Want to know how to get your product manufactured in China? If you’re new to manufacturing, this can seem like a daunting prospect. Maybe it feels out of reach.
Where do you even begin? And how do you find manufacturers in China? You’ve probably got quite a few questions…
Well, luckily for you, I’ve created this easy-to-read guide on getting your product manufactured in China.
Keep reading, because you’re about to learn:
- How to do business in China
- Where to find manufacturers
- How to pick the best manufacturer for you
- How to protect your intellectual property rights
- And how to make sure the manufacturing process goes smoothly
Table Of Contents
- 1 Pros & Cons of Manufacturing in China
- 2 Understanding Chinese Business Culture
- 3 The Main Manufacturing Cities in China
- 4 What You Need to Know Before You Start the Process
- 5 Where to Find Chinese Manufacturers
- 5.1 Online Directories
- 5.2 Made-in-China.com
- 5.3 Physically Searching
- 5.4 Social Media
- 5.5 Subscribe to Trade Magazines
- 5.6 Perform a Deep Dive on Search Engines
- 5.7 Referrals
- 5.8 Commission-Based Sourcing Agents
- 5.9 Sourcing Service Providers
- 5.10 Trading Companies
- 5.11 Final Word on Finding Chinese Manufacturers
- 6 Building Your Master List of Chinese Manufacturers
- 7 How to Choose the Right Chinese Manufacturer
- 8 How to Protect Your Intellectual Property Rights When Manufacturing in China
- 8.1 Non-Disclosure Agreement (NDA)
- 8.2 Why Most NDA Agreements Don’t Work
- 8.3 Non-Use/Competition, Non Disclosure, Non Circumvention Agreement (NNN)
- 8.4 Drafting an NNN That Works in China
- 8.5 Register Your China Trademark
- 8.6 Perform Research
- 8.7 Filing Your Trademark Direct to China
- 8.8 How to Protect Your Molds and Customized Tooling
- 8.9 Other Ways to Reduce Your Risk
- 9 Pre-Production: Getting Your Product Samples
- 10 Product Details
- 11 Sample Order Terms
- 12 Get Extra Protection with a Sales Agreement Contract
- 13 1. Shipping: Ocean Vs. Air Freight
- 14 2. Shipping: Choosing Your Broker & Freight Forwarder
- 15 Full Production
- 16 End Result: Your Very Own Product
Pros & Cons of Manufacturing in China
What’s the big challenge all companies face today? Yep, getting new products to the market as quickly and efficiently as possible. You’re probably aware that China is a market which can offer the ability to manufacturing a vast variety of products, and at the lowest rates.
But hold up, before you start your long Chinese manufacturing adventure, you should be aware of the advantages and disadvantages because it’s not a calm stroll in the park. The process can be tough, so it’s important you understand if it’s the correct decision for you.
Pros of Manufacturing in China
The main reason a lot of companies choose China, is that it’s often much cheaper to get products manufactured. Labor can be up to 80% less, but depends on the intensity of your design.
However, you must also factor in shipping and duties which don’t apply if you choose to manufacture domestically. And keep in mind, all prices are negotiable, so don’t be afraid to be aggressive in your negotiations.
High Output and Fast Turnover
Known for their high capacity and quick turnover times, many factories in China have the ability to produce large orders in a timely manner. And it’s the cheap labor costs which play a crucial role here. You’re able to hire more people to complete volume-demanding productions.
If your manufacturer tells you they can have your order done in four weeks, it’s likely to be completed in that time.
However, there are some ethical considerations when it comes to the low cost of labor, but not all facilities are equally exploitative. You just need to do your due diligence.
Better Customer Service
Chinese manufacturers want your business, so they’ll often go out of their way to get it. What you need to keep in mind, the service levels may change once you’ve signed a contract, so you need to set clear expectations. You’ll learn more on how to do this later in the article.
Market Expansion Opportunities
Get your products made in China, and the chances are you can also market your goods to the local market. And it’s a big market, with over 1.3 billion potential consumers, you get the promise of good returns.
Companies that outsource to China do more than just oversee the manufacturing process, they follow-up. It becomes easier, faster, and cheaper to enter the Chinese market.
Cons of Manufacturing in China
Intellectual Property Risks
The risk and expenses of IP protection and enforcement in China is real. And although you probably understand your need to protect your IP when you sell your products in China, you also need to protect yourself from your manufacturer.
It costs money and time to regulate and enforce your IP rights in China, you should always use an attorney who’s well-versed in Chinese law. We will go into more detail into how you can protect your IP later in the article.
Finding Your Factory
The first challenge you will need to overcome: finding the right factory to manufacture your products. This is going to take effort and due diligence, so you can be confident you’re going to receive proper service. It’s not easy to develop a relationship with a manufacturer on the other side of the planet.
However, there are tons of resources and tactics you can use to make this process as smooth and stress-free as possible. We’re going to go into detail on how you can find your own manufacturer later in the article.
I’m going to go out of a whim here and say, you’re Mandarin or Cantonese isn’t quite up to scratch. And even though China has opened up to international trades, doesn’t mean that they’re all proficient in English. Hiring a translator can make the whole process a lot smoother.
Now, the language barrier is one thing, but throw on top the difference in business culture and it adds a new dimension. It’s nothing like western business culture, which means you’ll need be more diligent when you’re building your relationships.
Again, you can learn more about Chinese business culture this later in the article.
Higher Minimum Order
It’s common for Chinese factories to have lower profit margins, resulting in higher minimum order requirements. You may need to look elsewhere if your company cannot accommodate these minimums. If you can find a factory willing to produce small orders, it’s likely the price per unit will increase.
However, there are some strategies you can use to negotiate MOQs (minimum order quantities), and you’ll learn more about this later in this guide.
I’ll be honest, shipping can be a real pain and take time, depending on which option you choose. You’ll need to take into account the cost shipping, including duties and tariffs when you’re comparing the costs of manufacturing in China.
China get’s a bad rap, but it really depends on the manufacturer and the product(s) you get made. Always choosing the cheapest option will often result in low-quality produce, so I wouldn’t recommend doing that.
What you can do to regulate the process, is hire a trusted local agent so they (or you) can make in-person inspections for quality. We’ll go into more detail later on how you can create quality control plan.
“Made in China”
There’s no hiding from the stigma that comes if your products being made in China. And unfortunately, it’s unlikely to change. Although, some people are often willing to pay a premium for domestically manufactured products, the reality is, people buy products made in China every day throughout the world.
And some of the world’s highest selling brands have their products made in China, so this shouldn’t be a deciding factor.
Balance is Key
You’re not going to get all the benefits without any disadvantages, it’s just not going to happen. If you choose to get your product manufactured in China, you’ll need to make precautions to help balance out the disadvantages.
That may sound complicated, but it’s easily doable and we’ll go into more detail later in this guide.
Understanding Chinese Business Culture
China is a huge, diverse country whose business culture can be very confusing for Westerners, especially if you’ve never done business there before. If you take the time to understand to cultural norms, it will make a substantial difference in the level of success you achieve.
How to Network in China
This is vital if you want success in China. And to succeed, you need to understand guanxiwang. In Western culture, it’s normal to negotiate contracts and start doing business without building a relationship. In China, you need to ‘bond’ with your manufacturer before doing business.
So guanxiwang, what is it? It encompasses your network of connections or relationships that operate within the Chinese market. You should always remember that the Confucian values of trust, mutual reciprocity, and harmony are the fundamentals of each guanxiwang network.
Without guanxiwang, you’ll have little to no chance of building your business in China, and it’s not something you should rush. You’ll need to nurture the relationship, and demonstrate that you’re worthy of being a part of their network.
Taking your time to develop good guanxiwang will give you access to decision-makers, local bureaucrats, and policy-makers. Now, this is not to be taking as an opportunity to bribe people, corruption is rarely accepted within a reliable guanxiwang.
These Chinese value trust, and harbor a long-term view towards any business relationship. Because of this, they rarely trust outsiders and will only explore business connections that come with recommendations from within their network. That’s why it’s so important to build relationships if you want to be successful.
You’ll want to gain the services of a reliable local contact who can put you in touch with established networks. If you have anyone who has close associates in China, now is the time to get their help and gain an introduction into their network. Chinese people would prefer to work with someone recommended to them by someone they know, rather than a ‘bigger’ or ‘better’ company they do not personally know.
Another option would be to connect through economic development groups in your country, professional business organizations, and services with a strong and reliable network.
How to Negotiate in China
Tan pan – the Chinese word for negotiation. It combines the characters meaning “to discuss” and “to judge.” From the Chinese perspective, the negotiations exist primarily as a way to build trust so that two parties can work and benefit together.
This is a delicate process. You’ll need to be prepared to be patient and keep your good humor during any negotiation. Never complain or criticize anything during the process – they’ll interpret it as an insult to their company. What you need to do, is give your advice as improvement suggestions that will lead to both of you being successful.
It’s generally known that the Chinese value personal camaraderie above contract formalities. This means that you’re more likely to get a better deal if there is goodwill between you both.
The concept of negotiation hinges on creating a framework for long-term cooperations and problem-solving, not just drafting a one-time agreement. Negotiations in China are viewed as an ongoing process that takes into account practical matters and context.
Many Chinese prefer this approach over creating contract-based absolutes, the Western-style. American often see Chinese negotiators as inefficient and vague, whereas Chinese people see American negotiators as impersonal, impulsive, and overly focused on immediate gains.
When you adapt to Chinese-style negotiations, you must balance the need for quick agreements on specific issues and contract terms with the slower-paced and seemingly abstract building of interpersonal relationships.
To compete effectively within a Chinese negotiation means understanding and accommodating their approach.
It’s a very good idea to take your time to prepare and understand your negotiating partner’s situation, intent, capabilities, and identify areas to focus your discussions. It takes time and effort, but will help you to decide how to approach the table and increase your chances of a successful negotiation.
Here are some strategies you should look to follow:
Face-Time is Essential
You won’t be able to establish personal trust unless you spend time face-to-face. Trying to seal the deal of a contract via long-distance communication will only be painful and long.
For the best results, plan your trips to China and spend at least one week for your first visit – allowing for non-task oriented activities.
Spending some time sightseeing and attending social activities will help build personal rapport, paving the way for a smoother and faster negotiation process later on.
Nothing is Agreed until EVERYTHING is Agreed
In Western culture, the expectation of negotiations is one where two parties discuss, negotiate and agree upon a list of open items. And when you agree on one, it’s considered settled and closed.
However, the Chinese regard change as a constant and fact of life, managing tasks in a more fluid way. During negotiations, all things are considered interconnected, and if one item changes, all items are up for negotiation or renegotiation.
If you feel uncomfortable with being in a state of uncertainty and ambiguity, it’s vital you remain calm and patient. You should remind yourself that with is a style difference, not a tactic to try and mislead you.
This can be an effective strategy in negotiating with a culture that’s relationship oriented. The trust and good faith that are established with the “go-between” can be passed on to you by association. Making business more personal.
By using a mediator, strong disagreements can be presented in a non-threatening manner. Something which is hugely beneficial in China where harmony and the protection of “face” is essential for a good business relationship.
You never want to directly confront the Chinese with strong disagreements, so if talks become gridlocked, pass the message to your mediator. By understanding both parties and their priorities, they’ll act as an informal broker to achieve a compromise agreement.
Patience, Patience, and More Patience
Critical whenever you’re doing business in China. During negotiations, time can be a sensitive topic, often because of internal pressures applied by your own organization. Remaining patient and informing others in your company to allow more time is vital to achieving a satisfying result.
Different from the U.S., where a speedy decision-making process is valued, the Chinese way is a lengthy process that generally requires multiple parties to consent to a solution. The bigger the decision, the longer it takes.
You should plan extra time for the whole process and understand that you’ll need to manage expectations on timing along the way.
11 Key Things to Remember When Negotiating in China
- Knowing a few key polite phrases can really help to give a good impression to your potential manufacturer. So making an effort to learn some basic phrases before you meet can go a long way.
- Hire a seasoned translator who’s on your side.
- Don’t be alarmed if your first few meetings result in very little. The Chinese like to know who they’re dealing with before discussing business.
- Once you’re negotiating, it’s not uncommon for your counterpart to present the same demand over and over in different ways.
- It’s possible you could spend hours negotiating, only for them to call their boss who enters the scene and objects to the agreed-upon terms.
- Your negotiations are never over. Issues can arise and renegotiations can take place at any point in the process.
- Take all promises made during negotiations with a pinch of salt. They may say they have government, sales, or supplier connections even if they don’t. Exaggerations can occur and unless they’re followed by a solid demonstration, don’t take them seriously.
- Have some demands you can insist on and then drop to show compromise. They may not be important to you, however, it’ll give the impression you’ve taken a hit.
- Appear confident and take your time with decisions, even if you’re not. If you show eagerness to close a deal, it could make the Chinese company think they hold all the bargaining chips.
- Don’t rush, give yourself time and get rest before you jump into meetings. It’s not easy to focus during slow business negotiations, especially if you’re jet-lagged.
- You should budget for subsequent visits, in case you don’t accomplish everything in your plan. Remember, everything takes longer in China.
How to Tell if Your Meeting was Good or Bad
You may struggle to work out how a meeting is going. It’s often hard to understand what people are thinking in China, and they’re not going to tell you. They’d rather tell you everything’s going well, even if it’s not.
Saving face is important in Chinese culture, and in order to do so, they’ll show no emotions or feelings. They could say yes and then nothing happens. This isn’t to deceive you, it’s to avoid an uncomfortable situation, because they may be embarrassed to say no.
If your counterpart rarely makes eye contact when they’re talking to you, don’t be alarmed. Most foreigners will take this the wrong way and think they’re not listening or interested. It’s not the case, it’s a cultural thing.
If I’m honest, it’s really difficult to tell if your meeting was successful or not. It’s recommended that you have good advisors who speak Chinese, is culturally informed, knows how they think, and can read their body language.
Social Hierarchy and Status in Chinese Business
This is really important in China, and there are several ways this manifests in the workplace.
People aim to become managers, directors etc. and will look down on lower levels. If someone is on a lower level, they’re not encouraged to share ideas upwards.
They do as they’re told and take little initiative.People on different levels won’t discuss ideas, talk through problems, or work together to solve a problem.
Understanding the hierarchy can really help and you’ll avoid offending people, which, as it turns out, is very easy to do so:
- If you greet or introduce a lower-ranking person before their senior, you’ll have given offense and make the junior person very uncomfortable.
- Sit in the wrong place in a meeting, you risk offending people.
- Toast someone with your glass higher than theirs and they’re your senior, you’ll offend them.
It can be really subtle, so getting some cultural training or having someone who’s familiar with Chinese culture (someone who knows the company would be fantastic), will keep you from making simple mistakes.
How to Dress When Doing Business in China
Man or woman, you’ll need to dress conservatively whilst you’re doing business in China. If you’re a man, you’ll be expected to turn out in a suit and tie. And you’ll need to leave your awesome ‘make everyone chuckle on Monday’ tie at home.
The key is to look sophisticated and professional at all times. Classic jewelry like a good watch or simple wedding band are good options.
If you’re a woman, wear pastel or darker colors instead of bright bold colors. Skirts should be well below your knees, high heels shouldn’t be open-toed and more than an inch or two in height – it’s considered ill-mannered to tower over your business counterparts.
Email Etiquette in China
You can never go wrong with a nice sincere email. And it’s important you understand the role email etiquette plays after you’ve had a meeting with your potential manufacturer.
What you need to do, is write a positive and polite email to thank your hosts for meeting you within 48 hours of the event. Briefly sum up the advantageous terms you both discussed and outline the agreed-upon points. It will help move your guanxiwang relationship forward.
Get Business Cards
It’s very important to exchange business cards the first time you meet your potential manufacturer. You’ll need to have information on both sides: one side needs to have simplified Chinese characters and the English translation on the other side.
Don’t use traditional Chinese characters if possible, as these are usually used in Hong Kong or Taiwan. I suggest you use a translation service that’s familiar with the city you’re going to, this way they’ll be correct.
And it’s not just a case of handing them your card, no no.
When you present your card, make sure the Chinese characters are facing him/her, and use both hands (it’s a sign of refinement and courtesy). When you’ve received their card, take a few moments to read it before putting it away in a case – never in your pockets.
You should be prepared to have a gift to share with your Chinese counterpart. They’re likely to provide you with on at the end of your meeting and/or stay. You don’t want to go out and get an expensive gift, the best option is to offer something that relates to your home city.
The Main Manufacturing Cities in China
Home to one of the largest and busiest ports in the world, it’s located on China’s central coast. A big economic, financial, trade, and shipping area in China, the main products manufactured here are communication equipment, automobiles, textiles, electronics, steel, chemicals, petrochemicals, and biomedicine.
Linked to Shanghai by the Hangzhou Bay Bridge and overland high-speed rail, are the nearby Cities Ningbo and Hangzhou. Here, heavy manufacturing of consumer and commercial goods happens daily.
North of Shanghai, Beijing is another leading city in China. Mainly focused on manufacturing pharmaceuticals and electronics, it’s also a leader in bioengineering and information technology.
South of Beijing on the west coast of the Bohai Gulf, Tianjin is connected to Beijing and hosts the largest port in the North of China. Located on the Haihe River Estuary, it serves 11 provinces and Mongolia.
Tianjin is a leader in aerospace and aviation, mobile phones, automobiles, and alternative energy products.
The main manufacturing hub of the Pearl River Delta, the city hosts thousands of factories. You can get anything from a toothpick to automobiles manufactured. Located in Southern China the main industries are automobiles, electronics, and petrochemicals.
Global brands such as Toyota, Honda, Nissan, Panasonic, Sony, Ericsson, and Haier manufacturer their products here and have headquarters in the city.
Directly north of Hong Kong, Shenzhen is the world’s manufacturing hub for electronics and home to the second busiest port in the world. And it’s logistics sector is one of the most developed in China.
Some of the global brands who get their products manufactured here include Apple, LG, ZTE, and Huawei.
So now you’ve got a better idea of the business culture in China, and you know the main cities in the manufacturing industry. It’s time to make sure you’re fully prepared before you start looking for manufacturers.
What You Need to Know Before You Start the Process
There are three steps you should go through before you start your search for a manufacturer: product, price, and quantity. When you know these, it becomes so much easier to find a quality manufacturer that can provide you with exactly what you need.
What do You Want to Produce?
If you don’t know already, you may want to start thinking about this one. Once you’ve got a clear plan of what you want to produce, it becomes so much easier to choose your manufacturer.
If you want denim jeans made, you can now concentrate on finding a manufacturer who specializes in denim clothing.
What’s the Sales Price?
You need to figure out your sales price so you know how much you can spend on manufacturing each item and still make profit. Here’s what you want to do, factor in all your start-up costs so you can see how much you can spare.
If you want to sell your product for $30, and other costs have already eaten up $5, you know that you have less than $20 to spend on production so you can make enough profit.
How Many do You Need?
Because you know much much you can spend on production, you can now figure out how many you want. Manufacturers in China will often have a minimum order quantity, so when you’re choosing which to go with, knowing how much you can buy will quicken your search.
Once you know all of the above, you’ll have a much clearer idea of who you want to make your product. Next, you can move on to researching and finding your potential supplier.
Where to Find Chinese Manufacturers
You’ve now got a great idea of how to do business in China, you know what you want to get made, how much you can spend, and how many you want, it’s time to start the process of finding your manufacturer.
And it’s important you take this very seriously, doing as much research as you can before deciding on which manufacturer you’ll pick.
If you don’t do your due diligence, this can be an exhausting and costly process. If you’re new to the process, trying to find quality manufacturers that are a good fit aren’t always easy to find. And sometimes it can feel like you’re constantly hitting dead ends.
Just be patient, and you’ll find the ideal partner for you.
But, what you really want to know, is how you can find these Chinese manufacturers. Let’s get stuck in…
This is an excellent, cost-effective starting option. These online directories can contain profiles for hundreds or thousands of manufacturers. Here are some of your best options:
This is the world’s largest online directory of manufacturers and suppliers. You’ll find thousands of Alibaba-verified manufacturers with strong performance ratings. The website is easy to use, providing a comfortable experience due to their trade assurance rating.
Global Sources (also know as GS), Alibaba’s closest competitor. And although there is no trade assurance on the site, it includes extensive ratings and some assistance. So it’s important you take your time to read as many reviews as you can. This site can be a great alternative if you can’t find what you’re looking for on Alibaba.
HKTDC stands for Hong Kong Trade Development Council, and they aim to help Honk Kong-based suppliers. They also organize trade shows in Wan Chai exhibition center in Hong Kong. You’re going to find a high proportion of Hong Kong companies here.
You should note that some of them are trading companies, but we will discuss this in more detail below.
Roughly number 3 or 4 when it comes to the big players on the market, Made In China mostly deals with larger items. Although the rating system isn’t on the same level, they do provide quality inspection and reporting facilities.
This site is often recommended if you’re looking for industrial products and parts.
The Trick to Using Online Directories
The best way for you to use these online directories is to find manufacturer clusters, rather than individual factories. Here’s why. In China, it’s common for manufacturing to happen in geographical clusters.
What I mean by that, is that most electronics tend to be made in Fujian province, while the plastic molding factories are in Zhejiang province. So you want to identify a cluster and visit them in person to find the best manufacturer.
While you can use online directories as a source for suppliers directly, it’s best to visit them in person. Because many of the best factories won’t be listed online.
The next best use for these directories is price checking. If at any point you’re unsure if your supplier is charging you fairly, you can use them to ask similar factories for quotes. This way, you’ll have a better understanding of the price range.
If you’re looking to create a simple product, sourcing your supplier through these directories can be effective. However, it’s harder to find manufacturers for more complex products that need multiple molds and electronic parts.
The “on-foot” approach to finding manufacturers, and if you can do it, I would highly recommend this tactic.
Note: This tactic is time-consuming and you will have to devote time and money to travel to China.
However, the benefits of using this approach are huge. You’ll get a first-hand look at their facilities and samples, which can take a huge amount of risk out of the equation because you know exactly what you’re getting.
You’ll get the opportunity to build your guanxiwang network and cement relationships. You may also find that some of the best factories aren’t actually listed on the sites above, so you might even find a better option.
If you use this tactic, and I strongly suggest you do, here’s how you can make the process smoother:
Find Manufacturers in Advance
Using sites that we’ve already discussed, make a list of your preferred choices who produce the same, or similar products that you want manufacturing.
Plan your questions
You definitely don’t want to go underprepared, there’s nothing worse than setting up a meeting, making the journey and end up looking like a fool because you have no idea what to say or you forget to ask key questions.
Use the questions listed in the ‘What to ask Manufacturers’ section of this guide.
Set up meetings
Set up meetings with your preferred manufacturers in advance. It saves a lot of time and hassle.
Use a translator
If you’re concerned about the language barrier, it is probably worth investing in a trustworthy local translator to guide you. Look for a translator whose familiar with the area in which you are visiting.
Examine the facilities
When you meet potential printers and suppliers, make sure you ask to examine their facilities. If you’re happy with them, ask to inspect a few sample to examine before you go any further.
If you’re unable to devote the time to travel abroad, I suggest you send a trusted representative because, for the best results, you will want your company to have a physical connection with your manufacturer.
Showing up lets the factory “Lao Ban” (boss) know you’re serious and they’ll take you more seriously. Communication will be faster and clearer, and you’ll be able to verify the factory can actually produce your product.
Attend Trade Shows
Your next option to physically searching is to attend trade shows in your industry and network with other buyers and suppliers.
Often, the best suppliers won’t be on Alibaba or other online directories. This is usually because they’ve already got enough business or only want to connect with proven buyers. And yes, these are the kind of suppliers you want to work with.
And by networking, you’ll up your chances of recommendations and referrals from people. Chinese businesses prefer to work with people who come recommended or they already know. So this can open doors and save you a lot of time.
You’ll want to do your research ahead of time so you can figure out who you want to meet. It’s very common for trade shows to have a list of attendees, so you can reach out ahead of time. When you finally show up, you’ll already be a warm lead and the relationship can escalate faster.
To get started, check out the Canton Fair, it’s the largest sourcing trade show in China. And you can also take a look at the East China Fair in Shanghai.
If you can’t devote the time and money to traveling to China, don’t worry. There are also trade shows in the U.S. that have a significant Chinese presence. These trade shows tend to be industry specific, like the International Consumer Electronics Show (CES) in Las Vegas has a number of Chinese participants.
The big downside to this tactic is that you may be limited to a small pool of Chinese suppliers and may not get the best deal possible.
If you want to see a list of industry specific trade shows, check out:
See here for a list of industry specific trade shows.
Attend Factory Tours
There are many companies which offer Chinese factory tours. Once you’ve researched manufacturers you’re interested in, they’ll organize your trip: transport, hiring a translator, arranging accommodation, airport picks, and travel to and from factories.
These tours can allow you to visit many factories efficiently. Some companies will even have an account manager accompany you to trade fairs.
Some popular tours include:
This isn’t the ideal platform for you to identify suppliers, as only some have a social media presence. But, they can be a good source for feedback and/or reviews of potential suppliers. However, you want to tread carefully and do your own due diligence as the information is often unverified, reviews are anecdotal, and sample sizes may be small.
You can search for relevant Linkedin networks and groups focused on sourcing in China:
- China Sourcing
- China Sourcing Forum
- China Sourcing, Networking, Import, Export, Trading, Manufacturing
- China Sourcing Group
- China Trade Group
Subscribe to Trade Magazines
Start reading trade magazines and you’ll start to get an idea of who the best suppliers are over time.
Find trade magazines to subscribe here.
Perform a Deep Dive on Search Engines
Possible one of the first thoughts that came into your head. You can do this, but you’ll need to pay close attention to what most people miss.
You see, most manufacturers’ websites aren’t exactly up-to-date with SEO (search engine optimization) and google’s algorithm changes. This means you’re going to have to go deep into the search results and well beyond page 10.
And what you need to remember, is that there’s no connection between the website and their production expertise. In fact, most of the websites are ugly. Don’t write them off until you’ve given them a call and ordered some samples.
When you are searching on Google, you’ll need to use a variety of search terms: manufacturer, supplier, wholesale, wholesaler, and distributor may be used interchangeably so experiment with different types of searches.
And if you’re still having problems, you can make yourself aware of these search shortcuts to improve the quality of results.
If you know someone who speaks Chinese, now is the time to ask them to help you by searching on Baidu.com. This is the Chinese version of Google, and you’ll often find that manufacturers which don’t rank on Google, have a strong presence on Baidu.com.
You’ll get your best leads from referrals, and reputable Chinese manufacturers prefer to work with people who are recommended. So, if you have any connections in the industry now is the time to take advantage of them.
Commission-Based Sourcing Agents
If searching and buying directly from a supplier sounds like too much of a risk, you can look to seek help from a commission-based China sourcing agent who has experience. They’ll help you identify and verify suppliers and facilitate communications. And their fees can range from 3% to 10% of the purchase price.
Even though they’ll do some of your “heavy-lifting,” like identifying and verifying suppliers, you still need to be closely involved with the transactions. And don’t rely on them to manage quality control effectively or make sure the transactions are done cost-effectively.
You should also be aware that there could be hidden commissions between sourcing agents and Chinese manufacturers.
Sourcing Service Providers
If you’re looking for someone who can help you throughout the whole process, hiring a sourcing service provider can be a huge help. They can offer services such as supplier identifications, price negotiation, supply management, quality control management, logistics and shipment management.
There are a few pros and cons for you to consider. The advantage is they’ll relieve you of the stress and hassle of identifying and verifying suppliers, product inspections, quality control, and logistics.
However, using these services denies you the opportunity to learn about the Chinese markets. And the cost of using a sourcing service provider runs higher than using a commission-based sourcing agent. So you should expect more upfront costs.
During your search for a supplier, it’s likely you’ll come across trading companies. These can be good if you want to buy a small amount of products and don’t wish to deal with the complexities of sourcing in China.
Trading companies work with multiple suppliers to wholesale production companies, so the costs of using them will be higher. It’s possible you may find it hard to discover information about the supply chain, and you’ll need to be on the lookout for product quality issues.
As a word of warning, some will disguise themselves as a supplier. To find out, ask them the following questions:
- Ask them if they’re a trading company or factory.
- Ask to visit their factory.
- If you visit their factory, talk to the workers (there are stories of these companies taking buyers to random factories).
Final Word on Finding Chinese Manufacturers
If you’re serious about getting your products manufactured in China, you must visit the factory and meet with them personally because it shows you’re willing and serious.
Use the research techniques to create a list of 3-5 top choice for manufacturers and go visit all the factories. You’ll get a much better idea of who your top 1-2 choices will be.
It’s really is essential to do this, Chinese factories will often promise you the world and not deliver, so you need to go and verify their claims. The price of a trip is nothing compared to what you could lose if you realize errors during the production process.
Next, we’re going to take a look at how you can easily keep track of all the information you obtain throughout the research phase.
Building Your Master List of Chinese Manufacturers
During your research phase, you’ll filter through a lot of potential partners, so you’ll want to record as many candidates as possible. It will give you a much better chance of finding the manufacturer who best suits your needs.
The reason you’re going to create a master list is because you’ll need to keep track of the manufacturer’s you’ve already looked at, their contact details, date of contact, who you spoke to and what you spoke about.
Making the list keeps everything in one neat place that’s easy to navigate and compare different manufacturers.
There are two great platforms you can use to build your master list: Excel and Google Spreadsheets.
Here’s an example of the type of headings you should use for your master list:
|Manufacturer’s Name||Website||Contact Details||Date of Contact||Contact Person||Notes|
I think you’ve guessed what you include here… in this column, record all the names of the potential manufacturer’s you find.
Tip: Keeping your list in alphabetical order will help save you a lot of time when navigating your list. And there’s a simple way you can do this. First, you’ll want to highlight each column and then click the filter button:
This will allow you to click on the column for manufacturer’s name and sort A-Z.
Again, super simple, if they have a website record it here.
Recording their contact details (phone number and email) will help streamline the process of contacting each manufacturer.
Date of Contact
This is an important one. You’ll be talking to many different suppliers, and you’ll want to keep track of when you spoke to them so you know if you need to follow up on any details.
Here, you record the name of the person you spoke to. This is essential, you don’t want to be talking to new people every time you call because it will slow the process down. On your first call, find out who’s the best person to speak to, and keep speaking to them.
This is where you want to record all of the key information you gathered from each call or email. If they told you they’ll email you the breakdown of costs by Thursday, you’ll be able to keep up-to-date and stay on top of everything they promised.
And Keep Updating Your List
There is no point creating this list if you’re not going to update it as soon as you’ve spoken to suppliers. It’s easy to fall behind and/or get things muddled when you’re talking to multiple manufacturers at the same time.
Creating and updating your master list stops you from getting confused, losing information, or missing out on a great partnership. And will make it easier for you to narrow down your choices.
How to Choose the Right Chinese Manufacturer
Once you’ve finished your research, you should have a large list of potential manufacturers who you might like to work with. However, you still haven’t overcome the hardest part yet – choosing the right manufacturer from your master list.
It’s common that a lot of manufacturers will promise everything under the sun, but then end up under delivering. It’s vital that you weed out low-quality manufacturers and select one you can work with long-term.
You can start by creating an RFQ to send to manufacturers.
Creating Your RFQ
Before you can start to select which manufacturers you want to use, you need data. Including pricing, tooling costs, MOQ requirements, supplier information, certificates and payment terms.
But first, you might be wondering what RFQ means and what it is. RFQ stands for Request for Quote, and it’s your starting point, you can use this to start gathering information from potential manufacturers.
It’s important you remember that Chinese manufacturers will only provide the information requested, so it’s up to you to do your homework.
Here’s what you need to include:
Your price is based on quality, and in turn, this is based on the technical specifications of your product you want producing. So without providing this information, your quoted price is useless.
There are two ways you can do this, and it depends on the type of product you want manufacturing.
An OEM product is a custom designed product, so you must provide the bulk of your specifications. Depending on your product, you may need to include some of the following:
- Design drawings
- CAD files
- Size tables
- Print files (.ai format)
- Material Specifications
- Technical Specifications
You may quickly come to realize that all manufacturers are limited to a certain degree: their own capability to achieve certain dimensional tolerance and their subcontractors capability to provide specific components.
It’s impossible for you to know this before you start, so you may need to have a degree of flexibility when creating your specifications.
You can leave some ‘gaps’ for the supplier to specify, as long as these specifications are defined and clearly mentioned.
An ODM product is a private label product, and the specifications for these products are different. Your product is based on a ‘ready made specification’. So you’ll need to provide a guideline specification or reference products for the manufacturer to match with one or more ODM products.
Because Chinese manufacturers consider ODM products as rough product templates, not fixed specifications, you can’t leave anything open. You have to identify all specifications the manufacturer must confirm.
Prepare the following:
- Guideline specifications/list fixed quality requirements
- List ‘gap’ specifications for the manufacturer to fill in
- Reference products
- Material specifications
- Print files (.ai format)
- Tooling list (e.g., injection molds)
You don’t want to start this process before you have decided whether you want an OEM or ODM product. Manufacturers won’t make the decision for you, so you need to know this if you want to move forward.
Without your specifications, pricing is pointless.
Applicable Standards & Regulations
Don’t expect a Chinese manufacturer to know the regulations your product needs. If you don’t communicate the safety standards and regulations your product needs, you won’t receive accurate pricing.
Even if the Chinese manufacturers you contact belong to the minority who are able to ensure compliance. If you fail to communicate in writing which compliance requirements, you’re not going to receive accurate price quotes.
Manufacturer Information & Order Terms
Technical specifications and prices are just part of what you need in order to make an informed decision about who you want to move forward with.
You’ll want to learn more about the manufacturers and the order terms they offer. Include the following in your RFQ:
- Company information: Registered capital, registered address, and contact person
- Compliance documents: Technical files, substance test reports, and declaration of conformity
- Company certificates: Quality management system certificates, social compliance, and audit reports.
- General Terms: MOQ, production time, ODM availability, and OEM sample production time.
- Payment Terms: Bank account, payment methods, L/C minimum order value and T/T payment plan
Your RFQ doesn’t have to be a fancy document. It can be a Google Doc or Excel file for example. You just need to make sure it contains clear and accurate information which is easy to understand.
Next, we’re going to cover all of the key questions you must ask Chinese manufacturers.
Key Questions You Need to Ask a Chinese Manufacturer
The following questions are not in any particular order.
What’s the Minimum Order Quantity (MOQ)
This could be the first reason you cross them off your list. Every manufacturer will have a minimum order quantity, so you may need to strike a balance here.
You don’t want to spend too much and have way more products than you need. But, you also don’t want to seek such a small amount that you have to use a second-rate factory.
We’ll discuss how you can negotiate MOQ’s at the end of this section.
What’s the Prices Per Sample?
Before you make your final choice, you’ll need to get a sample of your product made to inspect the quality. Prices of samples can vary widely from free to a discounted price.
What are the Production Costs?
You should find out how prices can change in correlation to your order volume. Ask for a full breakdown of costs, e.g. cost for the time, cost for the shipping, the cost of tariffs, and anything else the manufacturer includes in their pricing.
How Long will Your Product Take to Manufacturer?
This can vary depending on the quantity and complexity of your product. It’s a key question, because you don’t want to face to wait too long before you receive your finished product.
What is Their Manufacturing Expertise in?
It’s always best to work with manufacturers who have proven experience and expertise in your product category.
Have they Made Similar Products to Yours?
This will give you an indication of whether or not they have experience shipping your style of product.
What are Their Payment Terms?
Some manufacturers will offer credit terms if you qualify. There’s a big chance you won’t qualify, so payment terms can range from 15, 30, or 60 days and can change with different manufacturers.
This means that for up to a particular payment amount, you’ll be billed for what you ordered and you won’t have to pay until later.
Under What Circumstances will my Prices Change?
You should discuss potential market changes that can make your price go up or down with each manufacturer. It can depend on the materials you use, so ask as many questions as possible to learn about the commodity market for your product. This way you can take fluctuations into account.
What is the FOB Point?
FOB stands for “Free On Board,” and this is the point where you will take ownership and be responsible for your products. Some manufacturers will have you take ownership when the product leaves their docks. Sometimes you don’t take ownership of a bulk order until it has been delivered.
Can you Provide Liability Insurance
Find out if the manufacturer can provide a liability insurance certificate. This can protect in the event there is a recall or other issues with your product.
What’s Their Usual Customer Profile
If you’re talking to a manufacturer who produces products for large recognizable brands, you know their facilities have been visited and audited by major companies across the world. However, if they only deal with these types of companies, they may not give you enough attention.
How Big is Their Factory
The bigger the factory and the more employees they have, the longer they’ve been in the business of manufacturing. This is a good indicator if they have experience in your field.
What Quality Assurance Steps do They Take and How Many Points Throughout Production?
This is a hugely important step in the manufacturing process, how do they ensure your product will be manufactured to spec? The more quality assurance steps they take, the lower the risk of defective products and components.
Where do They Source Their Material From?
The best way you can ensure that your manufacturer is using high-quality materials and components is to ask them to give you a list of materials and names of the factories that they will buy them from.
Important! Ask Everyone the Same Questions!
Make sure you ask the same questions and get the same information from each manufacturer you speak to. You’ll be able to make a direct comparison between each one.
All of these questions are standard which any quality manufacturer would have answers to. If they refuse to answer any of them, delete them from your master list.
If this is your first time trying to get a product manufactured, you’ll quickly learn about MOQ’s (minimum order quantities). It’s extremely common for manufacturers to require you to commit to purchasing a certain number of products.
This can be difficult if you’ve got limited funds or want to play it safe before making a larger order. But, don’t worry. MOQ’s are almost always negotiable.
To begin, you need to understand why your potential manufacturer has imposed a minimum order. Is there a lot of work upfront? Does the manufacturer prepare to work with larger buyers?
Chinese manufacturers tend to exclusively purchase materials and components from subcontractors upon receiving your order. Meaning, their MOQ is often a reflection of their subcontractors MOQ.
Here are some strategies you can use to attempt to lower the manufacturer’s MOQ requirements:
Streamline Material and Components
Because MOQ’s are often a direct reflection of the manufacturer’s subcontractors, products that are made from many different materials can force the supplier to satisfy the MOQ requirement of the subcontractors.
This results in an escalation of the MOQ requirements you need to pay.
Therefore, streamlining the use of materials and components for your products can help the manufacturer meet the MOQ requirements of their subcontractors, and allow you to pay less.
This is often the best solution if you’re a small buyer looking to lower MOQ’s.
If your product needs rare materials or custom designed parts and components, you’re likely to run into higher MOQ. Because this forces the manufacturer to step out of their ‘normal purchasing routines’ and subcontract a brand new design.
Whereas, if you limit your customization, for example, using a standard pre-existing factory design and adding your own logo. Your manufacturer can use standard/common components, which will tend to have lower MOQ’s.
What you need to do, is limit the ‘degree’ of product customization, and base your product on ‘factory standard’ components – to the extent where you’re not sacrificing the overall quality.
Offer to Pay a Higher Price
MOQ’s aren’t always a direct reflection of the subcontractors MOQ requirements. It’s common for Chinese manufacturers to maintain a stock of ‘high turnover’ (commonly used) materials and components.
This means if they’re willing, manufacture a smaller quantity of products. However, Chinese manufacturers are often dealing with small profit margins, so it doesn’t tend to be worth the time, effort, and risk involved.
If you offer to pay a higher price, say 10 to 20%, it may give the manufacturer an incentive to accept a low volume order.
Use the Same Components Across Product Lines
Let’s say you’re getting watches manufactured. Now, they can be produced with different faces and bands, but with the same inner components. This can then make it easier to meet MOQ requirements for the components.
Try to Negotiate
An option that’s never really been relied upon, but it doesn’t hurt to give it a go. Now, before you start, you’ll need to know why they have it:
What problem are they avoiding by having customers produce a certain amount?
For many manufacturers, it’s the cost of setting up the equipment. For others, it can be because they’re so busy, they only want clients who provide them with the most profit.
Understanding the reasoning behind this minimum will help you come up with an offer that accommodates the manufacturer’s needs, as well as your own.
When you understand this, you can propose an offer for a lower order quantity that accommodates their needs as well. Let’s say you’re looking to get a piece of clothing produced. The prep work required to custom dye material (mixing custom color, sending you a sample for approval, etc.), is very time-consuming.
If you need 500 yards of a particular green, but the manufacturer’s minimum is 1500 yards, you could offer to pay a flat ‘dye fee’ in addition to the regular cost of the custom fabric.
This may feel like an added cost, but, your order total is likely to be less than if you were to order 3 times the amount of fabric.
Do Your Due Diligence
Your search doesn’t end after asking some questions, you need to do your due diligence and find out as much as you can about each manufacturer
Here’s how you can do this:
Ask Them for References
This may seem simple, asking for references will help you eliminate manufacturers that aren’t up to scratch. And every manufacturer should be happy and excited to provide you with lots of customers to speak to.
If they’re not willing to share references, take it as a big bright flashing warning sign! Get out of there and never look back.
Ideally, these references should be current customers, and try to get references for companies which are a similar size and category to yours. If the potential manufacturer can’t provide all of their clients’ names or brands, don’t worry. But, you do want to get at approximately 5.
When you contact the references, attempt to set up a phone call rather than emails; you’ll get a much better idea of the company and if they’re genuine.
Here’s a list of questions you should ask each reference:
- Was their product made to the required specifications?
- What percentage of their shipment was defective?
- Was there a problem with shipment? If yes, did the manufacturer make amends?
- Were deadlines met? If no, what did the manufacturer do to make amends?
- Did they deliver on all promises?
- How is the quality of the goods they produce?
- How long have you worked with this person/factory?
- How many orders have you placed?
- Was your contact easy to work with and how responsive to calls and emails were they?
- What type of projects does the manufacturer excel in producing?
- Who was responsible for landing the goods in your country?
Again, you’re going to want to ask each reference the same questions. This is going to put you in the best possible position for narrowing down your choices to the best one.
Online Search and Ratings
If the manufacturer has an online presences on major B2B (business to business) platforms, dig through their online profiles. Extensively check their ratings and take a note of any excessively negative feedback.
You’ll also want to search for the manufacturer by name online, and be on the lookout for any scam warnings or negative reviews.
Certifications and Documents
It’s imperative you request your potential manufacturer to provide some key registration documents and certifications. We’re now going to go over common documents every Chinese supplier should be happy to provide you and why they are so important.
Chinese Business License
This is a standard document which should be viewed in every business deal in China. It’s common practice to request a copy of the business license, and actually, you may find they’ll produce it before you even ask for it.
So if your potential manufacturer shows any signs of resistance, cross them off your list.
And you should always be aware of possible forgery when dealing with any documentation. Not common, however, fake Chinese business licenses exist: ranging from bad photoshop skills to ‘adjustments’ that are harder to spot.
The business license contains key details of the company’s registration, including:
- Registration number
- Official company name
- Company type
- Registered address
- Legal representative
- Registered capital
- Date of establishment
- License expiry date
- Business scope
- Registration Bureau
Unfortunately, the business license is going to be in Chinese, so if you don’t read Chinese, you won’t be able to make sense of it. I would recommend using a company such as China Checkup to help you verify the license.
Bank Account Certificate
Their company bank account certificate proves they’re a genuine holder of the business bank account shown on the certificate. Seeing a copy of this can be a useful way to avoid some of the blatant scams and frauds.
If you make a payment to the verified bank account shown on a company’s account certificate, you’ll know that your money is going to the right company. And not someone’s personal account where it might ‘mysteriously disappear.’
It’s common for most companies in China to operate several bank accounts. This can be to handle different currencies or aspects of business. If this is the case, it’s likely only one of the accounts will have a license associated with it. Now, this isn’t necessarily something to worry about, but, what’s important, is you always pay into business accounts. Not personal accounts.
Licensed business accounts have more protections and restrictions, so you’re safer.
Also known as tax registrations certificate, companies will obtain this after they have received their business license. The document covers a lot of the same details as the business license:
- Official name
- Business address
- Scope of operation etc.
Seeing this document can be a useful to help confirm/support the information shown on the manufacturer’s business license. It can also act as a warning sign: if they can’t show a valid tax registration certificate proceed with caution.
However, like business licenses, they can be faked or altered in photoshop. And unlike business licenses, there’s no publicly accessible way to confirm the details shown. So you can only take the manufacturer’s word for it.
Although, if you verify the business license you can be confident you’re dealing with a legitimate company.
ISO 9001 Certificate
This document tells you if the manufacturer has implemented adequate systems for:
- Quality management
- Management responsibility
- Resource management
- Product realisation
- Measurement, analysis, and improvement
The ISO 9001 inspection is very common and can be obtained by the manufacturer or you can request your own audit. You won’t find a shortage of third party companies who offer an ISO 9001 audit in China.
Either requesting to see a copy of the Chinese manufacturer’s ISO 9001 certificate or ordering the inspection yourself is standard practice before placing orders with them. Now, like everything, there is potential for deception here, so viewing the certificate alone is not enough.
You need to identify the ISO 9001 registrar who authorized the certificate (shown on the document). You’ll then need to independently confirm with the registrar they have the company and certificate on record.
You should also confirm which specific processes and operations the manufacturer holds the ISO 9001 certification for; as they may hold it for some processes or some factories, but not others.
It’s also good practice to confirm that the registrar who gave the certification is accredited by CNAS in China.
ISO 14001 Certificate
It’s best you think of the ISO 14001 certificate as an ISO 9001 for resource management and environmental concerns. In a nutshell, it certifies the manufacturer’s management systems in the same way an ISO 9001 certifies their quality management systems.
And this certificate is becoming increasingly popular for companies around the world as greater focus is being placed on the environmental aspect of manufacturing.
It relates to environmental concerns about reducing waste and improving efficiency, not friendliness. It can be used by a manufacturer who wants to improve resource efficiency, reduce waste and drive down costs.
This is a voluntary certification, so if this isn’t a deal breaker, you shouldn’t be concerned if they don’t have one.
Like the ISO 9001, the ISO 14001 can be obtained through the use of an auditor. The auditor is able to grant the certificate from a particular registrar, and then the registrar can get itself accredited by an accreditation body.
Again, you’ll want to confirm the details of the 14001 certificate with the registrar who awarded it and check the registrar is accredited by the CNAS.
Product Test Reports
You’re going to require a product test report from your Chinese manufacturer. Ideally at several points throughout the production process to confirm that your product is being produced to the standard you require.
You’ll need to determine what testing specifications you need, when the tests will be carried out, and who will perform the tests.
And you should be aware of manufacturers who show you product test certifications for other products (not the one you’re interested in).
Now, there is another testing issue which others overlook. And it can be a very costly mistake. When you import your products from China, there’s a high chance you will need certifications which show the product meets relevant standards in your country.
Many product categories require these certifications, and product tests have to be carried out before your goods are shipped. And certification will be needed by your country’s customs officials.
If you don’t have the right product testing certification, you may never get hold of your products.
Because of this, you should never rely on your manufacturer in China to:
- Get the required certifications for importing your products into your country, or
- Be aware of which product testing certifications are needed.
This is something you need to do yourself through researching the certifications for your product and having a third party certify the product as early as possible.
And always confirm the certifications are carried out by an accredited third party, and independently confirm the certification and accreditation with the next organization up the chain.
Chinese Manufacturer Product Brochure
You should be careful when you receive and read through potential manufacturer’s brochures. It’s not uncommon for Chinese manufacturers to include products they don’t produce in their brochures.
Instead, they’re acting as a trading company for these products and source from other suppliers. However, these issues can easily be avoided through factory visits and proper auditing.
Asking for Samples
Even if your potential manufacturers has all the right answers and produces all the correct documents, it doesn’t mean anything until you’ve seen samples of their work. Preferably similar products to yours.
Serious manufacturers won’t have any issues with this, in fact, it’s likely they’ll be more than happy to send you samples at no extra cost. If they’re unwilling to send you a few samples, they’re not going to make a good partner and you should cross them off your list.
When you’re asking for samples, it’s always good to ask the following:
- Where is your factory located? (This will impact shipping times)
- What is their shipping process?
- Do they have partnerships with logistic companies?
- Can they help with clearing customs?
When you receive samples from multiple manufacturers, you’ll need to examine them for quality and consistency. If a manufacturer hasn’t gone to the small effort of sending you quality samples, they should be removed from your list.
If they meet your standards, fantastic, this is a manufacturer worth considering.
Final Word on Narrowing Down Your Choices
If you’ve gotten to the point when you’re happy with a few different manufacturers, but there’s no stand out supplier, it can be hard to make your final decision. So here are a few things you can consider to help make that important decision.
What’s Their Speciality?
If you’ve found 3 or 4 manufacturers that meet your requirements, but, one of them specializes in the product you want producing, it’s likely they’re going to be your best options.
Where do They do Most of Their Exporting to?
If one of your potential manufacturers do most of their exporting to the U.S. or other Western countries, it’s likely they’ll have higher standards. And have proven they are able to meet the expectations of Western importers.
Including, product safety, labeling and packaging regulations. It’s likely the supplier will also have a better understanding of, and greater respect for your intellectual property rights.
It’s also much more likely they’ll have experience with the logistics of shipping products internationally and a greater ability to get your products over the finish line.
Does one of the manufacturer’s management philosophies align with your own? If so, it’s likely you’ll have a much better experience working with them.
Don’t Rush The Process
What’s you need to remember, is that you’re going to need to be patient throughout the research phase. Don’t go into thinking you’re going to find the right option instantly – it can some take time before you find your best option.
And when you’re searching, remember: Focus on the best solution, not just the lowest price.
Companies have lost significant amounts of money by not ensuring they’ve chosen the right manufacturer, and if you’re on a small scale, you can’t afford these losses. So do your homework! And ask as many questions as you feel is needed.
Doing this will not only ensure you find the right manufacturer for you, but you’ll show them you pay attention to details and you’re on top of their production.
Once you have completed this stage, you’re not there yet. Your next step is to get a sample of your product made, but, before this, you’ll want to do your best to protect your intellectual property.
How to Protect Your Intellectual Property Rights When Manufacturing in China
The step before full production is to get samples made of your products to really test the manufacturer’s skills.
However, before you start sending your product design to manufacturers, you should do your best to protect your intellectual property rights (IP).
IP protection is the No.1 challenge for most companies operating in China. And according to Forbes, IP theft is costing the U.S. as much as $300 billion a year, accounting for a 50-80% of intellectual property theft.
And among Europeans, the loss of IP in China reduced potential profits by 20%.
In this section, we’re going to go over the different strategies you can use to protect your IP.
Non-Disclosure Agreement (NDA)
Once you’re at the stage where you have your product design and you’re left with a few different manufacturers who you’re excited about working with, you’re going to have to send them your design file.
However, you don’t want to risk your design being leaked and exposed to everyone right away.
You should consider an NDA. And the most important thing to know when it comes to NDAs, is they’re far more effective when signed before you reveal the information. Rather than trying to get someone to sign one after they already have your product information.
NDAs are fast, cheap and easy because they don’t require a lot of customization from company to company or product to product. And it’s a good idea to include an attorney’s’ fee provision and provision regarding injunctive relief. Because if they violate the terms, you can quickly stop them from continuing and get your attorney fees in the process.
These provisions in can make a violation less likely.
You should also look to have two copies made: one in English and one in Chinese. The Chinese version should be the official document because Chinese courts will be able to understand it better and enforce it quicker. As well as taking away their argument that they didn’t know what they were signing.
Taking your time to craft your NDA can be effective in China for two reasons:
- Chinese companies are just like companies around the world, if they can help it, they’ll seek to avoid a lawsuit where the odds are stacked against them. And Chinese courts have become familiar with them and often enforce them.
- Asking a manufacturer to sign an NDA will teach you a lot about the supplier. If you find that a manufacturer refuses to sign one, it’s not likely to be a manufacturer with whom you want to work with. However, it’s extremely rare a company will not sign it.
Why Most NDA Agreements Don’t Work
The vast majority of Non-Disclosure Agreements which are used “quickly” by U.S. based companies with their potential Chinese manufacturers are essentially useless. The main reason they’re unenforceable, is they call for disputes to be resolved in America.
Now, there’s a HUGE problem with this because Chinese courts do not enforce U.S. court judgments.
Even if your company were to win the case in your home country, there are no repercussions for the Chinese company, unless they have assets in your country. And Chinese companies know this, so they can freely violate the NDA terms.
You shouldn’t just pull a U.S. style NDA “off the shelf” when you’re manufacturing in China, it’s not going to work. Now, your NDA doesn’t need to be complicated, but it does need to be done right. And that is why you should consider creating an NNN Agreement.
Non-Use/Competition, Non Disclosure, Non Circumvention Agreement (NNN)
So, we’ve discussed why NDAs are great, and not so great. It’s likely an NDA alone won’t completely protect your IP from Chinese companies. Here’s what you need… a China-centric NNN agreement.
Let’s discuss each section of an NNN Agreement:
First N: Non-Use/Competition
None-use/competition means your Chinese manufacturer agrees by written contract not to use your idea/concept/product in any way that competes with you.
This has nothing to do with intellectual property rights. And has nothing to do with trademark, copyright, patent, or trade secret.
You’re protected because the Chinese manufacturer cannot use your work because they signed a contract agreeing not to.
Using a non-use/competition agreement means you may not have to look outside the contract to other areas of law for you and China’s courts to control your manufacturer.
Second N: Non-Disclosure
I’m not going to go into too much detail here, we’ve already discussed what a Non-Disclosure agreement is above. But, I will discuss a common issue that can arise and how you can help to prevent it.
Chinese manufacturers rarely care about making your product design public. They typically want to use your idea for their own purposes. If you stop your Chinese manufacturer from using your IP, your clever Chinese manufacturer won’t directly breach the non-use agreement.
Instead, they’ll disclose your concept to someone in their “group” and deny having breached the non-use agreement because they did not directly make use of the information.
Because of this, it’s crucial you understand the type of group you are dealing with. Then you’ll want to make it clear in your contract that:
- Disclosure is specifically prohibited within the group.
- If there’s any infringement by any member of the group, the factory that made the disclosure is fully liable.
You may have to try and educate yourself further on this issue because there are different situations with different manufacturers. And Chinese companies often don’t see disclosure to a member of their group as violating a non-disclosure agreement.
Some of the most common scenarios with Chinese manufacturers are:
- It’s common for Chinese family member to own a sizable group of small-to-medium-sized companies. And will often view all of them as the same entity for disclosure purposes.
- A lot of Chinese manufacturer’s subcontractors are constantly changing. Some are part of the family group, related by co-ownership or viewed as related due to their location. It’s common for manufacturers to argue they have to disclose the information to provide you with the cost for your product.
- A large number of Chinese manufacturers are part of an extensive “group company” involving many subsidiaries owned by a single parent.
- SOE (State-owned Enterprises) companies believe information can be shared freely between other state-owned companies. Very common in niches with a public service background: medicine, healthcare, and aeronautics. Because they all seeking to benefit the public, they see nothing wrong with sharing your information with other SOEs.
Third N: Non-Circumvention
Adding non-circumvention is vital because your Chinese manufacturer knows you’re adding a big margin on top of what you’re paying them. Imagine this…
Your Chinese manufacturer contacts your customers and sells your product at the Chinese price! After they’ve gone through your customers, they start marketing and selling your product to the rest of the world. You’re in a nightmare situation!
A China-appropriate non-circumvention agreement is the best way you can help protect yourself against this.
Drafting an NNN That Works in China
You might be thinking, “this is all great information. But, how do I make sure it’s enforceable in China?” Well, here’s how:
Drafting an NNN agreement which is enforceable in China means, Chinese law is the governing law, Chinese is the governing language, and exclusive jurisdiction is in a Chinese court with jurisdiction over your manufacturer.
You want to use a China-focused approach because, in the case of infringement or circumventions, you need to move quickly against your manufacturer. Generally, any other approach will make the agreement unenforceable or delay enforcement for so long it makes it useless.
Here are some basics you should follow:
- Provisions that provide for U.S. jurisdiction renders your agreement unenforceable in China – making it useless.
- American Arbitration awards are technically enforceable in China, but their courts have a bad record of enforcing foreign arbitration awards. Chinese courts believe disputes with Chinese companies should be resolved in China.
- Arbitration in China is subject to delay and uncertain enforcement. The panels have no power to seize assets or take action to enforce your manufacturer to stop its infringement.
- Chinese law does allow for foreign law to govern a contract. However, you’ll be required to prove every element of your law. And because the interpretation of foreign law is almost always subject to dispute, it can lead to long delays.
- Chinese law does allow for contracts in English, however, a lot of Chinese courts will not deal with foreign language documents. When they do, they use a court appointed translator, and disputes over translation are common. Leading to long delays.
- The process of taking legal action must happen in the court with jurisdiction over your manufacturer. This is usually the city where they’re registers or does business. Anything that provides for jurisdiction in another court will be ignored.
You’ll need to write an NNN Agreement which actually makes your Chinese manufacturer fear breaking the contract. Use the information above to make sure it’s enforceable, then, you want to ensure it provides for contract damages in a specific monetary amount for every act of breach.
Using a contact damages provision offers you two main benefits.
- It forces your Chinese manufacturer to realize it will face real and quantifiable consequences.
- A specific monetary amount provides a Chinese court with the basis for prejudgment seizure of assets.
Your NNN agreement must include a sum certain contact damage provision which a Chinese court can, and will, enforce by allowing seizure of your manufacturer’s assets.
However, it’s vital you set the contract damages at an amount which reasonably substitutes for the damages if they breach your agreement. Because the Chinese legal system doesn’t allow for punitive or extensive consequential damages.
When approaching a Chinese manufacturer with a China-centered NNN agreement, it’s likely you’ll experience one of these three responses:
- They’ll refuse to sign. This is a positive reaction because these are the manufacturers who want to steal your information. You’ll know not to continue with this choice.
- Some Chinese manufacturers will have a serious discussion with you about what they believe should be excluded from the NNN agreement. This should be seen as a positive reaction because it tends to lead to productive talks regarding technical issues.
- The majority of Chinese manufacturers will accept the NNN agreement and treat it seriously. This doesn’t mean they’ll stop bad practices and begin good ones. But, it means if they do violate the terms, litigation isn’t required. Often referencing the NNN agreement and the threat of litigation/asset seizure is enough to force the manufacturer to stop.
Now, what I do want to stress, is that this information you’ve read is a result of extensive research, we’re not lawyers.
If you want to find out more or need a service to help you with creating an enforceable NNN, check out ChinaLawBlog.
They have a wealth of experience and knowledge when it comes to creating China-centered NNN agreements.
Register Your China Trademark
A common mistake made when manufacturing in China, is believing your patents and trademarks are valid. They’re not. Patents and trademarks are territorial, and will only protect your intellectual property in the country where they’re registered.
I highly recommend you register your trademark in China, and you do it ASAP.
If you don’t, it could have serious consequences:
- You can be stopped from selling your products under that trademark in China if it’s registered by someone else.
- You can be prohibited from manufacturing your products under that trademark by an original entrusted Chinese manufacturer. Even if you don’t plan to sell your products in China.
- Without trademark registration in China, you can’t use ® on your products you intend to sell in China.
- Your Chinese manufacturer or trading partner could be barred from exporting products by the trademark owner.
- If someone registers your trademark first, you may have to buy it off of them. Or face long and costly legal proceedings against them.
- Other companies could use your band on their products. If you haven’t registered your trademark, it’s very hard for you to prevent this.
China’s First-to-File Rule
In many countries, if you haven’t registered your trademark, you may still have a legal claim over that trademark if you can show the reputation your business has gained from using it in the past.
However, in China, it’s different. Prior usage is not considered within the trademark examination process. China uses a first come first serve rule: the first person to file for a particular trademark becomes the owner if their application is successful.
You’re going to have to secure the trademark of your brand in English, Chinese characters (translated), and transliterated form.
Difference Between Translation and Transliteration
If you do not use a Chinese version of your brand, your distributors, manufacturers, and even customers will start using a Chinese name. Someone could then register this name, blocking you from marketing in China.
You should consider a Chinese name or transliteration for your brand at an early stage. And you should get a branding consultant or lawyer to tell you the different meanings for the Chinese characters.
In transliteration, after your trademark has been translated into a Chinese name, and English version is created. E.g. Penfolds has been transliterated to Ben Fu.
Researching and selecting a suitable brand is important for marketing, but, it’s more important from a legal point of view. You need to ensure you’re not infringing on someone else’s registered trademark.
How to Check for Similar Trademarks in China
The Chinese Trademark Office provides a free search for existing trademark applications and registrations. The only downside, this site can only be seen properly if your computer has Chinese simplified characters installed. And you’ll need to be able to read Chinese.
You may need some help with this bit. And it’s a good idea to seek professional advice.
What You’re not allowed to Include in Your Chinese Trademark
- Names or emblems of a country or international organization.
- Words or symbols of discrimination against any race.
- Words which could mislead the public about the quality or origin of your goods.
- Foreign geographical names well-known to the public.
- Generic name or descriptive words of your (or any) goods.
A big issue you may face is, trademarks cannot be detrimental to socialist morals, customs, or have other unhealthy influences. Now, this can be very different or broader than what most Westerners might think. So I recommend you seek advice from Chinese trademark counsel or lawyers.
Filing Your Trademark Direct to China
Filing your application through the Chinese Trade Marks Office (CTMO) is generally referred to as direct filing. You should note that filing this way means your date of application becomes your date of priority.
And having an earlier filing date can be important if someone else is applying for the same trademark, because of China’s first-to-file rule. I recommend using an IP professional experienced in Chinese trademark law or a reliable agent in China who specializes in intellectual property.
The Benefit of Filing Direct
You’re able to nominate your own subclasses. It’s important to classify your proposed goods and services in a Chinese trademark application, so specialist advice should be sought as early as possible.
If the names of your goods/service items are not in the International Classification and the List of Acceptable Names of Goods and Services, you’ll only get one chance to amend before your application is rejected.
If your amended names are not acceptable to the examiner, you’ll be rejected and have to re-file – losing your original priority date.
What You’ll Need
- Your (the IP owner) name and address. Including a Chinese version of the name.
- A sample of your trademark: a high-quality representation of your trademark is needed as well as the meaning of the mark (if any).
- Classes and description of goods/services on which your trademark is used. It’s recommended you use the names of goods/service items in the International Classification and List of Acceptable Names of Goods and Services.
- Power of Attorney. Get this signed by the applicant, no notarization or legalization is required.
- If you’re applying as a company, you’ll need the Certificate of Incorporation.
- If you’re applying as an individual, you’ll need a copy of your passport or photo ID card.
- Letter of Consent (needed if your trademark is a picture or portrait of an individual who holds the rights to the image).
- A copy of the certified copy of first foreign application (if your application claims foreign priority).
The Examination Process
The CTMO will start by checking all of the required information and documents have been provided. They’ll then embark on a detailed examination to identify if there are any conflicting applications or registrations and consider whether your trademark meets the requirements.
This can take up to 9 months, ending in the CTMO rejecting or providing a preliminary approval, allowing your application to move to the next stage. The opposition period.
The Opposition Period
This is a 3 month period (after you’ve received your preliminary approval), where other companies or people can challenge your trademark.
If this happens, and the CTMO reject it and grants your trademark, the decision is final.
However, if they accept the objection, you can request a review from the Trademark Review and Adjudication Board (TRAB). This process can take 6-12 months.
If your application goes smoothly without any opposition, you can expect the whole process to take 12-15 months from filing to receiving your Certificate of Registration. It’s then valid for 10 years, after which, you can then renew.
Reasons Your Trademark can be Cancelled
- It was acquired fraudulently.
- You haven’t used it for three consecutive years from the date of registration.
- It becomes the generic name for the goods or services in its class.
- Changes are made to the trademark without approval from the CTMO
- Changes are made to the address of the person who holds the trademark without the approval from the CMTO.
How to Protect Your Molds and Customized Tooling
If your Chinese manufacturer needs to create/buy tolling that is customized for your product, you’re at risk of them keeping and using your mold to supply (or become) your competition.
Luckily, there are a few tactics you can use to help prevent this:
Mark Your Molds
You should consider making your molds easily identifiable by etching or engraving (in Chinese) that they’re your property. If it’s possible, do this where it is obvious so you can deter others, and where it is well hidden, to deter those who might try to remove it.
Get Your Molds Wrapped Between Production Runs
During the final inspection of your products (before they’re shipped out), your inspector can wrap the molds using proprietary adhesive tape, and then place a seal or proprietary sticker on the wrapping.
You then instruct your manufacturer to only unwrap the package when the next production batch is to take place. But, before they unwrap your mold, your manufacturer must send a photo of the whole package with the day’s newspaper next to it to prove the date.
Transfer Your Molds to a Separate Place Between Production Runs
The obvious way for you to avoid your manufacturer from using your molds is to let a reliable third party in China keep them between production runs. Although, you need to keep in mind any ownership terms regarding the mold must be clearly stated in your sales agreement.
Start the following:
- Ownership terms
- Maintenance costs & terms
- Number of units that the mold shall be able to produce
- Compensation terms (in the event the mold breaks before a certain number of tablet cases have been produced)
Other Ways to Reduce Your Risk
Look for ways to encrypt important information on technical files. One German company places a code on each drawing, e.g. a certain code can mean to “added 11% on all measurements”.
Break up the Manufacturing Process
You could look into making it impossible for one supplier to be able to make the whole product. This can be done by designing two parts which control each other.
The downside to this, is that it’s only possible for certain products with embedded electronics. Not garments or classic furniture.
Provide Your Country’s Customs with Information
Now, this one stops a manufacturer from recreating your product, but, it will make it harder for them to profit at your expense.
Some countries take fighting counterfeits extremely seriously. So, if you can get information about the importing channel where the copies enter your country and if you’ve registered your IP, you might be able to block the containers.
Pre-Production: Getting Your Product Samples
When you’ve selected the Chinese manufacturers you’d like to work with, and you’ve implemented your IP protection, it’s time to start the pre-production process.
Getting potential manufacturers to create pre-production samples is the only way you can truly test your design, and the manufacturer’s ability to produce it. If you don’t manage this process properly, it can cost you months, sometimes up to a year.
And your first task is to create sample order terms. Creating well-drafted sample order terms can save you thousands in development costs, as well as preventing delays caused by constant revisions.
We’re now going to take an in-depth look into how you can draft your own Sample Order Terms.
1. Design File
Because Chinese manufacturers are primarily OEM suppliers (custom products), they’ll expect you to provide all of the relevant product information.
Include the following:
Your product description is a detailed overview of what it’s intended to be. It should be so clear, that anyone reading it would be able to obtain a clear understanding of what your product is and what’s involved in order to make it.
You should include the following in your product description:
- Why it’s needed
- What it’s made of
- What it will look like
- How long it should take to create
- What the acceptance criteria is
- How those criteria should be met
This is a description of how your product should function in operation as well as the limitations of the functionality.
3D CAD Files
CAD stands for Computer Aided Design, and a 3D model contains all of the dimensional data for your product, even if it’s not displayed on the screen at any given time. Your manufacturer will be able to rotate and view your product from any angle.
Your 3D CAD files help your manufacturer get a sense of the part’s physical volume and geometry. Knowing your product’s physical size helps them when it comes to ordering raw materials and understand how your design fits together.
And because it contains raw data, they can use it to generate the cutting program for any CNC (computer numerically controlled) machining process (raw material is cut to create a part or your product).
Some of the most popular programs to create your 3D CAD files are CATIA, Pro/ENGINEER, and SolidWorks. And you just always check which formats your manufacturer can use. This is because different file formats are required for different processes.
For example, if you’re prototype is going to be produced using SLS (Stereolithography), then you’ll need to send your manufacturer the STL file format. If you need a component created on a CNC machine, you’ll need to send the IGS file format (IGS is based on the IGES standard: Initial Graphics Exchange Specification).
Understand what file formats your manufacturer requires.
2D Technical Drawing
It’s really important you include 2D technical drawings, as they communicate the finite details of how your product is manufactured. These drawings need to include all of the information from the person who designed the part to the manufacturer who will produce it.
This drawing is actually a legal document because it tells your manufacturer what you want them to produce. In conjunction with your purchase order or any other documentation, it’s advised you make this part of the contract.
You need to include the right information on your technical drawing, as it’s vital to the success of your product. Here are five standard elements that you need to include:
1. Title Block Information
Here you include key information about your product. Include:
- The company who owns the design (legal owner)
- Designer’s name (or at least their initials)
- Drawing checked by name (or at least their initials)
- Identification number (or “part number”)
- Product name (or “part name”)
- Date of release
- Revision level (important for change control)
2. Product Drawing
This is the drawing of your product, and you should show it from a number of different views, projections, and viewpoints. You’ll also need to show sectional views to provide more detailed information where necessary.
The dimensions control the feature-of-size. This could consist of two parallel surfaces, a cylindrical surface, or a spherical surface, in each case defined with a linear size. Your products limits-of-size only controls the local sizes (two-point measurements) of a feature-of-size. Not its deviations of form (flatness, roundness, or straightness).
You apply tolerances to a dimension to show an upper and lower limit for that particular dimension. These tell your manufacturer the measurements they need to work within to create your product.
The accuracy of the dimension is determined by the number of decimal places. And a dimension that has a tolerance applied can look like this:
24.1 +/1 0.01 shows it has an upper limit of 25.41 and a lower limit of 25.39.
This tells your manufacturer that this particular dimension can work anywhere in this measurement range.
5. Critical to Quality (CTQ) Information
You can show this in the form of geometric tolerancing or CTQ notes. Geometric tolerancing adds a layer of tolerance on top of the standard limits-of-size dimension. Specifying the tolerance of your products geometric characteristics.
It uses a universal language of symbols to allow a design engineer to accurately and logically explain part features so they can be manufactured and inspected.
This includes straightness, perpendicularity, flatness, angularity, roundness, concentricity, cylindricity, runout, profile, true position, and parallelism.
Your CTQ notes need to include surface finish, color, heat treatment, and any other specific attribute critical to quality that’s not associated with a dimension.
What’s important, is that you need to make sure your CTQ information is clearly highlighted in some way on your technical drawing. Dimensions can have circles around them, your notes could have a symbol attached etc.
Whatever identification system you use, ensure you include a key on the drawing; showing the system which highlights all the CTQ information.
Bill of Materials (BOM)
Your bill of materials (BOM) is a detailed list of parts, items, assemblies, and sub-assemblies required for your product. It’s basically a recipe and shopping list for your manufacturer to create your product.
Here’s what you can include in order to create an effective BOM:
- BOM Level: Assign each part or assembly a number to detail where it fits in the hierarchy of your BOM. This will allow anyone with an understanding of the structure to quickly decipher your BOM.
- Part Number: Assign a number to each part or assembly so they can be referenced and identified quickly. You should make sure you avoid creating multiple part numbers for the same part.
- Phase: Record the stage each part is at in its lifecycle. For example, parts in production are often recorded as ‘In Production’. And parts not yet approved can be classified as ‘Unreleased’ or ‘In Design’.
- Description: Write a detailed description of each part to help others distinguish between similar parts.
- Quantity: Record the number of parts to be used in each assembly or subassembly.
- Unit of Measure: Classify the measurement for each part.
- Reference Designators: If your product contains printed circuit board assemblies (PCBAs), include reference designators that detail where the parts fit on the board.
- BOM Notes: Write relevant notes to keep everyone who interacts with your BOM on the same page.
It’s common for manufacturers to second-guess the decision to include glue, wires, fasteners and other non-modeled parts like labels and boxes. You should take the time to document these parts because if you don’t, it might not make it into your product.
You should try to include as much detail as possible. You may never interact with some of the people using it, so it needs to convey all of the information they might need.
And remember, your BOM may go through several stages during your design phase. So, this might seem obvious, but if you don’t do it, you’ll have serious problems – have a way to distinguish between multiple versions.
An accurate BOM supports efficient manufacturing.
Color codes such as Pantone or RAL provide a standardized color matching system. Using standardized color codes allow your manufacturer to create the exact colors you want, so it’s vital you find out which codes they require.
This will ensure consistency for your products. And can allow for special colors to be produced, such as metallics and fluorescents.
Remember, when deciding on your colors, even white has a number of variations.
It’s important to understand what testing is required. This isn’t just for when your product has been finished, it’s also for sub-assemblies or at semi-finished stages throughout the production process. This needs to be specified accurately and clearly.
This includes pre-build testing, in-process testing, and end-of-line testing.
This could include checking a specific part function correctly, for example, if your product uses some form of light, this process could include checking they work and are the correct color.
Here, your manufacturer will test your product when it’s been partially built to check functionality at critical stages in the assembly process. Making sure your product functions correctly before adding more value to it by additional assembly.
Your finished product will be tested to determine if it passes the accepted criteria.
It’s vital you establish a testing process throughout the manufacturing process. If you wait until the end of the line and suddenly find problems with your product, it’s going to cost you a lot of money.
It takes a lot more work and money to rework fully assembled parts. The earlier you catch issues, the cheaper it will be.
2. Product Safety Standards and Substance Restrictions
Before your manufacturer can get started on your samples, you must communicate all technical standards and substance restrictions.
If it’s possible, you should get your sample product submitted for compliance testing once it’s complete. However, this isn’t always possible for these reasons:
Apparel & Textile Products
Some Chinese manufacturers may not be able to purchase compliant fabric and components in small quantities. So they may be forced to create you a sample for demonstration purposes only.
Your Chinese manufacturer may not be able to get hold of RoHS (Restriction of Hazardous Substances) compliant PCBs (Printed Circuit Board) and other components when creating your sample. It’s possible they may also lack equipment to test EMC (Electromagnetic Compatibility).
Again, your Chinese manufacturer may not be able to purchase compliant materials and components in small quantities. So may have to create your sample for demonstration purposes only.
Now, you must communicate all applicable standards and regulations to your supplier. However, don’t expect (for reasons stated above), your Chinese manufacturer is going to be able to produce a compliant sample.
3. Product Packaging & Labeling Requirements
It doesn’t matter if you’re producing an OMD (private label) or OEM (custom designed) product, you need to include the following:
- Artwork files (.ai format)
- Packaging Design File (.ai format)
- Bill of Material (BOM)
If you’re producing an OMD (factory standard packaging with your own artwork), you should be able to request an artwork template from your manufacturer.
It’s important you always remember, Chinese manufacturers expect you to provide all of the details. Therefore, you need to make sure to design your packaging artwork is compliant with all applicable labeling requirements.
This will depend on which market and product. So we’ll now go into detail on this subject.
Product Packaging Design: Custom Designed Packaging
This approach can be complicated. You need to design the packaging according to the product shape and dimensions. And never rely on your manufacturer to make final adjustments.
Unless you have previous experience, it may be a good idea to seek help from a professional. If you do it yourself, you’ll need to keep track of the following:
- Lock type
- Surface lamination
- Outer Dimensions
- Inner Dimensions
- Pantone Colors
Having a customized product packaging will also need additional tooling; adding to your total costs. However, product packaging tooling costs tend to be quite low – often a few hundred dollars.
Product Packaging Design: Factory Designed Packaging
If you don’t have a lot of experience, I would recommend using this option. The packaging design is already tested and based on your products dimensions. And the tooling is already paid for by your manufacturer or its subcontractor. It can save you time and money.
You can still add your own personal touch. You’re still able to customize the artwork and layout. But, this does have to be based on the template provided by your manufacturer.
The majority of countries have legal requirements for how your product should be labeled. Your label can inform your customer about:
- The manufacturing country
- If it meets certain legal safety requirements
- Size, material and other general product information
- Warning Labels and user instructions
Some requirements apply to all products, while others may only be needed for specific product categories. It’s important you understand which labels are needed for your product.
Never trust your Chinese manufacturer to ensure your labeling requirements are met.
How to Communicate Your Labeling Requirements to Your Manufacturer
After you’ve researched which labeling requirements apply to your product, you’ll need to add them to your label design.
It’s common for Chinese manufacturers to work with .eps and .ai files. And your manufacturer must also know the:
- Label Dimensions
- Label Material/print type
- Label color/s
It’s good practice to also provide your Chinese manufacturer with drawings to show their exact position on the packaging.
Labeling Requirements in the U.S.
Country of Origin
It’s common for most products sold in America to carry a Country of Origin Label. Getting your products manufactured in China means you should label your product as either:
- Made in China
- Made in PRC
This must be visible to the customer on the product, packaging, or both. You cannot attempt to hide the Country of Origin Label.
However, there are some exceptions. Watches can be labeled according to the origin of the movement.
If you don’t properly label your product with the Country of Origin Label, you won’t be able to sell it in the U.S., and customs are likely to return your product back to China.
CA Prop 65
Meaning California Proposition 65, it restricts more than 800 substances. This is only mandatory if you’re selling your product to consumers in California. If you are, it’s a good idea to check the substances list.
You’re able to comply with CA Prop 65 by either:
- Ensuring your product complies by submitting the product to a product laboratory.
- Affix a “warning label”: WARNING: This product contains chemicals known to the State of California to cause cancer and birth defects or other reproductive harm.
The second option doesn’t sound great, does it?
Apparel & Textile Labelling
These must be labeled according to FTC (Federal Trade Commission) labeling requirements. Including:
- Fiber composition
- Care labels
CPSIA (Consumer Product Safety Improvement Act)
This is a framework regulation for toys and children’s products. If your product falls within this scope, it must carry a “tracking label”. And you may need to attach user instructions and warning labels.
FCC (Federal Communications Commission)
This mark signals your product complies with FCC part 15 Subpart B, which regulates almost all electronic parts. You’ll need to research this because there are various types of FCC labels that apply to different electronic products.
UL (Underwriter Laboratories)
Underwriter Laboratories develop standards for mainly electronic products. This isn’t mandatory, but it is seen as a sign of quality.
Labeling Requirements for the EU (European Union)
This signals compliance with one or more EU directives, including:
- Low Voltage Directive
- EMC Directive
- EN 71 Toy Safety Directive
- Machinery Directive
This means that the CE mark is found on many different types of products, which are completely unrelated. Some examples include watches, bikes, and laptops.
Products like apparel and other textiles are not covered by any “CE marking directive” and do not need to have the mark.
WEEE Mark (Waste Electrical and Electronic Equipment Directive)
This mark is mandatory for all electronic products, and signals separate storage for electronic waste.
Apparel and Textiles Labeling
If you’re planning on selling clothing in the EU, your products must carry care instructions for fiber and composition (e.g., 95% cotton, 5% polyester), in the language of the target market. At the time of writing, there is no mandatory sizing system.
Labeling Requirements in the United Kingdom
Now, at the time of writing this guide, the UK is still a part of the European Union. However, after Brexit, this is going to change in the coming years.
It’s unlikely they’ll change their policy of implementing the EU labeling requirements. So if you’re planning on importing and doing business in the UK, you shouldn’t need to worry. However, you may want to keep an eye on it.
Labeling Requirements in Australia and New Zealand
If you’re planning on importing your products to Australia and/or New Zealand, many products are required to comply with certain safety standards which cover labeling requirements.
Currently, the following product examples are regulated by one or more product safety standards:
Toys & Children’s Products
- Toys for children 3 years or younger
- Toys or finger paints containing lead or other substances
- Toys containing magnets
- Inflatable toys
- Projectile toys
- Prams and strollers
- Nightwear for children
- Cots and bunk beds
- Balloon blowing kits
- Baby walkers
- Baby dummies
- Baby bath aids
- Aquatic toys
Sports & Outdoor Products
- Soccer balls
- Portable swimming pools
- Exercise equipment (e.g., treadmills)
- Basketball rings and backboards
Textiles & Accessories
- Luggage straps
- Clothing & Textiles (Care labeling)
Vehicles, Accessories, Parts & Tools
- Vehicle ramps
- Recovery straps for vehicles
- Motorcycle helmets and jackets
- Bicycles (pedal) and bicycle helmets
- Motor Vehicles (child restraints)
Home & Furniture
- Bean bags
- Curtains and window fittings
- Hot water bottles
- Fire extinguishers
- Disposable cigarette lighters
What if Your Products are Labeled Incorrectly
If your products are incorrectly labeled, they can’t legally be placed on the market. Customs will have the right to return your products back to China. If you do sell non-compliant products, you may endure heavy fines.
That’s why it’s so important to communicate clearly to your manufacturer.
Final Word on Your Design File
Don’t take shortcuts. Make sure all of the information required to produce and package your product is included. If you need to, insert additional notes to help explain key areas of importance and critical-to-quality aspects.
Don’t be shy to ask and ask again to ensure your Chinese manufacturer understands every detail.
Sample Order Terms
1. Production Time & Revisions
It’s likely you’ll discover when talking to your manufacturer they’ll say they can make this exactly how you want. However, samples rarely come out perfectly first time.
Depending on your product and its complexity, expect two or three revisions. Now, you definitely don’t want to be in a position where your manufacturer is asking you for more money because they failed to get your approval.
Because of this, include these terms:
- The manufacturer must produce an unlimited number of sample revisions (in case the previous sample batches don’t comply with the product specifications and quality requirements in this document).
- The seller may not request additional payments from the buyer, unless the buyer makes changes to the product designs, materials, quality requirements or compliance requirements.
- Pre-Production Sample Revision Time:
- 1st Sample: XX days
- 2nd Sample: XX days
- 3rd Sample: XX days
- If the manufacturer fails to produce an acceptable sample after X revisions, the buyer may request a full refund ($XXX) from the manufacturer.
- If the manufacturer fails to produce samples within the time limits set under ‘Pre-Production Sample Revision Time’, the buyer may request a full refund ($XXX) from the manufacturer.
The main purpose of these terms is to put pressure on your Chinese manufacturer to:
- Comply with all design requirements and specifications.
- Limit the number of revisions needed – speeding up the development process.
- Limit the time spent to produce each sample revision.
Please note, these terms will be void if you change specification after your manufacturer starts working on your pre-production samples.
Every time you get a sample product, put it through rigorous quality checks. Checking:
- Material and components
- Assembly and workmanship
- Size, weight, and other measurements
- Colors, finishing, and aspect
- Labeling, logo, tags, stickers
- Packaging: retail packaging, cartons, shipping marks
Test your sample as if it was the final product. And amended in collaboration with your manufacturer: take pictures or videos, and keep detailed notes. Make copies and send everything back to your manufacturer with your sample.
Testing is all about finding problems with your product and avoiding any horrible surprises during full production. Never be afraid to double check your manufacturer understands.
2. Mold and Tooling Ownership
If you’re purchasing a custom designed product, injection molds and other tooling is commonly required. This is likely to take up a large share of your product development cost.
We previously discussed potential issues when it comes to tooling ownership that you’ll want to avoid. To help this, add these clauses into your terms:
- All tooling (as listed below) is the property of the buyer, and may not be used in production, for the seller (manufacturer) itself or its other customers (domestic or international) without the buyer’s written approval.
- The tooling may be transferred from to the buyer, or its representative in China, at any time. Upon such a request, the seller must send the tooling to the buyer within 3 working days. The buyer must pay for all transportation costs (Maximum $XXX).
The main reason for buying pre-production samples is to test the Chinese manufacturer’s ability to create your product.
But, what if the manufacturer contracts your sample production to another factory!? You’ll have no way of knowing if this manufacturer can make your product. Quality issues may arise during full production, which you thought were already corrected.
To avoid this, include this term:
- The seller may not subcontract the sample production to any other party or company, entity (excluding procurement of components and materials).
- The pre-production sample must be made in the manufacturer’s production facility at the following address: [Insert Address]
- The buyer, or its representative in China, may inspect the seller’s facilities without prior notice, to verify that sample production is made at the specified address.
- Failure to comply with the subcontracting terms shall result in an immediate refund ($XXX).
4. Payment Terms
If your sample costs are in the hundreds, it’s likely you’ll need to pay 100% of the cost upfront. However, more complex designs can result in much higher costs. Sometimes in the thousands, even tens of thousands of dollars.
If you’re paying serious money, you need to manage the risk accordingly. It’s advised you apply these terms.
- 40% Deposit before production of tooling and pre-production samples.
- 60% Balance after the buyer’s (you) written approval of tooling and pre-production sample.
We’ve already gone into a lot of detail on NDAs and NNN Agreements, and how to protect your intellectual property rights.
If you skipped that section, head back up to ‘How to Protect Your Intellectual Property Rights When Manufacturing in China’.
Anyway, you’ll want to attach your agreed document into your sample order terms.
Get Extra Protection with a Sales Agreement Contract
Before you go ahead with full production and complete your purchase order, you’ll want to create a sales agreement contract. This can protect you against a wide range of common mistakes and issues which can occur when using a Chinese manufacturer.
Here’s why it’s important:
Crystal Clear Product Specifications
Misunderstandings over your materials, design, components, and colors are some of the most common reason why issues arise, especially in China. And here’s why:
- Important specifications can be lost in translation when communicating via email/skype
- It can be common for sales managers to confirm orders the manufacturer doesn’t have the capability to make.
- You don’t want to let your manufacturer will “fill in any gaps” on your specifications. If you do, they may “fill them in”, but it may not be to your liking. They may even use cheaper, poor-quality materials or components.
In your sales agreement, as I’ve previously mentioned, you can clearly state all of your product specifications, colors, logo, materials, components, and dimensions. You can also use this opportunity to add attachment samples and sample photocopies to make it even clearer.
It’s not uncommon for Chinese manufacturers to make huge promises on pricing and product quality to obtain your business, and then cut corners during production.
A contract can be a great way to make your manufacturer aware they’re at serious risk if they try to cheat you.
Do this by including the following terms:
- Specification of defects and damages that are not acceptable
- How a damaged or defective product will be compensated and within what time frame
- Your manufactured can’t request full payment until your products have passed quality inspection (see quality control plan below)
- Your manufacturer will refund your deposit payment if the quality inspection and/or product testing fails
Stating clear compensation terms will communicate to your manufacturer that any non-compliance will expose them to serious consequences.
And you should never pay the final amount before production. This tactic only works if you withhold until your products have gone through quality control or testing.
You should include a late delivery clause which will become active after a certain amount of days; counting from the date you pay your deposit. Usually, this is the stated production time +7 days.
You’ll need to specify a monetary amount (commonly 1% of total value), will be deducted from the final balance every day until the order is ready for delivery.
If your manufacturer has a number of different orders and scheduling is tight, and you have a late delivery clause, they’re likely to prioritize your order.
Be Taken Seriously
Chinese manufacturers are accustomed to signing these agreements with new buyers. If you don’t put forward a sales agreement, you’ll look disorganized.
Quality Control Plan
This is useful because it defines your expectations to your manufacturer before you start full production. And there are two types of quality control plans:
- The quality control plan to include in a contract with your manufacturer
- The control plan which decomposes production in each step (also known as control plan)
Quality Control Plan to Include in Your Contract
Defining this with your manufacturer won’t take too long, but can save you lots of time and money.
Here’s what you should include:
Timing of Inspections
You reserve the right to send one of your employees or representatives to the factory to inspect your product at any time.
Communication of Status During Production
- Your manufacturer should send you an email 3 days before they receive the main materials/components. And then a confirmation email on they day they arrive in the factory’s warehouse.
- Your manufacturer should send you an email 3 days before they start production. And then a confirmation email on the day they start production.
- Your manufacturer should send you can email 3 days before the first finished products are out of the line. And then a confirmation email on the day it happens.
- Yur manufacturer should send you an email 3 days before 100% of your shipment is finished and 80% is ready to ship. And then send a confirmation email on the day it happens.
- Your manufacturer should send you an email every time your products are sent for testing.
Quality Control Activities
You reserve the right to perform the following quality control activities, and any other activity not described below:
- Product inspections – random inspections of products, conducted based on the ISO2859-1 standard (single stage, normal severity, level to be determined as we see fit). Acceptable quality level (AQL) is 0% for critical defects, 2.5% for major defects, and 4.0% for minor defects.
- Lab tests – The manufacturer will have to send two samples to (name) laboratory for (required tests) tests, in order to respect the consumer safety law of the importing country. These samples must be extracted from bulk production. You may, or may not, ask the inspector to pick these samples.
- If your products fail inspection or lab tests, your manufacturer will contact you within 24 hours with a detailed explanation. If your shipment is delayed because of unacceptable quality, your manufacturer will bear the consequences.
- If a product inspection is refused, you have the right to ask for a re-inspection. The cost of which will be re-invoiced to the manufacturer in full.
- If all inspections are passed, your manufacturer still has to wait for your agreement to ship.
- Even if all inspections and tests are passed, they do not relieve the manufacturer from its contractual liabilities to your right for compensation for any apparent and/or hidden defects not detected by the inspection(s) and/or test(s).
The Production Control Plan
This document forces your manufacturer to do two things:
- Identify each process step, and indicate whether it is crucial (will it cause serious quality issues if improperly handled) or not.
- Define the quality control checks, what is checked, how often, using what method, and how it’s recorded.
After you’ve prepared these documents, it’s advised you or a trusted representative should spend time in the factory to explain how they work and what’s supposed to happen.
Now, you don’t have to do this. But, what it does it, is allows you to feel more relaxed about the whole process and stay on top of production.
1. Shipping: Ocean Vs. Air Freight
You’re going to be faced with two options: ocean or air shipping. Which one’s best? Which one should you choose?
We’ll it’s difficult for me to tell you, without knowing your situation. So, what I will do is discuss both in relation to cost, speed, reliability, and environment.
Typically, shipping by ocean is cheaper than air. However, this isn’t always the case because of how you are charged.
Airlines will bill you by chargeable weight. And that’s calculated from a combination of the weight and size of your shipment.
Ocean sea carriers charge per container. The most common containers are 20’ and 40’. And while weight can be a factor, the charge is usually based on the volume of shipment.
If you have a very large and heavy shipment, Ocean Freight will be the cheaper option. The smaller your shipment gets, the margin between the prices get smaller and sometimes air freight can end up being cheaper.
You’ll also have to account for destination charges. Doesn’t matter if you ship by air or ocean, you’ll have customs and destination fees. And while Ocean Freight tends to be cheaper, the warehousing fees at seaports are more expensive than airports.
You can use Universal Cargo to calculate shipping costs.
Air Freight is faster. If time is money because you’re on a tight deadline, this could more than make up for a higher cost. Ocean Freights can take around a month to arrive, opposed to just a few days by air.
However, you should note that technology is moving forward in the international shipping world. Ships are getting faster and canals have created shorter shipping routes. Some are even being delivered in only 8 days.
Air Freight tends to win the battle of reliability. Flights can be delayed due to weather etc. however, airlines are on top of their schedules. These schedules between major cities are daily, so if your cargo misses a flight it won’t cause a long delay.
Whereas ocean carriers have a bad rep. It’s not uncommon for ships to fall behind on schedule, and for most, a day or two won’t hurt. However, ships usually work on weekly schedules, so missing a cutoff means a longer delay.
Ocean freight wins on the environment front. Carbon Dioxide (CO2) emissions are much higher during air freight, and statistics show 1,000 kilograms of air freight will on average emit 500 grams of CO2 per kilometer on a standard cargo plane.
These emissions a reduced to 15 grams per kilometer when using ocean freight.
2. Shipping: Choosing Your Broker & Freight Forwarder
When you’re manufacturing in China, you’ll need to hire a customs broker and freight forwarder.
Customs brokers (or customs agents), are individuals or firms licensed to enter and clear your product through customs.
A freight forwarder is engaged in assembling, collecting, and consolidating shipping and distribution less than a trailer load (LTL) freight.
You’ll need to contact companies who handle both of these responsibilities to get a better understanding of what’s involved. Here are some tips you can follow when choosing:
- See if you can find a broker who specializes or has experience with your products or similar ones.
- If you need to clear your product through several ports, hire a broker with offices in those ports.
- The broker or freight forwarder must be fully automated with full connectivity to the tools necessary to partner with you.
- Freight forwarders: make sure you request and receive a copy of what was filed in AES (Automated Export System) on your behalf. Audit the information yourself and quickly correct any errors.
- Customs brokers will need access to not only your local customs but, also various web portals and cargo tracking sites. Your broker should be able to communicate easily with you via telephone, email, and fax.
- Ask for a reference from previous customers. You can also get unbiased feedback from ocean and air carriers.
- Have a written agreement and your freight forwarder and broker are on the same page about every aspect. It should include the scope of work that you want the broker to perform, fee structure for each service, and operation procedures and contacts. Periodically review the agreement with your broker or freight forwarder and make adjustments to reflect any changes.
- Expect delays and plan for adjustments. If the adjustment period lasts longer than one month, reevaluate your situation.
- If you have problems, call a meeting after two weeks to try and stop them.
- Mistakes happen but, unresponsiveness, rude behavior, and improper activity shouldn’t be tolerated.
Having a broker who can handle your customs business efficiently and accurately is an invaluable partner. Choose the wrong partner, and you can expect delays, errors on entries, and even fines. Take your time, do your homework.
Once you’ve gone through the process of testing, and you’ve got a sample on your desk which is exactly what you want; it’s time to place your order and enter the full production process.
You’ll want to create a purchase order form (PO). If you don’t, and you just accept the proforma invoice from your manufacturer you could be putting yourself in a dangerous situation.
It screams “inexperienced buyer” and you don’t control what goes into it.
If you write the PO, you control everything inside. And you can include all of your important information and make references to other documents that your manufacturer needs to comply with.
When you’re writing your PO, you should make yourself aware of local holidays and customs which could affect our order and it’s delivery.
Here’s what you’ll need to include:
- Full contact information of the person who follows the order in your organization.
- Full manufacturer company information.
- The complete Beneficiary Bank Account Details.
- Unique PO number, PO date, corresponding PO number of your customer (if any).
- List of the products with ordered quantity, unit price, and total price.
- The specifications of your product designs. Including labeling and packaging.
- Terms of purchase: currency, incoterm, loading port and receiving port, shipment date promised by manufacturer, payment terms, and penalty for late shipment.
- If you have a quality control plan, NDA/NNN or any other important documents, refer to it on your PO.
- Most important of all, get the PO stamped with the Red Round Chop and have the general manager sign it.
End Result: Your Very Own Product
Getting your own product manufactured in China can be a stressful, frustrating, nerve-wracking etc. And it’s going to take up a lot of your time. But, as you move forward, everything becomes easier and less intimidating.
The information you’ve read today should hopefully put you in an excellent position on what to expect during the process. And I promise you this…
…when you finally receive your very own product, you’ll have a sense of accomplishment you never imagined.