This is an experience question that cant be found in a book nor have I found it on any website.  But it will tell me something about the people that answer it.

ABC an Australian company wants to buy products from XYZ company in China.  ABC wants to pay via D/P.  ABC wants the items inspected before payment.

Now, how would you go about securing a deal  that is safe for both parties using that form of payment including the inspection.  Don't gereralize be specific.

I've done this myself China to the U.S. but it can be done between any two countries and I will give the answer in 7 days.   The first correct answer that is specific in nature will recieve the 100 MVP points.  This is chance for anyone to show what you know or to keep watching and learn something.  The idea is to define how its safe for both parties given the payment method.  This is a trust builder for both parties without the high anxiety of one party thinking they are going to be ripped off by the other.

Simon heres your chance show me what you know.

Ranger I am disappointed by this post. To single out and 'test' other members of the forum to see whether they are worthy of participating in the forum is - well - offensive.

This is a discussion forum that welcomes users - it is not some elite business club. If I post something on the forum that you disagree with then you can and probably should point out why you disagree. That is what discussion forums are for.

I do not hold myself out to be an expert here I just merely participate and answer questions that I believe I can be helpful with. I am a moderator here by invitation not because I applied to be one. The Best Answer rewards are an indication that the general members seem to appreciate my involvement in this regard.

I am not so sure that there is only one single correct answer to your question as there are just so many variables, but I am certainly happy to offer my opinion. I fully expect that my answer will be different than yours but I am also confident that I am also right. So this will probably only serve to prove what we already know and that is that people have different opinions.

In your scenario I assume that you are referring to a first time deal. I further assume that as my role here is to secure a deal for both parties which would make me some sort of middleman.

To be totally honest I would never push a supplier to accept * from a new buyer on a first order. In my opinion it is an unnecessary risk for the supplier. This may lose me the buyer if he/she is insistent upon * but business is a two way street and I want to be fair to both parties.

Everyone knows that there are three basic and common payment terms - TT30/70, *, and LC at sight. The requirement of a pre-shipment inspection is kind of a furphy as that does not affect the payment method used and is just good due dilligence practice in addition to the payment method. I would always recommend a pre-shiment inspection on a first time deal with a new supplier.

TT30/70 is clearly going to be the suppliers payment method of choice but I would not recommend that for the buyer as there is a risk that the supplier may not perform and a stalemate may arise with deposit payment left hanging.

DP is great for the buyer but not the best option for the seller. While goods ownership does not change hands until after payment has been made in full there is the very real possibility that a first time buyer may not make the payment and the supplier will be stuck with the goods.

LC at sight is to my mind the fairest and safest payment method for both parties for a first time deal. It is also pretty much the standard. It does not guarantee quality of course which is why the buyer would do a pre-shipment inspection, but it does pretty much guarantee that payment will be forthcoming provided that product is made according to the customers requirements. The only arguments against LC at sight would be cost and shipping time but to Australia shipping time is long enough for this not be an issue (Japan would be a different story). As far as cost of opening an LC well yes there is a cost to good business practice but I would consider that also an insurance premium.

So not expecting 100 MVP's for my answer but my answer is a fair and correct answer to the scenario that you presented. Let's see what others come up with, maybe someone will guess your answer.

Quoting from [Egernia]:

Ranger I am disappointed by this post. To single out and 'test' other members of the forum to see whether they are worthy of participating in the forum is - well - offensive.

1. I did challenge you to step outside the box as I did anyone that cares to take a shot.
2. Business is a challenge everyday otherwise why own a business at all?
3. I did solicit a response from you by mentioning your name once.
4. If I wanted to single you out soely I would never have invited others to respond nor would I have offered points.
5. Did I ever say you were unworthy to participate in any forum or by your response do you feel unworthy?  I merely said your response would tell me about you as I said it would about anyone who responds to the post.
6. "To challenge anyones thought process is offensive."  Hows that offensive.  Did your parents challenge you, did your teachers challenge you, do you challenge your self to step back and analyze situations.
   

This is a discussion forum that welcomes users - it is not some elite business club. If I post something on the forum that you disagree with then you can and probably should point out why you disagree. That is what discussion forums are for.

1. I welcomed anyone to respond as well as you
2. Who is slinging accusations, are you now callimg me an elitist?
3. If I see a post that is totally wrong or something that I disagree with believe me I say it.  Nor would I refuse anyone the same privledge.

I do not hold myself out to be an expert here I just merely participate and answer questions that I believe I can be helpful with. I am a moderator here by invitation not because I applied to be one. The Best Answer rewards are an indication that the general members seem to appreciate my involvement in this regard.

1. I am a moderator by invitation as well, one of the first few.
2. I have also nominated other members who are now moderators
3. I offer points in some of my forums to keep experts coming back to participate. 
4. These same experts challenge me and want to know my opinions as well. 
5. Should I feel hurt, be discouraged, or welcome the challenge?
6. All moderators are by invitation but some of them do not know who reccommended them
7. If your in this for the points you missed the spirit for which the positions were created.
8. For me this is not about a popoularity contest, I'd loose every time.

 

Quoting from [Ranger]:

I am not so sure that there is only one single correct answer to your question as there are just so many variables, but I am certainly happy to offer my opinion. I fully expect that my answer will be different than yours but I am also confident that I am also right. So this will probably only serve to prove what we already know and that is that people have different opinions.

1. Your not the middleman.
2. Theres no endless variables, there's one company that has it the other one wants it.  Both want to mitigate the risk and the cost.
3. How using D/P can this proceed being totally safe for each trade partner?

In your scenario I assume that you are referring to a first time deal. I further assume that as my role here is to secure a deal for both parties which would make me some sort of middleman.

1. You can assume that if you like, but not what I said

To be totally honest I would never push a supplier to accept * from a new buyer on a first order. In my opinion it is an unnecessary risk for the supplier. This may lose me the buyer if he/she is insistent upon * but business is a two way street and I want to be fair to both parties.

1. This is what confuses me about assuming your the middleman.  The supplier would be a trade partner you had already verified yourself or done business with before, otherwise why did you select this company to supply the goods over any other company?  Why would the buyer need a middleman if they already know that the supplier has what they want?  Adding another player in the situation only adds to the cost and doesnt make it any safer.

Everyone knows that there are three basic and common payment terms - TT30/70, *, and LC at sight. The requirement of a pre-shipment inspection is kind of a furphy as that does not affect the payment method used and is just good due dilligence practice in addition to the payment method. I would always recommend a pre-shiment inspection on a first time deal with a new supplier.

1. The above paragraph tells me alot about what you have never done or dont know about.
2. Three Basic terms?   I guess then there are alot of people that dont know there are 4 basic types and 3 additional special circumstance Documentary Letters of Credit, and 4 types of Documentary Collections.  2 out of 11 is not a good average.
3. It also tells me you have never done business in a Free Trade Zone or you would have never stated that the inspection was a "furphy"

TT30/70 is clearly going to be the suppliers payment method of choice but I would not recommend that for the buyer as there is a risk that the supplier may not perform and a stalemate may arise with deposit payment left hanging.

1. So clearly the above payment method is the worst except for W/U or 100% MT103 in advance.

DP is great for the buyer but not the best option for the seller. While goods ownership does not change hands until after payment has been made in full there is the very real possibility that a first time buyer may not make the payment and the supplier will be stuck with the goods.

1. I asked what steps using D/P would make the deal safe for both parties.

 

Quoting from [Ranger]:

 

LC at sight is to my mind the fairest and safest payment method for both parties for a first time deal. It is also pretty much the standard. It does not guarantee quality of course which is why the buyer would do a pre-shipment inspection, but it does pretty much guarantee that payment will be forthcoming provided that product is made according to the customers requirements. The only arguments against LC at sight would be cost and shipping time but to Australia shipping time is long enough for this not be an issue (Japan would be a different story). As far as cost of opening an LC well yes there is a cost to good business practice but I would consider that also an insurance premium.

1. You dont really believe a manufacturer or a contract manufacturer is going to accept a basic L/C at sight do you?  But then you assumed again. 
2. A supplier/distributor is going to have the products on hand e.g. buyer knows the supplier has the goods available or the supplier says they do.
3. Theres more costs than just havening an L/C opened what about the 7-10 other charges associated with completing the L/C.  I won't go into how much more it can cost if the negotiation documents are discrepant or an ammendment needs to be added.

So not expecting 100 MVP's for my answer but my answer is a fair and correct answer to the scenario that you presented. Let's see what others come up with, maybe someone will guess your answer.

1. Theres no guessing an experienced buyer, broker or sourcing agent would look at the question and know exactly what I was talking about.
2. Notice I did not say expert.  Thats why this is not a good name for this forum.  Experts assume that they know everything and that they cant be taught or learn anything more.  An experienced business person on the other hand knows his limitations and accepts challenges.
3. Have you ever heard of the Germain Scale?

Maybe you'd like to take another crack at this situation.  I've left plenty of hints.

Ranger

 

 

Ranger as per my answer to your question I would not use * in the example that you have provided. I assume that you have a preffered answer to your question and perhaps if you remove mention of me from the subject line and post then others may feel more inclined to jump in and provide an answer. You never know but someone may just provide the answer that you are looking for.

I agree with Egernia,this forum is for everyone.We could post here and watch if there is something wrong with our opinions and get improved later.

I also think there is nothing wrong with Ranger's post,remember we are from different locations all around the world,culture differences is the biggest barricade between us.He is just want to express his experience which may benefit us a lot in the future deal.

Last,I would like to ask if Ranger could post his method here?This will make the topic like a discussion.And surely there will be lots of people get participated and benefit from this post.

Last,I have to say I do not know how to do in this condition,I think there are too many variables too,looking for someone to teach me.

If the supplier is verified , then if shipment is by air. Supplier could send the goods by a forwarder to the customer's destination and give specific instruction to the forwarder not to release the goods to the consignee till further notice. Customer can inspect the goods in the forwarder's warehouse, if everything is ok then customer can send payment to the supplier , once payment is received the fsupplier can notify the forwarder to release the merchandise to the customer.

Quoting from [inspectorsid]:

I agree with Egernia,this forum is for everyone.We could post here and watch if there is something wrong with our opinions and get improved later.

I also think there is nothing wrong with Ranger's post,remember we are from different locations all around the world,culture differences is the biggest barricade between us.He is just want to express his experience which may benefit us a lot in the future deal.

Last,I would like to ask if Ranger could post his method here?This will make the topic like a discussion.And surely there will be lots of people get participated and benefit from this post.

Last,I have to say I do not know how to do in this condition,I think there are too many variables too,looking for someone to teach me.

Actually, I will reveal my answer in do time.  What IM trying to do is get an experienced answer from one individual while allowing others to participate.  Note*** I did not say there was only one way to do it, just how it could be done.  Business dealings are negotiations between two parties.  Theres working inside the norm (in the box) and being creative (outside the box). 

Deals like the one I mentioned are done an endless amount of times daily.  I will also award 100 points to any person who may not be experienced in this type of deal that can at least come close utilizing D/P to eliminate the anxiety of trusting the other party. 

Just like one business model does not cover every business so goes paying for goods.  IM looking for people that care to look outside the box at viable payment methods that dont cost an exhorbinant amount of money while allowing for trust to be established on both sides.

Merely giving the answer and allowing comments does not make people, think, develop, or analyze.  There comments are reactive not proactive.  Its true I want this to be a discussion but I want members to look inside themselves there experiences and look for an answer based on that experience. 

best regards,

Ranger