Your risks as an importer

Be aware of your risks

 

As an import agency, it is our aim to always offer the customer the best service. If you have the feeling that we are taking too much time to find the right trading partner, always be aware that the Agentur Frisch cannot bear the risk and responsibility for subsequent losses. The risk always remains with you as the importer. For this reason, Agentur Frisch works mindfully and chooses the safest possible paths in cooperation with you based on all available options

 

 

importers into the EU

As an importer into the EU, you can be held liable for damage caused by the product, since the injured party cannot reasonably be expected to have to assert his rights against a third party abroad. This is exactly why it is important to check the product thoroughly in advance in order to be able to rule out possible risks in advance. Please inform yourself about the Product Liability Act or seek advice from a competent lawyer. We would be happy to recommend a lawyer for you

 

Delivery risk – failure risk – getting to know the supplier

We try to check the reliability and seriousness of the supplier with all means of modern communication. We always recommend a prior factory visit by our staff in China to get a personal impression of the factory. We are happy to visit the factory on your behalf and create a visit protocol according to your specifications. If there are still doubts, additional security can be agreed in the terms of payment with the exporter, e.g. by an LC payment

 

quality risk

The goods do not always really correspond to what the supplier previously stated in his product descriptions and how it appears on the product images. We recommend that you have product samples or fabric and material samples sent to you and have them tested in the laboratory. Many products need ROHS or CE certificates. It is important to also have copies of the certificates presented for examination. It is not uncommon for manufacturers to deliver what you previously received as a sample. We therefore also recommend ordering an acceptance of the goods before shipment. We are happy to take care of that for you. We carry out an apparent acceptance test because we can neither test every single product for you nor do we have the technical possibilities for a flawless material test on site. In addition, there is no guarantee that the supplier will actually give the goods we have checked to the carrier. We cannot completely accept the risk, which means that a residual risk remains even after the most careful examination. We are also happy to offer production monitoring during production. However, this is very expensive because from the start of production to the end of production and until the load is loaded, an employee accompanies the production on behalf of our agency. This is therefore only worthwhile for very large production numbers.

 

transport risk

In the event of transport delays, you as the importer bear the risk of delays in delivery unless a different agreement has been made with the exporter. The goods are of course insured against destruction, damage or loss on the transport route, provided that Agentur Frisch can organize the logistics through the house forwarding agency. For collective shipments or CIF deliveries, please contact us regarding insurance.

Another risk is the cost of transportation. Most prices (e.g. sea freight, on-carriage, diesel surcharges, etc.) are daily prices. Alone from Feb. From 2012 to May 2012, sea freight costs tripled in some cases. Unfortunately, it is never possible to foresee in the long term what transport costs are to be expected after the goods have been completed. Therefore, a calculation can only be based on a guideline value for the last few months.

Port fees, which may also be incurred, should not be neglected. This, too, is often met with misunderstandings. In principle, you have three days off in the port, which the freight forwarder has usually offered you as “port fee” in the offer. Each additional day costs storage fees and demurrage in the port. But how can this happen:

 

Case study: The goods arrive at the port on Friday, May 27th, 2016 in the late afternoon, the customs application can then only be submitted on Monday, May 30th, 2016, customs clearance is released on Tuesday, June 1st, 2016 and the goods arrive on June 2nd. directly onto the next train or van. There have already been six days at the port. Of course, every carrier tries to avoid these fees.

 

Risk in customs clearance

When making previous calculations and recommendations, the Agency always bases itself on the current customs tariffs or, as a rule, on the customs tariff provided by the manufacturer in the third country. However, if you do not obtain binding customs information from the customs authorities, this customs tariff cannot be guaranteed. The importer bears the risk that the customs authorities determine a different customs tariff.

 

The fees for customs clearance are charged for each customs tariff. Please note that several customs tariffs can be set for different products and the fee for declaration for customs clearance is charged for each customs tariff.

 

The fees for customs clearance are charged for each customs tariff. Please note that several customs tariffs can be set for different products and the fee for declaration for customs clearance is charged for each customs tariff.

 

price risk

Since you often pay abroad with the respective national currency or with the USD currency, you as an importer have the risk of currency fluctuations. Foreign exchange losses are at your expense. If this has been contractually agreed in advance, the exporter can adjust any currency losses later and invoice you for the difference

 

Political Risks

Political risks cannot be ruled out either (e.g. war, strikes, expropriations, payment bans) and are borne by the importer. Other political risks can also be borne by the exporter (e.g. inflation)

 

economic risks

Different laws, import and export regulations, ordinances are a risk for the importer if he is not familiar with these laws and regulations abroad. Chinese exporters need e.g. an export license without which you are not allowed to export (except for express services such as DHL, as they then act as exporters)

 

Patents, Licenses and Certificates

Of course, the brand owners have the right to their brand for most branded articles, which is protected by the legislator when importing into a customs area (e.g. the EU). The trademark owner can of course enforce the right to his trademark. Likewise, certain details and technologies can be protected and licenses are required for import. Certificates such as CE, ROHS or EEC & COC are also required for certain merchandise. For your security, we can recommend a lawyer who can check for you which documents you need for import into the EU. Accordingly, we then support you in finding trading partners abroad who have or can acquire all the necessary documents. It is important to contractually stipulate when which documents must be available for purchase and payment so that you can prove that you have complied with all the specifications.

 

Agentur Frisch is already working with numerous suppliers who, to our current knowledge, have all the necessary certificates and licenses. However, the check must be repeated regularly, as the laws and rights of other manufacturers can also change constantly. In addition, we know that many manufacturers are reliable and that their products are of good quality. Through our local contacts, e.g. China, Argentina, Indonesia, we are also informed about current political and economic events and are also informed about laws and regulations. Of course, we cannot be equally well informed and advised for every industry and every product, but your risks are significantly reduced through our cooperation. You can get legal advice from our recommended lawyer at any timeThe most important principles when importing from a new supplier from China for the first time (also applies to suppliers from some other Asian countries, such as India, Indonesia and Vietnam)

– Never assume a fixed delivery date and plan a lot of time – Only invest as much as you are willing to lose – Never sell goods that have not yet been delivered to you from China and checked.

Importing from China is a hurdle that always brings new surprises. We are ready to go through this hurdle race for you.

Risks when importing from China (global sourcing)

 

Scientific elaboration by David Frisch, Managing Director of the Agentur Frisch

Consulting GmbH & Co. KG from Berlin.

 

  1. I. growth market China

 

  1. II _. Risks of importing from China, risks of global sourcing

 

III. China import opportunities, global sourcing opportunities

 

Many textile companies have now disappeared from southern China, since production in countries such as India, Pakistan, Bangladesh, Vietnam and Indonesia has become much cheaper than it is currently possible in China. Just a few years ago, most of the textiles available in the West were still “made in China”. We have to deal with whether China is still a low-wage country, in any case, China has to deal more and more with competition.

 

  1. growth market China

 

Even if we still often hear in the media that the economy in China is weakening, it should not be overlooked that this only means that the economy is growing more slowly, but growth is still there. On April 15, 2016, this was given as 6.7%.

 

Source: SPIEGEL ONLINE – 04/15/2016

 

In Germany, economic growth is not even 0.2% and yet Germany is one of the largest and most successful economies. This shows that a country’s economic growth and the strength of the economy cannot necessarily be used as benchmarks for one another. The economic development in China is still gigantic if you look at the construction of new airports and new railway lines and the increase in passenger numbers at the airports in China by about 70% since 2010. In 2015 alone, 45 new airports were built in China and 88 airports were expanded enormously. (Tille 2010, p. 7)

 

However, since China is also adapting more and more to Western competition in terms of quality, it can be expected that China will also shed its cheap image in the long term, which will of course also be reflected in the prices.

 

  1. Risks of importing from China, risks of global sourcing

 

Legal frameworks are a risk that is often underestimated, but can have a serious impact on global sourcing. In Beijing For example, the annual number of new passenger car registrations has been reduced from 50,000 to 20,000, which has become a significant risk for the automotive industry. The 20,000 approvals were awarded in a lottery process. Other Chinese cities such as B. Guangzhou or Shenzhen are already thinking about similar framework conditions. (Kuhl and Grundhoff 2011, pp. 17 to 18)

Another risk that cannot be calculated is the currency risk. However, the risk can be minimized by purchasing foreign currencies and diversifying suppliers from different countries of origin.

 

As the distances to the suppliers increase, the freight costs can normally increase. This can usually only be compensated for by larger purchase quantities or new framework agreements with the haulage companies. Deliveries from third countries also incur customs duties. Further risks are regulations on increased customs duties to protect the European market, such as e.g. B. the anti-dumping duty on bicycles from China. Due to the longer replacement times, a higher cash flow is required, since the minimum stock in warehousing is much higher than with short delivery times, e.g. with suppliers in Germany or other EU countries. The ability to plan is also made considerably more difficult. To make matters worse, suppliers from Far Asia often have very long production times, which are often unexpectedly extended. This can be offset by larger stocks or higher minimum stocks. However, if the supplier delivers on time, bottlenecks can occur in the warehouse, especially with seasonal goods. The scheduling problems for orders from third countries do not only affect the possibly longer production times of the manufacturer, but also a longer delay at the customs authorities (in the exit or entry customs) or delays in shipping can lead to longer delivery times. If quality problems occur that are only recognized by the customer, subsequent deliveries are rather difficult. On the one hand, returning complaints is often disproportionately expensive, and post-production and subsequent delivery also take a long time. If the subsequent delivery is then carried out by air freight due to the time pressure, the costs are higher than the “cheap” sea freight costs. (Faust and Gan Yang 2013, p. 38)

 

According to the experience of the managing director of theAgentur Frisch International Consulting GmbH & Co. KG from Berlin, Mr. David Frisch, management consultant with a focus on trade in China (hereinafter referred to as Frisch), trade with third countries is particularly affected by the language barriers and ignorance of the mentality of the foreign business partners more difficult. The distance also often makes it difficult, since the personal negotiations that are usually important on a regular basis are difficult to carry out. Due to the completely different mentality, however, it would often be necessary to clear up difficulties in a personal conversation. The effort of negotiating by email is very time-consuming and expensive, especially when negotiating with Chinese suppliers. Frisch has found that purchasing in China is completely new territory for many buyers. Different laws, legal opinions, quality requirements, standards, manners and rules alone often make it very difficult to create a corresponding harmony between buyers in Germany and suppliers in China in the first purchasing negotiations. From Frisch’s experience, the many ancillary costs involved in procurement from third parties are not sufficiently appreciated by buyers. One should already be aware that purchasing from a third country is only worthwhile if the purchase quantities are correspondingly large. Ancillary costs such as logistics, quality assurance and money transactions are particularly important for small purchase quantities. But even with larger order quantities, all ancillary costs as well as customs duties, port fees, insurance and the payment of import sales tax should be calculated in advance in order to be able to realistically assess the savings potential. The higher capital expenditure due to higher order volumes, taking into account the long delivery times by sea freight, should not be neglected.

Supply contracts in China are often interpreted in such a way that many agreements can easily be circumvented. Chinese suppliers often do not admit to mistakes and pass on all additional costs and quality problems to the customer unless something has been specifically agreed on this. Therefore, supply contracts should always be detailed and well thought out.

 

Every importer should also be aware that, by law, he is counted as a manufacturer in Germany when importing into the EU economic area and must accordingly deal with the EU standards and import regulations himself. This includes, among other things, observing the product labeling requirements, the packaging ordinance, the electronic waste ordinance, the battery ordinance and the regulations of the EU, which often have to be complied with, especially if the product requires a declaration of conformity (CE), e.g. in most electrical appliances or toys. Supplier development is important for every customer who wants to save costs. Suppliers who already produce in high quality in third countries and can meet the necessary guidelines here are usually no longer at the low-cost level. Low costs can often only be realized in the long term, in which manufacturers develop independently. However, it should not be forgotten that many certificates in China can simply be “bought”, according to Frisch. In practice, when looking for suppliers are often

90% of the certificates sent by the suppliers are “counterfeits”. The suppliers in China are often not aware that the buyer in Germany really wants to comply with the regulations, but there is often the thought “The main thing is that there is a certificate”.

 

According to Frisch’s experience, very few importers give any thought to the risk of transport damage or general liability during transport. Often the buyers do not even know which Incoterms the goods will be shipped with. The Incoterms specify the place of performance and the transfer of risk for the goods, i.e. also the point in time until when the liability lies with the supplier and from when on with the buyer. If the supplier takes over the transport to the port of Hamburg (CIF), the supplier can also have special fees set at the port of Hamburg, which then surprises the buyer in Germany and the supposedly cheap transport unexpectedly becomes a high proportion of the costs.

 

In order to achieve the prices that buyers in Germany are often looking for, manufacturers in third countries are often willing to cut back on quality. The high cost pressure that buyers in Germany often spread leads to inferior quality, since manufacturers in Asia try to meet the cost pressure, but the costs can often only be saved by reducing quality. Suppliers in China often miscalculate the first delivery, which can lead to sudden price increases for the second delivery, in not uncommon cases of up to 30%. (Feisel 2008, pp. 27 to 28).

 

The biggest risk when importing from China is probably the quality. It is not uncommon to hear of recall campaigns by large manufacturers of goods “made in China” and everyone who imported from China was certainly affected by quality problems to a greater or lesser extent. This is often due to poor employee training. However, many importers have failed to improve this. The now specially trained employees apply with the new ones

References from well-paying factories owned by foreign investors and that leads to high turnover. Well-trained employees in China are difficult to keep for those who want to produce at low cost, since the chances for well-trained employees in China to get very well-paid jobs are very good.

 

Of course, product piracy in China is also a risk, but that often doesn’t matter as long as you have a good relationship with the manufacturer and continue to be supplied by him. One’s own brand must have achieved a certain status, i.e. international recognition, so that the supplier takes the trouble to sell the customer’s product as “their own” or as a plagiarism. It is a greater risk to import a product offered by the supplier without further examination, since the Chinese often copy the product designs and the risk of design protection violations is therefore naturally high. A look at the research database of the trademark and patent office should therefore not hurt before importing, in order to reduce the risk of a sales ban or claims for damages.

III. China import opportunities, global sourcing opportunities

 

One of the main reasons for getting into global sourcing is the desired reduction in material costs. A larger pool of suppliers abroad can also strengthen the market position and thus also the ability to negotiate with suppliers. If the suppliers are spread across different countries of origin, supply bottlenecks due to new regulations in one country of origin can be minimized. As alternative delivery options are always available, it is also possible to react more flexibly to insolvencies or other possible delivery failures.

 

Many manufacturers in China produce the product entirely in-house, Frisch knows that some manufacturers have the molds and tools on one floor, the plastic housing on another and all the technical components of the inner workings of the product on another. Of course, this creates transparency for the buyer, there are savings on logistics in China, since fewer suppliers are involved, and if problems arise, it can be tracked more quickly at which production stage the problem occurred and how the error can best be avoided in the future can. But especially in the points

“Quality assurance”, “quality techniques” and “documentation of production”, many Chinese suppliers still need a lot of training and consultation. This should be an incentive for the importer to set up joint process optimization with the Chinese supplier, which will be beneficial for both sides for long-term cooperation. (Faust and Gan Yang 2013, p. 56).

As a management consultancy for the China import , the agency provides support with the entire

Services related to purchasing from China.

 

More information on risks when importing from China

Follow by Email
Twitter
Visit Us
Tweet
Youtube
Whatsapp
Skype
Wechat
Xing
Xing
Copy link