issue no.8 spring 2016 23
goods. It’s much better if you can move to telegraphic transfers (TTs), which you only pay on release of your goods to the freight forwarder,” says Sweeney. “Another option is to find a truly independent quality assurance auditor who checks and photographs the products before the letter of credit is released. But the auditors must not be from the local area and should have a reputation for independence.” With respect to Bangladesh, which produces 65% of the world’s T-Shirts, Sweeney says “It’s important to understand large parts of the country flood and know lead times to get goods out.” In terms of finding good factories in Sweeney says “Follow the European [buyer] trail. There are some state of the art factories supplying Europe, who have imposed very high standards on the factories, even crèches. Another tip is that if you are ordering something 99% like other items they make, then you are much more likely to get what you ordered – assuming you meet the minimum order size of 10,000 units.” With respect to Cambodia, Sweeney has a great tip “Many of the factories are now owned and run by Chinese companies. If you are dealing with
a Chinese company that owns factories in Cambodia, you can use them to access the substantially lower prices [up to 40%] and save import duty into Australia. It takes longer, but the savings are worth it.”
OzTramolines Founder of OzTramolines, Richard Haby, started selling out of his garage, and now imports 25 containers per year from China. He also ships directly to the US and UK. “Be aware that their customs are very different to ours. Be careful not to offend,” says Haby. Unlike others who deal directly with factories Haby uses a reliable agent – to whom he pays a volume based commission, to source products and liaise with factories. “I would not have my business without him,” says Haby. “If something goes wrong with an order – a warranty issue for example, the factory does not want to hear from me, but my agent can negotiate a solution. My agent employs six of his own staff, speaks good English, visits Australia regularly, and provides a similar service for other Australian companies, so knows the way we do business.” Haby says “An agent is great but I still go to the factories myself
each quarter, especially when we introduce a new product – to ensure it is right. Only I can do that.” “One reason I visit regularly is to avoid ‘quality fade’ – something unacceptable to Australians but normal in China. This is where, once they have produced an initial batch of quality items to your specification, and set a price, they tender out your work to other factories, each time secretly, and step by step, reducing the quality of the materials used, so as to maximise their profits.” The term “quality fade” was coined in the 2009 book “Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game,” by Paul Midler, which chronicles his years spent working with American businesses sourcing products made in China.
Expert advice “It’s important in terms of lowering input costs and managing cash flow that importers seek expert advice and understand both goods and service tax and customs duty implications of buying from particular countries,” says Eugen Trombitas, an Auckland based partner at PWC.
Spark Magazine Spring 2016 The fuel for business