PPE Part 1: The dangers of buying PPE from “your guy’s” “China guy”

Insider’s Guide: How to buy PPE from China during Covid-19 pandemic.

PPE Part 1: The dangers of buying PPE from “your guy’s” “China guy” Insider’s Guide: How to buy PPE from China during Covid-19 pandemic.

A growing number of people are looking into buying PPE from China for supply as the world scrambles to source equipment during the Covid-19 pandemic.

Introduction to our series on buying PPE from China during the Covid-19 pandemic.

A growing number of buyers are looking to China for supply as the world scrambles to source personal protective equipment during the Covid-19 pandemic.

China sourcing was never easy, but the sourcing game has been taken to a whole new level of complexity as the pandemic turns the supply chain upside down.  A totally new set of dangers now exist on top of the common pitfalls that have plagued Chinese supply chains for decades.

In this series of blog posts and video tutorials, the author will walk the reader thru 6 essential steps for safely sourcing PPE from China.

Safely source PPE from China: 6 Steps

  • Is the seller a real company? Avoid the scams
  • If yes, are they making the products you actually want?
  • If yes, can this supplier export out of China to you?
  • If yes, can you import into your county?
  • Does it still make economic sense after factoring in the costs of air or sea transportation?
  • If the goods arrive in your country’s port, how to ensure they make it to your door?

Before we explore the steps in detail, let’s first confirm these articles are right for you as the reader.

Target Audience for this article on how to buy PPE from China during the Covid-19 pandemic.

In my consulting practice during the past few months, I have found that the potential clients fall into 3 categories.

This series of articles is written for readers who fall into Groups 2 and 3. If you fall into group 1, shame on you and consider the arrest of this joker who horded masks in NYC before you make your next move.

Insider’s Guide:  How to buy PPE from China during Covid-19 pandemic.

Part 1:  The dangers of buying PPE from “your guy’s” “China guy”

Key Steps:

  1. Is the seller a real company? Avoid the scams
  2. If yes, are they making the products you actually want?
  3. If yes, can this supplier export out of China to you?
  4. If yes, can you import into your county?
  5. Does it still make economic sense after factoring in the costs of air or sea transportation?
  6. If the goods arrive in your country’s port, how to ensure they make it to your door?

Step One in Detail: Is the seller a real company? How to avoid the scams?

Despite their best intentions to get PPE into the hands of those that really need them back home, an alarming number of importers are falling into a growing list of new and old China Sourcing pitfalls.

In this report we will look at all the pitfalls and offer some best practices to source safe.  But to start off, let’s looks at a case study.

Case Study: Buying from “My friend’s friend’s contact in China”

The following email came to my desk the other day. It has been slightly modified to protect the identity of the buyer, but the question is quite common and the answer is worth sharing.

Mike,

Thanks for your articles on doing business with China.  I have been approached by a contact of a contact who tells me he is in the higher levels of China government and he can get me a good source of PPE. I am an expert who has been invited to lecture many times in China in the medical field and that it how he heard about me.  How do I know if it safe?

My reply:

Contacts are very helpful, but before you place a large purchase order, especially if any upfront payments are to be made, it would be wise to conduct some basic due diligence.

Here are the two most common due diligence reports:

Corporate Assessment (CA): Stability, Reputation & Assets of a Chinese company

Red Flag Assessment (RFA): Risk, Scams & Fraud in a given transaction

The two reports are not expensive. Hundreds not thousands of dollars.  So well worth the money in my opinion.

The links above will take you to sample reports that you can download.

Even if you end up not hiring my firm, please please please make sure to hire a professional due diligence provider.  Yep, you even need to do due diligence on the firm you are hiring to conduct the due diligence on your supplier!

The two reports are designed to complement each other and it is recommended you conduct both forms of due diligence on suppliers.  By engaging both reports, you will protect yourself from both possible dangers:

Danger One:  A legit business issues you a bad deal.

Danger Two: A scam/fake/unlicensed business issues you what appears to be a fair deal.

Because a legit seller could issue unfair terms of trade in your particular deal, it is important to evaluate both the company and the given transaction.

Here is a quote for Due Diligence using the preferential rates in place to help out during the 2020 Covid 19 pandemic. Rates are listed in Chinese CNY (also known as RMB), but payment can be made in any major currency at the day’s exchange rate.

Click to enlarge image
I welcome any additional questions you may have.
Glad to help,
Mike

More Notes on Due Diligence (Corporate Assessment) during Covid-19 Pandemic

Keep in mind that Due Diligence is essentially an investigation of a business prior to signing a contract to ensure the supplier is who they say they are.

At the moment there are A LOT of sellers claiming to be manufacturers of PPE.  Many are scams. But even the ones that are actual manufacturers may not have a lot of experience with PPE as many companies have pivoted away from textiles, toys and electronics into PPE to meet the global demand.  Also, thanks to the stay at home orders around the world, people aren’t shopping as much.  So Chinese suppliers are going out of business at a pace I have not previously experienced before during my 3 decades doing business in China.

With that background in mind, a Due Diligence report should cover the following:

  • Reputation: How do customers, employees and suppliers view the factory?
  • Financials: Are they in sound shape and not likely to close their doors in the middle of your order?
  • Legal: Do they have any court cases, past or present?
  • Confirmation of Factory Profile: Does the picture of their business given to you by their sales team and website match the information on record with the local government?  This could include: scope of business (trading vs. manufacturing), ownership, size, history, export experience, registered capital and so on.

Pro Tip:   5 Simple Ways to Source Products Safely from China

#1: Do your due diligence on potential suppliers and only buy from legit businesses.   (Watch the tutorials mentioned in the “Additional Resources” section below)

#2: Use a bilingual contract and purchase order (PO).  This Chinese lawyer explains why.

#3: Make sure the name on the supplier’s bank account matches their business license and contract.   If these items are not the same, you will have little recourse in the event the supplier underperforms and you need to go to court.

If you are unclear on why, please check out the additional resources below.

#4: Don’t release payment until an independent 3rd party as check the quality of goods before they ship out.

#5: If the deal is too good to be true, it is probably a scam.

Avoiding Scams in China: Additional Resources

Articles on the subject of Avoiding Scams in China

 

Short Videos about Avoiding Scams in China

 

Podcast:  Interview with the Global from Asia team.

https://www.globalfromasia.com/how-to-avoid-being-trapped-in-a-chinese-factory-scam-order/

Full 1-hour tutorial covering Safe China Sourcing

The section on scam avoidance starts at the 10-minute mark.

Video tutorial:  https://www.youtube.com/watch?v=0sGfMqzRryQ

revised from: Apr 4, 2020

About the Author: Michael J. Bellamy

About the Author: Michael J. Bellamy

Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses.  Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.

A featured presenter on China issues at seminars, trade shows and corporate events across the globe.

Learn more about Mike and AsiaBridge Law at
https://www.asiabridgelaw.com/business-advisory-services/

Mike is the author of “The Essential Reference Guide to China Sourcing
(available on Amazon).

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