Regarding escrow.com I agree that it is a great payment system....for retail or wholesale purchases, but not for purchases from a manufacturer. If you are looking at making retail or wholesale purchases then you are best to do that back home as it will be much safer, quicker, and essentially cheaper as you will be sure to get what you pay for and will have the consumer laws to protect you if you dont.

Buying in China is really about buying from manufacturers in big quantities and low prices and then wholesaling these yourself to smaller buyers.

Why dont manufacturers in China accept escrow.com? Quite simply because they do not have to as they have good existing business using proven international trade payment methods such as TT and LC.

Most manufacturers in China produce orders after the order has been received. They do not hold stock. So with escrow.com there are two huge disadvantages to the supplier:

a. they need to wait longer to get paid. Very few buyers would ship a large order by air and sea shipment takes one to two months. Why would a supplier choose to wait one to two months to receive payment?

b. escrow.com leaves the opportunity for the product to be returned regardless of the quality which is an issue that factories in China cannot accept. I understand that the buyer is not supposed to be able to return product unless there is a legit problem but these sorts of systems are open to abuse and non-English speaking supplier is going to be at a real disavantage. They do not want to hold stock so the last thing they want is a shipment to be returned even if the buyer covers the return shipping costs.

So if you want to do business in small quantities using western payment methods then you best stick doing business with western businesses.

If you want to take advantage of the benefits that dealing direct with factories in China has to offer then you best accept the relevant payment terms and then be smart about protecting yourself by ensuring that you pay for a preshipment inspection BEFORE you release final payment.

 Actually, Simon you'd be suprised how many legitmate Manufacturer's accept escrow.com as well as the amount of international trade deals done via escrow alone.  I can personally name 7 Chinese law firms in China's largest cities of industry that do nothing more than negotiate trade deals and hold escrow funds.  But for my money if anyone wants to do business via escrow or needs help with anything related to International trade they should contact Lehman, Lee & Xu either in:

1. Bejing  -   10-2 Liangmaqiao Diplomatic Compound, No. 22 Dongfang East Road Chaoyang District, Beijing 100600, China
2. Hong Kong  -    Suite 2311 Shell Tower, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong, China
3. Jilin City  -   3F, Jiliang Futures Building, No. 1307 Jianshe Street, Jilin City 130000, China
4. ShanghaI  -   21st Bank of Shanghai Building, No. 168 Middle Yincheng Road, Shanghai 200120, China
5. Shenzhen -  Suite 810 Excellence Times Square, No. 4068 Yitian Road Futian District, Shenzhen 518048, China

Jun He Law Offices is also another very good one for these types of deals. 

• +86-21 5298-5488
• +86-755 2587-0765
• +852-21670000

Personally Simon, I don't believe you should really be giving financial advice on something your really do not understand, nor in how it fits into the scheme of international trade deals.  Maybe before you come back here with a return reply you should contact either of the law offices above and find out exactly what I'am talking about and how often escrow is used as a payment mechanism in China.

Fact of the matter is no business has to accept any form of payment they are not comfortable with no matter where in the world they are located.  But on the other hand if you want to survive in business your going to be receptive to any legitimate means of payment.  Personally, I would never deal with a distributor nor trading company using escrow as it defeats the whole purpose of escrow.  After a product reaches either of those two entities product quality is uncontrolable.  Escrow itself holds payment until such time that certain negotiated conditions are met.

Now as to your point that Chinese companies dont want to wait for payment until after a production run, that is totally false and you would have never made that statement if you understood the workings of LC at sight or LC by Usance.

You probally didn't even realize that a legitmate manufacturer can go to a bank in China and secure a pre production loan on either an L/C or certified funds held in escrow.  So where's the downside?  Actually certified funds held in escrow is better than a confirmed L/C and far better than an unconfirmed L/C.  Also as L/C's in some parts of the world can be troubling because of that country's laws, India, Bangladesh, and Pakistan escrow is a perfered payment mechanisim and I can reccommend law offices in each of those countries as well.

Look at it another way.  If you are having something made for you who better to represent you than a lawyers group that deals in, International trade negotiation, Patent protection law, and handles escrow.  A bank can't protect in any way shape or form and a T/T payment is less than useless for any kind of protection.

Bottom line is escrow works for anyone from individuals, SMB's to large multinational corporations in the international buying process. 

Ranger

By the way you loose your crediblity, when you choose to give advice on a subject you have noexpertise in, and if you have no expertise in it how can anyone assume that your advice is trustworthy.  or E+T=C

Ranger

Ranger you are talking about professional escrow services. My post is about escrow.com.

Best read posts before you reply.

Oh and you can leave out the personal insults in future as it is unnecessary for discussion and against the rules of this forum.

Quoting from [Egernia]:

Ranger you are talking about professional escrow services. My post is about escrow.com.

Best read posts before you reply.

Best if you read what I said since as I covered both topics.  Also escrow.com is a profesional service whose practices are goverened by the state of California Banking and Finanacial Institutions Department.

Ranger

Ranger, other than a passing reference to escrow.com in the first line of your reply the rest of your post has nothing to do with escrow.com. You are talking about professional escrow service companies which is a totally different thing and has no relationship to my post here. Perhaps in your eagerness to try to prove me wrong you overlooked this simple fact.

Anyway, Escrow.com targets small buyers buying in small quantities. This is what makes it unsuitable for use in buying in China in my opinion. You may disagree with my opinion but that does not make me wrong.

Yes some sellers in China may accept it but overall new buyers are going to be hitting their head against a brick wall with over 95% of suppliers in China if they insist on this payment method.

As far as your comments on LC well it seems that you missed the point again so I suggest that you read back on my post that you are replying to.

With escrow.com a supplier would have to wait till the customer receives the delivery and approves the delivery before payment can be received. If the shipment were large and sent by sea then that would mean a time period of six to ten weeks from door to door including time for the customer to review the product.

LC at sight is hardly in the same ball park here as the supplier gets their money shortly after the product ships out so within a week or two of the production leaving the factory.

I am sure that you would agree that there is a big difference between waiting for a payment for two weeks or two months!

Perhaps you can explain to me why a supplier that currently accepts LC at sight with pre-shipment inspection should change over to escrow.com. What are the advantages for the seller here?

 

1. escrow.com is a professional escrow company
2. Where on the escrow.com site does it say they deal only in small amounts?
3. Small buyer med buyer or large buyer?  Going it alone or with the help of an agent?
4. What point about L/C's?  You mean they dont have to, becuase they have no plans to grow their buisness and their international business relationships?
5. The slow container ship could navigate 15,120 - 25,200 nautical miles in that time frame and average for most container ships put in service since 2000 can do 16,480 - 27,468 nautical miles in that time frame Shangahi to west coast of North America.  If your talking 6-10 weeks between China and Australia the ships must be less than seaworthy.
6. Based on the sheer facts that 95 % of Alibaba Chinese suppliers don't even offer payment via L/C what option does a new buyer have in securing their payment?  Once production is done how long do you think it takes to prepare the documents for negotiation and then review them for errors and ommissions?  Plus the 5 days that the issuing bank has to respond on the draft and documents for negotiation of the L/C?
7. I agree there is a big differece between 2 weeks and 2 months but where did you ever get the number of 2 months  or 6-10 weeks for that matter?
8. First a buyer would actually need to find a supplier on Alibaba that would accept an L/C that allows for a pre-shippment inspection.  Actually the pre-shipment inspection is the killing point of most deals on Alibaba that utilize L/C's becuse it hold the company to a higher standard of quality than they might otherwise be able to get away with.  The advantage I think would be apparent.  Long term business relationships.

This is not to say that there no Alibaba suppliers that accept both L/C's and pre-shippment inspections but of the millions of Chinese suppliers on this sight how many do you think there are?  We already agree about the standards of Gold Supplier's and Gold Suppliers with Trust Pass or even trust Pass alone for companies outside of China.

Simon, have you ever visited the escrow.com website?   If you do nothing but look at a few pages you miss the whole point of escrow.com  The first few pages discuss one type of use for escrow.com not every condition for how it can be used. 

Before we keep going back n forth I need to know what your answers are on a few questions. 

1. What do you consider a small purchase?  (med  or large)
2. Average purchase amount from any company on Alibaba?
3. Your guess at the percentage, points and fee's associated with DLC's?
4. What percentage of Alibaba suppliers have actually even done business by DLC and know how to prepare the documentation to support the negotiation of an"At Sight"DLC?
5. What percentage of buyer's buy containers and what percentage use express shipping
6. Do you think that pre-shipment inspection is not a possible condition at escrow.com?
7. What is the ratio of parts/products checked by any inspection company? (100pcs, 1000 pcs, 10,000pcs)

Now even before you answer any of that I have a client that purchased and just recieved as of October 21st, 2008 $200,000.00 of textiles from Weiqiao Textile Co. Ltd. via escrow.com with a 7 day inspection period.  

1. Containers transfered to a Canadian Bonded Warehouse.
2.  B/L released upon confirmed transfer of funds to Weiqiao Textile Co. Ltd.. (5 containers)  #1 and #2 are the conditions of the agreement
3. Transit time 15 days from Port of Shanghai to Port of Vancouver, BC. 

While negotiating with Weiqiao Textile Co. Ltd. I also explained that the reason for utilizing escrow.com was 2 fold.

1. To evaluate lead time and shipping of goods.
2. Their company quality.  
3. The quality of the company that did the pre-shipment inspection.

So where is the 2 month wait.  I'll even give you the vessel number so you can confirm the time at sail. OOCL vessel number OFN-069. 

Now then if a company such as Weiqiao Textile Co. Ltd. will accept that form of payment wheres the road block. 

By the way the Weiqiao Textile Co. Ltd. is one of the largest companies in China by sales volume. (top 100)

Breakdown DLC vs escrow.com:

• LC Fees and percentages average for $200,000.00 USD   Cost $2,678.00USD
• escrow.com fees total $1870.00 USD total

I've been doing this a very long time Simon.  Because Weiqiao Textile Co. Ltd. actually accepted these terms they now have a PO backed by an CDLC for $2,000,000.00USD over a 6 month delivery.  CDLC fee's for this amount $7,763.00 providing there are no amendments.  Notice that the ratio in costs for the CDLC did not multiply 10 times. actually only about 3 times.

You keep asking why would a Chinese company wait for payment.  Hmmm how about a deal worth 10 times as much as the first order.  International trade to me is putting legitimate buyers together with legitmate suppliers for long term relationships not one offs.  One offs don't grow business for either party.  The  goal is to spend a litlle more time putting a good deal together for a future relationship than for a supplier to spend 10 times as much time negotiating several small deals.

Plus if you have read many of my posts about agent commision, deals worth 2.2 million pay off very nicely.  I have a happy supplier and a happy buyer because of a small compromise by the seller.  Yielding a far larger return and business relationship for the supplier.

Your right your entitled to your oppinions but I still think than when you advise people out of a viable option its never good advice.  We may find some common ground once you answer the 7 questions so that I know from what perspective you are talking about.  Its not intended as a test of your knowlege only from what point of view you are making your assumptions.

By the way the company claimed 1.5 deviations in quality per 100 the pre-inspection claimed .5 deviations per hundred.  Buyer inspection at the bonded warehouse 1.67 deviations per hundred.  Acceptable in any event but this buyer wont be utilizing that pre-shippment inspection service again.

Ranger

Ranger you seem to be replying to what you think I mean rather than what I am writing. Perhaps that is what leads to conflict in our posts.

Let me show you what I mean - your quotes in bold:

escrow.com is a professional escrow company

I never suggested that it wasnt. In fact I even written about what a good service it is. My point is that escrow.com is different than a full service legal escrow service. I know that you agree with me on this.

Where on the escrow.com site does it say they deal only in small amounts?

I never suggested that it is a rule, but common sense dictates that large companies do not use escrow.com they use professional escrow service companies or other established payment methods such as LC. As an online entity escrow.com's services are clearly skewed toward small buyers at wholesale and retail level.

If your talking 6-10 weeks between China and Australia the ships must be less than seaworthy.

Just because I am from Australia does not mean that all users here are from Australia. Of course the shipping times I quoted were general shipping times based upon the fact that many users here are probably shipping to the US and Europe.

Based on the sheer facts that 95 % of Alibaba Chinese suppliers don't even offer payment via L/C what option does a new buyer have in securing their payment? 

That is factually incorrect and I am surprised that you would even write that.

Certainly most suppliers in China prefer TT payments if they can have their choice, but LC is acceptable by every Chinese supplier that I have ever dealt with and that includes many from here at alibaba. On small orders suppliers may be reluctant to pay LC fees but I have never found a supplier in China that did not accept LC.

Of course on alibaba within certain product areas such as foreign brand name electrical products there are a lot of scammers that only want cash payments - but those scammers are not representative of legitimate suppliers in China.

I agree there is a big differece between 2 weeks and 2 months but where did you ever get the number of 2 months  or 6-10 weeks for that matter?

As per my earlier post if we compare payment by LC or escrow.com. With the former the supplier gets paid once proof has been provided that the product has been shipped. With the later the supplier does not get paid until the products have received the destination and been approved by the customer. So with the former the supplier could expect to have release of payment within around 2 weeks of the product leaving the port, while in the latter they may not see payment for up to 2 months. Same as what I wrote earlier.

Legitimate suppliers dont have a problem with customers approving production before releasing payment but the standard is for that to be done prior to shipping.

This is not to say that there no Alibaba suppliers that accept both L/C's and pre-shippment inspections but of the millions of Chinese suppliers on this sight how many do you think there are? 

As above if we remove scammers from the equation and concentrate on legitimate manufacturers and trading companies then I would confidently say that pretty much every supplier in China will accept LC - but some may raise objections to the relatively high fees on small orders. The simple answer there is for the buyer to offer to pay those fees in order to secure an LC.

In regards to the Weiqiao deal well good for you. I am sure that are many more such exceptions to what I am suggesting here which is why I have not at any time stated that it is not possible to find a supplier in China that will accept escrow.com.

See once again Ranger you seem to be arguing against points that I am not even making, but instead that you think I am making.

Please quote from my posts here where I stated that it is not possible to use escrow.com when  buying in China?

The essence of my point of view here is as follows:

a. escrow.com is a good service for small buyers;

b. escrow.com is not offered by the far majority of legitimate suppliers in China;

c. The far majority of suppliers in China dont offer escrow.com as a payment term and I believe that one reason for this is that they and their current customers are happy with LC or TT payment systems;

d. I further believe that LC with pre-shipment inspection achieves the same aims as escrow.com while maintaining the benefits for both buyer and seller - that is timely payment for supplier, secure transaction for buyer;

e. Finally I have pointed out what I see as being some major disadvantages for a seller in China in accepting escrow.com over LC - namely extended time till payment release, and risk of illegitimate product claims and returns.

f. By far the biggest concern that I would have for a seller here would be when quality problems are found in production. With a pre-shipment inspection a supplier can rework the production and solve the problems to both parties satisfaction. By its very design the Escrow.com model makes resolution of quality problems more difficult and would likely lead to more escalation to claims. Claims are not good for either party as the seller loses money and the buyer loses product.

In answer to my question about why a supplier should choose to accept escrow.com over LC you reply that if they did so they could multiply orders by 10 fold or some such. There is no substance in that suggestion.

So again I ask - why would a supplier who is doing business happily under TT and LC payment terms choose to accept escrow.com? There are plenty of Chinese suppliers on this forum so if you sell it well perhaps you will get some converts. So what it is it exactly about escrow.com that you believe makes it a better option for the seller than LC with pre-shipment inspection?