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China QC Inspection. So Totally Worth It.

Posted in China Business, Legal News

I have always thought it crazy for a company not to have a quality control inspection done of its China product before shipping. Yes, crazy. 

The Quality Inspection Tips blog has a post, entitled, “How much does an inspection in China cost?” that puts the need for a QC inspection into proper focus. The post starts out talking about the two kinds of reactions the author usually gets when he quotes his company’s USD $295 daily fee for China quality inspections:  

Some purchasers get to talk about their project for some time, see where we would help them, and finally (nearly as an afterthought) ask for the price. I tell them 295 USD per day of work, and I can nearly hear them thinking “wow these guys are cheap”.

They compare this fee to the costs of professional services in their country, or maybe to the total amount of the order, or to the cost of their best alternative (taking a flight to China). So it sounds really low.

With other buyers, it’s the exact opposite. To them, even our basic “no frills, internet booking” service, at 170 USD per product type, seems like a rip off.

They compare it to the salary of most English-speaking staff in China (5,000 rmb), they divide it by 30 days, and they think we make an insane margin. Forget about the main costs of a company that has set up a network in the main regions (training/supervisory/internal control overhead, travel expenses, client communication, taxes in China, etc.).

The post goes on to discuss the second type and their unwillingness to pay the minimal fee for protection:

I learned that the second category of buyers, unless they absolutely have to, will never accept to pay the market price for quality control inspections. They prefer to pay a cheap “agent” who will not do a professional job (if he does any QC job at all), or to simply roll the dice and let the factory ship out. It is not rational because in the end they are probably worse off — it is psychological.

Because my firm charges thousands of dollars to draft OEM Agreements (in Chinese and in English) the companies for whom we draft these agreements typically think nothing of paying a bit more to ensure their China-manufactured products meet their quality standards. This combination of a good OEM contract and good quality control monitoring means our regular clients virtually never call us for legal assistance relating to quality problems simply because they have so few quality issues or their contract means they are well-positioned to resolve them quickly without having to call in the lawyers. Additionally, the same companies that pay for a good contract and good quality control monitoring tend to be the same companies that conduct due diligence on their potential Chinese suppliers before they enter into any agreement with them and it is these three things in combo that truly reduce the likelihood of quality problems.  

So the phone calls we get regarding Chinese product problems almost always come from potential clients, not existing ones. Most of the time, the amount at stake for these companies is so little that my best advise is that they be more careful the next time.  Every few months though we get a call from someone out $500,000 or more and I am usually unremitting in my questions to them.  The following is a typical exchange:

Me:  Do you have a contract with this Chinese factory that you can send me.

Them:  No, because I have a purchase order.

Me: Does the purchase order set forth the quality standards required?

Them: No.  I didn’t think that was necessary.  Everyone knows what is required to have a   good quality _________.

Me:  Apparently not your manufacturer, which is unfortunate. Compounding your problem here is that without a written document setting forth the specifics on quality, your case will be much tougher. Did you have someone inspect the goods before they were shipped (knowing the answer to this is virtually always going to be no)?  

Them:  No.  

Me:  Why not?

Them:  Because the whole point in going to China is to save money and if I pay out for    inspections I won’t be saving as much. 

Me:  (long silence)

Them:  Guess I would have saved more by having paid for the inspection though.

Me:  Yeah. Around $500,000 [or whatever amount they have paid for essentially nothing].

Them:  Well, I will talk this over with my [mythical] partner and let you know what we    decide.

Me:  Thanks.

I have no idea what percent of product comes bad if you do not engage in QC inspections nor do I know what percent of product comes bad if you do, but I have seen enough to become absolutely convinced (as is pretty much every person I know who has worked in or around Chinese manufacturing over the last five years) that QC inspections are pretty much always worth the money.  

What do you think?  To QC inspect or not to QC inspect?

  • http://www.malpracticeinsuranceagency.com Phil N

    It really is crazy, shocking, and stupid for companies not to be checking quality. I just don’t get it at all.

  • s

    Can commentators please include what QA companies they use? The blog post fails to realize that for some of us QA companies may seem just as dodgy as hiring an agent.
    Without us doing QA on the QA company how do we hold them liable?

  • http://www.qualityinspection.org Renaud

    Pay now, or risk paying much much more later… Lawyers and QA firms, same fight ;-)

  • http://www.foreignentrepreneursinchina.com Clara Muriel Ruano

    I still can’t believe that people will invest thousands of dollars on a Chinese supplier and will not spend a few hundred in ensuring that they do not lose money on the operation. Quality Control is the one single thing that all entrepreneurs I’ve interviewed for my blog make special emphasize on. I even wrote a post on the topic entitled “Quality Control , Quality Control, Quality Control. Can you hear me loud and clear?”. A very useful tip that one of my interviewees was sharing was “Never relax! Even with good suppliers”. You can read this post in:
    http://www.foreignentrepreneursinchina.com/2010/04/quality-control-quality-control-quality-control-can-you-hear-me-loud-and-clear/

  • Dofus

    So true. The failure to adequately QC your product will result in unhappy customers and a resultant loss of repeat business. Trust me, I have seen it.

  • http://www.chinalinkgroup.com Pedro Medina

    After 15 years residing and working in China and many thousand containers contracted, inspected and tested for clients in 25 countries, I feel confident in saying shipping without proper contracting, quality inspection and testing is a gamble.
    I believe in specialization. In our industry (wood),we need to test various quality aspects of glue, varnish, wood properties, etc… a plastic or maritime products specialist’s experience would be useless in our sector. Only a company with multidisciplinary capacity would be able to develop, through many years of intense work, the experience necessary to help clients abroad with professional contracting, inspection and testing of wood products in China.
    Pedro (Dalian)

  • Sandy B.

    I completely agree. Buying product from China without an inspection is like going out in public without clothes. One has to be crazy to do either.

  • Merry

    What is the QC company liable for? How can we trust they really do what they promise to do? If we find defect in shipment even though 100% qc was agreed, should QC company pay? Or we only have option of not using them next time?

  • http://www.china-qualityinspection.com/ Bill

    Many foreign buyers told me, once the factories get more orders, they become less capable to control the products quality. So it is always good have some one on your behalf to check goods in factory before they leave.

  • http://www.purchasewell.com Purchase Well Solutions

    Yes, QC inspections are pretty much always worth the money. if a third party agent can help u to analysis price and quality from different suppliers, do sample testing and inspection service. it is much better.