一个人的挑战是另一个人的珍宝-住宅建设材料，第4部分

Sourcing products from China can seem like reaching an arm into a black-hole. 您是不知道的到质量，不负最后期限和期望甚至知道产品是否的供应商的结果在您的市场上将卖。支持它的经验在建筑业， Sourcejuice继续举办给予您洞察力的“一个人的挑战是另一个人的珍宝”系列入什么在另一边。

这篇文章将谈论哪些项目在存货可以被维护为中小规模大厦供应室。我们也将谈论可以被卖对商业不动产的开发商的项目。

在早先文章我们谈论了什么产品建造者买。这些源头指南适应往可以被卖的送往建造者的产品，因为他们是与最大的痛苦点在建造者的预算关系的昂贵的项目。

第1部分 -配管， Sheetrock，修剪， Stairparts，修剪，厨房细木家具

第2部分 -知道您的顾客、建造者或者开发商

第3部分 -器具，硬木地板，高端瓦，习惯门，壁炉，石灰华瓦片，照明设备

商业不动产的开发商
有可以是sourced相对商业不动产或细分的发展的无限的相当数量产品。不仅材料为大厦，但得到物产准备好的组分修造可以是sourced。

这预算为5全部细分的发展在佐治亚。从这预算您能获得可以是sourced或卖对商业开发商项目的候选人名单。记住多数美国细分是atleast 40全部，因此这些预算图将相应地增长。

•下水道泵浦驻地组分 -在包括土地大量以一个陡峭的斜面到街道的物产，一个泵站将要求为下水道服务。驻地为商务应用可能从$80,000范围到$375,000。这些驻地包括，有时他们的建筑的县具体规格如此情景源头一个整个驻地为大量生产也许不申请的地方。在这些驻地内包含的组分是昂贵的，并且可能被生产国外用于实施入这些驻地。这些组分可能包括：高压用于管理和监视的泵浦、电子，钢甲板镀层、阀门等等。
这在确定可能帮助产品进口可行性为一个泵站的建筑的有些概要。

•Pre-fabricated金属大厦 -商业发展承包商在美国典型地做“设计对修造”已建成投付使用的解答为金属大厦。 You either provide them specifications or architectural plans and they quote the project, many times including development cost for the property. From there, the major components that make up the frame of the building are produced elsewhere in the US and shipped to the construction site for installation. The industry of importing these buildings in pieces, pre-fabricated from China is soaring and there companies that have been engaging in this business to manufacture pre-fabricated buildings for developments in the US since 1995. Check out this article. With the residential housing market at an all-time low, developers have begun to diversify their portfolio with commerical investments. Are these developers looking or already performing this business in China? It would pay to find out. The industry for metal building’s “revenue for the year 2007 was approximately $7.9 billion USD, with an estimated gross profit of 27.9%. Import was valued at $183.2 million USD from 34 countries.” Check the market research here. If you can source these products yourself and have the commercial real estate contacts, then you could be the next major player.

•Lamp Poles - these items can be purchased or leased from the power company during final stages of development, but the developer has the option of installing them themselves. These poles are relatively expensive so sourcing them from China is an ideal product to import. Their construction is modular so shipping can be maximized on this import.

Check out a subdivision development plan with lamp pole location highlighted. I see at-least a container of lamp poles just in phase 1.

•Sewer and Storm Drain concrete conduits
•Water and Fire lines
•Fire Hydrants
•Street Signs - If you want to purchase street signs for developments without going to China, buy from someone who does. Check out Global Home Construction.
•Retaining Wall Blocks
•Erosion Control

Power and Cable television lines are typically purchased and installed by the service providers themselves. During the development cycle a developer will provide blueprints indicating the layout and they handle the rest. These items are not good sourcing items unless you have a relationship with one of these providers. These lines that run inside the house may be good housing items to source as they can be sold directly to electrical contractors.

Small to Medium Sized Building Supply Houses
Sourcing items in this category are ones that:
•Will have a high volume of sales, maintaining constant amount of inventory while still purchasing regularly every 30 days.
•Items that are common purchases to builders
•Have good margin for profit after import
•Low individual cost per item
•Are not typically items sold by a lumber yard
•Can be mixed with the rest of your US domestic products for a seamless product-line.
•Can be packaged as a turn-key solution for installation

These items are include:
•Interior trim and moldings
•Interior and exterior door locks
•Exterior doors: front doors, metal doors, sliding glass doors
•Exterior cornicing materials
•Kitchen cabinets
•Contemporary Chinese lavatories
•Plumbing fixtures
•Lighting fixtures and fans

dylan@sourcejuice.com // Dylan Blankenship

August 25, 2008 | Filed Under Sample Reviews, Sourcing Guides | 1 Comment

Export to China – Selling, rather than Buying, from China

A few weeks ago, alibaba.com launched a new service called Export To
China and is promoting the business of exporting to China based buyers for
the domestic China consumer base. They mention the growth in China’s
middle class as well as the rising RMB (Chinese currency) as signs
that a market is ready for your products to be sold to China. Upon
review, the service is fairly basic and utilizes Alibaba’s extensive
network. Logic would dictate that all those Chinese based exporters
are potential buyers and are possibly the most prepared to seize and
address such internal opportunity in China. Additionally, Alibaba
(our assumption) realizes that most small to medium sized businesses
need new outlets for growth and possibly make up the bulk of their
clients on the import side of Alibaba.com - so why not make buyers
into sellers? Buyers are sellers and sellers are buyers and for
Alibaba this is yet another revenue stream.

Exporting to China is not new - hundreds, if not thousands, of
multinational corporations from all over the world are doing business
in China and most are selling all range of products. Many of these
multinational corporations are doing so well in China that the
business in China is making up a significant percentage of global
sales. Research some of the numbers for automobile manufacturers such
as Volkswagen, General Motors, Honda, Toyota, etc. and you will find
staggering growth in China. Additionally, you will find reported in
the major media that luxury brands are surpassing expectations in
mainland China and that many of these luxury brands are increasing
their exposure to China each year with new stores and distribution
channels.

Besides Alibaba, there are other avenues to promote your products into
the Chinese market. One of them is supported by the Chinese
government and offers its services free. Below are some
excerpts from their “About Us” section of their website which can be
found at this link.

Export to China is an information exchange platform of
products of all countries and regions in the world, and it was set up by the Ministry of Commerce of the People’s Republic of China to promote the balance of international trade and help foreign products enter into China’s market.

Export to China will issue the information to China’s users both in Chinese and English. Main users of the platform are the manufacturers, trade companies and consumers in Mainland China who are interested in the world’s products. The information provided in English is welcome. It will achieve much better effect if you provide information in Chinese at the same time.

As a part of the public commerce information service system of the
Ministry of Commerce, information providers issue the essential
information at our website is free of charge.

For companies in the USA, there are many options to understand and
begin the process of researching how to successfully export into
China. Below are some organizations that can help you tremendously in
a growing and vast market filled with incredible opportunities as well
as challenges.

US Department of Commerce’s online portal on helping US Businesses
export abroad. They have an in-depth China section. click here.
The US Commercial Service helps those importing from the USA or businesses in the USA exporting to other countries. click here.
American Chamber of Commerce People’s Republic of China (Beijing) - click here.
American Chamber of Commerce Shanghai - click here.
American Chamber of Commerce Guangdong (South China) - click here.
American Chamber of Commerce in Southwest China - click here.

Some important information when considering the business of exporting to China:

1. Make sure your Chinese translations are localized for Chinese
readers. Just translating content will not adequately represent your
objectives, products, and or information well. It is crucial to
localize the content with a respected translator. We highly recommend
this company when dealing with
translations of any nature – they are professional and know the
business of translations exceptionally well.

2. It is not enough to just post and wait for buying leads to be sent
to your email inbox if you are truly serious. It may be best to work
with companies that understand the nature of selling into China. For
companies in the USA, you should begin your research with government
agencies that support exporting activities like the ones mentioned
above.

3. Find a company that doesn’t compete with your company but does
business already in China as a resource. This can be done via
professional organizations and once again, for companies in the USA,
the chambers of commerce noted above can truly help.

Good luck, but more importantly please do your research.
-Sourcejuice Team

August 19, 2008 | Filed Under Sourcing Trends | 1 Comment

Supply Chain Insurance May Help Manage Supply Chain Risk

supply chain insurance

Reading Spend Matters blog article Call Your Broker: Have You Purchased Supply Risk Insurance Yet? we were introduced to an interesting concept - Supply Chain Insurance.

Marsh, the world’s leading insurance broker and risk advisor, will be offering the product. According to Marsh’s website:

“As businesses in nearly all industry sectors take advantage of globalization to reduce costs and achieve efficiencies, their supply chains have become the lifeblood of many of their production, manufacturing and distribution activities,” said Robert Howe, Leader of Marsh’s Global Property Practice. “While the economic benefits of such supply networks are clear, the risks have become more acute and a supply chain interruption can have potentially devastating effects on a business. Our new program approaches business interruption on a broad basis to help companies address a wide range of potential disruptions.”

You may ask, “how would an insurance company decide on a premium for a supply chain risk?” Apparently there is some science involved as you would expect from such a large insurance organization.

For businesses interested in the program, the first step in obtaining the coverage is to have Marsh’s Risk Consulting Practice conduct a comprehensive supply chain risk assessment. Lexington Insurance Company will then use the assessment to underwrite the risk.

Has anyone yet contacted Marsh about this? We’d love to hear your feedback.

July 27, 2008 | Filed Under Sourcing Trends | 2 Comments

Data Seizure from Abroad, is your data protected?

The New York Times recently reported on laptop and data seizures by US Customs and Homeland Security in the name of protecting the security and borders of the United States of America. In the article the Times called for this agency to stop the seizures for Americans returning from international travel abroad. “There have been widespread reports of the government searching — and often seizing — laptops, BlackBerrys, iPhones and other portable electronic devices at airports. It is not clear how often these searches occur, and the government will not say.

The Association of Corporate Travel Executives says that of 100 people who responded to a survey it conducted this year, 7 said they had had a laptop or other electronic device seized.” –New York Times What does this mean to you? Often times the information that this agency is seeking may require them to sort and review through confidential business contracts, contacts and other sensitive documents.

Traveling abroad for business could inevitably cause you to have to release information relative to intellectual property and business transactions at the border. There are reports that US Customs may retain your laptop and data or even erase it as indicated in a similar article from the Washington Post.

What are your options?

I firmly believe and understand that there are necessary measures to ensure the security of the United States and its citizens. Any advice provided here is not to subvert these measures, but instead is provided to change the methods in which you utilize technology to secure your sensitive information.

•Remotely store your information online – services like xdrive.com and Google Docs can provide a means in which to store and save sensitive data. GoToMyPC.com allows you to remotely control (like Remote Desktop) your home computer.

•VPN – Many corporations have invested in virtual private networks that allow you to access the company’s local network from abroad. Storing your data at your company’s network may be the most secure place.

•Biometric authentication – Many laptops today include fingerprint scanners that allow you to access key applications on your computer. While this won’t prevent Customs from accessing your data, minimally, it will allow you to be present when the data is being accessed.

•Install a Linux partition – Windows XP by default does not display partitions created by the Linux operating system. Creating a dual boot laptop with Windows and Linux could allow you to simply keep those without advanced technical knowledge away from your files. While this is not preventing anyone from accessing the data, it does keep the non-technical savvy people away without looking suspicious. Dual boot computers are very common today with the advancement and ease of use of the Linux operating system.

•Delete History and Cookies – deleting your cookies, clearing cache and history are some basic ways to keep others from seeing where you visit on the internet.

While there are encryption methods available to secure your data from prying eyes, this is not a recommended method. Those that secure information with software like PGP (Pretty Good Privacy) may be identified as an individual trying to hide something. Additionally, there are reports that US Customs has asked that travelers provide passwords to access their electronic devices.

July 22, 2008 | Filed Under Customs | 2 Comments

Incoterms Definitions - the basics to the advanced

Incoterms Definitions

Incoterms (International Commercial Terms) are a series of international sales terms widely used throughout the world. They define monetary transaction and role responsibilities for both sides of the international trading buyer and seller transaction. The purpose of standardized incoterms is to determine export and import clearance responsibilities, who is owning the risk for the condition of the products at each stage in the transport process, and who is responsible for paying for what.

Here is the shortlist of Incoterms and definitions from the International Chamber of Commerce that you should be familiar with:

EXW “Ex Works”

The seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller’s premises.

FCA “Free Carrier”

The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller’s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading. This term may be used irrespective of the mode of transport, including multimodal transport.

“Carrier” means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes.

If the buyer nominates a person other than a carrier to receive the goods, the seller is deemed to have fulfilled his obligation to deliver the goods when they are delivered to that person.

FAS “Free Alongside Ship”

The seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage of the goods from that moment. The FAS term requires the seller to clear the goods for export.

FOB “Free on Board”

The seller delivers when the goods pass the ship’s call at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. Many people use either FOB or CIF and aren’t sure of the exact differences. SourceJuice wrote an article To FOB of CIF That is The Question which may be of assistance.

CFR “Cost and Freight”

The seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. The CFR term requires the seller to clear the goods for export.

CIF “Cost Insurance and Freight”

The seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination, but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer.

However, with CIF the seller also has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under the CIF term the seller is required to obtain insurance only on minimum coverage. Should the buyer wish to have protection of greater coverage, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements.

The CIF term requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CIP term should be used.

CIP “Carriage and Insurance paid to…”

The seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been delivered. However, in CIP the seller also has to procure insurance against the buyer’s risk of loss of or damage to the goods during the carriage.

Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under the CIP term the seller is required to obtain insurance only on minimum coverage. Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements.

“Carrier” means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transportation by rail, road, air, sea, inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. The CIP term requires the seller to clear the goods for export.

CPT “Carriage paid to…”

‘Carrier” means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier, The CPT term requires the seller to clear the goods for export.

DAF “Delivered at Frontier”

The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country. The term “frontier” may be used for any frontier including that of the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term.

However, if the parties wish the seller to be responsible for the unloading of the goods from the arriving means of transport and to bear the risks and costs of unloading, this should be made clear by adding explicit wording to this effect in the contract of sale.

DES “Delivered Ex Ship”

means that the seller delivers when the goods are placed at the disposal of the buyer on board the ship not cleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination before discharging. If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used.

This term can be used only when the goods are to be delivered by see or Inland waterway or multimodal transport on a vessel in the port of destination.

DEQ “Delivered Ex Quay”

The seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (wharf) at the named port of destination. The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay (wharf). The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import.

If the parties wish to include in the seller’s obligations all or part of the costs payable upon import of the goods this should be made cear by adding explicit wording to this effect in the contract of sale.

This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on discharging from a vessel onto the quay (wharf) in the port of destination. However if the parties wish to include in the seller’s obligations the risks and costs of the handling of the goods from the quay to another place (warehouse, terminal, transport station, etc.) in or outside the port, the DDU or DDP terms should be used.

DDU “Delivered Duty Unpaid”

The seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto, other than, where applicable, any “duty” (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs dudes, taxes and other charges) for import in the country of destination. Such “duty” has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time. However, if the parties wish the seller to carry out customs formalities and bear the costs and risks resulting there from as well as some of the costs payable upon import of the goods should be made clear by adding explicit wording to this effect in the contract of sale.

DDP “Delivered Duty Paid”

The seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable, any “duty” (which term includes the responsibility for and the risks of the carrying out of customs formalities and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination.

Whilst the EXW term represents the minimum obligation for the seller, DDP represents the maximum obligation. This term should not be used if the seller is unable directly or indirectly to obtain the import licence. However, if the parties wish to exclude from the seller’s obligations some of the costs payable upon import of the goods (such as value-added tax : VAT), this should be made cear by adding explicit wording to this effect in the contract of sale. If the parties wish the buyer to bear all risks and costs of the import, the DDU term should be used.

To help you find the appropriate Incoterm for your situation, have a look at BusinessLink’s interactive guide.

July 15, 2008 | Filed Under Landed cost | 2 Comments

VAT Rebates Coming Back for Textiles and Garments

While not announced yet by China, The South China Morning Post today has an article stating that VAT Rebates are coming back for textile and garment exports. This is a bit of a surprise move and is welcome news to those in the China textile and garment industries and for buyers seeking relief from higher prices.

For those unfamiliar with VAT rebates and their place within China sourcing, please have a look at this SourceJuice article Reminder: Understand VAT Rebates to Bargain More Effectively.

According to the article:

Various industry sources and tax experts say the mainland is finalizing a plan to raise VAT rebates on textiles and garments as much as 4 percentage points to 15 per cent. Generally, exporters are paying a value-added tax of about 17 per cent.

The plan also would increase rebates on viscose fiber - a key raw material in making fabric - as much as 1- percentage points to 15 per cent.

The plan signals a rescue of the country’s pillar industry, which is undergoing an unprecedented consolidation exacerbated by a United States-led global economic slowdown, a sinking US dollar and sourcing costs of raw materials, labour and crude oil.

When the VAT rebate returns, be sure to get the discount on your next purchase order!

July 10, 2008 | Filed Under Landed cost | 1 Comment

Walmart Reinvents the Milk Carton - Adjusting Packaging to Increase Efficiencies

Walmarts new milk jug

SourceJuice recently wrote an article 4 Ways to Combat China Price Increases without Raising Prices to your Customer. Number 1 on our list was ‘Adjust Your Packaging Size, Colors and Materials’. While this may seem obvious on the surface, a recent example is sure to prove the point… that truly rethinking your product’s packaging can increase efficiencies and lower production and delivery costs.

The example is the 1 gallon milk jug and the forces behind the change are Walmart and Costco. The 1 gallon milk jug is a product that everyone, at least in the United States, is familiar with. We’ve grown up with it. Most people probably wouldn’t have ever thought about changing it. However with milk for the most part mass produced and trucked hundreds or thousands of miles to its final destination, the milk jug really isn’t the ideal packaging. So what are the changes exactly?

Superior Daily is the company responsible for designing the new jug and they’ve put together an excellent chart explaining all the benefits of the new milk jug compared to the old one. Click the chart below to make it larger.

Is everyone loving the new packaging? Of course not. Some people are claiming that it’s harder to pour. Others are loving the new jug, particularly how it fits in the door panel of modern refirgerators. Either way, with the new jug reportedly saving about 20 cents per gallon of milk, they’re unlikely to be going away anytime soon.

“This is a key strategy as a path forward,” said Anne Johnson, the director of the Sustainable Packaging Coalition, a project of the nonprofit group GreenBlue. “Re-examining, ‘What are the materials we are using? How are we using them? And where do they go ultimately?’ ”

So what are you doing to rethink your packaging?!?

June 30, 2008 | Filed Under Negotiating & Strategy | 1 Comment

Establishing a Sourcing Entity in China

Incorporating in China

China is in a constant state of flux, and the legal environment is certainly not immune to this reality. As a foreigner your behavior is often scrutinized more than a local so you need to constantly be aware of the legal bounds under which you and your business operate. This article attempts to provide an overview of typical legal set-up options for a sourcing company in China, including RO (Representative Office), WFOE (Wholly Foreign Owned Enterprise) and FICE (Foreign Invested Commercial Enterprise).

Choosing the proper set-up

The overall objectives of your operation are the most significant aspect to consider when establishing an entity in China. What are your short and long term goals? What types of products do you want to source? Do you want to distribute, assemble, or manufacture products domestically? Do you plan on employing local staff? The answers to these and other questions will help define your objectives so that you can formulate a legal strategy that best serves them.

It is important to note, that no one legal solution exists to accommodate all of your unique conditions. Therefore, the more detailed your understanding of your objectives, the better equipped you are to make good decisions. Further supplementing your understanding with proper due diligence is always important when making decisions of such lasting consequence. Let us now take a look at typical legal set-ups for trading companies.

Representative Office (RO)

This formation is popular because (1) the registration process is shorter in duration and usually easier to complete, and (2) there is no minimum level of capital investment required. An RO will be suitable if its planned functions are simply liaison, market promotion or research. For sourcing companies, it will mean you have to give up a significant amount of control over your operations. All transactions must originate from abroad, and you are required by Chinese laws to heavily rely on 3rd party services providers, such as an Import/Export agent, Logistics provider, and HR outsourcing agent.

International Trading Wholly Foreign-Owned Enterprise (WFOE)

With official minimum registered capital of RMB 100,000 for a single shareholder company (but closer to USD 60,000 to 70,000 in practice), an International Trading WFOE allows added control over your business operations. However, the enterprise must be located in a Free Trade Zone (FTZ) and it is usually limited to export activities. Those that wish to distribute within China must either use a 3rd party distributor or apply for a separate import/export license (which essentially qualifies them as a FICE in a FTZ).

Foreign-Invested Commercial Enterprise (FICE)

Unlike the Trading WFOE, a FICE has the ability to import and locally distribute on top of export activities and may also qualify for retail activities. Both have the same level of required minimum investment, but in practice the FICE necessitates substantially higher levels (about USD140,000). The registration process is also more complex compared to that of a trading WFOE. A major issue to consider when evaluating the advantages of a FICE is location. Specifically, operating inside or outside of a Free Trade Zone significantly alters the investors options.

FICE inside a Free Trade Zone

A FICE operating inside a FTZ enjoys freedom in its business scope, but at a price. The FICE is unlimited in terms of what can be traded so long as it does not belong to a prohibited trade category according to the Chinese laws. A major drawback from operating inside the FTZ is that VAT invoices can only be issued through the relevant governing authority, creating a fair bit of logistical hassle. Additionally, you will undoubtedly pay a premium to exist in the FTZ - costs of services, talent, office space, etc tend to be higher. Finally, it will be more difficult to establish branch offices in other locations.

FICE outside a Free Trade Zone

Outside a FTZ, a FICE’s trade activities are limited to those relevant to its stated business scope. But it also enjoys some advantages. Unlike operating in a FTZ, the FICE is able to issue its own VAT invoices, operational costs may be significantly less, and branch offices can be set up more flexibly.

Manufacturing + FICE

Enterprises looking to incorporate manufacturing activities with its trading business can explore setting up a Manufacturing entity with an extended FICE status. However, such entities must maintain an above-50% revenue stream through its manufacturing activities. Historically, this requirement acts as a measure to prevent enterprises from abusing such entity status to access preferential tax policies granted to manufacturing enterprises. Even though the new corporate tax law has scrapped most of such preferential treatment, the authorities may still scrutinize enterprises enjoying tax incentives due to their encouraged status (eg. High and New Tech Enterprises).

Business registration is a complex process that involves navigating China’s far-reaching bureaucracy. While it is not compulsory, using a specialist service that understands not only the legal environment, but also the objectives of your business is highly recommended. Selecting the optimal legal entity from the beginning is crucial to your success in China. Don’t proceed without a thorough understanding of the legal implications of your actions.

For regular news and updates about China’s business environment, check out and subscribe to JLJ’s monthly newsletter here.

For more information on establishing a sourcing entity in China, please contact:
Ms Lynn Ng
Manager, The JLJ Group
Email: lynn.ng@jljgroup.com
Tel: +86 21 5211 0068 ext 821

This article is contributed by The JLJ Group – a one-stop service provider assisting foreign companies to enter and grow in China. Over the past ten years, JLJ has assisted more than 400 international clients with their China entry and growth projects. Their client base includes Multinational Companies, Small & Medium Enterprises, Government Organizations as well as individual investors from more than 30 countries in Americas, Europe and Asia-Pacific.

June 23, 2008 | Filed Under Negotiating & Strategy | 2 Comments

Importing a Pet into China via Hong Kong

Importing your dog into China

Moving can be stressful at times especially when you decide to move to a new country. You have placed things in storage and — OOPS! what about the family pet?!? Can’t live without Fido or Fluffy! The process of getting your pet to a new country is very tedious and can be quite costly.

There are many steps in getting a four-legged friend to a new country (your new home). Be prepared to allocate time and money in both the origin and destination countries. It is smart to have a person on both sides (current pets home and new pets home) to work through the process, making it all happen.

Selecting Your Airline Carrier

One of the main obstacles is to locate airlines that service your destination country. Many countries restrict pet cargo to only airlines with headquarters in their country. For this reason, Cathay-Pacific airlines is one of the few passenger carriers that can bring in pets. Within the last 45 days, Delta was unable to service a flight from Atlanta to Hong Kong. Delta’s suggestion was to call their sister airline, Korean Air (who were also unable to service HK). While some countries will allow you to bring the pet with you in the cabin, Hong Kong flights require pets to be booked only as air cargo. It is important to note that not all airlines have a cargo terminal in every city (even though there is a passenger terminal). If there is not a cargo terminal in your city, you will have to fly the pet to a different city and send them out from there.

Here is a short-list of airlines that service pets to Hong Kong (I used China Airlines)

Cathay-Pacific Air Cargo, 800-628-6960 or 404-761-9393 x232
China Airlines (CA)
Continental Airlines
Eva Air, Jimmy 404-209-7688 [Air-Cargo carrier] – Utilizing a sole air-cargo business company will require you to work with an import/export forwarding company. If you are in the southeastern US, you can work with Southern Export Services, Inc. Richard Tang 770-907-0021.

Check with one of the above carriers for pricing and scheduling. As of 45 days ago, Cathay was shipping pet cargo at $19.36 per kilo. Continental is a little pricier. Make sure that they can move your pet when you need. There are restrictions on times of the year because pets cannot fly when the temperature will be too hot (above 85 degrees F) in the cargo hold. Beware that they charge by kilogram (there is some kind of formula: dog+crate weight X volume?), but do not starve your pet before the flight (there are other ways to save money on shipping fluffy).

Here are some good Pet-for-Thoughts:

If your pet’s final destination is Shenzhen, arriving via air to HK, Cathay can bring the pet by truck direct (very expensive).
If you wish to fly on the same plane as your pet, Cathay Pacific can accommodate this by calling the above 800 number.

Ok – so you have selected your airline - this can be an enormous task and you have now completed 10% of the process that will bring your pet to China.

Origin City Side

To complete all the tasks required to export your pet, you will need at least 2 weeks lead time (do not schedule your pet’s flight any earlier). Once you found a reputable cargo company, next you need to get your paperwork in order. You need a valid health certificate from your vet. I would suggest calling your vet before you show up for your appointment and verify that they have this certificate on hand. Also check with the USDA pet department and make sure you have all the necessary shots given before you go.

Our pet had these shots

Once the vet has filled out the necessary certificate make sure you do not mess it up in any way shape or form or you will have some problems down the road with customs. Next you are going to have to go to have the USDA veterinarian approve it. You will need to make an appointment and have them review the health certificate and they will provide their embossed stamp of approval.

It is important to note that on each side of the equation (city the pet is in and the pets new home) there are companies that can facilitate all the processes for you. These companies can be worth their weight in gold. Due to the mounting costs associated with bringing the dog to China, we handled the Atlanta side ourselves.

On the US side, here are some companies local to the Atlanta area:
Animal Land, Inc.
Atlanta, Georgia (GA), United States
Office Phone :+1 404-812-1555
Fax :+1 404-812-1588
Toll Free :+1 877-379-8625
http://www.petmovers.com

Lucky Dog! LLC
Atlanta, Georgia (GA), United States
Office Phone :+1 404-551-5028
Fax :+1 866-373-4819
Toll Free :1 888-575-5025
http://www.luckydogtravels.com

Now you have your documents for your animal. Make sure you have filled out all the necessary paper work for the cargo company you have chosen and make sure they understand that it is a live animal you are sending. When you fax your copy of the health certificate make sure you use the carbon copy underneath and rub in on the embossed stamp or it will not show up. You also need to fax a copy of your animal’s current vaccinations and dates and you need to give an original copy to the cargo company as well.

Airline Liability Letter

Shipper’s Letter of Instructions

Shipper’s Certificate for Live Animals

Once the cargo company has received the documents they can then begin to process their paper work as well. In the meantime make sure you have an animal crate that is airplane approved. Usually it will be indicated on the crate if it is or not. Look first and make sure your pet can fit comfortably inside and can turn around inside with the door shut. There are some great pads you can place inside of it that provide comfort as well as absorption in case the pet has an accident (you know what I mean, the dog can’t leave the crate for 20 hours). Beware your pet will need a bath when you finally get it to its new home. About 30 minutes before boarding the plane, my vet suggested giving my dog 2 Benedryl tablets. It is not advisable to sedate your animal unless your vet says otherwise. It can be quite traumatic for your animal to be sedated. Bendryl is best. Even through an 18 hour flight its OK.

Hong Kong Side

This is where it gets a little hazy – there is so much that goes into allowing the dog into the airport, out of the airport and into China. If you make any mistakes at this stage it will cost a lot of money to fix them (export the dog, reimport the dog, etc). I solely recommend using a Pet Import company like:

Pet Movers Hong Kong
Tel: (852) 3404 0061 / (852) 9198 4543
Fax: (852) 3404 0062
www.petmovershk.com

From the HK side, you must obtain a transit permit for the dog to legally be in Hong Kong. The transmit permit must then be sent to the cargo airline carrier back in the US before the dog can leave. Also ensure that ALL THE DOCUMENTATION that you have been working with are available in Hong Kong. If the documents were processed in the US, attach them to the doggy crate. All original documents are required for customs at the border to mainland China.

Import Special Permit

Entry Into China - Why it’s best to hire an agent!

Go to airline air cargo terminal (get there before noon, everyone goes to lunch and you will have to wait until after 2:00PM to pick up your pet).
See your best friend in the crate and have the Hong Kong customs agent examine the dog for contraband hidden inside the dog. Do not touch the dog or get near the crate – looks suspicious!
Pack the dog into the van that will take you to the Hong Kong border.
Switch vans as the old van does not have double license plates to enter into China.
Meet up with the Agriculture and Fisheries agent that will escort the dog into China.
Take the dog through customs (bring 20 RMB for processing fees) and hope that everything is in order. If there is a problem at this stage, a dog can only legally stay in Hong Kong for 24 hours before it goes into mandatory quarantine or deportation.

And finally if all goes well…

Amanda Blankenship

June 18, 2008 | Filed Under Logistics | 2 Comments

Contacting a Factory Online; Lessons Learned from the Field

Request for quote strategy

Contacting a factory online is very common, especially with the growth on online directories such as Global Sources and Alibaba. However when most buyers contact a factory online using these websites, they are often frustrated by their experience.

Many buyers complain that the factories don’t respond to requests for information or requests for quotes quickly, if at all. Other buyers complain that when they do receive a response, the emails are very brief, don’t include the requested price quotes, don’t answer the questions that were asked, and in general don’t inspire confidence that the factory can meet the buyer’s requirements.

On a clear bright day in the spring of 2005, we made a decision to look East to procure building materials. At the time, real estate development in the United States was growing very fast as an industry. In particular, converting apartment buildings into condominiums was big business. We decided to launch Parkview Industries, which would help to increase our profit margins by importing building materials from China by acting as a distributor to our existing real estate development business.

Our top 5 qualifications when evaluating a potential factory were

They had to have unique products.
Specific models we were interested in needed to be available.
The price had to be low. (After all, it always comes down to this in the end!)
Ability to accommodate all export/logistics for the shipment was important to us as we didn’t have previous experience.
Future capability for private label opportunities was important to us because we were considering starting our own brands.
References needed to be available for review.

We learned very quickly that in fact we were not only qualifying factories but also that the factories were qualifying us as buyers. The factories we took the time to develop a relationship with were much more forthcoming with information and price quotes. The factories that were not convinced in our ability to put containers on the ocean were much less helpful.

At first we thought ‘well if a factory doesn’t want us as a buyer, then that’s their problem’. However in fact, the reality is that these are sometimes the better factories, and they are nervous that you might be a competitor just trying to get their pricing information.

When making initial contact with a factory online, keep in mind the following

You are not only qualifying the factory; the factory is also qualifying you as a buyer. Validating your company in the minds of the supplier is of the utmost importance.
The initial communication, preferably through email, should include a brief introduction to your company, your position within the company, and include a statement of adequate buying power resources.
Showcase your company with a polished website illustrating your industry and experience. The site should generate a logical understanding, in the mind of the reader, of why your company would be interested in manufacturing in China.
Ensure the email asks for the specific information you require. For example, you may ask, “May I please have a price quote for item …” or “What is your sample availability and process?”
Include the specific item or model numbers you are interested in, attach pictures from the factory’s website or other sources, and in general be as specific as possible with your requests.
Indicate available contact methods for further communication (MSN, Skype, email, phone). In addition to email, most Chinese factories are on Skype and MSN and this sometimes is better than email because the “back and forth” is quicker, once an initial relationship is already developed.

Given the experiences we have had with sourcing over the internet, there’s a lot more to each point we have made here in this article. We will expand on the key lessons presented here in an upcoming article that provides detail on what we learned and how it helped find us both good and bad suppliers. Stay tuned and thanks for visiting.

June 15, 2008 | Filed Under Negotiating & Strategy | 2 Comments