Made In China?
By Alan McCabe,  President, Global Source Canada Ltd.

When someone mentions import, do you automatically think China?

Although our industry and the media would lead us to believe they do,
not all imported products originate in China. Imported products come from all over the world including the United States, United Kingdom, India, Korea, South America and, yes, China.

I would like to focus on the myths and reality of products imported from China.

We have been inundated with stories and reports of lead paint in children’s toys. We have seen dirt cheap bucket/wringer combos flood our marketplace. We have been told that all imported products are 30 per cent cheaper. And, we have all heard about a friend of a friend who purchased full containers and received non-sellable product. All these stories have some form of truth but they seem to travel faster than an urban legend.                                                         

The industry, along with the general public, has led us to believe that Chinese products are of poor quality or second rate. The reality is that below par and poor quality products do not have to travel by ocean. Every manufacturer is different and produces various grades or levels of product, whether they are in your own backyard or across the ocean.

The public has been convinced that all Chinese workers make $1 per day and that the work is performed in sub-standard conditions by 12-year-old children. Bad news sells. We see it on the evening news and we read about it everyday in the newspaper.

If these stories had originated in Canada, they probably wouldn’t have been talked about in such detail because the truth would be much easier to determine and we would have passed it off as twisted truth.

The Chinese factories that I visited do not use child labour, they get paid more than $1 per day ($250 per month is the norm), they don’t cut corners with ingredients or specifications, they don’t use chlorine to whiten paper products, and their facilities are cleaner and more organized than most of the Canadian factories that I have seen.

The Chinese run their businesses the way most manufacturers do. They motivate and train staff, they use production forecasts and schedules, they have extensive quality control programs and audits, and they are extremely honoured and proud of the fact that their products are accepted in Canada.

There is a fear of the unknown that resides in all of us. However, if you do your homework and ask the right questions, you will be able to determine if importing is right for your company.

You may choose to set up the whole importing program yourself or you may choose to deal through an import broker, either way, you will need to answer the following questions:

  •  Are you dealing with the Chinese factory directly or is there another layer (middleman) in China?
  •  Are you or your broker focusing on this program full-time?
  •  Has the factory been qualified by you and/or your broker? i.e. ISO 9000, Good Manufacturing Practices (GMP) Certifications, References, etc.
  •  Is the factory environmentally conscious? i.e. non-chlorinated whitening, recycled product, etc.•    Can the factory private label and if so, is there an artwork or set-up charge?
  •  Are the factories you are dealing with currently doing business in Canada, either directly or indirectly?•    What is the production capacity of the factory and how much of that volume do you and/or your broker require?
  •  Is there a pre-payment policy, if so, how much and when? Thirty per cent with a purchase order (PO) is the industry norm.
  •  Does the factory have the ability to mix different product groups on one container and if so, is there a cost for this service?
  •  Will you be saving money on each product and/or container?
  •  Is the product cost “All In” including product, duty, ocean freight, local freight, customs/tariffs, etc.?
  •  Will the product be consistent on every order?
  •  What is the total number of factories involved in your import program?
  •  Do you or your import broker have staffed offices in China?

Make sure you understand the complete process because even with all this information, you still have to look at other factors that will affect the cost of your product as well as delivery dates. These factors include peak season container rates (pre-Christmas); on-going, devalued U.S. currency; Chinese New Year; volatile Canadian currency; tariff changes (Canada and/or China); and the fact that the Canadian and Chinese ports are nearing capacity.

Some products that arrive in Canada are floor loaded. This has to be weighed against products arriving on pallets – i.e. a 40-foot container floor loaded with 1000 cases of product will take four to five hours to unload, palletize and shrink wrap.

Assuming you pay one person $15 per hour and your pallet cost is $5 each, your cost will be approximately $185. If the same product arrived palletized, it would take one hour to unload and should have approximately 22 pallets. Assuming you pay one person $15 per hour and your supplier charges you $4.50 per pallet, your cost will be approximately $114.

Floor loaded versus palletized works out to a dollar difference of $71 extra per container for floor loaded. Not bad when you consider your product cost savings.

If you understand the entire process and it’s managed properly, importing can add dollars to your bottom line while giving you a competitive advantage over your competitors.

A proper import program will allow you to fly under the radar and you may realize that purchasing from China isn’t much different than purchasing product from the U.S., Britain or France.

If you are sitting on the fence wondering whether to enter the import game or not, the first thing you need to ask yourself is “What do I want to gain?”

Not all imported products from China are less expensive. Freight can add 25 to 40 per cent to your FOB (cost in China without freight) China price. Be creative with this portion and it could dramatically increase your bottom line. The more products in a container, the less expensive your per case cost is. All products are based on supply and demand. The population of Canada is relatively small compared to that of the U.S., so it makes it more expensive to purchase product that is only marketed, accepted and sold here.

The whole process from purchase order to product delivery at your location can take four to six weeks and possibly longer depending on time of year and port availability. It is important to plan your purchase cycles accordingly.

Only purchase product that you are currently selling. Don’t purchase a low cost item and then try to find a Canadian buyer. Product that sits on your shelf for an extended period of time will drastically reduce any cost savings you had.

Import products are not sold through pictures in a catalogue. They are examined and scrutinized by weight, size, colour, texture, etc.

The products you provide come and go from the warehouse on a daily basis without anyone opening a box. However, when it’s import product, all eyes will continuously focus until everyone has some level of comfort level.

Gain as much knowledge as possible. Get everything in writing and ask a lot of questions. You may even want to consider a non-disclosure and confidentiality agreement.

Remember to stay focused and build solid relationships with brokers and factories. If you don’t sell staplers and doors now, don’t pioneer a new line in unfamiliar waters because of cost alone.

With imports, you have the ability to “Cherry Pick” the line. You only purchase what you need and your only requirement is one full container.

Always remember to judge a person/company/program on how they handle and solve issues because whether it is import or domestic, issues will occur. We are only human.

Good luck and good selling.