Doing Business in China For Dummies®

Placing Orders

This section discusses the ordering process, which is fairly standard. As you and the supplier get to know each other better, you’ll be able to get some more favorable terms.

Putting down a deposit

The standard deposit for a new relationship in China sourcing is 30 percent. As a supplier gets to know you better, they may reduce the deposit. In most cases, you shouldn’t have to pay the deposit until you’ve approved the samples; however, if producing the samples is really expensive, you can deal with the upfront costs in a couple of ways:

✓	Sign a purchase agreement stating that you’ll purchase a minimum amount of product if you approve the samples.
✓	Pay for tooling costs (if they’re expensive) but have these costs offset against your first order.

When you put down your deposit, always be ready to lose it and walk away. Losing your deposit doesn’t happen often, but you shouldn’t be shocked if it does. If the deposit’s large enough, you can pursue legal action — particularly if your contract has an arbitration clause (see Chapter 17); however, a few thousand dollars may not be worth pursuing.

Purchasing goods via free on board arrangements

The most common way of purchasing goods is free on board (FOB). FOB [origin port name] means that the seller must deliver the goods on board a ship (or airplane) at the port of origin. If you buy FOB, the factory delivers to a freight ...