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Molds and Mold Fees in Chinese Manufacturing

November 29, 2009

When manufacturing many products, especially plastic, rubber, and confectionery products, the manufacturer will begin work by creating a mold or using a mold provided to them. Molds are not an optional element of the manufacturing process, but a necessary element that makes it possible to produce items in large quantities and ensure that each product looks like the others.

Those who wish to manufacture products in China are often unaware that a mold is required and, depending on the type of product, the cost to produce the mold can range from a few hundred dollars to thousands of dollars. It is important to be mindful that a product comprised of several distinct pieces may need a mold for each piece, meaning the total cost of molds can be quite expensive. Further, like everything else, a mold itself is a product that can be constructed of high-quality materials that can be used to make millions of products or of lower-quality material that may only yield a few thousand products.

Sometimes, manufacturers will provide a quotation for a product that includes the cost of the mold and sometimes they will not. When you are given a price quotation, you should check to see whether the cost of the mold is included. One way or another, the manufacturer will charge you the cost of those molds. Just knowing about the mold costs will enable you to better negotiate the total cost for manufacturing: we discuss these costs openly with the manufacturer to help reduce the production costs for our clients.

It is also recommended to establish ownership rights to the molds that are produced. If a manufacturer closes shop or if you become dissatisfied with the manufacturer, you may find it prohibitively expensive to switch manufacturers if you do not have rights to the molds that are used in the manufacturing process. Never put yourself in a "manufacturer lock-in" position where you are not free to move to a different manufacturer who will offer better service, higher-quality, or lower prices.

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A Forum for Questions about Business, Travel, Culture, and Language in China

September 20, 2009

Every week, Terrapane receives a number of questions about doing business in China. In some cases, those questions ultimately result in a project that we can work on to help our customers accomplish some objective in China. In other cases, we merely serve to provide some professional advice on engaging China. That's OK, as it is a part of doing business.

While Terrapane's success is ultimately driven by doing real work for customers to help them succeed, we aspire to be of some value to everyone whether we work together on a project or not. To that end, we decided to create a discussion forum, aptly named Terrapane Forums.

On Terrapane Forums, everyone is welcome to subscribe, ask questions, post answers, etc. It does not matter whether you are a customer, competitor, supplier, manufacturer, or somebody who is just interested in learning something about China. We hope this site will be a lively forum for exchange of information and ideas.

We look forward to seeing you in the Forums!

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Successfully Avoiding and Handling Legal Disputes in China

September 13, 2009

Doing business in China is like doing business anywhere else in the world. There is a risk of non-payment, a risk of non-delivery, and a risk of being misled entirely. Even though risk exists, risk is simply a part of doing business and it must be dealt with intelligently. To be successful in doing international business, you must place a certain amount of trust in business partners, but the risk is always present and you need to be mindful of this fact.

So what do you do when you purchase something from China and find out that what you purchased is not what you really purchased? What do you do if a manufacturer steals your product designs and sells your product through other distribution channels, effectively robbing you of any potential profit? What do you when you send money to a company and never hear another word? Sadly, all of those things have happened to people doing business in China and, unfortunately, they come to Terrapane for help after the fact.

Of course, we are happy to help customers with issues like these in China, but really prefer to work with customers from the beginning to avoid these situations in the first place. Legal entanglements can be expensive and they are definitely best avoided. So, we thought we would share some advice to those who are looking to do business in China and who prefer to go at it alone, or those who have encountered problems and do not know what to do next.

The first rule of thumb is to never send a lot of money to China without some assurances that you will receive what you pay for. The definition of "a lot of money" really depends on you. If you do not want to risk losing it, do not send it carelessly. Even if you send money to what appears to be a manufacturer, it does not necessarily mean it is truly a manufacturer or that the manufacturer is honest. Until you establish a certain level of trust, exercise extreme caution.

When sending money to China, it is best to use a trusted third-party. Sometimes, Terrapane will hold payment for goods and release that payment only after we inspect the products ourselves. When going at it alone, you should consider getting a Letter of Credit (LC) from your bank, if the manufacturer will accept that. In any case, you really should seek the services of a trusted third party to ensure you do not get cheated.

When a company requests for you to send money for a product, they will produce a Pro Forma Invoice (PI). Never send money without one of those. Further, any such invoice should be stamped with the company's seal. If possible, request that they fax it, scan it, or mail it to you, so that you can clearly see the company's seal on the document.

When you do send money to China, make sure the beneficiary is a company, not an individual. Inside any company, there are sometimes unscrupulous individuals who will accept your money and then deny every having known you, quite often giving you instructions to wire money to a friend or associate. It may be difficult or impossible to show that the company is at fault if you carelessly send money.

As time goes on, you may start to build a trust relationship with your partner. Even still, you should exercise caution. We have seen cases where trusted partners turn into thieves and sometimes deploying rather elaborate webs of deception. Be very wary if your business partner suddenly requests that you send money differently than you had done previously, such as a change in the bank or beneficiary.

When you do encounter legal issues, be mindful that the legal solutions will cost you money. You will need to seek the services of a trusted attorney and, sadly, there are a lot of dishonest attorneys in China. In fact, some attorneys will accept your payment and also accept payment from the other party in the legal dispute! When we are hired to engage in legal disputes, we take extra precautions to make every effort to determine which side of the courtroom our client's attorney is truly representing by engaging directly in the attorney selection and sending staff to visit offices of prospective law firms.

Having said all of these things, this blog posting was not intended to scare you. More often than not, businesses in China are honest and you will get what you expect. Even still, it is prudent to be mindful of the fact that there are cases where the manufacturer misunderstood instructions, misrepresented the products they had to offer, or had employees who were deceptive. It is for these reasons that Terrapane takes care in selecting manufacturers, handling our customer's intellectual property, and dealing with financial transactions. We want our customers to have a good experience doing business with China.

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Managing Risk and Using Resources Wisely

July 22, 2009

With any project, your goal should be to get the job done on time and within budget. You should strive to find every opportunity to reduce your total cost when engaging China, but you should also make sure that you do so without fear of making a serious mistake.

When a company decides to engage China in order to import goods, to establish offices, or to carry out other business functions, there are often many places where things can go wrong. It takes time to learn the procedures, find the right products, establish the right relationships, etc. Inexperience can result in long delays, unacceptable product quality, government fines, wasted human resources, and frustration. Worse, you may spend far more money than you planned.

If this is your first venture into China, your company may be best served by keeping its people focused on business and hiring Terrapane to help with your engagement in China. Terrapane will work with you to help guide you down the right path to ensure success, reducing wasted time, and avoiding many of the pitfalls.

No matter whether you go at it alone or work with Terrapane, there is no question that China represents an incredible opportunity to grow your business. Just make sure you manage the risk against the reward carefully.

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Chinese Culture

April 8, 2009

When you start to do work with China, you may find that communication is a little difficult, but manageable. You may be fortunate enough to find that your Chinese business partner has an English-speaking person who is quite fluent and communication flows more smoothly. However, we have often found that cultural differences can still have a significant impact on your business, even in the face of what seems to be good verbal communication.

While there may be no intent to mislead, if your company does not have a fluent Chinese speaker representing you, what you said and what your business partner in China thought you said may not be precisely the same.

We have seem on numerous occasions where a Chinese company will employ the services of an external translation company and that translation company does not always accurately convey the meaning of spoken words. Sometimes it is due to misunderstanding that happens as a result of not being knowledgeable on a particular subject. Sometimes it is due to what might be called "perfect translation" where grammar is translated perfectly, but the meaning is not accurately conveyed. For example, how does one translate "a month of Sundays" or other such idioms into Chinese? English and Chinese are both filled with phrases that do not translate perfectly.

There are other occasions where the translator would translate words so as to be favorable to their employer. In fact, if the translator is not your own, you can almost be guaranteed that you do not have a neutral third party present. For these reasons, it is very important to have a person in your corner to ensure that your message is accurately conveyed and your expectations will be met.

Language is not the only cultural difference you will encounter. It is impossible to put into just a few words all of the differences between American and Chinese cultures, but without a doubt, making the right moves socially in China can make a difference in the success of your business.

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Quality versus Cost

February 5, 2009

Sometimes going to China and getting the cheapest price does not always translate into the highest profit. This is a good lesson often learned the hard way.

Manufacturers that offer the cheapest prices often suffer from poor communication skills, poor product quality, poor customer service, or other. You may find yourself spending much more time and money correcting problems that should have never arisen in the first place. Do not let your profits erode due to communication problems or the selection of a bad manufacturer.

In addition, you should always take necessary steps to ensure product quality before your product ships from China. To that end, you should consider using the services of a quality control company to inspect your goods and reject products that do not meet your product quality requirements.

What is this about product quality requirements? This is one of the more important considerations that are often overlooked by companies when they first engage Chinese manufacturers. It is vitally important that you define the quality standards for your products, which might include material composition, stiffness, elasticity, resistance to wear, shelf life, or other specifics.

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China Manufacturing and Sourcing

December 7, 2008

Finding a manufacturer when sourcing products can be difficult if you do not know where to start.

In many cases, people will find web sites that list manufacturer after manufacturer in China and spend hours contacting those manufacturers. Far too often, those "manufacturers" are not manufacturers at all, but merely middlemen who are looking for an opportunity to earn a commission on your business. While some are successful in finding what they're looking for, there is a real danger that your business is "stuck" with a middleman indefinitely.

These middlemen or "trade companies" are useful in the industry. For companies that are looking to make a one-time purchase of a particular item, then a trade company is a reasonable option to choose. Often, the buying volumes are lower than what a manufacturer would require (though not always!) and you can shop around between various trade companies in order to get a good price.

However, if you want to import large volumes or have products custom-made to your exacting specifications, a trade company is a very bad choice. There are many reasons why we can make that assertion, not the least of which is that your company loses some level of control. For example, suppose you create a new product and sales skyrocket. Suppose the trade company you are working with decides they want a bigger commission. What can you do? You may have no idea who the real manufacturer is. We have seen this before where a business is at a critical juncture and is seriously encumbered by a trade company.

It is possible to bypass the trade companies entirely and work directly with manufacturers to get products made. Often, order quantities can be negotiated and prices are always more favorable when creating new products.

If you do not know how to tell whether a company is a manufacturer or a trade company of some sort, we can always help to find out for you. Whatever your needs, we are happy to help you work with either trade companies or real manufacturers to source your products.

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Helping North Carolina Companies Do Business in China

September 6, 2008

Terrapane works with businesses and individuals across the United States to help them do business with China, while also working with Chinese companies who wish to business in the United States. While the company has an international reach, service starts in our own back yard.

Based in North Carolina, Terrapane helps businesses throughout the state succeed with their engagements with China. Over the years, we have witnessed an explosion in the interest to outsource manufacturing, source products, and open new market opportunities for North Carolina businesses in China.

China represents a huge opportunity for businesses growth. With an estimated 1.3 billion people in China, strong economic growth in recent years, and commitment from the Chinese government to be an active member of the World Trade Organization, it is simply impossible for any company to ignore the potential China has to offer.

Going forward, it will be increasingly important for the state of North Carolina and the businesses based here to reach out to China in order to help strengthen and grow the economy and the businesses based in the state. Terrapane can serve as an important player in helping to facilitate successful growth for your business.

We invite you to give us a call or send us an e-mail if you have any questions about doing business in China. If your company is based in North Carolina, we would be happy to schedule a visit to come talk to you about what we can do to help your business succeed as it considers becoming a major player in the growing Chinese market.

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