Returning Products to a Factory in China

I have a friend that has his own business and has been exporting goods from China/Taiwan on his own for a few years now.  He has recently had quality issues and it has finally gotten to the point that he can’t take sub standard product any more.  He wants to return a full 40’ container of product to the factory now.  So he called me up for some advice—what should he be watching out for?  Here’s what I told him:

  1. This WILL kill any good will you may have developed with your supplier.  Chinese style “cooperation” means that you allow for a few mistakes/problems and still accept the product for the purchase price.  Now you are calling their bluff and asking them to actually put up cash (redoing the order is cash out of their pocket).
  2. You may not get the product back into the country—especially if it’s defective.  Import restrictions- there are limits to what China (and all countries) will allow into their country.  Rejected product and or second hand items are often not allowed into China.  You need to confirm with a freight forwarder before you start negotiations with your supplier that this is really an option.
  3. You have to decide who will pay and where the cash will come from.  Phone calls and verbal commitments from your factory rep are ABSOLUTELY not enough.  You need to get a written, stamped document from a factory manager/owner that says exactly what you both agree to.
  4. There really is no such thing as credit—the cash has to come from somewhere.  Be careful- IF your factory says that they’ll “credit your account” you’d better know how much credit and what that credit will buy next time.  If you think that you’ll get another order for free (especially if you can’t send it back) you’re probably wrong.
  5. You will see the product again, somewhere.  If the product is usable, you can send it back into China, AND if you are getting a second order for free I can guarantee that the factory will sell the stuff to cover their costs.  They don’t care about your reputation in the industry—they are concerned about their bottom line, first.
  6. What will it cost you in terms of time, shipping costs, lost clients due to the production flaw, etc?  You need to balance the nature of the problem with the fact that giving the product back will destroy your factory relationship and your product will still find its way into the market and you’ll have additional costs (return shipping at least) that you don’t have now.

What’s the solution?  DON’T EVER SHIP BEFORE YOU (YOU PERSONALLY OR SOMEONE OTHER THAN THE FACTORY) APPROVE IT.  It doesn’t matter how “good” your relationship with the factory is.  It doesn’t matter if you’ve shipped the same thing before.  It doesn’t matter how big your order is or how many other future orders rely on this shipment.

If you’ve got product in your home country (and you’ve already paid for it) it’s too late to be finding out about problems now.

Written by David Dayton, Silk Road International

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