We are working with the local authorities in PR China to avoid fraud. Here are some of the recent scenarios we have seen. Please be aware of these scenarios and advise our clients as needed.
Background
When we decided in mid-March of this year to expand the focus of our business in China to assist in developing secure and efficient supply chains for CoVID-19 supplies and to use our extensive network in China for that purpose, we anticipated the development of a chaotic situation in China and the development of a number of risks for our client-partners.
The chaos developed as we anticipated, but not only from the China side. Western countries implemented, at times, wildly varying new policies designed to adapt to the rapidly changing situation resulting in product blockages at ports-of-entry and even product seizures, sometimes to the intended effect and sometimes to indiscernible intent. Policies were often not uniformly applied in China nor in the West with each port seeming to have their own policies.
Our customs clearance agent advised us on multiple occasions to, “Ship to Atlanta, but not to NY,” and similar advice for different ports on different days. Our own team members and supply partners warned us several times to hold shipments temporarily in China to avoid such issues in the ports-of-entry as they were aware through their own networks of industry partner what was going on both within China and the destination ports.
Risk of Fake Product
Many small companies in China, not unexpectedly, have appeared and have begun producing fake product that can be defective and/or under-performing. We are taking several steps to reduce the risk of our client-partners’ exposure to these products (and to other risks).
First, we use our network of established industry distributors to advise us about the business history of any potential product supply factories.
Second, we obtain business licenses and validate those using Chinese online resources.
Third, we check registrations where possible especially with the US FDA where supplier company and product registration and certification information can be readily validated.
Rapidly Changing Import Regulations
In response to rising risk, Western import authorities have been also rapidly changing their decision processes. This means that the rules that applied upon shipment-loading may not apply upon-shipment arrival resulting in shipment delays, blockages and/or return to port-of-departure.
We are staying abreast of these changes both by staying closely attuned to third-party accounts of their own experiences within our network of distributors, manufacturers, and agents, by staying abreast of Emergency Use Authorizations (EAUs), and by also being in direct contact with the import regulating authorities.
Inappropriate Business Licenses in China
It has recently become more often the case that a legitimate business in China is seeking to cash-in on the lucrative prices prevalent in the market. Many of these businesses, in their original business registration, included the term, “export,” in their filings. Upon initial inspection of licenses, it may appear that these suppliers are allowed by the Chinese government to export.
In point of fact, the license to export in China is a separate license that may not be subsequently applied nor issued. One not experienced in this detail may inadvertently assume, upon seeing the word, “export” on the business license that they are working with a company that is permitted to export.
In this case, the supplier receives 50% deposit payment, procures or prepares the order shipment and then sends it to the carrier (sometimes with some private incentive to individuals within the carrier to accept the shipment.) Upon preparation of shipping documents, the supplier receives final payment. When the shipment arrives at departure port, the “error” is discovered and the shipment is returned to the seller. In the mean time, the buyer has paid 100% of the cost and is left with no product and the cost of trying to recover their exposure.
Therefore we are obtaining actual export licenses and validating those with online Chinese government resources.
The New Supplier Group in China
China has recently enacted new regulations that have effectively created a cartel of permitted suppliers. Under this new regulation, only certain suppliers are permitted to export supplies.
This new group was put in place for several reasons. One reason was to reduce exposure of China and their companies to lawsuits and financial claims and obligations under international law due to fake or defective products.
The second reason was to reduce their national brand reputation exposure to brand deterioration also due to fake or defective products.
The third reason was related to market price control.
As part of steps by the Chinese government in creating this list of approved suppliers, the government has reinstated the commodity inspection process for each batch of products from the manufacturer. Finished products must now obtain an approved certificate from the local commodity inspection department prior to shipment.
To combat the risks of working with unapproved suppliers, we have obtained access to the list of approved suppliers of CoVID-19 supplies from the Executive Deputy Director of China Council for the Promotion of International Trade (CCPIT) who is charged by the Chinese central government with implementation of new regulations related to CoVID-19 suppliers.
By working exclusively with these approved providers we can be assured of best business practices and, due to enhanced government lot inspection, of best quality, authentic product.
Funds Transfer Final Check
In an effort to mitigate any perceived risk to our client-Partner’s funding we have implemented a new policy to make a second full review of our supplier information, licenses, and regulatory approvals immediately before transfer of client funds.
Final Comments
Our collective goal is to build trusted and efficient supply chains for our client-partners.
Please do not hesitate to reach out to me directly with any feedback you may have or suggestions for how we can improve our service. Many thanks for your continued confidence in Rain8 Group. We look forward to a very long and mutually prosperous relationship.
In the event that your client-partners require additional measures – we welcome those additional requirements as a form of continuous improvement.
While we cannot assure specific products performances nor the behavior of our suppliers, we are committed to meeting the needs of our client-partners to the best of our abilities.
Kind Regards,
Tracy Crawford | CEO Rain8 Group LLC
Contact
Contact us here: https://www.raineightsourcing.com/contact for more information about the contents of this article or how we may assist you with a custom product or service search to meet your business needs.
About
Rain8 Group, http://www.raineight.com/, has over 20 years experience in China market-entry and business development. Rain8 Sourcing, https://www.raineightsourcing.com/, has over 10 years experience in developing and managing supply chains in China. Rain8 Group and Rain8 Sourcing are wholly-owned subsidiaries of Precision Arrow Placement LLC, http://topranger.us/, a producer of wired and wireless cloud-based sensor networks operating over LoRa WAN for the industrial and agri-tech markets.
Partners
Rain8 partners with the Chinese central government and with influential Chinese industry organizations to achieve superior results for our clients including:
○ product quality,
○ product authenticity, and;
○ security of financial transactions.
Visit our partner, The Chinese Council for Promotion of International Trade (CCPIT) here: http://en.ccpit.org/info/index.html
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