How to Avoid Loss When Importing from Alibaba

aviod loos when importing from alibaba

Table of Contents

Make Sure It Is Not a Middleman

Most sellers on Alibaba are middlemen. They will get a big cut from your profit margin, which can possibly make your import business model useless. They steal pictures of their suppliers on the profile page and dropship to you.

There are a few ways to uncover them:

  1. Check the validity of their business certificate
  2. Check if their business scope includes “manufacturing”
  3. Do an on-site inspection
  4. Use a Chinese company verification service, like sinoinspection.com

Case Study

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Shenzhen Kingstar Network Technology Co., Ltd is a supplier of electronic products on Alibaba. It claims to be a manufacturer. However, when we check its information on the National Enterprise Credit Information Publicity System, we found that its business scope does not include manufacturing the products it’s selling on Alibaba, which indicates it is a middleman.

Make Sure The Company Is Not Lying about Itself

Some sellers lie about their scale and age in order to quickly gain trust from their potential buyers. Make sure to cross-check using various public information sources.

Case Study

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Suzhou Hi-Liang New Energy Technology Co., Ltd is an e-bike seller on Alibaba.com. The company claims that it has been producing motorcycles for 20 years.

But according to the information on the National Enterprise Credit Information Publicity System, the company was established in 2016. As of 2021, it has only been operating for 5 years, far from what it claims.

What to Do?

Make sure they are not using fake certificates

In order to import or sell products in your country, the manufacturer or the product (sometimes both) should be certified by certain organizations. Risks of not certifying your products:

  • The products may be unsafe to use
  • May be confiscated at the customs of your country
  • The products are forbidden to be sold in your country
  • You may face severe fines or a recall of the products

4 Commonly Seen Certificates

MARKNAMEINFO
image5CEconformity with European health, safety, and environmental protection standards for products.
image6RoHSrestricts (with exceptions) the use of ten hazardous materials in the manufacture of various types of electronic and electrical equipment.
image7FCCa voluntary mark employed on electronic products manufactured or sold in the United States which indicates that the electromagnetic radiation from the device is below the limits.
image8UKCAa certification mark that indicates conformity with the applicable requirements for products sold within Great Britain

Case Study

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Changzhou Victory Machinery Co., Ltd is a Gold Supplier on Alibaba. They provide CE certificate on their profile page. While we check the validity of the certificate on the issuing organization, we found that the certificate was issued to another company called Beirui Industrial Co., Ltd. They one Victory machinery provided was forged via Photoshop and Alibaba didn’t check the if it was a valid certificate.

Solution

Alibaba and their third-party verification service provider do not thoroughly check sellers’ certificates. Check the validity by yourself on issuers’ websites or via other means.

Make a product specification

Always make a detailed product specification. Here are the benefits:

  • Getting more precise quotation. The manufacturer would not be able to pin down the cost without a bill of material (BOM)
  • Higher product quality. After specifying the materials and approved sample of the product, the manufacturer won’t be able to use inferior material to cut down their cost. Product specifications are also crucial in quality control.
  • Help resolving disputes. In cases of dispute, having a product specification would be able to help determine who should be responsible for the loss.

Ask for Samples

Why?

  • Know the competence of the factory
  • Use as a reference during production, quality control, and quality inspections
  • Help resolving disputes on product quality

Signing Contract

A well written contract will reduce your risks and benefit your relationship with the manufacturer in the long term. Here are a few tips on contracts:

  • Price Clause
    • Specify all the possible costs in the price clause.

Shipping Terms

  • Incoterms(R) specifies costs and obligations during shipping. Read our guide to Incoterms(R) and choose the one that suites you best.

Payment

Never Make Full Payment in Advance

Here are the reasons:

  • You will lose all leverage over the manufacturer once you make a full payment before production
  • If it is a scam or the manufacturer goes bankruptcy during production, you will lose all your money

A widely used payment scheme is 30% deposit before production starts and you balance the payment before the shipment.

Pay safely

  • Use secure payment methods like: Alibaba Secure Payment, PayPal, Telegraphic Transfer (T/T)
  • Do not pay to some offshore account of the seller or a personal account. It is very hard to get the money back if something goes wrong.

Conduct Quality Inspection

Quality inspection can happen at various stages of production, not only before shipping or upon receiving.

Pre-Production Inspection

Some defects could be prevented before production by inspecting the raw material. Manufacturers cannot turn bad material into good products.

Inspection could also happen when making a sample, so that the buyer could know

  • If the factory is competent in making the product
  • If the factory has fully understood the product specification
  • Has the requirements and standards been communicated fully

In-Process Inspection

Should defect appear, conducting in-process inspection could:

  • prevent parts with defects from enter next stage of production, saving manufacturer from rework
  • save time and cost

Pre-Shipment Inspection

This is the most popular form of inspection among importers. But it has some shortcomings:

After pre-shipment inspection and before shipping, nasty things could still happen. It is advised that you hire a third-party container-loading supervision service if you do not fully trust your supplier.

Wrapping Up

Stay safe and prosper.

Read more articles of our Importing from China series at sinoinspection.com

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