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OT: Trade with China, serious question

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  • OT: Trade with China, serious question

    First, I would prefer is this doesn't turn into some sort of shouting match about international trade etc. blah blah... comments are fine.

    Some background: My wife is general manager of an industrial abrasives company. Recently she received an inquiry from an importer based in Zhengshou, Henan Province in China. They wished to know if she could supply certain types of abrasive wheels. I checked out the company as best I could and they seem legitimate. They are listed on the Trade-India importer/exporter system as a Chinese importer of hardware items. I also have a phone number for an international trade center in Zhengshou to do a further check.

    My wife quoted prices as the items are standard and available. I should point out that the company my wife manages is a distributor for several major manufacturers here in North America, both Canadian and American. Her company does not manufacture wheels.

    Now the main point of this; Today my wife received an order from the chinese importer. It exceeds 1/2 million dollars. They gave no prior indication that they were talking about this size order.

    The contract looks reasonable using standard IncoTerms 2000 for international trade. Half payment in advance and half upon proof of shipment. All risk assumed by buyer when it boards the ship, FOB.

    Now the questions.

    Have any of you done business with a chinese importer? If so, what method of payment did you use?

    Also, this order exceeds not only my wife's company's capacity to deliver in the time frame specified but possibly also the capacity of her suppliers. Also, in this case her main supplier for these parts would be her US supplier. It is likely that if they received such an order to drop ship they would simply cut her company out of the loop. How do you avoid this possibility?

    Any ideas?

    BTW, times seem to be changing.
    Last edited by Evan; 08-21-2006, 01:49 PM.
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  • #2
    Send the US Supplier an overnight letter saying that you wife has an overseas buyer for x amount of product to be shipped by such and such a date. Also tell them the buyers payment terms and the amount of commision she expect to collect from the US Supplier. Have the US Supplier send her a signed contract stating how much she will be paid and when,

    China buys lots of things in order to reverse engineer them! Gary P. Hansen
    In memory of Marine Engineer Paul Miller who gave his life for his country 7-19-2010 Helmand Province, Afghanistan. Freedom is not free, it is paid for with blood.


    • #3
      China buys lots of things in order to reverse engineer them!
      Not 1/2 mil worth of abrasives they don't.

      Their economy is running flat out. It isn't suprising when they can't supply something from local production. It's a global economy.
      Free software for calculating bolt circles and similar: Click Here


      • #4
        Prior to the chinese copying everything we made, we sold several million dollars per year in china, through a chinese distributor, over a number of years.

        As far as I recall, we sold to them on the same basis as the chinese sell to us............... international irrevocable letter of credit.

        Usually these are payable when the goods go into bonded storage at the shipper, whichg normally means they are in the container in the shipper's bonded storage area.

        Large new orders are a problem, no history of business, etc.

        I agree, 500k of biz isn't for reverse engineering, not that the chinese NEED to reverse engineer abrasives.... they DO make those already, for most of the used-to-be US suppliers.

        Nope, they surely want the stuff because they can't get it there. They are digging for goods anywhere they can get them. How else would they have located a "relatively" obscure supplier in a small Canadian town?

        odds are they are hoping for a fast shipment too.

        Keep eye on ball.
        Hashim Khan


        • #5
          One thing, Evan, Americans will be buying those abrasives from them. China's economy is booming so fast they are buying EVERYthing they can get their hands on.


          • #6
            All funds to be wire transferred. Period. Either in US dollars or Canadian funds.That way nobody can claim the check is in the mail. Take final payment before the boat leaves the dock.

            China is making a large military buidup. This could be for that.

            I'd get with my suppliers and find out exactly what they can supply and then check and see what inventory your competitors are willing to part with. Then get back to the Chinese and work something out.


            • #7
              re getting carved out of the loop long term. a distributor has certain value proposition in the supply chain - local stocking, credit & clearance, currency exchange, service, local customer relationships, preparation of local marketing and product literature, fulfillment etc. you would provide these in exchange for say the exclusive cdn distribution rights. under your current business, you'd only be offering a fraction of the value proposition in acting like a clearing house for shipments to China - you are not providing the manufacturing with same value in distribution to China that you are to Canada and therefore should expect to get carved out of the supply chain. if you don't have an exclusive distribution arrangement, but simply buy and resell their product, all bets are off and pretty much anything goes.

              if you have a distribution agreement and the manufacturer knew what they were doing, in likelihood you'd be in violation of it selling outside of Canada anyway. as the manufacturer may be selling directly to China or be in the process of setting up an exclusive distributorship, they don't want their distributors acting as competitors. This happens frequently, govern yourself based on how important relations are with the manufacturer.

              on the other hand, if you wanted to invest/risk the time and money to offer those same services to the chinese market, approach the manufacturer with the view getting a distribution agreement with China. be prepared to show a meaningful effort/commitment though.

              on a more practical basis, you need to partner with someone experienced dealing with the chinese, sounds like this is more the start of a negotiation than a real order. the EDC might be a place to start, they provide export insurance.
              Last edited by Mcgyver; 08-21-2006, 03:18 PM.


              • #8
                1. All funds to be wired in currency of your choice. (talk to your banker, they will let you know how it works and why its safe)

                2. Have the Chinese sign a contract for the order.

                3. Extend the time (if possible) for delivery to avoid supply issues

                4. Take half the money

                5. If they wont extend the delivery time, agree to it and avoid contract issues of not delivering on time.

                6. Does the US supplier really need to know who the order is for???


                • #9
                  Something bothers me about this.

                  First, a company putting down that money, not that this is an appreciable amount as it happens everyday but if I was looking for that quantity I would be going to the source right away.

                  I would think the supplier of the goods to your wife if they are an established firm, wouldn’t overstep you.

                  As far as right away. ANY company placing that amount of order would ask for lead time. I know I do.
                  I would ask your supplier their lead time to you.

                  With the internet what it is today any company selling a specific product in a specific field might appear to be any size even much larger then they actually are.

                  Is your wife’s product manufacturer’s name located where the Chinese firm could have or can find it? Does your firm give the appearance of a company that can manufacture the abrasive itself?

                  I save my “shouting matchesâ€‌ for important subjects like well pumps!


                  • #10
                    The products my wife sells are mostly rebranded with her company's name. The supplier in the US is the manufacturer. The products are US made. My wife's company already does business worldwide although not in this sort of quantity and not with China. As far as I and she knows the US supplier does not export to China. There is enough lead time to supply the product if it is already in stock but probably not enough if it must be manufactured.

                    Before approaching the supplier we need to check out the importer more thoroughly. I do have a friend that speaks mandarin so that may be some help.

                    The more likely alternative is to simply act as agent for the manufacturer rather than distributor in this case. Does anyone know what sort of commission would be expected on this size of sale?
                    Free software for calculating bolt circles and similar: Click Here


                    • #11
                      a way to gauge the commision maybe is the diffence between your price from the supplier vs your price to the chinese. Then take some off for the "hassle" to the supplier maybe.

                      I guess it depends on who is going to ship it and from where.

                      Approach the distrubitor. Ask them if they are willing to pay a commsion for a large order.

                      Of course do not disclose who the buyer is under any circumstances


                      • #12
                        Evan, it may be illegal for the US supplier to sell to China, and they are trying to get around US law. This is how the Soviet union obtained CNC milling machines in the 80's, they bought from Canadain dealers of US products that were banned from export to iron curtain companies.

                        Contact export Canada , its a government agenciy set up to help canadian companys export, and tell them your story. Hopefully they can help.


                        • #13
                          Are these diamond wheels or CBN?

                          If they are they want them simply because China can't seem to produce decent diamond wheels.Something I read awhile back said they were producing wheels using fine mesh natural diamonds which aren't the best geometry for cutting.
                          I just need one more tool,just one!


                          • #14
                            I wish some one would send Sieg a couple emco lathes to reverse engineer and do a proper job on it, or hell, a South Bend 9" lathe, hopefully they do a good job with it. Update it correctly, high speed spindle bearings, 5c spindle, etc.


                            • #15
                              If you seek to avoid the manufacurer knowing where the shipment is going, have the shipment sent to a warehouse in Canada c/o her company. Then reship it in her companies name to the Chinese.
                              It's only ink and paper