Procuring gloves, masks, and other PPE from Asia is not for the faint of heart! Let’s understand what has changed since the COVID-19 pandemic broke out.
This article was initially titled “Procuring masks from China.” But if you have been involved in this business over the last few months, you probably saw how the situation has developed. Just yesterday I had a call with a friend in France, who submitted a Letter of Intent to source a million+ Euro worth of disposable powder-free nitrile gloves. The seller is a Chinese lady based in Germany buying from a factory in Malaysia owned by her Chinese partner. Prior to that, they were in touch with a hedge-fund in Switzerland that stockpiled large quantities of PPE and is now retailing that in the EU. Another foreign friend based in Hangzhou (China) has just transacted with a trading company in China, sourcing from Vietnam, to export to the UAE.
Back in March, the main challenge was to find a factory capable of providing proper certificates. Today the challenge is to just find a factory. The market is full of middle-men, and the more layers you add to the process the more red flags you will see popping up along the supply chain. Consider this: When the COVID-19 pandemic broke out in Italy, the starting price for face-masks in China was RMB 0.2 (USD 0.028) a piece for large quantities. Those were retailing at RMB 20 (USD 2.8) in Europe. No wonder everyone I knew in China, from English teachers to lawyers, became a face-masks trader.
Where to start?
Based on my experience living and doing business in Asia over the last years, I have put together some initial questions you might want to consider before you place that first order.
- Do you have the license to import that type of products in your country?
- Wait, is it legal to import them in your country these days?
- Is the government easing up regulations to import them or making it more difficult? Some countries went as far as imposing a ban on importing foreign-made PPE. Others like the US introduced temporary exemptions.
- Do you run the risk of having them seized by the government/customs when they reach destination? It happened in Europe.
- Did the import duty change over the last few weeks?
- Are the face masks and other PPE compliant with the local certifications in your country?
- Is the certificate you received from the factory authentic? Faking certificates is standard practice over here.
Beware the new dynamics
Because this is a unique situation where demand surpasses supply, suppliers in Asia are dictating the rules. And that means:
1/ They decide on the payment terms. You don’t. In normal times, Chinese exporting companies would generally agree on a 30% advance payment and 70% when the goods/documents are ready. Not anymore. For face-masks and PPE, they only accept upfront payment, or escrow.
2/ Factories don’t care about how special you are. They have 3 or 4 local partners/trading agencies they’ve been dealing with for years, and that’s where their supply goes. The factory focuses solely on production, the agencies get their allotment and handle the sales and logistics.
3/ A Letter of Intent (LOI) and Proof of Funds don’t mean anything when buyers are lining up at the door. The supplier will receive several requests and decides to supply whoever they think offers the best deal.
4/ You will hear empty promises all day along. Every middleman will claim owning stockpiles. To be clear, almost no one in the market is building inventory. Products are shipped the moment the machines spit them out. For instance, you can ask your contact to get on a video call and show you their merchandise before you discuss any terms. You’ll be surprised.
My best advice remains: Your two best friends are your inspection company and your lawyer on the ground. It took us over a year to find the proper lawyers in China that have our best interests in mind. You can read about the importance of that here.
Please remember: If you are procuring gloves, masks, and other PPE from Asia, think twice. You’re not trading toys… People whose life is at stake will be using those very products. The substandard products you supply might cost someone their life.
Article originally published in Medium here.