Ways of wholesale purchase of goods in China, the importance of market analysis in assessing the liquidity of the product, advantages and disadvantages of different types of import, the contract terms of work with Chinese enterprises
Many people tend to joke saying that all international trade is based in China. In fact, it’s true in most cases, because Chinese products are available in the markets of wide majority of the countries and regions of the world. Foreign customers buy goods from China in bulk, sell them in their own countries and even resell to the other local smaller companies for further sales. All this is possible by the fact that the products exported from China are manufactured in accordance with international standards, while the price of the goods is still very attractive, especially compared with American and European analogues. Along with that, it maintains a high demand for wholesales commodities from China, and its competitiveness.
Many Chinese manufacturers realized the great interest in their products coming from foreign companies and no longer work with small consignments, but prefer the customers who are ready to buy their goods in large bulk, whether it’s knitwear, building materials, LED-lamps or equipment. In any case, if you want to organize wholesale deliveries of products from China, you always have plenty to choose from. The potential buyer of goods from China in bulk among a vast range of products offered by the Chinese, can find the ones that meet his requirements. Or even place an individual order for production in the factory.
Among the large number of Chinese suppliers it is better to choose those who has established themselves in the market as a reliable partners and has experience in dealing with foreign customers. It’s convenient to look for suitable suppliers while visiting specialized exhibitions. It’s also possible to meet a partner from China at major wholesale markets (such as, the market in Yiwu, which is called the biggest wholesale market in the world). In order to organize the supply chain from China, it is also possible to do it through Internet sites or directly transfer the analysis of the market to an experienced intermediary company, which professional staff will navigate you to the Chinese market and achieve the desired results with the least amount of effort and resources.
It is not as difficult as it seems from the first sight to buy wholesale products from China. Of course, this means the supply of fairly large orders of products or equipment. At first, the market analysis is very important in assessment of the liquidity of the product when it is sold in any country. Besides that the assessment of possible existence of one or more wholesale customers for this type of product is of primary importance as well.
Let’s assume that this step is successfully passed, and you are able to determine the type of products, that must be purchased in China. Then there are questions about the purchasing procedure of goods from China in bulk, their transportation, insurance, customs formalities for export and import. All questions that arise at each stage are very important, and if you do not take into account at least some of the factors influencing the process of buying and selling, you may have risks of loss of funds or the product itself. The deal may be unprofitable.
Of course, such course of events should be avoided by using preventive measures and proven methods of solving problems. There are several ways to purchase goods from China in bulk, minimizing the risks of cooperation with Chinese companies .
Option number one: buy or order goods (equipment) from China: while an importing company is registered in its country as a participant of foreign economic activity, opens a foreign currency account in a bank, usually in US dollars.
Already at this stage, it should be clarified with what Chinese enterprise the company will cooperate, who will be the agent, how the payments, shipping, customs clearance will be made and so on. Entrepreneurs should be aware of all the project partners. In addition, you need to calculate the final cost, having on hands all the final figures on prices of goods and the exact amount charged by all parties and organizations for services rendered. Thus, each transaction, that aims at goods purchase from China, involves the development of a detailed business plan.
After that, the company signs a contract with the Chinese side, specifying the conditions in advance, including payment terms, product range, payment transfer conditions under the contract and so on. The contract or specifications usually specify the period of production, so after the counterpart in China receives the prepayment, you can determine the date of shipment.
It should be borne in mind that not all Chinese manufacturers have the export license, so often an agent, engaged in freight forwarding from China, can provide clearance of export documents when shipping products abroad.
The final stage of the goods purchase from China includes the payment for shipping and customs clearance of goods (usually by a customs broker) and receiving the products in the warehouse.
The disadvantages of the method described include: cost transparency for tax inspection , exchange control, excessive paperwork, tax margins when selling the goods.
In turn, the benefits are minimal risks and low operating costs.
The second option to purchase goods from China in bulk implies the scheme when the contract is signed by the agency company, payments under the contract are entrusted to a third company, customs clearance and shipping is done by the broker. Reception of goods in the warehouse by the customer’s company takes place on the basis of the sales contract. There are various options of payments and documents that can be agreed by the parties. All other steps of the procedure have a similar structure as the first option.
In this case the disadvantages are the increase in costs and paper work.
However, the benefits are: low risks, minimum tax margins on goods when sold, no access to the transaction for tax inspection and exchange control, flexibility at customs – the customs duties might be decreased.
In fact, there are many more schemes of purchasing goods from China in bulk and cooperation with Chinese partners. UGL company is ready to orient you in the process and help you find the best way to acquire goods or equipment from China, considering the wishes and possibilities of the client.