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LOGISTICS Open Container Shipping Prices P 8 PROJECT MANAGEMENT Long Production Lines- What Importers Can do P. 11 LEGAL China Non Disclosure Agreements P 13 FINANCE Core Strengths P 15 EXPERT INTERVIEW Julien Roger- CQF Shenzhen P 17 TOOLS OF THE TRADE Alternative Dispute Resolution- Mediation P. 19 CHINESE CITY INFO Dongguan P. 20 ONLINE PDF EDITION CHINASOURCINGINFO.ORG ISSUE ONE- SEPTEMBER 2010 QUALITY CONTROL Doing Business Globally P. 6

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Page 1: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing

LOGISTICS Open Container Shipping Prices P 8

PROJECT MANAGEMENT Long Production Lines-What Importers Can do P. 11

LEGAL China Non Disclosure Agreements P 13

FINANCE Core Strengths P 15

EXPERT INTERVIEW Julien Roger- CQF Shenzhen P 17

TOOLS OF THE TRADE Alternative Dispute Resolution-Mediation P. 19

CHINESE CITY INFO Dongguan P. 20

ONLINE PDF EDITION

CHINASOURCINGINFO.ORG

ISSUE ONE- SEPTEMBER 2010

QUALITY CONTROL

Doing Business Globally P. 6

Page 2: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing

Assembly, Inspection, Packaging(Contract Manufacturing)

Sourcing Feasibility Studies

Vendor Coordination

Medical Grade Clean Room

Factory Formation/Joint Venture Opportunities

www.psschina.com

US Owned & Operated, China Based

Page 3: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing

David Dayton is the owner and manager of SRI. David has nearly twenty years experience working in and with Asia and he leads SRI from Shenzhen, China. Besides Shenzhen, David has lived, worked and/or studied in Thailand, Taiwan, and Chongqing China.

David is a regular presenter for Global Sources’ New Buyer Training seminars in Shanghai and in Hong Kong. He has also spoken for Global Sources’ Supplier Education program and the Metering China Xi’An Sourcing Show. David has been published in Euro Biz magazine, Right Sight Asia, Garden International and other trade publications and on numerous sites online including the China Economic Review, the New Zealand government’s international trade information website and China Success Stories. He has been interviewed by the BBC, CBS 60 Minutes, the CBS Evening News, the Hong Kong Trade and Development Council and by NPR on China related issues. His blog postings have been on the WSJ China blog “best of” lists.

David has a Master’s Degree in Southeast Asian Cultural Anthropology, focusing on Comparative Chinese and Thai Corporate Cultures and a BA in International Relations and East Asian History. David has worked as a consultant, manager, trainer and translator on both sides of the Pacific and he is fluent in both Thai and Mandarin.

Welcome to the China Sourcer! This is the magazine of The China Sourc-ing Information Center. You’re reading this most likely because you want to do your job better; become a better buyer, procurement or sourcing professional. We’re here for the same reason.

The folks behind CSIC are professionals just like you. And we were looking for ways to improve our job skills and performance too. After searching we realized that what we needed—a resource specific to both China and sourcing—didn’t exist. So we put our decades of experience together with other professionals to create what you’re reading now—a resource for sourcing professionals in China—the China Sourcer, the magazine of The China Sourcing Information Center.

The purpose of the China Sourcer is to become a resource of informa-tion and tools, to provide professional procurement, sourcing and buying advice that is specific to China and the unique Chinese work en-vironment. We are committed to producing a truly helpful and timely magazine and welcome your feedback and participation in the process.

We hope that you’ll learn from, contribute to, recommend to others and enjoy this magazine and its online companion, www.chinasourcinginfo.org

Welcome! Happy Hunting and thanks for reading the China Sourcer!

David A. Dayton

Editor

Letter from the EditorSilk Road International, August, 2010, By David A. Dayton

David Dayton Founder of Silk Road International

Page 4: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing

Questions to the EditorFeel free to ask any questions via email at [email protected] or on our website www.chinasourcinginfo.org

Q. What do we do about MOQ’s? Do we tell the factory that we want 100K or 1K?

A. Just like you, if you were told that your price changed just before you made a purchase, factories don’t like bait and switch either. If you really do want 100K but need to see 1K first, put that into your Purchase Order (PO) and negotiate with the fac-tory to make the 100K pieces contingent on the quality of the first 1K. But don’t ask for a bid on 100K and then order 1K and leave them hanging. The factory most likely will not sell you 1K pieces at the 100K price anyway.

Q. Do I need to speak Chinese to work here? What if English is my second language too?

A. Certainly not. If you can it helps, just to listen in and find out more of what’s going on first hand. But it’s not necessary, no. If you don’t speak English well (chances are your factory doesn’t either), then you need to just hire a translator. If you are doing a lot of complicated mold work or if your product is very technical you’ll want to hire an industry expert rather than just a kid with a college degree in English. You can always just use a calculator and calendar to work here but- it will take much longer, leave you with a ton of questions, and will be very dif-ficult to confirm quality—but it can be done.

Q. I can’t come back to China so how do I confirm that quality is achieved?

A. Unless you hire someone to check it for you or you come back yourself, you will never be able to confirm the quality. 3rd Person Quality Control (3PQC) is relatively cheap, a few hundred a day, to give you at least the peace of mind that you got the product in the correct quality/quantities and in the container like you ordered. China Quality Focus or a hundred other folks can do this for you. Don’t chance it.

Q. I’m thinking about managing my own shipping to save money, how problematic is the Chinese Customs for export-ing?

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Any other Q?Feel free to ask questions via email at

[email protected] or on

our website www.chinasourcinginfo.org

A. Very. I would never even consider this! Unless you’ve got enough quantity to have your own in-house shipping depart-ment (and yes, it will take more than one person to do all your tariff codes, paper work, logistic coordination and VAT refunds), There are at least 10 if not 20 different people you have to coor-dinate with to ship any single container. With all the forms and information from China (in Chinese) you’ll never save any time or money doing it yourself until, like I said, you’re big enough to have a complete department dedicated to shipping..

Q. “I’ve made samples and placed two trial orders already with 4 different factories. I didn’t like the quality I got and I’m currently not working with any of them. But now I’m worried that they may be violating my IP.” .

A. Don’t worry, they are. You’re best case scenario now is to hope that they don’t’ file for trademark or patent registrations in China before you do. Remember China is a file first country so you’d better be the one that files first! That means file BE-FORE you give your art to the factory.

Q. My quantities are small, so how do I get good prices from Chinese suppliers?

A. You don’t. There are reasons for being in China, and small quantities are NOT one of them. If you are not buying as much as your current domestic distributor (or will soon be buying these quantities) you are probably not ready to be in China. Just because you know you can get things cheap still doesn’t mean that it’s right for you. China is best for millions of the same thing- not hundreds of different things. Even if your prod-uct items are of a large dollar value (hundreds of US dollars per piece) you are probably still better off buying from a domestic distributor rather than from a Chinese supplier.

Further, because you are getting lower costs you need to un-derstand that there is a trade off in a lack of oversight/Quality Control (QC) as well as logistics and importing responsibility. If you are buying small quantities and you can’t afford to do some of the QC and shipping/importing yourself then you shouldn’t be buying in China. If you are just starting your own business and you are going to be buying stock items in quantities that are appropriate for a small retail you will most likely find China a bit beyond what you can realistically manage or afford.

Chinese suppliers want to run large lots, one time, for con-firmed orders. Typically suppliers’ margins are small and within the environment of changing exchange rates and domestic inflation. Suppliers lose money to produce goods and then wait for a buyer.

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

QUA

LITY

CO

NTR

OL

“Wei,” the voice over the phone said.

“Do you speak English?” I asked.

“Wei?”

“Do you speak Chinese?”

“Wei?”

“That about uses up my language ca-pabilities,” I thought as I handed the telephone to an assistant.

The person at the other end of that phone call works at a company which, in the advertisements it runs regularly in major publications, states it has cus-tomers all over the globe, skilled & ed-ucated workers, and state-of-the-art equipment. The ads also say that this company is based in Taiwan. In truth, as my assistant was to learn, the com-pany was based in Taiwan—five years prior to our telephone conversation. The person I was talking to turned out to be the mother of the factory owner. She could not speak English or Chinese, but conversed in Taiwanese (Fujianese), a dialect peculiar to a small sliver of the Chinese population with ancestry to Fujian Province on the Chi-nese mainland.

The management of this enterprise had decided to take a calculated risk by advertising itself as a Taiwanese company but maintaining only a shell in Taiwan. They did not expect a po-tential customer to telephone them from the same time zone. All faxes

and e-mail correspondences were dutifully forwarded to China from the Taiwan “factory”—actually the boss’s house—and answered from China. All telephone calls after working hours (Taiwan is located 12 time zones away from the American Central Standard Time Zone, and most telephone calls after working hours would be made in the middle of the night Taiwan time) were greeted with a nice message—in English— on an answering machine that informed the caller that the fac-tory was closed for the day and calls would be returned promptly the next working day.

As competitive intelligence profes-sionals, we often are tasked with researching competition, searching for new products, market trends, and even hiring practices. All the while we take for granted that our own suppli-ers and vendors have been researched and vetted properly by someone within our own organization.

Most of the time this works, as repu-table companies will conduct due diligence on potential suppliers and verify that they can do what they say they can do in the time they say they can do it. But as the world shrinks and transactions are conducted more and more via optic fiber and less and less in person, there is room for gaps and slips that can be potentially embarrassing in the best case and tragic in the worst. Particularly vulnerable is the American or European company that wishes to take advantage of the short lead times and cheap communications offered by doing business electronically.

In the case above, the Taiwanese own-er of the factory presented his compa-ny as being based in Taiwan. The com-pany had a proper address, was listed in government databases, and had all the proper licenses necessary to do

business in Taiwan. Furthermore, his company could produce the products he claimed to be able to produce. He just did it in China and not Taiwan.

Is that such a big deal? Potentially, it’s explosive. China is not yet ready to deal with such nagging questions as human rights and worker exploitation. Workers are paid less in China, South-East Asia, and the South Pacific than in Taiwan naturally, but they should still be able to expect basic human rights and to be free from abuse. Sadly, such is not always the case.

Even companies that conduct proper due diligence, and go so far as to in-vest in a factory and monitor the oper-ations periodically are not immune to labor irregularities and human-rights abuses. Adidas and Nike come to mind as two socially conscious compa-nies that learned to their chagrin, that their factories were employing child or prison labor without their knowledge.

Asia presents a different set of prob-lems for buyers. A prosperous country like Taiwan, with a high per capita income, is less than two hours by plane from the grinding poverty of the Philippines and Indonesia. Company owners are tempted to accept orders in Taiwan and have the products manufactured overseas where labor is 30 times cheaper, land is practically given for free, and tax breaks await the investors. Hong Kong, the great Asian monument to capitalism and the free flow of capital, is a train ride away from Third World working conditions in China.

The Perils of the Ostrich Approach

These unique problems give rise to moral dilemmas for associated com-panies in the developed world. Some companies will opt for the ostrich ap-proach: After all, the major retailer in

Doing Business Globally?Focus CI on Suppliers!

By Kevyn Kennedy, GM CBI Consulting LTD

DUE DILIGENCE

Do you know who your supplier is hiring to make your project? Be safe, and perform proper Due Diligence on all suppliers in China.

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

England doesn’t really need to know where the stereos come from. And even if it does, if the products are being made in conformance with local labor laws, what right does the retailer have to as-sert its values on Asian workers?

Other companies will try to guarantee that workers are employed not only legally but ethically, ensuring they are paid proper wages and that their ages can be verified before putting them to work in safe working habitats. This ap-proach works as long as the parent keeps a presence on the factory floor, because once the factory goes unmonitored, the prime jobs often become the best com-modity in a village and are bartered and handed out in exchange for kickbacks or other favors. The good jobs may even have a destabilizing effect on the local economy, as abnormal wages paid by well-meaning companies at times at-tract symbiotic service industries that do not develop the local economy but which siphon workers away from more productive but lower paying jobs in an attempt to service the well-paid work-ers.

Finally, a prospective buyer can come to Asia, vet the potential factories, hire trusted management to run the opera-tions, and maintain an actual presence in the country. This approach works for companies who want to purchase a steady supply of products from lo-cal manufacturers for the foreseeable future, but is ill-suited for the company that wants to purchase one shipment of goods or is not intent on settling down in Asia. This is particularly bad for companies that wish to take advantage of ecommerce, which can arrange for a container of products to be delivered in the shortest possible time without even having to leave the home office.

No matter what approach your com-pany uses in dealing with overseas suppliers, be aware that the potential damage is not always measured in legal terms. Negative media and bad public-ity is a real and expensive threat to your company, and can result in the loss of competitive advantage.

Ten years ago, when looking for a sup-plier in Asia, the consumer had one op-tion—get on a plane and go check the supplier out for himself. Now, thanks to the gods of technology, all business can be done from the comforts of home.

Technological developments, especially e-commerce, have made it possible for every buyer in Europe or the United States to have access to the same sup-pliers as the major multinationals. All these wonderful developments, and now someone wants to come along and tell you that it’s not worth the risk? That’s not my point at all. What I’ve tried to do is lay out the worst possible sce-nario, and as competitive intelligence professionals, you should be aware of the worst possible scenario. But, there are ways to protect yourself, even from abroad:

Proper due diligence must be conduct-ed. Due diligence in Asia should, howev-er, be done on a more thorough level, in-cluding researching the company’s debt history and verification of hard assets. Some effort must be made to verify the company has the equipment, personnel, and time to produce your orders. Other-wise, it’s possible the company will lead your order through an endless maze of subcontractors, some of which might not conform to the high standards you expect.

Contact should be initiated with the potential supplier’s customers -- and its own suppliers. If a supplier says it can produce your order in 30 days, does it mean that 40 days is close enough?

Unannounced, pretext visits must be made -- but NOT BY YOU. If you can read this in English, you will probably stand out in an Asian crowd, and if you visit a factory, you will not see things the way they really are; you will see what the principal wants you to see. Visits must be made periodically by local people. If you don’t have a local branch in Asia, find professionals you can trust.

The partners’ reputation in the media should not be ignored. Most Western companies are keen to the role the media plays in business, and few things sting like being criticized in the press. Find a market researcher or hire a con-sultant, but learn what the local news-papers are saying about your potential partner.

Finally, remember Ignorance Is No Ex-cuse. When in doubt, imagine how your CEO will look with a microphone in his face explaining that he really didn’t know the soccer balls were being made

by children chained to sewing machines.

The steps described above are not ex-traordinary. In fact, you are probably do-ing them already with partners in your home country. Keep in mind, however, the stakes are higher here in China. If you did not perform proper due dili-gence on your subcontracted factory in Alabama, there is still little chance that it is employing prison or child labor. But that chance increases as you cross the International Date Line. Luckily, proper vetting of potential suppliers worldwide falls in the realm of common sense and good business practice. Does it fall into the realm of competitive intelligence? It does in the hands of your competition!

Notes

1. International Herald Tribune (February 22, 1999), “For Saipan’s Laborers, Exploi-tation or Opportunity?” by Seth Faison, New York Times Service, p.2.

2. International Herald Tribune (June 16, 1998), “In the Asian Crisis, Even aSweat-shop Job Beats No Job at All,” by Nicho-las D. Kristof, New York Times Service.

About the Author

Mr. Kennedy, General Manager of CBI Consulting, (www.cbiconsulting.com.cn) has over fifteen years experience conducting and managing commercial inquiries throughout Greater China. A U.S. Navy veteran with journalistic experience, Mr. Kennedy speaks fluent Mandarin Chinese. Mr. Kennedy may be reached at [email protected]

CSIC is a distributor, (not a publisher) of 3rd party content. The views, com-ments, or suggestions are those of the author and not those of CSIC or its employees

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

LOG

ISTI

CS

I have been involved in importing fur-niture from China for the last 18 years working for two different Top Ten furniture retailers in the US. I am cur-rently based in Shenzhen and deal with sourcing, product development, quality control, and logistics. Although my comments are directed towards the fur-niture industry, they can apply to most every commodity being imported to-day. The biggest concern that import-ers face today is no longer the quality of the goods, the negotiated price of the goods, or even the lead times quoted to produce the goods are growing increas-ingly important.

The issue is the impact of ocean con-tainer freight rates, and the ability to secure container space on the vessels. I have spent more time negotiating my way through this new battlefront, than any of the multiple tasks that all of us are faced with as importers. There doesn’t seem to be any common ground between the importers and the transportation providers. In the case of furniture, they are slowly killing the industry.

When container rates literally double from just 12 months ago, and freight percentages compared to the cost of

goods are now over 100% in some cases, it just doesn’t make any sense to continue importing. So what happened in such a short period of time that could lead to the demise of furniture imports?

Furniture has always been considered one of China’s top commodities sold to the US. China – US trade statistics that go through the end of 2009 show furniture as the fifth leading commod-ity imported to the US, behind electrical machinery, power generation equip-ment, clothing, and toys.

But in terms of containerized volume from China to the US, furniture is the number one commodity. There are more containers of furniture hitting our shores than any other product.

Holding the number one position, you would think that the steamship lines would take notice, and be careful in their upward price negotiations, so as not to alienate an entire industry. We all know there is volatility in pricing from year to year.

I am used to paying an additional 10-20% to move my containers as each year goes by. Every summer, I expect to pay even more for the peak shipping season. This is normal and not alarming at all.

This year is different. Steamship lines are in “revenge” mode. Container rates bottomed out last year at the lowest levels seen in a decade. The lower rates had nothing to do with shippers trying to drive prices down, but were a result of competition among the different car-riers trying to put out the lowest price, to gain the largest market share.

While it is true, us shippers were ec-static to pay the lower rates, no one ever predicted there would be such a backlash. It wasn’t a return to what could be considered a fair price to move a container, but instead the car-riers decided to shoot for new records in revenue growth, to literally doubling the rates. When rates increase, we all sigh, adjust our pricing, and move on. Business should be as usual, and even though it is hard to write that check to the carrier, at least we know our goods are moving and getting to market on time. Then something happened along the way that compounded the problem even further. Empty containers dried up in China. They were all hiding somewhere, and not available for the shipping community to use. I have seen pictures of hundreds of vessels with empty containers sitting in the waters off of Singapore that were sim-ply taken out of rotation by the carriers, but I can’t prove that this was the cause of the severe container shortage that we are all faced with. The end result of all this was higher container rates, and no space to move the goods. That is enough to kill any import activities.

Furniture, generally speaking is a low value commodity. One of the main rea-sons that furniture companies source in China is take advantage of low cost

Ocean Container Pricing & the effects on Furniture Imports

SHIPPING, PRICING

by Jeff Sears, G.M. for Art Van International

Even with increasing numbers of containers, shipping prices still remain quite high.

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

sofas that are made in the Hangzhou area. Beautiful upholstered sofas can be bought for $100 - $150. A compa-rable product bought in the US is usu-ally in the $200 range, and would retail about $399 - $499. It makes perfect sense to ship a large assortment of sofas from several factories in the area. Because sofas are rather large and bulky, you can usually stuff around 50 pieces in a 40’ high cube container.

The company I work for was importing about 150 containers per month. At least we did until the rates skyrock-eted. I am now paying over $5000 per container which means my costs have doubled. There is a $100 freight add on for every piece I purchase. The few remaining upholstery factories in the US are now price competitive and can promise much faster order times and guaranteed delivery overnight or second day once they are complete. This means that it makes no sense any-more to import this type of furniture. I just attended the Las Vegas Furniture Show last week and the same senti-ment was heard from many of the buy-ers there. It takes too much time and effort to source products from China, when you can get the same deal in your own backyard.

Compounding the problem is once the order is ready; actually shipping it on your time frame is nearly impossible. When the steamship lines decided to substantially increase their pricing, I am confident that the value of goods in the container was never taken into consideration. Luckily for the China furniture industry, there are several other types of furniture such as dining sets, entertainment consoles, lamps, occasional tables, home office, etc, that are simply not made, or are not price competitive in the US anymore. These are usually higher priced goods that even with all the freight increases, still make some sort of sense to buy in China as they often cannot be found anywhere else.

The “no container space” issue is another pressing problem. The eco-nomic downturn of last year was rea-son enough for the steamship lines to take a large number of containers out of service. Now that the economy is starting to improve, at least in some

areas, factory orders are up in almost all factories in China. There is a great need to bring back all the container capacity. Unfortunately in someone’s mad think-ing, it was decided that keeping the con-tainer space tight would be the impetus and justification to raise the prices.

As we have no other options to get the goods from China to the US, the im-porters have no choice to pay and pay and pay. Once the higher price levels were reached, the containers are slowly coming back on line, but not nearly fast enough. It is kind of the “too little, too late” syndrome. All shippers have been suffering for over four months now, pleading, begging, paying premiums, doing anything we can to get more con-tainer space.

We are starting to see signs that space is loosening up, and then in the same breath, we are told that this will be short lived as all the Wal-Mart and Target orders are nearing completion and will get first priority on all containers. Most shippers have no way to compete with the big box retail chains. Even when we believe we have significant volumes, in my case, 5000 containers per year, and believe we have some clout with our car-riers, along comes Wal-Mart with 10,000 containers per month.

On the back end, once we get the con-tainer space we need, we have to deal with another issue that no one offers any relief for. Furniture that sits on the factory floor for over a month, waiting for containers during this hot and humid season, has a tendency to develop mold. Once you find mold when the container is opened up at the destination, your shipment is lost. Can’t repair, can’t sal-vage, can’t do anything but throw it away. Who is going to claim responsibil-ity? The factory did nothing wrong, they made the goods on time as requested.

The carriers will not claim responsibil-ity as they never had possession of the goods, even though it was through their lack of space that caused the furniture to sit on the dock for a month. You can claim against your own insurance, but more often than not, the deductibles are quite high compared to the cost of goods, that you are not getting ahead too much. This has happened a few

times already with the company I work for, and I suspect it will continue on for some time as I don’t see the space situ-ation improving. Not getting any cooler where I live either.

The winners in all this are clearly the steamship lines. They are getting the revenue they so desperately claimed they needed to operate and turn a profit. This winning though I believe will be short lived. Furniture imports will most likely drop off at some point as the US Furniture Industry starts to revive and come back to life again. After all, do-mestic goods are slowly becoming the value they were 10 - 15 years ago before China rose to the point to knock out the domestic suppliers. At some point, a group of shippers will form together to stand up to the carriers to let them know enough is enough.

I have a feeling that ocean rates have recently peaked in early August as they just added the second peak season surcharge to all my shipments. Getting space will most likely be an ongoing is-sue for some time to come. Somehow we will get through this and consumers will accept the higher furniture prices and all the trials and tribulations of the 2010 shipping season will be a footnote.

About the Author

Jeff Sears is the General Manager for Art Van International located in Shenzhen, China. He has resided in China for the last 3 years. He has worked in furniture and logistics for the last 18 years. Jeff travels throughout SE Asia performing QC, product development, and sourcing activities. Jeff is also the Chairman of the Board for the International Furniture Transportation and Logistics Council.

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ForÊmoreÊinformationÊonÊwhatÊSRIÊcanÊdoÊforÊyou,ÊtoÊarrangeÊaÊfactoryÊtour,ÊorÊforÊbidsÊonÊcurrentÊorÊfutureÊproducts,ÊpleasecontactÊusÊatÊ801.542.9458ÊorÊemailÊusÊatÊ[email protected].ÊWe'dÊloveÊtoÊhearÊfromÊyou!ÊForÊmoreÊcontactÊinformation,includingÊoverseasÊoffices,ÊclickÊhere.

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OnlineÊProjectÊQuestionnaireÊInterestedÊinÊhavingÊSRIÊhelpÊmanageÊyourÊoverseasmanufacturing?ÊSubmitÊaÊprojectÊquestionnaireÊtoÊreceiveaÊdetailedÊbidÊandÊmoreÊinformationÊonÊyourÊproject.

SRIÊBlogÊStayÊupÊtoÊdateÊwithÊtheÊcurrentÊChinesebusinessÊclimateÊandÊwhatÊitÊmeansÊforyourÊmanufacturing.

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AboutÊBusinessÊinÊAsiaÊReadÊtheÊlatestÊarticleÊinÊourÊseriesÊonmanufacturingÊandÊdoingÊbusinessÊinAsia:Ê"QualifyingÊYourÊOverseasÊSupplier."

TheÊSRIÊAdvantageÊExpandÊyourÊnetwork,ÊimproveÊcommunication,ÊandÊsavemoney.ÊLearnÊmoreÊaboutÊtheÊadvantagesÊusingÊSRIÊbringstoÊyourÊbusiness.

TheÊSRIÊProcessÊLearnÊaboutÊtheÊthreeÊprimaryÊstepsÊinÊtakingÊyourÊproductfromÊdesignÊtoÊmarket:Êdevelopment,Êproduction,Êanddelivery.

“Ten Best” China Business Blogs: www.silkroadintl.net/blog

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

PRO

JECT

MAN

AGEM

ENT

Long production cycles in China:What can importers do?

SOURCING, SUPPLY CHAIN MANAGEMENT

By Renaud Anjoran

Before a PO is issued, the supplier should commit to certain dates in writing: beginning of production, 50% of finished products, 100% production

Production cycles are usually much longer in China than in the US or in Europe. Approving prototypes, order-ing the materials, doing the manu-facturing, and shipping the goods takes time—usually more than two months. With the freighting often tak-ing another month.

Importers can accelerate this process by focusing on three areas:

1. Re-organizing the whole supply chain

It is possible to cut the usual manufac-turing cycle (from design to delivery) in half. Some large fashion brands have managed to reach that objective. Here are some of their best practices:

• Buying the raw materials in ad-vance, and keeping options open for different types of designs;

• Standardizing the accessories as much as possible;

• Reserving the capacity of sub-sup-pliers and suppliers (all in the same geographical cluster) in advance;

• Once designs are finalized: distribut-ing the work in several factories, to ensure a higher capacity;

• Launching production of the “safe” styles first, and making unpredictable products as late as possible;

• Cutting orders in small batches that can be shipped little by little;

• Using air freight as needed.

2. Micro-managing the factory

It might not be realistic for you to re-organize the whole process, especially if you are not a large buyer. Then you will have to deal with the cycle length your suppliers promise you. But how do you reduce the probability of late shipments? This is a hands-on process. I listed the most important steps to take below-

Choosing the supplier:

Ask yourself the following questions:

(1) If the supplier is reliable enough, and

(2) If you have enough weight to im-pose your conditions on him. Small workshops are usually pretty disorga-nized, but they pay attention to small & medium buyers. On the other hand, large manufacturers are on time more frequently, but they always give prior-ity to their largest buyers and their prices are higher. All importers face this trade-off. Finding the right sup-plier often takes time.

Setting expectations:

Before a PO is issued, the supplier should commit to certain dates in writ-ing: beginning of production, 50% of finished products, 100% of finished products, shipment date. He should also specify the place of production (the danger here is uncontrolled sub-contracting), and accept QC inspec-tions mandated by his customer. If you can afford it, contact a specialized lawyer to draft an OEM agreement (your PO is not a contract).

Impose penalties for late shipping:

If the factory gets behind schedule, its managers have to make a choice: do we favor this order or that one? A buyer with strict penalties will have pri-otiry over another customer who does business in friendly terms. This type of question happens every day because Chinese suppliers tend to be too op-timistic about timing before they get the order. Penalties might not prevent all delays, but they will help.

Have a representative on site:

If nobody goes in the factory during production, how do you know whether they are on time? Some Chinese suppli-ers break bad news little by little, and at the last moment, when the importer is committed to his customer and cannot cancel his order any more. Do not let that happen to you. Similarly, if no one checks production, how do you know whether product quality is acceptable? Finding substandard quality just be-fore shipment (or worse, after delivery) is a source of major delays. The factory

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

About the Author Renaud Anjoran lives in Shenzhen, China and writes advice about quality control in China for importers.

His blog and regular writings about quality control can be found at www.qualityinspection.

org. For questions about his work, Renaud can be contacted at his e-mail-[r.anjoran@gmail. com]

Do you keep changing your mind and asking for new features, as the factory is working on a prototype? This will not only waste time, but will also cost you some goodwill.

has to sort out the bad items, re-work them or often reproduce them, and submit them for re-inspection. The production cycle can become twice as long! Try to send someone who repre-sents your company, such as an inde-pendent QC inspector or an agent who will protect your interests, to check production status and quality. Don’t wait until the products are all finished and packed.

Is this too tough on the supplier?

Are you afraid of price increases, or order rejections? In that case, you have already eliminated a risky supplier. The advice I wrote above is standard and thousands of importers follow them. Do you really want to work with a fac-tory that cannot comply with these requirements?

3. Making the purchasing organiza-tion more responsive

If you follow the steps I listed in the previous part, the main source of delay, will probably come from… your own purchasing organization. How long does it take to approve a sample, after you receive the pack-age from your supplier? If it has to go through a trading office in Hong Kong, if it takes 3 or 4 days to give feedback, and if samples have to be submit-ted 3 times before final greenlight, several weeks have just been wasted.

Do you have to send a design sheet for the new product developments? If you can prepare a sample by yourself, or buy a product in a store and send it to China, the development will be much faster. Similarly, can’t you work on the basis of a product already made by the factory? This is the fastest of all solutions—provided the samples you see in their showroom all come from their own production.

Do you keep changing your mind and asking for new features, as the fac-tory is working on prototypes? This will not only waste time, but also cost you some goodwill. Do you have to wait for the results of lab tests before

you go ahead with production? Some of my clients need the testing results to design the labeling. One solution would be finding a material supplier who guarantees testing results.

Does your marketing department need to take photos of production samples (in exact color) before they prepare the packaging artwork? Can they Photoshop existing photos in-stead? These are only a few examples. Look at your organization and you will probably see room for improvement.

The objective is to show your suppli-ers that you are correcting your own shortcomings before you start blam-ing them. This is a smart move.

For more information on 3PQC be sure to read page #17, the expert interview with Julien Roger, of China Quality Focus

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

LEG

AL

For any business involved in outsource manufacturing in China, Non-Disclo-sure Agreements (“NDA”) are a vital tool for protecting the sort of intellec-tual property that gives a business its value: the design, the manufacturing details, and the product details that make a product unique. The NDA is particularly important in China be-cause the intellectual property (IP) needing protection is usually trade se-crets, know-how and non proprietary drawings that are not protectable ex-cept through a contract.

Western businesses outsourcing pro-duction to China typically have their company’s regular lawyer draft up an NDA for their Chinese business part-ner as a standard step in finalizing the business relationship. The problem is that these NDAs are almost always ineffective at protecting the Western company’s IP. The typical NDA fails to protect Western businesses in China because they have not been written to account for China’s unique IP protec-tion requirements.

First, having a foreign company’s de-signs revealed to a third-party in China is a fairly uncommon problem. The bigger risk is that the Chinese partner will disclose the supposedly protected information to a related party. Many Chinese companies have a large

number of subsidiaries, and the entire production process is often spread among a large network of subcontrac-tors. In China, passing information within this network is usually done in a cavalier manner. So while the stan-dard NDA focuses on third-parties, a China-centric NDA needs to focus on preventing valuable information from being shared within a wide network of related companies.

Second, disclosure to a third-party by the company is not even really the foreign company’s main concern. The bigger risks are that the Chinese com-

pany will use the IP information for itself and eventually become the for-eign company’s competitor or that an employee of the Chinese company will reveal the information after he or she has left the Chinese company. These fundamental risks are usually missed

by standard NDAs.

Third, foreign companies should be concerned that the Chinese manu-facturer will learn how to make the product and then go around them and sell the product directly to the foreign company’s present and future customers. This is a serious problem because over the course of a business relationship, the Chinese company often learns a good deal about the for-eign company’s target market and this circumventing by Chinese companies is all too common.

To combat the problems standard NDAs miss (namely, the IP issues of which foreign companies are really concerned), the better way to go in dealing with Chinese companies is to use what my law firm calls a non-dis-closure/non-use/non-circumvention agreement, or “NNN.” The NNN fo-cuses on the three primary “bad acts” discussed above that the foreign com-pany needs to prevent.

The non-disclosure terms cast a much broader net than a standard NDA. Rather than prohibiting transmission of IP information to only third-parties, the NNN agreement focuses on con-trolling information within a network that the Chinese manufacturer may not consider falling within the scope of the standard NDA.

The non-use provision is designed to prohibit the Chinese manufacturer from using the disclosed information to compete with the foreign company. A good non-use agreement focuses on two issues: First, the agreement identi-fies the applicable IP or confidential in-formation of the foreign company and then authorizes the Chinese manufac-turer to use that property/information solely to manufacture the product for the foreign company. Second, the

China Non-Disclosure AgreementsAvoid turning Chinese suppliers into future competitors and protect your IP.

By Dan Harris of Harris & Moure

IP PROTECTION

A good NNN agreement will provide enforcement through litigation in a Chinese court or through CIETAC arbitration.

Are you protecting your IP and your business? Dan Harris explains how standard NDA’s might not be enough to keep your IP safe

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

agreement requires the manufacturer to agree not to manufacture the prod-uct or any similar product under any circumstances, other than for the for-eign company. This second provision is the most important because it pre-vents the Chinese manufacturer from producing a similar product under its own trademark.

The non-circumvention agreement prohibits the Chinese company from cutting out the foreign company and targeting its current and future cus-tomers. A good non-circumvention agreement is incredibly important for foreign companies, as circumvention is an extremely common problem in China.

For these agreements to achieve their highest value, they must have good enforcement mechanisms be-hind them. The standard NDA usu-ally makes the mistake of calling for disputes to be resolved in the foreign company’s home court or through arbitration. The problem with this is that foreign courts typically have no power over Chinese companies and their judgments against Chinese com-panies usually cannot be enforced. Ar-bitration outside China can be expen-sive and slow and, most importantly, it almost always denies the foreign company access to the injunctive type remedies it often needs to stop the Chinese company from continuing to violate the agreement.

A good NNN agreement will provide for enforcement through litigation in a Chinese court or through CIETAC arbitration. Despite their wild-west reputations, Chinese courts are get-

ting pretty good at enforcing these sorts of agreements, even against Chi-nese companies. To make this work, the agreement must be accurately translated into Chinese so the Chinese court or arbitral body will be able to understand and enforce it quickly.

The agreement will contain specific monetary damages payable upon a breach. In China, this is a much more successful approach than the normal injunctive breach approach. Under Chinese law, when parties to a con-tract set a fixed amount for damages, this amount effectively sets a floor for damages. If actual damages exceed that amount, it is permissible to seek damages for the excess. In addition, money damages and injunctive re-lief are not exclusive, and a court or arbitrator is free to order that dam-ages be paid and that the infringing/breaching party terminate the infring-ing action. Chinese courts love these sorts of monetary damages provisions because they ease the court’s work burden. It is much easier to award a specific monetary amount than trying to force a company to behave properly through an injunctive remedy. It also makes settlement much easier, since the breaching party knows exactly what will happen at trial or arbitration.

In addition to the contractual benefits provided by a good NNN agreement, it can also serve as a valuable filtra-tion device in finding a good Chinese manufacturing partner. Chinese manufacturers that plan to pilfer valu-able IP will be scared off because they know the NNN agreement is actually

enforceable and that they will likely be sued and found liable for a breach. A Chinese company that is reluctant to sign a reasonable NNN agreement is probably not the company with whom to do business.

About the Author

Dan Harris is a founding member of Harris & Moure (www.harrismoure.com), a boutique international law firm with lawyers in Seattle and in Qingdao, China. He is also lead editor of the multiple-award winning China Law Blog (www.chinalawblog.com). Dan has written on China for such publications as the Wall Street Journal, Forbes Magazine, and Advertising Age and he has been an international law analyst on CNBC, BBC, ABC, CNN, CBC, and Fox News. Dan has a B.A. from Grinnell College and a J.D., magna cum laude, from Indiana University, where he was Managing Editor of the law review.

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

FIN

ANCE

*With outlay expected to increase further in the months ahead, China makers are banking on experience, government funding and streamlin-ing measures to buoy exports.

Realizing it can no longer bank on having the lowest-cost factories in the world, China is now highlighting key competitive advantages to shore up sales amid rising production ex-penses. One of the main points being emphasized is the country’s rich and long experience in the export manu-facturing industry. Its thousands of factories in the Pearl and Yangtze River Delta regions, and the Bohai Bay Rim Economic Region have established a well-oiled supply chain spanning at least 10 years.

The range of products available, and the mature sourcing and after-sale services are incomparable with those in other competing production hubs in Asia. There are at least 365 factories and more than 3,000 individual work-shops producing sweaters in the Shan-dong province city of Haiyang alone. The 1,886sqm hub is home to other types of apparel makers, machinery suppliers, and auxiliary industries .

Further, such businesses have been

able to form long-term relationships with clients globally. The familiar-ity between supplier and buyer is one reason customers continue to source health and personal care products from Wenzhou-based Anionte Elec-tric (Zhejiang) Co. Ltd despite higher prices. The trader even projects 2010 exports will not be impacted signifi-cantly by rising labor and raw material costs.

Local, national support

A competitive supply chain is not enough to stave off contraction, how-ever, and the government has taken steps to encourage businesses to move up-market and boost product quality. The central administration for instance, set out incentives to entice local and overseas manufacturers to the thin-film solar cell industry and raise the current total yield of 500MW. These include the Implementation Suggestion on Promoting Solar Energy Architecture Application and Prelimi-nary Methods on Financial Subsidiary for Solar Energy Architecture.

One of the major household appli-ance hubs in the country, Shunde, is the world’s largest export manufac-turing center for air conditioners, mi-

crowave ovens, and electric cookers. Home to 1,328 suppliers, this city in Guangdong province now has three professional testing laboratories that operate following international stan-dards. These labs were set up by the provincial government along with the Shunde Inspection and Quarantine Bureau, Guangdong Inspection and Quarantine Bureau and the South China Household Electric Appliances Research Institute. The 40 million RMB ($5.85 million) laboratories also help makers glean the latest technology and improve their R&D capability.

Performance testing of household appliances is carried out in one facil-ity, equipment for the vibration and sound attenuation rooms, and safety and lighting inspection are located. Energy efficiency evaluation is done in another lab. The third laboratory con-ducts EMS and EMI testing. It is said to be the most advanced one of its kind in Southeast China.

To encourage companies to invest in high-technology businesses, Beijing doles out a corporate income tax rate of 15 percent to such operations (the CIT is normally set at 25 percent!). City governments provide funding to sup-port various endeavors as well. The Guangdong city of Dongguan has set aside 1 billion RMB ($146 million) to help solely processing plants upgrade to full manufacturing entities. More than 9,000 companies benefited from this allocation of funds in 2009.

Also in Guangdong, Nanhai autho-rized a 1 to 2 billion RMB ($146 million to $293 million) special fund in Octo-ber 2009 for the development of the city’s semiconductor lighting industry. This spurred major player SemiLEDs to invest in a $350 million LED chip proj-

Core strengths shine through cost conundrumBy Global Sources© www.globalsources.com Originally Posted: June 03, 2010

CORE STRENGTHS, CHINA

www.homeproducts.globalsources.com/gsol/I/Home-product/a/9000000109874.htm

Revised for the China Sourcer August 11, 2010

Global Sources discusses core strengths

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QUALITY CONTROL LOGISTICS PROJECT MANAGEMENT LEGAL FINANCE

ect in Nanhai.

The Wenzhou Entry-Exit Inspection & Quarantine Bureau, on the other hand, expedites crayon pigment evaluation based on US and EU standards. Doing so reduces testing fees and product recalls.

Reducing outlay

Suppliers are not relying solely on Chi-na’s export manufacturing strengths and government support to survive cost challenges. Many are devising ways to minimize expenses:

Electric shaver maker Superhuman Group Co. Ltd has estimated EuP, RoHS and REACH testing costs add 10 to 20 percent to total outlay. Since this is a necessary step, the company decided to scale down on R&D expenditure instead. The supplier used to launch an average of 10 models per year. Not all items, however, were popular in the export market. As such, product releases have been cut to just five or six well-researched designs. Fewer units also mean overall testing fees are lower.

Xiamen Comfort Science & Technol-ogy Group Co. Ltd, on the other hand, tries to use the same accessories and raw materials for its massager mod-els to reduce procurement costs. Thin-film solar cell manufacturers are investing in R&D and equipment to boost performance and reduce prices. At present, the power efficiency of a-Si and μc-Si thin-film solar cell is 6 to 8 percent, while that of cadmium tellu-

ride and GIGS varieties, 8.5 to 10.5 per-cent and 10 to 12 percent, respectively. By 2015, local players aim to achieve an efficiency of 15 percent for the first, 13 percent for the second and 15 percent for the last.

Expenses continue to climb

Manufacturing in China is becoming increasingly expensive and may be even more so as the industry matures further. No longer limited to materials, land and labor, expenses related to technology and shipping are on the rise as well.

Stricter product and safety require-ments in key markets have resulted in higher R&D and testing fees. Suppliers now have to allocate 10 to 20 percent more to improving and evaluating en-ergy efficiency, functionality, ease of use, and safety than they did just two years ago. Further, the cost of major materials such as metal, cotton and wood is increasing. Melamine-lami-nated boards rose 8 to 10 percent after the Chinese New Year. Some types of engineered board went up 10 to 15

percent on March 1. Imported iron ore grew 30 percent, which in April re-sulted in a 200 to 500 RMB ($29 to 73) per ton hike on various related items.

Ocean freight charges are also on an upward trajectory. On May 21, the Chi-na Containerized Freight Index soared 41 percent year-on-year to 1125.78. Moreover, the need to expand pro-duction has pulled up land prices in Shenzhen from 600 RMB ($88) per square meter in 2007 to between 900 and 1,600 RMB ($132 to $234) this year. The situation is true for most types of industrial land within the Pearl and Yangtze River Delta regions.

-www.globalsources.com-

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InterviewExpert JULIEN ROGER, CHINA QUALITY FOCUSInterview by Richard Meyer

RM- What guides a Corporate Social Audit? Do corporate charters, foreign & international law, and general public opinion play a role in setting industry standards ?

JR- A corporate social audit is done as per international so-cial standard SA8000.

The audit includes the following check:

- Child labor,

- Forced labor,

- Health & Safety.

- Freedom of association and

right to bargain,

- Discrimination,

- Disciplinary practices,

- Working hours and Environment,

- Compensation,

- Management Systems.

Basically the law we follow when auditing is the local law supplemented by the international standards which can embrace public opinion and any specific concerns. Local laws do vary a bit from region to region in China and in the big picture of things, when it comes to famous brands and big buyers; the buy side dictates the standards anyway.

RM- In the wake of the recent strikes at Toyota and Honda, and the suicides at Foxconn, are companies asking you to raise the bar in your audits? Are you suggesting they do so?

JR- Most companies don’t want to have any bad press in the local papers back home. And like I said before, the brands that are concerned about Social Compliance have already raised the bar beyond the local standards. Of course when strikes and suicides are in the news, the Social Audits can be adjusted to dial in on areas of concern.

Most small and midsized buyers are not exposed like the major brands. So they sleep better at night knowing a Social audit was conducted. Buyers aren’t interested in putting the factory’s workplace under a microscope so long as the facto-ry doesn’t have any major red flags, and is in full compliance with local laws. As such, most of the audits we conduct on behalf of clients result in scores that are not fully compliant with international standard SA8000, which is quite strict and a challenge for the average “local Chinese factory”. In other words, we give the clients an accurate picture of what is go-ing on at the factory, good or bad, and they can decide what to do with that information.

RM- Are more audits being requested? Are a wider range of companies requesting audits?

JR- Indeed, more and more companies want visibility at the factory floor. We have seen a 50% increase of this service during the past two years. One can think it is simply a rise in the demand, but it is also simply because we are developing fast as the demand for Chinese products keeps rising and the added value of third party inspection companies like China Quality Focus is quite clear in most importers’ mind.

Besides Social audits in China, our other Factory Audit servic-es are also appreciated and actually requested by our clients more often now. I believe simply because normal factory audits concern a larger range of clients and actually shall interest all buyers willing to buy in China, while social audits usually concern only large or medium importers who want to show their credentials to their shareholders and who want to protect their image/brand and avoid devastating public-ity, which shall arise if a social issue such as child laborer is seen at the manufacturer plant.

Why do standard factory audits seem to concern all buyers? Because, in our standard audit reports, concerns such as knowhow, time, price, capacity, capability, experience etc. are addressed.

Our Simple Factory Audit (1 working day) includes:

A. FACTORY PROFILE: name, contact details, licenses check etc.

B. EMPLOYEES and WORKFORCE: management, QC, workers etc.

C. FACILITY CHECK: office, equipment, production lines etc.

D. CLIENTS and EXPERIENCE: trade history, samples check etc.

E. DOCUMENTS VERIFICATION: licenses, certificates etc.

Our Extensive Factory Audit (2 working days) includes the same checks but also includes checks on: Design Control, Purchasing Control, Storage Management, Incoming Inspec-tion, Production Control/Inspection/Testing, Continual Im-provement, and Social Environment Responsibility.

I also believe that more and more companies will soon be requesting “green audits” that will include environmental checks and the manufacturer’s attitude towards sustainable development.

Julien Roger : General Manager, China Quality Focus www.ChinaQualityFocus.com [email protected]

Done for Compliance Week magazine www.complianceweek.com, a Boston print publication

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Tradeof theTermsPOPurchase Order

Also known as a Wire Transfers or a Bank Transfer, the TT is fastest and most direct way to wire money from one account to another. Money wires can be sent to domestic or international recipients via banks’ SWIFT Codes.

EXWEx Works

Good ready to be picked up at fac-tory. All transportation, insurance, fees and duties is the responsibility of the buyer.

DDPDelivered Duty Paid

Goods are delivered to the buyers warehouse. All duties, logistics fees and duties paid.

NEt 30Buyer pays 100% of PO value 30 days after delivery

FOBFree on Board

Goods are delivered to boat, domestic fees paid. International shipping, fees and import duties is the responsibility of the buyer.

3rD Party QC

Independent quality inspection/quality

assurance agents.

CIFCost Insurance and Freight

Goods are delivered to the import port. Duties, fees and local delivery is the responsibility of the buyer.

P

E

D

N

F

3

C

By David A. Dayton

IPQC/QaIn Process Quality Control or Quality Assurance

IHtSHarmonized Tarrif Schedule

Tax tables for goods imported into the US.

H

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We chuckle each and every time, but that is the pervasive perception of many people who do business in China. Now these comments come mostly from people who have been on the ground in China trading punches with suppliers for years.

This reaction is common when com-ing from the US, where people have sued the golden arches for making them fat or for their hot beverage be-ing too hot. The simple fact of reality is that China does not enjoy the direct confrontation that we do in the West when problems arise and must be dealt with. While the courts in China are changing, it will take time for the structure of the legal system to de-velop, just as it did everywhere else. In the meantime, you do have several op-tions for dealing with disputes IF you PREPARE correctly:

Mediation is a great choice and is quickly becoming a preferred method of settling disputes in Hong Kong; in fact as of January 10th, 2010 solicitors are required by law to inform and ex-plain the availability and differences between mediation and litigation.

This is the direction that dispute reso-lution will take in Asia, and those that do business in Asia will need to under-stand the manner in which to handle disputes with a minimum of disruption to business. Mediation, however, is not a one-size-fit all solution to disputes in China. There are situations when it is a good idea and situations when it is a bad idea.

Mediation is a good idea when:

o You have a solid history of coopera-tion with the other party.

• There are many different parties involved or individual parties where there is a clear distinction about who

is responsible for your relationship-

o Mediation works best between two parties that will attempt to be fairly open about their relationship.

• There are no huge overwhelming issues between the parties-

o Mediation works well for smoothing over small bumps in the relationship road, not for overly complex and in-volved issues.

• You have an ongoing relationship with the other party-

o Mediation is not a good option for resolving disputes between you and a supplier that is being used for a single project.

• The parties BOTH want to reach an agreement-

o If one side is going to be a stick in the mud, they will have a pretty easy time stopping the mediation process.

There are also times when media-tion will probably be ineffective:

• If the parties have a history of ad-versarial relations or there is hostility between the two parties-

o If both parties come to the table looking for a fight, they’re going to find one and nothing will be resolved.

• If the issues in dispute are overly com-plex or involve many different parties-

o Remember the goal of mediation is for the parties to resolve the disputes themselves. The mediator can only facilitate the parties and act as an in-dependent third party.

• If the issues are purely legal issues or one party is forced by requirement to mediate-

o This is the inherent issue I have with judges requiring parties to mediate. When someone is forced into a situa-

tion where they must amicably reach an agreement, they often fail to do so.

• If continuing the dispute is beneficial to one of the parties-

o In a situation where one party would benefit from a long drawn out media-tion, it is possible to entice the oppos-ing party by acting as if that party is serious about a resolution, when in fact, they are simply wasting time.

• If there is a significant power imbal-ance between the two parties.A well trained mediator should be able to help you work through some small problems. Their job is to help the par-ties look forward and not dwell on the past. A mediator should be able to separate the people involved in the dispute, from the problem that is at the core of the dispute. Most impor-tantly, they need to be able to help the parties find common points of interest and remember why they are doing business in the first place. Keep your eyes open and your head on a swivel.

Trade of the

ToolsMediation- Alternative Dispute Resolution

By Matthew Kowalak Southern Perspective Shenzhen

When people learn that I studied Chinese Business Law, I get the same reaction nearly every time; “They have laws here?”

About the Author

Matt Kowalak of Southern Perspective SZ has worked in manufacturing related

positions in Shenzhen for the last 6 years. Matt and his team at Southern Perspective SZ are focused on staying on the cutting edge of Chinese Business Law. They help their clients to understand potential problems that may arise in the course of doing business in China. Whether you’re manufacturing, sourcing from existing suppliers, or looking to sell into the Chinese market, Southern Perspective SZ can help. For further business questions or consulting, visit www.southernperspectivesz.com

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Dongguan is a Chinese city you might not have ever heard of. This month, our focus is on- Dongguan, Guang-dong province, of the Pearl River Delta (PRD).

Dongguan is located about 90km from Shenzhen, 30km from Guangzhou and about 90km up river from Hong Kong and Macau. Trains, buses, ferries and expressways from Hong Kong, Shen-zhen, and Guangzhou all pass through Dongguan. Air traffic is typically ser-viced through Hong Kong, Shenzhen and Guangzhou international airports, all of which have shuttle services to Dongguan.

Dongguan is famous as both a desti-nation for international investment, especially from Taiwan and Hong Kong, as well as being the source of many overseas Chinese in HK and elsewhere. Extensive Foreign Direct Investment has made Dongguan one of the largest export centers in China. Dongguan is third in total exports from China—behind only Shanghai and Shenzhen.

Due in part to its fame as a manufac-turing center, Dongguan has more than 8 million residents, 6 million of which are immigrants from other parts of China.

Dongguan, again along with Guang-zhou and Shenzhen, are three of the most populous urban areas in the world—traveling from Hong Kong through Shenzhen and Donguan to Guangzhou it’s difficult to know where

one city ends and another begins.

Dongguan is also one of the fastest growing cities in China with average GDP growth, since 1979, at over 20%. With so many factories in close prox-imity, basing a sourcing or QC trip out of Dongguan can be quite convenient.

City Data

Area Total 2,465 km2 (951.7 sq mi)

Population Total 6,949,800 (2008) est. at over 8,000,000 in 2010

Useful linksWikipedia

Dongguan Today

Dongguan东莞

Dongguan Skyline in 2008

Guangdong

Page 21: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing

Tradeshow CalendarFor a complete list of all the tradeshows in the greater China region please visit Global Sources Calendar

All Shows highlighted in Red will be attended by CSIC. Our booth location will be listed in the show guide under our corporate sponsor PassageMaker

Wed 1

Thu 2

Fri 3 26th China International Furniture FairGuangzhou

Sat 4

Sun 5

Mon 6

Tue 7

Wed 8 MumbaiWith Chairman of Board of Directors of CSIC Mike BellamyProducts: Electronics & Components, Security Products, Home Products, Gifts and Premiums Hardware & Building Materials, Auto Parts & Accessories, Bathroom Products

Thu 9

Fri 10

Sat 11 The 18th China Int’l Hardware FairBeijing

Sun 12

Mon 13

Tue 14

Wed 15 2010 4th Road/Patio Lamp & Outdoor Lighting FairShanghaiThu 16

Fri 17

Sat 18

Sun 19

Mon 20

Tue 21

Wed 22

Thu 23

Fri 24

Sat 25

Sun 26

Mon 27

Tue 28 CKI & B (China International Kitchen & Bathroom Appliances & Technology Expo)Shanghai New Int’l Expo CenterWed 29

Thu 30

Fri 1

Sat 2

Sun 3

Mon 4

Tue 5

Wed 6

Thu 7

Fri 8

Sat 9

Sun 10

Mon 11

Tue 12 Asia World Expo Hong KongWith Chairman of Board of Directors of CSIC Mike Bellamy,Executive Director David Bruns,Editor at Large David DaytonProducts: Electronics & Components; Security Products

Wed 13

Thu 14

Fri 15

Sat 16 Canton Fair Oct. — Oct 15-November 4China Import & Export Fair (Pazhou) Complex Center, GuangzhouSun 17

Mon 18

Tue 19

Wed 20 Asia World Expo Hong KongWith Chairman of Board of Directors of CSIC Mike Bellamy,Executive Director David Bruns,Editor at Large David DaytonProducts: Home Products; Baby & Children’s Products; Gifts & Premiums

Thu 21

Fri 22

Sat 23

Sun 24

Mon 25

Tue 26

Wed 27 Asia World Expo Hong KongWith Chairman of Board of Directors of CSIC Mike Bellamy,Executive Director David Bruns,Editor at Large David DaytonProducts: Fashion Accessories; Garments & Textiles

Thu 28

Fri 29

Sat 30

Sun 31

SEPTEMBER OCTOBER

Page 22: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing

find out moreat www.chinaqualityfocus.com

Secure your imports with China Quality Focus

188 € all in per MD

Anywhere in China

Online QC Platform

Same-Day delivery Report

Western Management

Big Enough / Small Enough

International Standards

www. .com

ANY QUESTIONS ? [email protected]?

Page 23: ISSUE ONE- SEPTEMBER 2010 ONLINE PDF EDITION · 2015. 5. 29. · he is fluent in both Thai and Mandarin. Welcome to the China Sourcer! This is the magazine of The China Sourc-ing