner like Guomao, you’ll enjoy two benefits when it comes to suppliers.
Firstly, if you’ve found a Chinese supplier you want to work with, Guomao can conduct a compressive audit to verify their authenticity, conduct site inspections, and check their product quality.
Secondly, Guomao can also provide you with access to its network of thousands of pre-vetted and reputable suppliers, or source a new supplier that matches your exact needs on your behalf.
Pitfall 3: Making Upfront Payments
In China, suppliers usually demand full upfront payment to process orders, especially for new business. This leaves importers with no protection if their orders are incomplete, incorrect, or undelivered.
Financial institutions developed trade finance tools such as Letters of Credit (LC) to mitigate these risks and assure both the buyer and seller. An LC is a binding commitment from a bank to pay a seller a specified amount upon the presentation of specific documents. It ensures the seller receives payment while also protecting the buyer by ensuring they receive their order as agreed.
"The problem is that Chinese suppliers rarely accept Letters of Credit (LCs). However, if you choose to work with a supplier listed on the Guomao database, Guomao will accept the Standard Bank LC and proceed to pay the supplier for the goods. They will then receive their payment through the LC at a later stage. Because this is only possible with a Standard Bank-issued LC, this exclusive agreement is restricted to business customers who bank with Standard Bank,” says Dlamini.
Pitfall 4: Not Inspecting Goods Before Shipping
Importers often order samples from suppliers to verify specs and quality before placing their orders. However, it's important to note that this does not guarantee that the final shipment will match the quality of the samples you received.
This challenge is taken care of when you partner with a reputable import company like Guomao. Their agents conduct a comprehensive inspection of goods before they are loaded for delivery, ensuring your shipment meets the exact criteria agreed upon by both parties as per the signed agreement.
Pitfall 5: Ensuring Imported Machinery Complies with International Standards
All imported machinery must meet minimum prescribed local standards – goods that fail to do so will not be permitted to clear through customs.
The problem is that getting the correct International Organization for Standardization (ISO) certifications from Chinese suppliers can be challenging – and not all of them meet these requirements. In fact, China adopts ISO standards in different ways: Identical (IDT), Modified (MOD), and a small number as Not Equivalent (NEQ).
To find the correct alignment, you need to work with an import partner with in-house technical expertise to understand these differences and help you match them to the correct equivalent standard.
“This is another area where Guomao adds considerable value and provides peace of mind. By leveraging their in-house team of designers and engineers, they work directly with manufacturers to ensure all relevant ISO standards are met,” says Dlamini.
Pitfall 6: Avoid Unnecessary Currency Costs
The official currency of China is the Renminbi (RMB), whereas the US Dollar (US$) is the world's official reserve currency. When trade occurs between foreign countries, such as Uganda and China, for example, it’s common for the buyer to convert their currency from Ugandan Shillings to US$ and then from US$ to RMB to pay for goods in China.
These multiple currency conversions lead to unnecessary additional costs and the potential loss of currency value in each transaction.
“While multiple currency conversions may not be a major expense for our South African clients, they can add a more considerable cost for importers in other African countries with limited foreign currency reserves,” says Dlamini.
“Standard Bank has seen an increasing demand for the use of RMB in Africa. We’re actively improving our RMB product capabilities, and we encourage our clients to use RMB as a settlement currency,” says Dlamini. “Through our partnership with the Industrial and Commercial Bank of China (ICBC), Standard Bank is an indirect Cross-border Interbank Payment Systems (CIPS) participating member in RMB/CNY.”
Interested in Learning More?
Get in touch with us to find out how our end-to-end Africa-China Import Proposition can expand and de-risk your trade operations by visiting our website or emailing us at [email protected].