FAQ

Is Annex Asia an inspection company?

Yes, we specialize in quality control, auditing and laboratory testing. We can reach all Mainland China, India and Latin-America throughout diverse agreements and strategic alliances. We work with Laboratories certified by CNAS giving our clients quality service with fast and efficient response.

What is an audit?

Audits are often preventive actions in that they identify problems before they have produced poor quality product. This is why audits are often used as part of the basis for selecting suppliers.

How do inspections reduce costs?

In-process inspections identify problems as they develop on the production line and save time in making corrections and reduce costs of reworking completed product. Pre-shipment inspections identify non-conformances prior to shipment, reducing the risks to the buyer of receiving defective product along with the associated delays in receiving replacement products.

What international standards inspection companies must follow to evaluate suppliers?

Q.C. norms

When performing quality control service it is important to understand the standard used for the selection of samples for visual appearance or review.

Most companies employ Quality Control for inspection of a product the standard is ISO 2859-1 (ANSI / ASQCZ1.4-2003), also known as AQL tables (Acceptance Quality Limit) (Limit of acceptable quality).

Defects can be classified into three levels:

Critical: If the product proves to be unsafe, detrimental to the end user and / or contravene with regulations.

Mayor: When the product exhibits flaw affecting performance, and / or aesthetic considerable impact on the sale.

Minor: When the failure does not significantly affect the aesthetics or functionality.

Understanding AQL tables

The first table shows how the code is organized Letters of quantity of the product. There are three levels II, III, and I Level I is the least severe and level III is the most stringent. Level II is the standard and commonly selected and QC traded companies. (Note: The customer may choose Level III or I).

To understand the concept well let's do an exercise. Suppose we have an order for 3000 units and the second is selected, then the code letter is "K".

Sample size

The severity level can be recorded in the following table. Recorded at the top are the levels ranging from 1 to 6.5; in most cases (standard) 0% for critical defects, major defects to 2.5% and 4% for minor defects.

For this example 2.5% is considered a higher and 4.0% a minor defect. The sample number is 200 units, with a tolerance of 7 major and 10 minor defects.

Sampling plans

The original box ISO 2859-1 is as follows

This table lists the number of total units to the degree of thoroughness of the inspection. As I mentioned the degree that is usually considered is Level II.

Sample size

Special Levels S1, S2, S3, and S4 are special inspections in which small samples are selected for special testing (e.g. Hi-Pot test, Seam testing), in some cases the samples can not be used again for testing or because the testing takes too long. The level of severity ranging is from S1 being the less rigorous to S4 being the most.

The following table lists the number of samples to be taken depending on the stringency level selected. For example if Level II is selected for a quantity of 5000 units then we must take a sample of 200 units (sample size) and the degree of acceptance that usually is stipulated at 0% for critical errors, 2.5% for major defects and 4% for minor defects. At the top we see the acceptance rate for which it will only be considered from 0.010 to 6.5. If the margin for error is greater than 2.5% then the number of errors allowed is 10 units (Ac) from 11 units is rejected (Re) for minor defects the accepted quantity is 14 units.

Sampling plans

To visualize the difference in sample size suppose we have a total number of 5000 units, we can see the number of samples must be selected according to the stringency.

Inspection levels

How to get list of safe Chinese suppliers?

The important thing is to begin the process with an initial list of suppliers, which can be found from sources online in B2B Global sourcing portals like Alibaba, Made in China, etc.; international fairs, associations, chambers of commerce, or references. Once you have the initial list, the next step is to validate the information by requesting basic documentation such as business license, export license, and certification fees. This will give you a notion of the size of the business, legal representative, and the nature of the business (e.g.: Company Distributor, factory or both). The important thing is to have the correct experienced person that understands the documentation and that can visit the supplier to verify and validate the information provided.

What is the process for inspecting a vendor before making a bank transfer?

The important thing is to have made a visit to the facilities to confirm and validate the information, you can request for a Bank Certificate with the vendors name for better assurance.

Before shipping it is recommended that a Quality Control company or person you trust makes the final review of the product to confirm that all products meet the specifications you requested before the payment; this can give you more bargaining power requesting modifications or compensations under the contract before making the payment; this is more likely that your supplier in China will make the desired changes. If the payment is made before, bargaining power is highly reduced and in some cases the changes and request are at the mercy of the provider.

Who should you contact in case of scams, claims, or wrong merchandise once the products have reached their final destination?

In case of fraud the first step is to make a claim with the local authorities and consult a local lawyer with experience in dealing with foreigners. Many times small importers desist in making legal process because of the low amount of money, time, and cost of prosecution warrants. Report your case to the Embassy or Consulates in China Try to keep abreast of your case.

Treated claims can be negotiated with the factory under the contract and mediation and compensation can be reached. In case of a dispute it is important to go by the arbitration clause in the contract.

What are the requirements for establishing a new office or company in China?

The requisites and processes for a company in China are:

Steps to the Establishment and Registration of a foreign company (WFOE):

  1. Booking of company name (company name) to the Administration for Industry and Commerce (AIC).
  2. Application for a Code of Organization with the Department of Quality Supervision and AIC.
  3. Request Approval of establishment to the local office of the Ministry of Commerce (MOFCOM) and showing of corporate documents including, among others, the bylaws, business plan, bank reference letter, appointments, passports, powers, lease of office in China, legalized translations, etc.
  4. Application for Registration of the AIC and WFOE before obtaining the Business License (Business License).

Formalities necessary after obtaining the Business License:

  1. Request for company seals, financial, legal representatives and invoices to the Service Center of the Office of Public Safety.
  2. Application of the Code of Organization Registration with the local AIC office.
  3. Request for Tax Identification Number in the Tax Office.
  4. Application for registration of foreign exchange and approval to open capital account foreign currency before the Administration of Exchange Control (Administration of Foreign Exchange, or SAFE). This request must be submitted within 30 days of obtaining the Business License.
  5. Application for Certificate of financial records of the company with the financial department of the Center Unified Foreign Investment Services.
  6. Request the certificate of financial records of the company with the financial department of the Center Unified Foreign Investment Services.
  7. Opening of bank capital account and foreign currency bank account in Chinese Yuan.
  8. Transfer of the capital to the currency account within 3 months of the licensing business.
  9. Making capital verification by independent audit firm.
  10. Request for new business license to MOFCOM the paid up share capital.

The process may take 3-5 months or so, the cost of the procedure is $ 8,500. It does not include the registered capital that will be determined by the governing authority, there may be values between 500,000 Yuan to 1,000,000 Yuan about $ 85,000 to $ 170,000 (average). You can make partial contributions, and property may also be considered as investment, technology transfer, etc. (but this is considered by the competent authorities).

For the representative office

  1. Application and Registration Local Administration Bureau for Industry and Commerce, it is recommended to seek advice (or consulting firm) to provide guidance in the bureaucratic process. Starting on 2010 companies wishing to register, as RO must have at least 2 years of operation based on "Administrative Regulation on the Registration of Permanent Representative Organizations of Foreign Enterprises" the regulation came into effect from July 2013. Registration is valid as long as the foreign company exists legally.
  2. Designate a representative that is authorized to act on behalf of the foreign company as a legal representative.
  3. Register with the Tax Office.
  4. Accounting, which can be hired or done by the company.
  5. Recruitment of staff. At this point it should be noted in recruitment of RO staff, you could use specialized companies authorized by the Chinese government.
  6. Bank account in a Chinese bank.
  7. Rental of office. Chinese regulations allow the RO to be established only in certain property and places.

What legal steps may be used to avoid being scammed?

The only legal precaution is having a contract in English and Chinese between buyer and supplier. Hence other precautions that must be taken into consideration are the evaluations and inspections of supplier quality control:

1. Evaluation of Suppliers
a. Factory Audit
b. Financial Risk

2. Quality Control
a. Initial Production Inspection
b. During Production Inspection
c. Pre-shipment Inspection
d. Container Load Control

Performing a factory audit avoids starting a business relationship with a false Chinese company and making quality control of the products prevents failures by the China factory.

What are the most common scams in China?

Ghost companies commit one of the four most common frauds that occur in sourcing projects in China, either through lack of clear information, validation of the supplier or attracted by low margins and high profitability.

1) Ghost Enterprises

Virtual companies that exist only on the Internet, and are characterized by:

- Having only foreign names: This is a detail to consider as most firms in China have names that, by law, must indicate the city or county in which they are located. For example Shenzhen Bin Xin Yan Electronic Co., Ltd.; Shantou Xinyu Industry Co., Ltd.; y Dongguan Yongfang Electronic Technology Co., Ltd. The first word of all the names of these companies is the city where they are established, ie, Shenzhen, Shantou and Dongguan.

- Content in a foreign language: It is important to mention that, in case of a Chinese factory, more often than none find information in Chinese and then in a second or third language. Just think about it: If your company has a website, you only publish information in a foreign language and not the language of the country where you work? This is a sign to be suspicious of.

- Limited or residential address Information: If within the website is only one cell phone or an email, beware. Also pay attention to the address of the factory. It's hard to tell whether the address is residential or a commercial area. For that you should be familiar with the area.

2) Paper Businesses

They consist of companies that legally exist, but only for illicit activities. Usually are newly formed or have had less than one year of operations. The best way to detect them is to check the address of where they are established. This information can be found on the business license. If your provider is not open to a visit or asks a prepayment before visiting, beware and evaluate other options.

3) Imposters or hacking of email accounts

Today, the most common type of fraud, and most difficult to prove, is that in which companies that the dealer has already visited and even done business with. This type of fraud takes the form of 'hacking' of email accounts or email accounts created with the domain of the company with extra characters or numbers, these companies request the dealer to deposit money into a personal account or third company other than the one mentioned in the purchased order

4) Brands

This is another common online scam. It consists in offering name brand products at very low cost, which appeals to the importer by profitability that could be generated and also led by the stereotype that, if manufactured in China, then surely it is much cheaper. The truth of the matter is that it is likely that it is pirated products, which in the future may lead to problems with the customs authorities.

Note that the name brands usually have established distribution channels and dealers. If you find online a name brand item at very low cost, do not think they are original, also do not believe that these products are from the rejections from factories that specialize in making name brands, this is very rare.

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