# China Sourcing Guide

## Table of Contents

1. [Supplier Types](#supplier-types)
2. [Verification Checklist](#verification-checklist)
3. [Pricing Negotiation](#pricing-negotiation)
4. [Common Pitfalls](#common-pitfalls)
5. [Trade Terms](#trade-terms)

## Supplier Types

| Type | Description | Pros | Cons |
|------|-------------|------|------|
| **Manufacturer** | Owns factory, produces goods | Best price, customization | Higher MOQ |
| **Trading Company** | Buys from factories, resells | Lower MOQ, multi-category | Higher price, less control |
| **Factory Trading** | Factory with trading arm | Good price + flexibility | May outsource some items |

**Rule of thumb**: For high-volume standard products, go direct to manufacturer. For small orders or multi-category sourcing, trading companies add value.

## Verification Checklist

Before engaging a supplier:

- [ ] Business type (Manufacturer vs Trading Company)
- [ ] Years in business (prefer 5+)
- [ ] Certification badges (Audited Supplier, ISO 9001, etc.)
- [ ] Main products align with your needs (not a random product line)
- [ ] Location matches industry cluster (e.g., Shenzhen for electronics, Yiwu for small commodities)
- [ ] Response quality (detailed vs generic replies)
- [ ] Sample availability and pricing

## Pricing Negotiation

### Key Factors

- **MOQ**: Higher quantity = lower unit price. Always ask for price tiers.
- **Payment terms**: Common terms are 30% T/T deposit + 70% before shipment.
- **Sample cost**: Usually $50-200 for custom samples; may be refunded on bulk order.
- **Incoterms**: FOB (Free On Board) is standard; compare FOB vs CIF for total cost.

### Price Breakdown Request

Ask supplier to break down: material cost, labor, packaging, margin. Helps identify where negotiation room exists.

## Common Pitfalls

1. **Too-good pricing** — If it's 50% below market, quality is likely compromised
2. **Ignoring MOQ** — Don't assume you can negotiate MOQ down significantly on first order
3. **No sample first** — Always order samples before bulk, even if supplier has good reviews
4. **Single source** — Get quotes from 3-5 suppliers minimum
5. **Skipping inspection** — Use third-party QC (SGS, Bureau Veritas) for orders >$5,000
6. **Vague specs** — Provide detailed requirements with tolerances, materials, colors (Pantone), packaging

## Trade Terms

| Term | Meaning |
|------|---------|
| **FOB** | Free On Board — seller covers costs to port of shipment |
| **CIF** | Cost, Insurance, Freight — seller covers to destination port |
| **EXW** | Ex Works — buyer handles all shipping from factory |
| **MOQ** | Minimum Order Quantity |
| **T/T** | Telegraphic Transfer (wire) |
| **L/C** | Letter of Credit (bank-guaranteed) |
| **OEM** | Original Equipment Manufacturer (your brand on their product) |
| **ODM** | Original Design Manufacturer (their design, your brand) |

## Industry Clusters

Major manufacturing hubs by category:

- **Electronics**: Shenzhen, Dongguan (Guangdong)
- **Textiles/Apparel**: Shaoxing, Keqiao (Zhejiang)
- **Small Commodities**: Yiwu (Zhejiang)
- **Furniture**: Foshan (Guangdong)
- **Auto Parts**: Taizhou, Wenzhou (Zhejiang)
- **Hardware/Tools**: Yongkang (Zhejiang)
- **LED/Lighting**: Zhongshan, Guzhen (Guangdong)
- **Toys**: Shantou, Chenghai (Guangdong)