Announcement: We are Now Following the Laws
Sorry for the lack of posting this last month. Contrary to popular opinion (wishful thinking?) I was not arrested for protesting. I was on vacation, and then at two different trade shows in the US, and then in a couple of factories for almost all of the last week.
Some interesting mail arrived over the vacation and I thought I should share. This is a letter from an actual supplier:
DEAR ALL CLIENTS:VERY IMPORTANT NOTICE!IN FUTURE, ALL THE BUSINESS SHOULD BE DECLARED AT REAL PRICE AND REAL AMOUNT, CAN'T BE DECLARED AT SMALLER AMOUNT!BUT WE CAN STILL HELP TO ISSUE THE SMALL VALUE INVOICES!!PLEASE NOTE THAT WE CAN'T DECLARE LESS AMOUNT, BUT CANISSUE SMALL VALUED INVOICES!FROM NOW ON, CHINA GOVERNMENT FORBID ANY PAYMENT TOCOME TO CHINA WITHOUT A CONTRACT, AND THE CONTRACT HAVETO BE REPORTED TO THE GOVERNMENT, ALL THE DEPOSIT AND PAYMENTRECEIVED HAVE TO BE SAME AS CONTRACTED!SO IN FUTURE, THE PAYMENT AND DEPOSIT HAVE TO BE PAID ON TIMEAT RIGHT AMOUNT! OTHERWISE, THE BUSINESS WILL BE DIFFICULT TO GO ON.CHINA'S RMB CURRENCY APPRICIATED TOO FAST BECAUSE OF TOO MUCHFOREIGN CAPITALS FLOW TO CHINA, DISTURBED OUR FINANCIAL SYSTEMTOO MUCH!THAT'S WHY CHINA GOVERNMENT NOW PUSH HARSH MEASURES TO FORBIDDEN SUCH HAPPENING AGAIN.THANKS FOR YOUR KNID ATTENTION,
This is telling for a number of reasons. First, obviously standard practice for many companies in China is to lower the invoice amount to avoid declaration penalties (save money). If this is a problem for you (and it should be since it’s illegal in the US and other countries) then you need to be involved in the shipping process even if you are buying product FOB.Second, public announcements of compliance with legal standards are necessary to at least appear to be following the rules (i.e. the default assumption is that no one is). To be sure that your suppliers are following the standards you require you need to confirm samples and double confirm production and have additional independent confirmation for each step in the process that you will be held accountable for.Third, prior to this year exporting from China was relatively easy and buying (read: not necessarily qualifying for) the licenses, clearances, export visas, etc. was relatively common. Since the clampdown last year on toy factories there has been a concerted country-wide effort to require that everything leaving China has a confirmed factory of origin.Things are certainly changing for the immediate future and hopefully for the long term. But in the mean time you still must continue to be working under the assumption that the bottom line is driving production/purchasing decisions. Despite the increasing stringent legal standards if the RMB values higher against foreign currency and domestic inflation increases this will increasingly be the case.