CHINA IMPORTING SECRETS

IMPORTING FROM CHINA 1 Sourcing 17

____________________________
Online Sourcing 17

MY EXPERIENCE 1 Finding An Agent 19

____________________________ Going To China 20
Before the Fair 22
PLAYING THE RISK 2
____________________________ At the Trade Fair 29
Negotiation 35
WHY IMPORT? 3 36
Customization
Marketing 3 37
Ordering
The Consumable Market 3 Money 39
Working With Retailers 4 Letters Of Credit 39
Ensuring Your Margins 4
____________________________ Time Of Transfer Payments 40
Shipping and Duties 42
WHAT TO IMPORT 5 What To Ask Your Freight Company 42
Commodity Products 5 Harmonize Codes 43
Gifts And Decor 6 Freight Forwarding 44
Niche Markets 7 Trade-Free Zones 45
Business To Business Goods 8 Partial Containers 45
Lead Generation 8 Top Loading 46
Importing To Rent 9
Air Freight 47
Parts and Raw Materials 10
Damaged Goods 48
Services 10
eBay And Craigslist 48
____________________________
Scratch-n-Dent Sales 49
THE IMPORTING PROCESS 12 Overstock Companies 49
Limiting Risk 13 Liquidation Auctions 50
Pre-Selling 13 Insurance 50
Dry Testing 15 Recouping From The Factory 51
____________________________
Samples 15
Stateside Prototyping 16 CONCLUSION 51
 CHINA IMPORTING SECRETS
IMPORTING FROM
CHINA
We’re going to get into how to import from China.
Before we go any further, I want to make a
couple of quick disclaimers. First of all, I am
not an attorney and am not able to give any
sort of legal advice. If I describe past personal
experiences, don’t take these as legal ad-
vice. Everybody’s situation is different. If you
have a legal question, you need to seek out an
attorney and get their opinion and take their
advice. Secondly, I am not an accountant or tax
professional, so if I mention taxes or tariffs or
anything like that as far as goods coming in,
those laws and things change regularly. I am
sharing personal experiences from my importing
career. It doesn’t mean it applies to you.
What you really want is just the raw information;
you want to know what to do and how to avoid
mistakes when you begin to import from China.
Well: here it is.
1 CHINA IMPORTING SECRETS
MY EXPERIENCE
I started importing before I went to China. I had
a candle manufacturing company where we
manufactured a ton of those little inexpensive
candles. My company was partially bought by a
Chinese importer and we started importing the
glass that we put our candle wax into. At the time
we were paying about .60 cents a piece for glass.
We imported the glass for something like .16
cents a piece.
I saw the benefits immediately of importing, but
I had a partner who was a giant importer, so
I didn’t need to learn all the ins and outs of it.
A few years later, as I branched out into other
manufacturing businesses and got out of the can-
dle business, I needed equipment and supplies.
I started selling a lot on the Internet and was
thinking, “Man, it would be cool to direct import
some products and sell them online.” But I was
too big of a chicken to go to China by myself.
Finally, I talked a friend of mine into going with
me on that first trip. He had never been to China
either, so I don’t know why I thought he was
going to help. The very first trip I went to China
I was there for three and a half weeks. I ended
up buying nothing, I was so doggone confused. I
was more confused when I left than when I got
there. I came back feeling really foolish after
having spent all that money and time, so I started
developing a little system: if I went back again,
what would I do?
My system involved how to get the best sources,
how to get the best prices, and things like shipping
and duties. I documented it all, so the next time
I went back to China, I had my homework done.
I began bringing in a few products that I was
using in my own business; I brought stuff in for
personal use and I brought stuff in to sell.
I eliminated products based on things like the
marketplace being too small or the competition
too big. Eventually, some patterns started to rise
and I developed a system for buying winners
predominantly. Everything I have purchased has
not been a winner, but I have figured out how to
make money from the losers.
2 CHINA IMPORTING SECRETS
PLAYING THE RISK
There is an inherent risk in importing, if you don’t
know what you’re doing. It comes from many
different directions. It comes from a tax and tariff
perspective; from agents and guys like that trying to
screw you; from buying incorrectly and buying for
too much. If you pay too much for the products you
import, they may be worthless when you get them
here. You have to take this seriously as a business.
The upside to the importing business is that I
have met very few importers who have been
importing for more than four or five years who
are not very, very successful. You don’t meet a lot
of people who have become importers without
becoming successful. You meet a lot of people
who become importers for a minute, lose all their
money, and then go away. It is a little bit like
stock brokerage or commodity brokerage: if you
don’t know the rules and how the game is played,
you can get beat up pretty good.
This book aims to give you a strong education in
importing; a strong education in how to reverse
risk and put it back on the sellers and other
people; and even how to use other people’s
money to start your importing business. Even
if you don’t have a lot of money to invest, if you
have the knowledge and connections, typically
speaking there is more money out there than
there are knowledgeable people to run a
business like this.
 WHY IMPORT?
One word: MONEY.
Importing gives you an incredibly unfair
advantage. In the buy low/sell high business,
everybody knows that the money is made on
the buy side. If you could buy a new Mercedes
Benz for $5,000 a piece, could you make money?
Of course, you could because there is a market.
There is an established market for practically
everything. We find the established market price
and if we can buy that product for less than the
established market price and get it to market, in
front of the eyeballs of the people who are the
potential buyers, we pretty much win the game.
Old Navy is a good example of the benefits
of importing. Old Navy is a clothing retailer.
Most retailers sell a pair of jeans for $40 after
paying $20 for them from a designer, from a U.S.
company that had it made somewhere and gone
through all the steps. Old Navy figured out that
if they could import the jeans themselves for $2
or $3 a pair this would give them an amazing
amount of money to spend on marketing. This is
how they can run all those cool commercials and
run all those great, big stores in the really high
traffic locations. They have an unfair advantage
over the other clothing retailers as they have the
margin to market and the margin to advertise.
Marketing
If you don’t have a margin to market your
products, it is very difficult in today’s
marketplace to win. Everybody is marketing
very heavily. The Internet has created an entire
3 CHINA IMPORTING SECRETS
new breed of people who know how to market. I
would venture that 20 years ago you could count
all the great marketers in America on two hands.
Now, there are hundreds of great marketers. It
takes marketing dollars to market, so you need
margin to be able to spend marketing dollars.
If a product has a lot of price elasticity, you could
sell it for $5 online or you could spend the same
product for $20, and spend $10 on marketing.
In this case, I would choose the higher price and
spend the money on marketing. I would absolutely
dominate the competitor; I would crush them.
There is no way on earth that they could get in
front of the eyeballs that I could get in front of. This
is the reason I love the import business so much.
The Consumable Market
The import business consists of real merchandise
and with merchandise that is consumable, you
can often do the work one time and make money
for a long time. If you start selling consumable
things that come from China to the U.S., the same
customers will come back to you and buy month
after month after month after month.
Believe it or not, at some level most things are
consumable. Spark plugs are consumable,
obviously; tires are consumable. Believe it or not,
to a distributor, to a wholesaler, microphones
are consumable. They’re not consumable to an
end use customer, sure: you buy one microphone
like we are talking on now and it will last you a
lifetime. However, for the music store where I
bought this, they sell 30, 40, 50, 100, 200, 500, or
1,000 microphones a month. This is a consumable
thing to them: they will run out and need more.
If you are importing correctly and choosing your
markets wisely, you will find markets where you
can set up a relationship one time, begin to bring
products in, establish customer relationships on the
U.S. side (or wherever you are), and then consistently,
every month, just deliver those wholesalers or
retailers more and more and more goods.
Working With Retailers
There is an absolute gazoodle of money in
importing when you get it right. There are
billion-dollar and multibillion-dollar importing
companies. The gentleman who bought my
company sold a billion dollars a year worth of
home décor, chachkis, stuff that you set around
your house. They had a 40-foot section inside
every Walmart store in the country.
A lot of retailers are there buying directly
now. Bass Pro Shops is one. You can’t be more
American than that: “Let’s go bass fishing.” Pick
up some of the Bass Pro Shop stuff and I challenge
you not to find “Made in China” on the back.
They have buying offices in Guangzhou and
Shanghai now and Hong Kong. The big retailers
are turning onto the fact that they can go over and
buy, but there is still a service you can provide
4 CHINA IMPORTING SECRETS
to them. They aren’t able to buy all of their stuff
themselves, and they never will be able to.
There is also another whole rung of wholesalers
and retailers out there that are not billion-dollar
a year retailers like Bass Pro Shops, Garden Ridge,
and multi-hundred-million-dollar companies.
They don’t have that ability and they’re stuck with
buying things at markets in the U.S. where they
can only make a 50% margin or so.
Margins
As an importer, you are typically looking to buy
products at one-third of their U.S. wholesale
price. For instance, let’s say we’re selling a $40
pair of jeans. We have to wholesale that $40 paid
of jeans to the retailer for $20. We want to pay no
more than $6 and that is called FLC (First Landed
Cost). In other words, the $6 should include the
price of the materials, the initial warehousing,
the freight, and the duty. You want to be in at
about $6 on a $20 wholesale item as this gives
you the ability to do something.
The stores are paying $20 a pair for the jeans
and selling them for $40. If, for whatever reason,
this particular purchase doesn’t perform well or
there is a minor flaw in it or whatever, it gives
you the ability to sell it for two times your cost
to a liquidator. This means you still double your
money on a bad batch.
The other thing is that when you’re selling for $20,
you are typically going to have to wait to get your
money. You can use a factoring company who will
advance you money on your invoices. If you need
to find out about them, look up “invoice factoring”
at Google. There are some good invoice factoring
 WHAT TO IMPORT
companies that, as soon as you ship your product
to your customer, will go ahead and cut you a
check for 80% or 90% of the purchase price.
It is not as simple as saying: “These are the best
However: here’s the drag. They will charge you
things to import.” What is best for you to import
2% to 3% per month interest on that money until
depends on your own particular skill set.
the retailer pays you. You have to realize that
when you are selling to the end use customer for
$20, you are going to have what we call “cost of
money.” You will have a cost of money expense;
you will have some returns unless you have a
ridiculous return policy. There are other costs
involved too that will not allow you to keep all of
that $20. The worst-case scenario, if you import
based on this rule I’m giving you, is that if you
had to you could sell the jeans for $6. You could
dump them to Big Lots or Dollar General Store,
flea market vendors, or somebody who would
give you $6 for them.

While the importing business is risky sort of, if

you understand the last part of the importing 1: COMMODITY PRODUCTS
business which is liquidation, there is not a lot of
Commodity products are things like lumber,
risk in the business. If you’re going through all
concrete blocks, carpeting, and whatever, things
the checkpoints, making sure you know how to
that people use up and fundamentally buy based
buy, what to buy, and you’re following the points
on price, or things they buy a lot of at a season
being laid out here, while you are risking your
period of time.
money sometimes and sometimes other people’s
money, you do have that Plan B. When I was in business with my Chinese partner,
one of the biggest items we brought in every year
Buying at a third of U.S. wholesale will work in
was artificial Christmas trees. How many houses
most markets. You should try to make it work
everywhere you are, if you can. In some cases, in America have an artificial Christmas tree up

like the commodities business, for instance, at Christmastime? Probably 95%, right? The

there is no way on earth that will happen. You downer is that there is an established price for
will bring in for .80 cents and sell for a dollar. those. An eight-foot Christmas tree is worth, say,
However, for the most part, if you are going to $47.20. There are so many of them out there and
end use, this is what you want to do. they are fundamentally the same doggone thing;

5 CHINA IMPORTING SECRETS

one is not a whole lot different to the other. They
have that established price and the markets are
driven by price.
If you’re selling bamboo flooring, it will have an
established price of X dollars per square foot.
People buy it in massive bulk because tons of
people use it, and I would imagine the margins
in bamboo flooring are extremely tight. Does this
mean importing commodities is a bad idea? No,
it doesn’t. It means that if you are going to import
commodities you’re going to be a different kind
of importer. The kinds of people who import
commodities are typically people who look at
importing as if it’s a stock trade. They can go to
China, buy a million dollars worth of hardwood
flooring with practically no risk, knowing the
hardwood flooring is already sold by the time it
lands here for $1.2 million. They can make a 10%
or 20% return on their million dollars in 60 days.
If you trade stocks, that isn’t a bad return.
There is the ability to import like that, but here’s
the downer to that: in a commodities business
you have to have the best price possible. If you
buy wrong, you’re dead in the water. If you buy
for more than the market, it is a zero sum game.
It turns that profit margin upside down. Also,
if you have a quality control issue, you’re dead
in the water. If the boards are supposed to be 4
inches wide and they are 4.15 and it doesn’t fit
anybody’s blueprints or floor plans anymore, you
have a million dollars worth of firewood. The
commodities import business is not my favorite
kind of importing for these reasons. Also, you
make such a low margin that it is not worth your
6 CHINA IMPORTING SECRETS
time unless you are investing $1 million or $2
million at a time. It is hardly worth making 10%.
There is one way to make money in commodities
and a good friend of mine does this. He brings in
Freon for one of the largest automotive supply
companies in America. It is a commodity, but he
made the relationship with the factory and got
that locked down. He then went to the automotive
distributor and said, “Look, I can get you Freon
for $30,000 a container. If you are willing to
put up your letter of credit, your money, and
take the risk, I’ll go all the work for you for 8%
per container. I’ll handle all the importing for
you.” He had a track record of being a successful
importer. They wouldn’t just let Joe Anybody
do this. These containers come in and there is
$100,000 worth of Freon in a container. He makes
$8,000 per container and they bring in several of
them per month. This is zero risk to him.
There is a downer to that model: they could
decide to screw him out of the equation and go
directly to the source. However, if they’re smart,
they won’t do this. The importer does a lot for
quality control, and most of the retailers get
the benefits of using a good importer who has
a relationship with the factory. And of course,
they’re scared to lose their money, too.
2: GIFTS AND DÉCOR
The gift and décor market is a huge market. It
could also include the fashion market. As far as
gifts, décor, and clothing go, basically you need
to have good taste or somebody with good taste,
possibly a designer.
However, good taste to you may not be the good
taste that sells. I was working with a home décor
importer who sold all of his stuff to Walmart.
I think I have a pretty good eye for design, so
when we started working together I started
bringing him designs of all these really high
end candles and things I’d seen in New York at
Bloomingdale’s and Bergdorf Goodman and all
these high end department stores. Every time
I’d bring something in, he’d go, “No, no, no! It’s
all wrong.” I was getting all of my design ideas
from high-end magazines and going to very
expensive stores in New York, Europe. I’d bring
in these fantastic, and he’d say, “All wrong, all
wrong, all wrong.” Finally, I was so frustrated
that I said, “Look, they have this here, here, and
here,” and showed him the different stores. He
got frustrated with me and he said, “You don’t
understand. Only 5% of Americans have really
good taste. We sell to everybody else.”
He knew his market. He knew exactly who his
market was, and he knew they would buy the Jeff
Gordon NASCAR candle long before they would buy a
fancy, beautiful, frosted candle that looks like a cake.
The upside to home décor is that the margin
is sick; it is ridiculous. The margin is sick and
you’re probably looking at a purchase price of
anywhere from eight to ten times your money.
That is cost of retail.
3: NICHE MARKETS
Niche markets might be hobbies. This is
something where you have specialized knowledge
of the industry. Maybe you are a model train
7 CHINA IMPORTING SECRETS
builder and you know there is no real branded
track. Maybe the trains are branded, but the
tracks are not. I don’t know: I’m not a train guy.
I’m just making this up. You may decide that the
price you are paying for your model train track
is ridiculous. It is, say, $10 a foot and you may be
able to find it in China for .50 cents a foot. You
know you have a market there. You can bring
in the product knowing pretty much what the
market is based on your specialized knowledge.
One of the best examples I’ve seen of this is a
guy who used to work for Ford Motor Company.
He was one of the guys who designed the little
keyless clickers for locking and unlocking your
car. I used to have a building next to this guy and
every couple of days I’d see a 40-foot shipping
container back up to his back door and they
would unload it. The entire contents of those
containers were keyless door clickers for cars. He
sold them to car dealerships, to automotive parts
companies, and so on, as a replacement for when
you lose your car clicker.
Basically, these things sell for $150 to $200 a
piece from the car dealer. This guy would sell
the replacements to other people who would sell
them for $50 or $60. He got anywhere from $12
to $20 wholesale for them, and he was paying
$2 to $3 per clickie. He knew his market, and he
knew his product. He found all of these different
places, non-traditional places, to sell his goods.
He sold them to retailers and to parts suppliers.
He sold them to car washes, so when you’re
walking through the carwash watching your
car get washed and you go to check out there is
a rack of these little key clickies. He sold them specialized need. We would bring in a piece of
to locksmith companies. He’s getting anywhere equipment for $700 that we retailed for $3,700,
from $12 to $20 wholesale and he’s paying $2 to and that was a pretty normal market.
$3, so there’s your margin difference.
If I bought that same piece of equipment from the
States, I would have paid $3,400 for it. Imagine this
4: BUSINESS TO
now. There are a lot of guys out there competing
BUSINESS GOODS with me. They’re paying $3,400 for a piece of
I had a company for a while called Cleveland
equipment and trying to sell it for $4,000. Well,
Equipment Company. We had tapers
I’m beating their brains out at $3,700. Once I come
manufactured for us, which is a piece of
into the market at $3,700, they have to reduce their
packaging equipment, and liquid fillers and heat-
price to match me or they won’t sell any. But they’re
sealing equipment to shrink-wrap products with.
already on a slim margin, so now they are making
All sorts of packaging equipment, which is real
$200 or $300. What can they spend on marketing to
niche B to B stuff. I was able to get my one-third
get a customer? Practically nothing. I could spend
of wholesale buying price and still be ultra-
$1,000 per customer in marketing and still make
competitive in the market.
way more money than they do.
I was selling directly to end use consumers.
We did this via the Internet; we did it via trade 5: LEAD GENERATION
shows. We had a repping network that went out I never used to look at products that were low
and showed our products to other people. You dollar or very, very inexpensive little pieces, but
want to become prime: this is your ultimate goal. I’ve since been corrected.
This means you are the source for everybody
In most businesses, if you’re not already selling
to get their products from. In heat sealers we
your products online, you will eventually be
became a prime vendor, which meant we always
selling your products online. This is where lead
had the product in stock and our stock was good.
generation tactics can come in.
We had a lot of good quality control testing, we
had a lot of units out in the field, and we knew One company I know imports guitar picks from

that everything we had was good. a guitar pick factory in China. Their guy buys
all the extra guitar picks they have that are
Here’s what happens when you’re prime: your
overruns. He sells bags of guitar picks on eBay
market becomes global. We sold equipment
and he doesn’t make a lot of money on this, but
to England, Germany, South America, Brazil,
if you’re going to buy guitar picks, you really
Iceland, Canada, South Africa, Australia, New
want to buy them from him because he’s really
Zealand, and all over the place, because we
cheap. But who buys bags of 1,000 guitar picks
had kind of odd products for which there was a

8 CHINA IMPORTING SECRETS

at a time? People who own guitar stores. He has
used the picks to build a business of people and
now he wholesales strings to them. He brings in
guitars and musical instruments. He got them
as a customer and now he can sell them all sorts
of other stuff, so although he doesn’t make any
money to speak of on the picks, he makes a ton
of money from acquiring the customers. He’s
grouping people based on a certain need. He
is building a list of people that would probably
want something else he has. That’s smart.
6: IMPORTING TO RENT
Importing to rent is another big market right
now. We met a gentleman in Canton Fair in China
who imports oxygen generators. A lot of people
who have problems breathing have this little
machine they can use that helps generate oxygen
for them. Social Security and a lot of medical
plans will pay a rental of a couple of hundred
dollars a month to rent the machine for the
patient, but they don’t want to buy them because
they are quite expensive, around $4,000 or
$5,000. This guy goes to China, buys the machines
for anywhere from $500 to $600 a piece, and
comes back to rent them for the same $200 a
month. In three months, he’s in the black.
Plus, guess what that gives him? It gives him
marketing money. It gives him much more
money to spend to acquire the customer than his
competitor. His competitor is 18 months down
the road before he breaks even. My guy breaks
even three months down the road. Who wants
the customer more? There is no question that he
9 CHINA IMPORTING SECRETS
wants the customer more.
In China, you can often buy a piece of equipment
for about the same amount as a monthly rental in
the States. You get a company like Home Depot,
and they have a concrete finisher that rents for
$50 a day, let’s say, which is $1,500 a month. The
concrete finisher in China is probably $400. In less
than a month’s time, it’s paid for.
There are guys going over to China, buying
a piece of equipment, and then building a
business around it. They then sell it as a business
opportunity. They may go buy a power-plumbing
snake. Those things are usually $2,000 or $3,000
in the States, but in China they are $300 or $400.
So they package that plumbing snake along with
a business operations manual, some ad slicks,
and the use of a brand name, then they sell it
either as a business opportunity or a franchise
agreement to be ‘Mr. Super Rooter’ in their area.
There’s another company that goes over and
imports these floor steam cleaners that clean
grout floors. Instead of just selling the piece of
equipment, he sells the piece of equipment with
a Grout Genie franchise thing. He’s able to put
together all the pieces.
One of the cool things about importing things from
China is when you can take something you’ve
imported and add other things to it that add value.
Then your customer is not just comparing apples to
apples. You’re keeping them from saying, “This guy
has the same piece of equipment over here for $20
less.” It doesn’t matter at that point. They are more
buying into the business opportunity than the piece
of equipment. It doesn’t even have to be a piece of
equipment. It could be that you have a wholesale
source of cell phone covers, and you get a pushcart
in a mall filled with cell phone covers. You’re the
direct importer. It gives you advantages. You’re
building continuity and residual building.
7: PARTS AND RAW
MATERIALS
China does a massive business in materials like
chemicals, stone, and granite countertops. A
perfect example is a guy I know who imports
aluminum extrusions. This is a big word for
aluminum trim, the stuff that goes around a dry
erase board, for instance. They’re on almost
everything you pick up. Aluminum extrusions in
the States sell for an average of $3 or $4 a pound.
In China, they charge about $1.25 a pound
for extrusion. Well, this guy had the greatest
business in the whole wide world. You talk about
a risk-free importing business. He would go to
other manufacturing businesses and say:
“Hey, my name is Paul. I know you’re buying
a lot of aluminum extrusions right now and I
know you’re paying about $4 a pound for them
because I know where you are buying them from.
“What if I could get you all of your aluminum
extrusions for $2 a pound and cut your price in
half? Would you have any interest in that?”
He didn’t get a lot of nos. He would take their
samples, send them to China, and China would
send him back samples of the extrusions. He
would take their order at $2 a pound, have it
secured and locked down in a purchase order,
10
and then he would tell them it would be six to
eight weeks to get delivery. They were fine with
that because they were saving half. All they have
to do is plan out a little bit more.
He would take the order, deliver it, and then they
would set up what’s called a JIT (Just In Time)
Inventory. After the first order, after they saw
everything, the quality was good and it was going
to be okay, he would say, “Okay, let’s set up a Just
In Time Inventory for you. How many extrusions
are you using and when do you want them?”
They’d figure out they were using one container
of extrusions every two weeks, so he would place
orders six weeks out, eight weeks out, whatever,
and every two weeks they were getting another
container of extrusions in the back door. Every
two weeks he was getting another check. You call
on that business one time, basically. The rest of
it is just maintenance. No one ever says, “Hey, I
really think I’d like to go back to paying $4.”
8: SERVICES
Another great area in the import trade is services.
Sometimes these are service and product tie-ins.
Sometimes it is a product matched with a service.
This is one of the coolest ways of importing I have
found in a long, long time.
I met a guy on an airplane going to China not
too long ago who was an importer of trophies.
I said, “Oh, you import trophy parts,” and he
said, “No, I import finished trophies.” This was
his business. If you have ever seen a trophy, the
parts came from China. Most of the time they
make the parts, but they assemble them and they
CHINA IMPORTING SECRETS
do the engraving here in the States, then they
sell them. But this guy has a factory in China
that not only manufactures the trophy parts, but
will also have each one assembled and custom
engraved. He does this based on his orders that
he gets from big Fortune 500 companies. They
do a lot of plaques: a company like 3M may
give him an order for 10,000 plaques to go on
their distributors’ walls. The labor in China is
less than a dollar a day compared to labor here.
Figure in the equipment costs and the engraving
equipment: a lot of times, it will blow your mind.
We were asking about granite countertops one
time. The equipment you had to have to finish
out the granite countertops once you got them
here was going to cost something like a half a
million dollars. I had a client who was building
giant condos and every kitchen in every condo
was exactly the same size. We needed the same
piece of granite for 1,100 condos. I said, “What
would you guys charge us to finish out this edge,
cut the hole for the sink, and cut the hole for the
drain?” The guy looked at me and said, “Oh, no
charge.” They took the hole, they cut out a sink,
and they made marble cutting boards and sold
those as a separate product. The bottom line is
that they are laughing at me all the way. They’re
thinking, “What a dummy! We get a totally free
thing for cutting the hole out.” For me, it was a
matter of not having to invest a half a million
dollars into equipment and have everything sent
to me perfectly cut to go into the job.
I know another guy who exports truck engines to
China to use Chinese labor to completely rebuild
11
the motors. Once they’re rebuilt, they put them
back on a container and send them back to the
States. The labor to rebuild that engine in China
is something like $200 instead of $5000. Even
with the shipping there and the shipping back,
he is still saving money.
There is another place I’ve seen doing the same
thing lately: a dental laboratory here in the States
that is becoming very, very big in a lot of the
cities. When you get crown work, bridgework,
denture work, and all that, they take all the
molds that the dentists take, FedEx them to
China, and in a matter of two weeks or so they
are FedExed back to the States. The cost of raw
materials inside a crown or a denture is almost
nothing. It is almost all labor. They are able to
build crowns, bridges, and dental work in China
for .10 cents on the dollar versus the cost of a
wholesale dental lab here in the States.
The good news is that once you’ve secured the
vendor, you are virtually in a no-risk situation.
Most of it is prepaid. Importing doesn’t always
mean 40-foot containers and $100,000 worth
of stuff at a time. As a matter of fact, it is pretty
easy to buy almost anything in China $5,000 to
$10,000 at a time. You will have to wait because
your freight will be a little slower and your
freight expense will be a little higher because
once you start shipping less than container loads,
the freight goes up quite a lot. However, many
of the factories over there will sell you $5,000
to $10,000 worth of something. You don’t have
to go over there and buy a 40-foot container of
everything you look at.
CHINA IMPORTING SECRETS
 THE IMPORTING PROCESS
I
f you’re going to do this yourself and really
be in charge of the process, there is a way
you have to go about importing.
1. LIMITING RISK
First of all, you have to do your product
research. You have to know where your
market is. You need to do some price testing
and some elasticity testing and to how much
stretch there is in the amount of money
people charge. You need to know the high, the
low, the in-between.
You also need to research quality. What
features are needed, what features will
people just not live without? One time we
were bringing in shrink-wrap machines and
we didn’t have a knife that cut off the shrink-
wrap. People didn’t want our product. It was
a new feature that another manufacturer
added and it basically made our stuff ob-
12
solete. We had to close out a bunch of heat
sealers and order new ones.
If you ever run across a situation like this,
the best thing to do is get rid of the product
you have as quickly as you can for whatever
you can get out of it. If there is a major
development in your technology market, it
will quickly become the industry standard.
2. SOURCING
The next thing to do is find a source of
quality manufacturing and get a sample from
them. You want to physically see an exact
representation of what you will get when you
get your order, the understanding being that
the sample is what will be in the container
when you get it.
3. NEGOTIATION
Next you want to get your quote for the
CHINA IMPORTING SECRETS
 product. You will negotiate this a couple of
times. You will get at least two quotes, probably
three quotes, during the negotiation process.
4. CUSTOMIZATION
Once you have done this, you want to
customize your product as much as
is allowed. If you are importing small
quantities, this is the downside: you typically
can’t get as much customization work done.
If you are importing a container of something
from China, you can get them to brand it for
you almost always for no additional charge.
5. ORDERING
Next you are going to actually place the order.
Write the spec, place the physical order, and
get all the paperwork in place.
6. MONEY
You need to decide how you’re going to pay
for your goods, and it’s going to take a little
guts to send your money out there.
7. FREIGHT FORWARDING
You will deal with freight-forwarders and
getting all the freight documents done. You
will deal with your documents. Everything is
done in China based on a bill of lading and a
set of documents you have to have in order to
receive your freight.
8. DAMAGE CONTROL
Lastly, we are going to talk about damage. At
the last step of the process, what do you do if
13
your freight comes in damaged or unusable
for some reason?
1: LIMITING RISK
My number one concern when importing is
limiting risk. This is everything to me. You can have
three or four good import deals and then have one
or two bad import deals and lose all your money. It
is really important that you begin with a mindset at
the start of the process of avoiding risk.
Pre-Selling
My first strategy for limiting risk is pre-selling. As
an importer, people will look at you like a three-
headed monkey. They say, “What do you mean?
You go all the way over there to China and you
deal with all these Chinese people?” Yeah, you do.
These people will never be importers: they are
scared of the process, they don’t understand it and
they’re not going to be part of it. For this reason,
it is usually easy, especially if you have a great
price, a great product, and great quality, to go out
and pre-sell, if not all of what you import, at least
enough of what you import to avoid any risk.
We import hand dryers that blow your hands
dry, such a romantic business… We got a quote
on them and it was a fantastic price: they sell for
about $400 each and we were buying them for
$50. The quality was outstanding. We had the
factory send them labeled and branded. Because
we were known as an importer, they went above
and beyond and actually branded the samples
they sent us to our brand. Oddly enough, next
door to the building we were in at the time was
CHINA IMPORTING SECRETS
this company called Sani-Clean. They basically go
in and clean toilets for a living. A very romantic
business as well. Anyway, they had 30 trucks
and they maintain a problem most people don’t
want to deal with, meaning the restrooms inside
their businesses. They maintained the restrooms
including the supplies. We knew they used
hand dryers and they were paying wholesale
anywhere from $250 to $350 for a hand dryer
and would sell to the retailer for $400 or $500
when somebody needed one. We went to them
knowing we were going to sell our hand dryers
for $295. We went to them and said,
“Hey, we have these hand dryers. We want to buy
a bunch of them. Would you be interested in co-
oping a shipment with us? We can get them for
you for $150 a piece.”
That was way less than half of what they
were paying for the hand dryers, so I got a
commitment from them to buy one-third of the
container at three times what I was paying. The
container came in, I dropped it at their place and
unloaded one- third of the hand dryers off the
container, they gave me a check. At that point, I
was absolutely even. The container moved over
and dropped behind my dock and dropped off
$65,000 worth of absolutely free merchandise
into my warehouse.
This is what I mean about pre-selling. This is the
number one way to eliminate risk in importing.
You have to find bulk users.
Another example: we wanted to be in the key
cabinet business, so we put up a website and the
14
key cabinet business did okay. The thing was
that there was a lot of competition. There were
100 different sites online selling these big key
control boxes, and we were just one of them.
In this particular market, we had a ridiculously
good wholesale price. It was so good, in fact, that
we didn’t want to reduce our price down to just
become the cheapest in the market because it
would make our quality look poor. Here’s what we
did instead. We were selling a key box everybody
else was selling for $200 that we were buying
for about $12. We figured that all the other guys
were paying about $100 for that lockbox. It was
way smarter for us to not compete retail head-to-
head. It was better for us just to go out and sell
the lockboxes directly to all the other websites for
$55 apiece. I made my four- or five-times markup
– or at least my three-times markup – and I didn’t
have to ever mess with having to deal with retail
customers, selling individually.
The best part was that the product became much
more of a consumable product at that point.
Once you get that base established, now you can
direct mail all the locksmiths in the country,
which we did. You can go to the locksmith supply
companies and sell them wholesale. You can go
to trade shows for apartment complexes, for car
dealerships, and for big arenas, and we did all
that. You basically pick the low-hanging fruit
first. You’ve just got to find bulk customers, and
it’s not that hard to do.
If you have a few samples you can send out
to your bigger suppliers, that’s a risk-free
proposition. Even if you’re going to retail, it’s
CHINA IMPORTING SECRETS
a great way to help get rid of some of your When we get them in, we’ll put up a website, and
slower-moving inventory. The only problem is then we’ll see if they sell!”
that if you’re retailing online and you’re selling
wholesale online, you’re sort of straddling the
fence a little bit, and the wholesalers may not
like you very much. You’re competing with your
clients and that sometimes ticks them off.

Dry Testing
Dry testing is another way to limit your risk. It is
basically seeing if a product is going to sell before
you buy it. There are two kinds of dry testing,
but we don’t do pure dry testing because I don’t
think it’s very ethical.

You can do this on the Internet very well. You

just go out, put up a website, and begin to sell
something. Some guys will do it and just be out of
stock of that thing, but I don’t think that’s a good That’s just dumb. The better way is to know that
idea because you’re being deceptive when you do you have a market before you ever get started.
that: you never really had it anyway.
Samples
Instead, for most things that you’re going to
One of the things that I like to do is make sure
import, there’s already a domestic supplier of that
that I get more than one sample. I’ll ask for a
thing. Let’s say that it’s lockboxes. I’m going to sell
dozen or two dozen samples, and I’ll be willing
lockboxes and I know I can buy lockboxes for $12.
to pay extra for them if need be. A lot of the
To buy them wholesale in the States, they’re $100
time, I’ll have five or ten suppliers out there,
apiece but everybody’s selling them for $200. I’ll
and I want to send them a sample along with a
put up a Web site selling lockboxes for $125, just
letter. I want to get good photography. I want to
to see how many I’ll sell. If I sell some, I’ll go buy
get everything together so that they’ll give me a
them from the other company for $100 wholesale
buying commitment, so I know whether or not
and fulfill my orders, but only until mine get here.
I want to import. It’s also a good way to check
It’s a great way, rather than saying,
consistency from a manufacturer. I’ve stumbled
“I know what I think. I think these widgets are across a couple of bad items when I did that
going to sell. I’m going to go ahead and invest a once, and that was just in the sample lot.
bunch of money, buy them, and bring them in.

15 CHINA IMPORTING SECRETS

Stateside Prototyping
Another I which can save you a lot of time and
money, I call ‘Stateside prototyping’. A lot of
people try to get their prototypes made in China.
You try to draw a drawing or give them a spec if
you want something built a certain way in China.
You’re trying to explain it to them, and they’re
trying to understand what you want. I always joke
about it. I say, “If you send a drawing of a football
to China, they’ll send you back a baseball. If you
send them a baseball, they’ll send you a baseball.”
The best thing for you to do is to get designers to
build your prototypes in the States if that’s possible.
If you can’t build a prototype, then maybe there’s
one for sale already. You can buy one and send it to
them, and ask them to make one like it.
However, there are patent laws and trademark
laws that apply. One of the worst things that you
can do is get a container-load of something here
that violates a patent. If you get the merchandise
here, you just can’t sell it, and you have no
choice. If you start to sell it, you get is a Cease
and Desist. At that point, that merchandise is
absolutely the worst merchandise you can have
because you’re not even allowed to liquidate it.
You just have to destroy it, and you have to pay to
have it destroyed. It’s the worst possible problem
that you can run into.
What I suggest you do is build your prototypes
on the States side, send them to China, and say,
“Make me an absolute duplicate of this.” They’re
fantastic at duplicating things. They’re not very
good at creating things from concept.
Later on, as you get savvier, you’ll learn how to walk
16
in anywhere, look at an item, and tell you within
five or ten percent what that thing costs in China. It’s
a blessing and a curse. If you go shopping with your
wife, you’ll say, “I’m not buying that stupid thing! It’s
three dollars in China!” She’ll say, “Yeah, I know, but
this one’s $150 and it’s pink!”
The good thing though, is that once you learn
what stuff costs in China, you have this real big
advantage. The guy I worked with that was huge
in the home décor market would go to the Atlanta
market, which is a wholesale market selling to
other stores. He would go out into stores and find
a vase or a knick- knack that was at some store –
maybe even in the thrift shop – that was popular
30 years ago. He would just polish that thing up,
put it out on the shelf for sale, and take orders
from it. If a lot of people ordered, then he would
go buy it from China. If people didn’t order it, he
would write a letter back to the ones who did and
say, “You ordered this, but after some internal
testing, we realize it’s probably not going to be a
good seller.” He was seen as a hero for protecting
them from a bad seller. Also, though, he was able
to have a big display of stuff in his showroom.
This is what I call “the sticker method.” You can
actually scrape the other guy’s sticker off the
bottom of the product and set it. In order to do
that, you have to know your market and know
your business well.
Those are some ways that you can limit risk.
Limiting risk is a theme here, because the main part
of this is that you can make a lot of money. However,
if you don’t take some of these steps – or all of these
steps – to limit risk, you could really get caught with
your pants down and get broke real fast.
CHINA IMPORTING SECRETS
 2: SOURCING YOUR PRODUCT
There are about three ways that you can really
go about sourcing products from China: online
sourcing, using an agent, or actually going to China.
ONLINE SOURCING
A lot of people approach me now and
talk about online sourcing, things like
http://www.Alibaba.com. This is probably the
biggest website for sourcing products from China.
Yahoo owns part of it and it’s sanctioned by the
Chinese government, so they have a lot of support.
Basically, a lot of the Chinese manufacturers
have their products on Alibaba, so you can view
them and send in any inquiry asking about the
product, the quality, samples, etc. Another is
http:// www.ttnet.net. It’s also one of the best.
There’s another one called Global Sources.
I don’t care for it as well, but you can go to
http:// www.GlobalSources.com if you choose to. I
think Global Sources is more of a Hong Kong based
company. I’ve never been able to get manufacturers
that have good pricing from Global Sources.
Let’s talk about Alibaba and ttnet first. They’re
going to have you sign up for an account. They’ll
tell you to send your inquiries in through their
system and you can do that. There’s nothing wrong
with you doing that. However, here’s a biggie:
when you make contact with a Chinese company,
I’ll bet you can send in ten inquiries through
Alibaba and probably only get back two or three
replies. It’s not one of the more traditional ways of
contact. Also, they get a lot of knuckleheads that
just go on with, “Hey, how much for this thing?”
You just can’t approach them that way.
17
APPROACHING A MANUFACTURER
We’re going to get into this in depth, but I want
to start talking to you about it here. Chinese
manufacturers will treat you a certain way based
on how good a businessperson they think you are.
If you seem like a chucklehead, they’re going to
treat you like a chucklehead. If you act like just the
blind idiot walking through the door, they’re going
to totally ignore you, because they assume you’re
just full of crap and aren’t going to buy anything.
You can bet that every one of these places gets
dozens of inquiries every day through Alibaba. They
look at a large majority of them and go, “That guy’s
an idiot. He’s not serious.” They don’t even reply. For
other ones, they’re going to say, “That guy’s an idiot,
but he looks like he’s an idiot with some money to
waste, so let’s sell him just a truckload of garbage.”
They’re going to assume you’re going to be out of
business in no time anyway. They’ve got nothing to
lose. Why not just take some money from you if they
can? They will tear you up.
Everybody thinks that the mentality of Chinese
business is long-term relationships and that’s
absolutely true, if they feel you’re worthy of a
long-term relationship. If they don’t feel you’re
worthy of a long-term relationship, they’re going
to try to skin you for as much money as they
can get out of you, as quickly as they can before
somebody else does. They see you as an idiot
walking around with your wallet hanging out
of your back pocket and eventually, somebody’s
going to take your money, so they might as well
be it. They’ll just send you a container of junk
and you’ll just be screwed. The beginning of this
process starts with you looking like a professional,
CHINA IMPORTING SECRETS
because they judge you based on that.
METHODS OF APPROACH
I can remember in the 1980s there were still a
lot of older companies that wouldn’t do business
with you unless you would send them a letter on
letterhead, asking them to do business. We still
had traditional wholesale channels in the States
back then. China is still, today, very much like
that. If you want to get a quick response, go ahead
and send in the Alibaba form or the ttnet form if
you want to, but type up your request and fax it
on letterhead. If you’ve got to create letterhead in
Microsoft Word, that’s fine. Fax it on letterhead to
the supplied fax number for that company.
I don’t think I’ve hardly ever sent a fax to a
company that I haven’t gotten a response to
overnight. If you don’t have a fax machine,
you can use eFax. There’s a company called
http://www.eFax.com, you can go there for about
five dollars a month – or something like that – and
get a fax number where you can send and receive
faxes. They’ll send your faxes to your e-mail
account in a PDF form. You’re going to use faxing
for all of your orders. Every order you ever place is
going to be placed by fax, so you’re going to have to
have faxing in order to make it work long term.
WHAT TO ASK
When making online requests for information,
you don’t make the price the first and only
criteria that you want to know. You want to
ask them about quality, about their company’s
turnover. Ask them a lot of questions about
18
whether or not they’re reputable. You should
ask them their factory location. Are they the
prime owner of the factory or a broker? Can they
send you a prospectus? What is their annual
turnover? That’s a big question which we don’t
use in the States at all.
A big pride issue in China is how much they
sell. Another good question is asking what
percent of their annual sales are in the country
you’re in. Also, ask them if they have a stateside
warehouse. If they do, you probably don’t
want to do business with them because they’re
probably going to become your competitor.
That’s not always true, it is a lot of the time.
These online tools are very self- explanatory: you
literally just search a name and you find it. One
little tip I’ll tell you is that you’ll miss searches
in Alibaba if you search in plural because most
Asian manufacturers and most Asian people
don’t use plurals. If you search for “tennis shoes”
you’ll get nothing, as they will advertise with:
“We manufacture tennis shoe.”
I’d say online is my least favorite source,
although I did use it a great deal in the
beginning. When I’m going to import, though, I’m
typically looking at importing a million dollars a
year or more worth of product from somebody,
so it’s worth a trip for me to go see. However,
I’ve got a friend right now that I talked to the
other day. He’s in an equipment business where
they’re doing three million dollars a year, and
he’s never been to China. He does 100% of his
importing online, so it definitely can be done.
CHINA IMPORTING SECRETS
FINDING AN AGENT
The second thing to do is to find an agent. Agents
used to be more popular than they are now. An
agent is just somebody who understands importing
better than you do. They’ll typically take a fee of
somewhere between eight and fifteen percent to
go out and put together your deal for you: to source
your product and to find your manufacturers.
There are a couple of problems with agents. One
problem with agents is that they typically don’t
want to mess with you if you’re not doing volume.
They claim to only take a small percentage, so they
don’t want to go through a lot of trouble. Did you
hear the key word in that phrase? It was “claim.”
They claim to take a small percentage. I have yet
to ever meet an agent – at least one on the Asian
side of the water, in Hong Kong or China - that
didn’t have a back door deal with a factory.
So they’re going to be charging you on your side.
They’ll swear to everybody on earth that they’re
not making any money on the back side and
that is bullshit; they’re all making money on the
back side, every single one of them. That’s just
something that you need to accept, deal with, and
get over. As long as they are a quality agent and
providing you some services, then that’s just the
nature of the beast.
There are basically three agents. I typically avoid
Hong Kong and Shanghai agents, especially Hong
Kong agents. I’ve never had a Hong Kong agent
quote me a reasonable price on anything – ever.
If you’ve not been to Hong Kong before, it’s an
incredibly international metropolitan city. It cost
19
a fortune to live in Hong Kong. If you’re an agent
living in Hong Kong, I’d say that those guys are
making a minimum of anywhere from $500,000
to one million dollars a year brokering goods.
Unfortunately, based on their circumstances,
they have to make a lot of money on the front
and backend of you to make it work.
Shanghai is becoming the new Hong Kong. A
lot of guys are now moving from Hong Kong to
Shanghai, or they have an office now in Hong
Kong and Shanghai. Does that mean that every
Hong Kong broker and Shanghai broker is a bad
guy? Absolutely not, but the ones that I’ve had
experience with in the past have not been good.
If I were you and looking for an agent, I would look
up Trade Agents in Guangzhou. Guangzhou is more
“real China.” That’s what I call it anyway. When
you’re in Shanghai, it’s all pretty and shiny. It’s
westernized. Hong Kong is incredibly westernized,
too. However, when you’re in Guangzhou in
Southern China, you’re still really in China. A huge
percentage of what’s manufactured in China is
manufactured in the south, in Guangzhou. This is
because a lot of the raw materials are down there.
It’s in Southern China.
You can also go to a Stateside broker. If you use a
Stateside company you need to make sure that they
have an office in China. You need to get the address
and phone number of the office in China, and
be sure to call the office and make sure that they
aren’t full of crap. You’re going to have to do a little
due diligence here when it comes to your brokers.
CHINA IMPORTING SECRETS
GOING TO CHINA
The third way is the best way, but it’s scary as
hell for most people. It’s to get your oars out, get
in your rowboat, and row to China. Or you can
fly if you want, it’s more convenient.

I waited a long time before I went to China. I

turned down three or four invitations to go to
China. I’m not sure what freaked me out about
going to China; but it just scared the snot out of
me. I think that it scares a lot of people.
Honestly though, the only thing about China is
that it’s not a very convenient place. Things that
we’re used to being easy and simple are very
formal and systematic there. If there’s a line with
a hundred people in it waiting for a taxi, nobody
will cross the street and try to get a taxi on the
other side of the street. They’ll just stand in the
line even if it takes an hour and a half. They
don’t care. As a person from the U.S. – Western
– that will just drive you nuts. We’re used to
everything right now: fast, fast, fast, fast, fast.
Anyway, let’s assume that you decide to go to
China. I would say that you would want to focus
your trip around a trade show. There are a
number of trade shows in China. You can go to
the Guangzhou Fair Complex, which used to be
called the Canton Fair. It’s the biggest trade fair,
over one hundred years old.
TRADE FAIRS
There are trade shows in Guangzhou, Beijing,
and Shanghai. I know that the best trade shows
are in southern China – in Guangzhou. This is
because you’re very near to the manufacturers
down there. You can literally be at the factories
of a lot of the manufacturers that are at the
Canton Fair in an hour.
So, pick your trade show. There are a lot of new
shows that are starting in Beijing and Shanghai
– particularly Shanghai – right now. They are
new shows. You’re going to fly to China, get there,
go into a building, and there are going to be 100
vendors there. That is a real drag when you’ve
flown 14 hours to go to a show with a hundred
vendors; you’re done in two hours and didn’t
find anything that you were really interested in.
THE CANTON FAIR
The Canton Fair is quite the opposite. The Canton
Fair is now in three phases over a four-week
period in China. Each show holds about 2,000
booths. If you want to stay for the full ride it’s
about 6,000 booths of merchandise. They are
semi-categorized. One area of the show is apparel
and consumer goods; one area of the show is
business to business; another area is industrial.
However, it’s not unusual to see some guy sitting
outside who sells bulldozers and hair bows.
Basically they are categorized, but not very well.

20 CHINA IMPORTING SECRETS

The longer that you can stay in China and see
more of the show, the better off you’ll be. This is
especially true for the first time that you go. You
come back breathing a little easier about the whole
process. You’ll come back with a little bit more
understanding, but also a little bit more confused!
At the Canton Fair there are basically three
different fairs that go on at the same time.
There are two centers: a downtown center and
an amazingly beautiful, brand new convention
center on the outskirts of town.
When you go to the Canton Fair it’s an amazing
thing. It’s a multi-cultural, international event.
The last time that I was there, they were
announcing some statistics. Only nine percent of
the buyers are from the United States of America.
There’s almost no one from China that attends.
They don’t let the Chinese people go into the
Canton Fair, unless they are a vendor. A Chinese
man and I went over there once from the United
States. He had a very difficult time getting into
the show because he was Chinese. Translators
are a pain in the neck to get in too.
So, there’s a show for a week. They break it down
for about five days. Then they have another show,
break that down for five days, and then have
another show. You can choose what you want to
do, but what I usually did was to go on factory tours
during the days that the shows were closed down.
Other times I would take a plane over to Thailand,
the Philippines, or Malaysia and just relax for four
or five days. I wanted to go somewhere where
people smile and speak English. China is great. It’s
a cultural experience, it really is, but if you have
gone a lot of times, it isn’t a place that you really
21
want to stay around a long time.
When you go to the Canton Fair you have to be
prepared for incredible price gouging. Overall
China is an inexpensive country to travel in. It’s
inexpensive to stay, fly, and eat there. However,
when you go for Canton Fair week, they know that
you’re there to spend money and they pipe it to you.
The hotel rooms that are normally $30 to $50 a night
are $400 a night, depending on where you stay.
Whatever the bad sides, the Canton Fair is an
experience that every importer needs to take in to
actually understand how things work. There will be
an area in the Canton Fair where they have industrial
equipment. They’ll have entire manufacturing
plants set up in a trade show. You can watch all these
machines running, the kitchen equipment running.
All of this stuff is actually functioning while you’re
sitting there talking to the guy.
If you’re into equipment, he can show you
how the machine works. They have vehicles,
motorcycles, mini bikes, and other things that
you can ride. You can go out into the outdoor
yards. There will be complete school buses,
tour buses, tractors, giant heavy equipment, oil
wells, oil drills, all kinds of crazy stuff sitting
out in these lots. You can literally go up and buy
yourself an oil drilling rig if you want to – or, if
you have enough money, a dozen of them.
If you’re an entrepreneur – and I’m sure you are if
you’re listening to this – you go into entrepreneurial
overdose. You say, “Oh, I can make money with that.
Look at that, I can make money with that. That’s
crazy.” You’ll just go nuts. You’ll need to take it all in
and then have a refining process.
CHINA IMPORTING SECRETS
BEFORE THE FAIR
TRAVEL TO CHINA
If I’m going to Guangzhou I fly on China Southern
Airlines. The reason that I fly on China Southern
Airlines is because I can fly China Southern out
of L.A. first class for not much more money than
flying coach. If I’m flying coach on domestic for
$1,200, I can usually fly business class on China
Southern for $1,700. Business class on a Chinese
airline is like domestic first class on an American
airline, but to be honest, it’s a little better than
domestic first class. Again, you need to remem-
ber that rates vary and things change.
For about $3,000 you can fly first class. The seat
makes into a bed; you get three really amazing
meals; total peace and quiet; slippers; cologne; and
toothbrush. They give you everything. I have made
a lot of really good business deals in first class.
Other people that are in the know also fly these,
the experienced players. If you can swing the three
grand ticket, it’s worth your while to fly first class.
China Southern flights leave late at night. They
usually leave at midnight. You’ll fly out at
midnight and arrive roughly at seven or eight
o’clock AM two days forward.. You’re going to lose
a day going over. If you’re planning on being there
on Wednesday, you have to leave Monday night
because you cross the International Date Line.
When I come off the plane, I check my bags in
my hotel and go directly to the trade show. I
would suggest that you do the same. You have
to understand: this is a huge trade show. Hotels
22
are booked. You usually have to check your bags
with the bellman and go ahead and go. Your
room isn’t going to be ready at eight AM in the
morning. This is China. Even if every room in
the place was empty and check-in time was three
o’clock, you’re going to get to check in at three
o’clock because they’re not going to break a rule.
WHERE TO STAY
If you’re on a budget, I would start out by
checking the Guangzhou Holiday Inn. There’s a
website called http:// www.AsiaRooms.com. It
isn’t too bad, I’ve stayed there before. It’s not my
favorite place, but it’s fairly clean and the rates
are probably going to be somewhere in the $150
to $180 range.
The second place that I like that I’ve had good
results with in the past has been the Ramada
Inn Pearl Hotel. The Ramada Pearl has one little
downside to it: it’s kind of in between the two show
arenas. You’re going to have to take transportation.
However, there are shuttle buses that run in
between all of these. It’s a reasonably priced hotel,
probably around the $200 per room rate.
The China Marriott Hotel is the oldest hotel
there. The rooms are pretty good, but this hotel is
fantastic because it sits directly in front of the old
trade center. The old trade center is one of the two
trade centers that they still do shows at. The rate
is going to be somewhere in the $300 price range.
The other cool thing is, they have the best dining
restaurant in Guangzhou. For the most part, the
food is American and it’s absolutely excellent food.
I’ve never eaten a meal there that made me sick.
CHINA IMPORTING SECRETS
There’s also the Asia International Hotel. The Asia and be ready to walk into the show the next day.
International is a five star hotel and one of the
nicest hotels in all of Guangzhou. The ninth and
tenth floor of the hotel is an amazing spa. They
do the best massage – foot massage, saunas – it’s
fantastic. They do an hour and a half long foot
massage for $20, and once you’ve walked those
shows, especially by the third day, your feet are
going to be pounding. Unfortunately, it’s not
centrally located. It’s about 10 or 15 minutes from
the old convention center and 45 minutes from
the new convention center. However, they do run
shuttles. That’s going to be $350 to $400 a night.

If price is no object, my number one favorite TRANSPORTATION

recommendation – and where I stayed the last time
I’m a little bit spoiled because I know that I’m
– is the Shangri-La Hotel. The food still sucked at
going to be spending money. I call and ask for the
this place, but the hotel was amazing. It is brand
hotel to send me a car and a driver. It will usually
new and directly across the street from the brand
cost you twice as much as a cab, okay? However,
new convention center. It’s about $400 to $450 a
in my opinion, it is money well spent. You’re
night and is truly a five star hotel. You’re going
going to get a nice car. They’ll probably bring you
to be directly across the street from the main
bottled water and a newspaper to read; they’re
convention center. When you leave in the morning
going to treat you real nice. When you get there
you’re going to be two to three minutes to get to the
there’s going to be a driver standing out in front of
convention center versus a 45-minute ride.
the terminal holding up a sign with your name on

The other thing that’s really good about all of it. More importantly, if he comes from the hotel,

these is that they all have shuttle buses. They will he probably knows how to get back to the hotel!

also allow you to register for the show at your

Another thing about cabs: even though they’re
hotel. I absolutely recommend that you do this.
expensive, during the Canton Fair there are lots
When you get to the show the next day you’ll
of hustlers around. There are guys asking, “Do
thank me for that, because usually the line to
you need a ride? Do you need a ride?” Don’t ever
register at the Canton Fair is about an hour and
go with those guys. Only go in the red or blue
a half to two hours long the first day of the show
taxis. Those hustlers can take you anywhere.
and about an hour long every other day. You can
They could tell you it’s going to be $500. If
do it in your hotel in ten minutes, get your badge
you don’t want to go, they’ll just drop you off

23 CHINA IMPORTING SECRETS

wherever you’re at. That would be a drag.
Keep your hotel room key with you at all times. It
usually has a logo on the front of it and a map on the
back. You can ask them to draw you a map back to
the hotel, too. You can be almost certain that the cab
driver that you get will not be able to speak English.
CHINESE CELL PHONES
One of the first things that I do when I go to
China is get a Chinese cell phone. Inexpensive
cell phones are less than $100 in China. It’s going
to be a pain to use, but on any budget you can go
get a phone and have some minutes. It gives you
credibility and some safety.
They’re just not going to treat you the same way
if you don’t know the game, if you don’t look
like you know where you’re going. With the cell
phone you can talk to your other people. You
need to exchange numbers if you’re going to go
in a group. I assume that you’re not going all by
your little lonesome, especially the first time. You
shouldn’t. So be sure to exchange numbers with
whoever you’re with.
Cell phones work differently in China than they do
in the United States. You can buy a cell phone and
minutes anywhere. There are little minute cards
that you buy and you scratch them off. If you can
communicate with the young lady wherever you
buy a minute card, you can ask them to enter your
minutes. It’s fundamentally a pre-paid cell phone.
FINDING A TRANSLATOR
The next important thing to do is find a translator.
You’re going to be able to find a translator to work
24
for you very easily. This is not their first rodeo.
I like going to the old center the first time at the
Canton Fair because, typically speaking, there are
more translators down by the old center because
it’s near the university. There will be hundreds of
young men and women from the college holding
up signs that they translate. Some of them translate
into French, Spanish, and Russian. However, there
will be more English translators than anything else.
You need to go along and talk to them. Don’t just
pick one based on their looks or that they seem
nice. You need to ask them a few questions:
“Tell me how you’d order a cheeseburger for me
if I was going to McDonalds. I want a Big Mac
with cheese, no onions, two packs of fries, and a
coke. How would you say that?”
See what they say back: it might be surprising to
you. You need to speak relatively
slowly and give them a fair shot. For the most
part they’re going to be able to do all of this little
stuff that we’re talking about, like getting you a
cell phone and minutes.
When you’re at Canton Fair, the only food that you
want to eat is probably going to be McDonalds.
There’s a McDonalds there. Guess what? You
aren’t the only one with that idea. The lunch line
starts just a hair before they open for breakfast.
I usually send my translator at 10:30 to go to
McDonalds and stand in line. I’ll give her my
order and usually around noon she’ll give me a
cell phone text back to tell me that lunch is ready.
I usually use female translators. I’ve tried male
translators on two occasions. On two occasions
CHINA IMPORTING SECRETS
I’ve been sorry that I did. Again, you may find a
male translator that’s absolutely fantastic for you.
However, we’ve always done better with young
ladies. They’re usually nicer. They’ll usually have
friends, too, and people are nicer to them.
Your translator is usually going to charge you $30 a
day for their services. That’s pretty much a set rate.
However, the Canton Fair is going to charge you
$50 a day to bring them into the fair. You’re going
to have to go and get them early. Even though you
have a badge, you can’t register your translator.
The translator can only register at the show. You’re
going to have to stand in line with them, show your
passport, and show that they’re your translator.
They’re going to get badges. If you’re pretty sure
that your translator is who you want, go ahead
and get them a three or four day badge – or as
long as you’re going to be there, otherwise you
have to get them another badge every day. At the
end of the day, when the time is over though, you
need to make sure and take their badge back. It’s
one of the little tricks you need to know about.
They can come back the next day – they have
a very unique selling proposition for getting a
different client. They can say, “Hey, take me. I’ve
already got a badge.” I’ve never had that happen
to me; but I’ve heard of other people who have
had that happen to so I usually just take their
badge with me at the end of the day.
The translators get time off of school and credit
for doing this. Typically speaking, they’re just
amazed with the culture that you’re from. They’ll
be willing to stay with you in the afternoons or
early evenings as long as you want. If you want
them to take you somewhere to get good food,
25
to a mall, get a suitcase, or a cell phone, they’re
very accommodating. They’re not too wigged out
about their time being over right at five or six
o’clock. They’re usually overly, overly helpful.
I will tell you that if you have a female student
translator, you need to be very proper in the
way that you communicate with her. They don’t
take romantic jokes or flirting very well. It’s
considered a taboo to do that. I think a lot of guys
go over there and want to flirt with this cute little
girl, but you’ll really offend them. They’ll end up
not doing a very good job for you, or just leaving
completely. So, please don’t do that.
So, translators can go and get food for you. They
can do anything that you need for them to do,
but the most important thing they’re going to be
doing is helping you to communicate with the
people in the booths and shows.
WHAT TO BRING
First of all, you’ll need to have a passport. You also
have to have a Visa. It’s not a big deal to get a Visa;
anybody can get a Visa in a day. I use a service in L.
A. called U.S. China Travel Services. Danny usually
handles all of my travel. I’ll send him my passport
– you have to send in your passport, so don’t get
freaked out by that – and he will get me a Visa the
next day along with my passport. Or, he can just
hold them with my other travel documents. Danny
can get the Visa really easily because he has an
arrangement with the government.
If you’re getting it some other way, you may
need to get a Chinese company to give you an
invitation to Canton Fair. You can also go onto the
Canton Fair’s website and ask for an invitation.
CHINA IMPORTING SECRETS
They’ll send you one by email, then you can send
it in with your Visa application.
You will also need at least 1,000 business cards.
Business cards are the weirdest thing in China
ever. You can’t get anything done without a
business card. They won’t talk to you in the
booths, they won’t give you a price or do anything
for you, unless you give them a business card. It
needs your company name, your name and email
address. Don’t put an email address on there that
you use all of the time because they are going
to email you pretty heavily. You might want a
special email address for that card. You also want
a fax number on it and your Skype ID. You want
everything on there that makes it look like you’re
a legitimate business.
If you have a cute card or a card with your picture
on it, they’re going to look at you like a goof ball.
You want a very professional looking card. It
should also have your company logo on it. If you
don’t have a logo, make the card black text on
white cardstock. The heavier the cardstock, the
more seriously you’ll be taken. You need to think,
“How can I look the most established?” When you
walk up to a booth, one of the first things they’re
going to ask you for is a card.
If you take any sort of prescription medicines,
you need to make sure that you have an adequate
supply of them with you. To get pharmaceuticals
over there is the very next thing to impossible.
You can go get pharmaceuticals or almost
anything that you want at a pharmaceutical
window, believe me, but God knows what’s in it.
In terms of clothing, if you’re going to the Canton
Fair you’re going to want to wear something that’s
26
relatively cool. I’ll usually go in khaki slacks,
button down short sleeve shirt, and black tennis
shoes. The reason that I wear black tennis shoes
is because they kind of look like dress shoes.
Also, they’re rubber soled and comfortable; pick
something with a lot of arch support. I would guess
you’re going to walk somewhere between five
and seven miles a day. If you’re not used to a lot of
walking, it’s going to absolutely wear you out.
I definitely don’t want to be in shorts. When
you’re in shorts over there, it looks like you’re
a very junior player. I don’t usually go over
in a suit and tie because I would get very
uncomfortable. It’s a long day. On the other
hand, you don’t want to go over there in shorts
and a Pink Floyd t-shirt either, as you’d look like
a goober. So, try to dress in between those two.
I like to take a Flip HD video camera with me. It’s a
pocket size video camera, about the size of a pack
of cigarettes. You can shoot really high quality
video. Always ask permission before you shoot
video in a booth, as it’s considered extremely rude
to shoot video without their permission.
I also carry a voice recorder with me. That way
when I’m walking through a booth and want to go
back later, I can record the booth number, name
of the company, what they had to sell, and a note
to remind myself why I want to go back there. For
example, the booth may be real busy the first time
I’m there so I just plan on returning later.
The key is running through this thing with
incredible speed. What you’re going to try and
do the first day of the Canton Fair is to see as
much as you can see, as quickly as you can see it.
You have four or five days for each of these legs.
CHINA IMPORTING SECRETS
So, the first day or two you can make a quick
run through, then you have three more days
to go back to the things that you were the most
interested in and really hone down on them.
When you’re going through the first ones, you’re
going to be running and gunning.
You also need to be prepared to walk your butt
off. I’ve got a little kit that I prepare before I go
into the trade show. I’ve got a roller bag that rolls
behind me and a smaller shoulder bag, like a tote
bag, for my assistant. Basically, you’re going to be
picking up a ton of catalogs, materials, and things
like that. I’ve shipped back a 65-pound box of
catalogs from China before: that’s not unusual to
do. In fact, there’s a place in Canton Fair where
you can go and put all of your catalogs in a box,
and ship them directly from home, if you want to
and if you have a FedEx account number.
You also are going to need your badge to go in
and out of the show. You’re going to definitely
need your hotel room key, so you know which
hotel van to go back to. There are literally 150
vans sitting in a parking that take people back
and forth to hotels when you come out of the
Canton Fair Show. You can either try to find
yours among the 150 in the baking heat, or you
can hold your room key out and ask the lady and
she’s going to tell you exactly where to go.
The next thing is the simplest little thing in the
world, but you want a spiral notebook and a
stapler. This shows that you’re a serious buyer
who knows what he’s doing. When you walk
into a trade booth over there, they almost all do
it the same way. You give them a business card,
they open up a spiral notebook and staple your
27
card to the top of that page in the notebook. Then
they’re going to begin to take notes about you
and what you discussed.
If they give you a quote or a price, you can bet your
bottom dollar that they know what it is. So, if you
go back to them and say, “You told me that you’d
sell that for two dollars.” They will pull out that
piece of paper and show you, “No, I told you right
here it was two dollars and 75 cents. You’re full
of bull.” You want to be able to go into the show
handling yourself, your business and any leads
the same way that they do. That is what’s going to
make you look like a professional in their eyes.
You’re going to want samples, so if you have
a particular product that’s small and portable
enough to carry around that you’re sourcing in
particular, you should bring one with you from
the States. That way you can just go into the
booths, hold out your tool and say, “What would
it cost for you to make this for me?” You can take
those samples too, and compare them to their
version for quality.
You’re also going to want a laptop computer with
you. If you don’t have one, for whatever reason,
hotels like Asia International have a computer
center. You can go and use one of their computers
but it’s very expensive. They charge so much
a minute for every minute that you’re on the
computer. What you’re going to want to do is go
online and find out what the things that you’re
looking at are selling for. You’re going to need to
have research for that first couple of days to help
determine who you’re going to go back and see.
Typically speaking, the first day or two of the
show is wicked hard work. When you get back to
CHINA IMPORTING SECRETS
the hotel room, it’s time to open up the computer, GETTING SAMPLES
start going through the catalogs, and start doing
As an importer, you need samples. Getting sam-
pricing research. If you’re going with a group of
ples in Guangzhou is relatively easy. If you carry
people, you can sit down in a circle and compare.
yourself well at Canton Fair, you look like you’re
You then see all different kinds of things because
a professional. They realize that you’ve flown 15
everyone got different stuff. There just is no way
hours and probably spent thousands of dollars
on earth that you’re going to see everything. I’ve
to be there. They’re not going to be wigged out
had people that have walked down the same
about sending you samples.
aisles with me – right behind me in a show – and
we’ll get back to the hotel and they’ll show me all If they have any problem with sending samples,
kinds of stuff that I never saw. the problem will be the shipping price. If they

Another thing to do online while in China is find say no, the one word that will get you all the

the factories in Guangzhou so that you can go samples you want is FedEx: “Here is my FedEx
and tour the factories while you’re there. One of account number.”
the best deals that we ever found on a product
If you’re willing to give them your FedEx account
came when we were buying stanchions – the
number to ship the sample from, nine times out
little stands you find in airports. We got an okay
of ten they’ll give you the sample. If it’s less than
price at the fair, maybe $18, but we had a little
$50, they’re almost always going to give you a
extra time in China so we started searching
sample for free – as long as you’re willing to pay
for stanchions. We found a supplier – the one
that we have now – that just happened to be in the FedEx to ship it home.

Guangzhou, about 15 minutes away from our A lot of times I have cash with me when I’m
hotel. We called them up, took a cab right out to
at Canton Fair. I’ll give somebody cash for the
their place, and toured the factory. We ended up
shipping. They’ll call and get the shipping price,
buying stanchions better than the ones that we
then I’ll just give them the cash at the show. If I lose
had for $12.40 a piece. Not only that, but they
$50, so what? So far I don’t think I’ve ever had a
had two other lines of totally different products
single person that I’ve given FedEx money to send
that we were able to pick up.
me samples not send me the samples. For the most
Importantly, when you’re in China at the part, Chinese people are incredibly honorable
Guangzhou Fair, you’re going to see items people. They’re not cheats by nature. However,
that you’re looking for and see what they’re they’re not going to waste a lot of time or effort
classifying them as. Now you can go back to
to do a quality job for you if they don’t feel like
http://www.AliBaba.com and search with the
you’re going to be around as a customer for them.
proper search reference. You’re going to find a
If you’re not worthy of a relationship, they’re not
ton of factories that you didn’t find before.
going to treat you with relationship potential.

28 CHINA IMPORTING SECRETS

AT THE TRADE FAIR
HOW TO ACT
How you act and how you approach this – your
positioning in China – is gigantic. I’m going to
give you a few tips here, but you’ll learn more as
you go along.
You should immediately give your business cards
to your assistant or translator when you get into
the show. You don’t need to have any of them on
you, as that way you’re not tempted to reach in
your pocket and give somebody one. When you
walk into a trade booth in China, the person who
is the most important person in that company
is probably in the far left or far right corner of
the booth, sitting in a corner, reading a book
or newspaper. They’re going to have a number
of people in the front of the booth waiting on
people. They’re going to immediately ask you
for a name card. When they go to give you a
business card, ask them to please give it to your
assistant. Don’t take their business card and
don’t give them your business card. Have your
assistant exchange cards with them.
The vast majority of the conversation needs
to be between you and your assistant. In a lot
of cases now, the person at the booth speaks
very good English; still, it’s not a good to talk to
those assistants. In China, if you’re talking to
the assistant, you’re assumed to be at the level
of their assistant. It’s a class system. It’s better
to have your assistant speak to theirs. Then, if
you’re more interested, have your assistant ask,
“My boss would like to set up a meeting with
29
your boss. When would that be possible?”
It might be possible right then. There’s an
extremely high likelihood that the person who
runs the company will not speak English. The
younger people – the assistants, the hostesses,
and the ones working the booths – speak pretty
good English but a lot of the time, the big bosses
speak absolutely no English at all. This is where
your interpreter and their interpreter are going
to really come in handy. However, it’s a good
chance to meet them.
At that point, you can present them with your
business card directly, if you want, even if you’ve
given one to the assistant. You should ask for a
prospectus on their company. Pretty much every
manufacturing company in China has a prospectus
– like stock companies do in the U.S. – that tells
you what their turnover is. It has picture of their
factory and bios on their executives. Although a lot
of times these are in Chinese and you can’t read
them, it’s a good idea to ask for them.
If you look like you know what you’re doing,
they’re going to treat you like you know what
you’re doing. If you look like a chump, they’re
going to treat you like a chump. They would
never do business with a company that they
didn’t thoroughly investigate first. They’re
assuming that if you’re not going to investigate
them, you’re not doing your due diligence; you’re
probably not a very viable person. So, you want
to ask for a prospectus for their company.
CHINA IMPORTING SECRETS
 WHAT TO ASK
When you want to request a price, don’t make
that the first question you ask. You can ask for
a price – that’s fine – and they’re going to give
you a price in the show. However, ask for some
more information before you just ask for a price.
The bottom line is that the price is going to be
what you want it to be if you do a good enough
job negotiating. For the most part, though, if
something costs $100 in the States, it’s $15 or $20
in China. It runs along those lines. That “three
times at wholesale” is a pretty standard thing
(unless you’re in commodities). So, you know
what the price is going to be. a commodities market – if you’re buying blank
CDs and they’re nine cents each – no, you’re not
However, you don’t want to just to compare
going to buy them for four- and-a-half cents. You
things by walking down the aisles and asking,
might be able to shave a penny off or something.
“How much is yours? How much is yours? How
However, if you’re buying something that’s
much is yours?” without knowing the quality,
unusual, you should usually get somewhere 30-
the manufacturer, the terms, or any of that stuff.
50% less than that by the time you’re ready to buy.
That just makes you look stupid. Don’t make
everything about the price. At the end, after I might not get that on my first order, though, and
you’ve asked a few more intelligent questions, that’s a big deal: I don’t try to win the war on the
you can say, “Can you please give me an opening first order. A lot of times, if a guy quotes me $20,
quote on this product?” There’s a reason you and I like the company and I like the quality, I may
want to say “opening quote.” You’re telling them, offer him $17 or $18 for an initial offer for an initial
“Give me your book price. Obviously, I’m a sale to get the first container in. Once you’ve got a
savvy businessperson, and I’m not going to pay first container in, and you’ve sold it fairly quickly,
anywhere near that, but go ahead and tell me now is a wonderful time to renegotiate. Now they
what it is anyway.” You’re starting the game. know that you’re a customer. They know that
you can probably burn through a full container
They’re going to give you a ballpark. You can use
of goods every two or three weeks. That’s a time
that just to make sure that they’re not insane
where you can go back to them and say,
before you waste any more time with them.
I usually expect to work somewhere 30-50% “It looks like this is going to work out. I really
under the initial price quote. Again, if you’re in like the quality of your product. However,

30 CHINA IMPORTING SECRETS

 financially, I just can’t make it work at this
price. I can make it work at $14. If you’ll give
me $14, I’ll promise to not shop anymore, not
ask you for any more discounts, not ask you for
any more concessions, and give you 100% of my
business in this product.”
Usually, if you’re willing to do that and if it’s
within their power to do it, then they will.
They’re typically working on a one-third product
cost when they’re dealing with you. If they’re
charging you $20, their real cost is about six
bucks, so they’ve got a lot of room to wiggle.
They’ve got the same amount of room to wiggle
that you’ll have when you go to wholesale the
product to somebody else.
RESEARCHING YOUR PRODUCT
So always let them know that you’re going to give
in to them for now, and then follow up. You want
to do your online research. You want to take a
look at the quality and the market.
When I go to China, I’ll look at 200 opportunities
while I’m there. I’ll hone that down to five or ten,
and really try to get down to two or three. For the
two or three I’m the most interested in, I’ll ask to go
to their factory while I’m there. You will never get as
good a price as you’ll get if you go to their factory.
You can buy there at the show: I’ve bought at the
show before. You can’t exchange money but you
can write a purchase order. Then when you get
back home, you’ll send in a proper order along
with payment and everything will get arranged.
31
One of the things I really always try to do is read
the prospectus of the company. I want to see that
they have a turnover of at least the equivalent
of a million U.S. dollars per year. I think that,
without that, there are way better places to go.
Then I ask to go to their factory. I don’t care
what you do at the trade show – I don’t care if
you stand on your head or if you come in with a
Wal-Mart badge on – you will not get as good a
price as you’ll get if you go touring that factory.
When you’re in there, you need to be turning
those products upside down and on their sides,
and looking at them from the bottom. You need
to be basically dissecting the product. You want
to show them that you’re not an idiot; that you’re
only going to buy exactly what you want.
Don’t ask them to quote 5,000 things. Choose
the things that you’re really interested in then,
basically, pick them apart. Pick them apart before
you ask for a quote, by the way. You want to look
at the quality of the product as it compares to an
American product, and see where the weaknesses
are: whether or not people are going to be able to
tell that it’s a Chinese product.
BRANDING AND VALUE ADDING
There are a whole lot of products in American that
have a little “Made in China” sticker on the bottom
of them somewhere, but that most people assume
were made in the States or were made somewhere
else. You can brand a product. When you’re touring
the factories, it’s a great time to bring it up. You can
typically have any product you buy customized to
your liking and most of the time it’s totally free.
CHINA IMPORTING SECRETS
Little customizations that don’t require retooling, a product, this is the mindset that I have. I don’t
typically speaking, are absolutely free if you’re want to buy anything that you can buy at Wal-
willing to buy a container, or sometimes less than a Mart, Kmart, Home Depot, Target, or anywhere
container-load of something. like that, unless I plan on selling it to them. The
reason for it is because you’re going to walk
A couple of years ago, when I was in the equipment
through and you’re going to see some amazingly
business, we brought in heat sealers. Everybody
cool things. You’re going to say, “Wow. That’s an
in the world brings in these little heat sealers from
awesome little $20 consumer product. How much
one company in China. They’re an aqua blue color
is it?” They’re going to say, “It’s five dollars.”
and they’ve got a silver chrome piece across the top
You’re going to go, “Wow! That’s the coolest thing
of them. Everybody has the same ones. They just
I’ve ever seen. I’ll sell a million of them!” So, you
scream, “I’m a Chinese heat sealer.”
buy a container of them for five dollars.
Our company name was Cleveland Equipment,
Guess what? You ain’t the only cowboy there that
which is a very American-sounding name. We
notices the cool thing. There’s no more disgusting
had a Cleveland Equipment logo that was very old
a feeling in the world – ask me how I know – than
school. It looked like it was 50 years old. We asked
going and buying a container-load of five-dollar
that all of our heat sealers be painted a darker red
widgets, sending your money to China, waiting for
color, because we wanted to go the polar opposite
your container to get here and three weeks later
of the blue. We were able to command a higher
you’re walking through Walgreens and they’ve
price in the market for exactly the same heat
got the widget you paid five dollars for in China
sealer, just based on the fact that our heat sealers
on sale at Walgreens’ end cap for $4.99. They
were branded to our company, and that they were
walked in there and said, “Okay, we’ll take two
boldly different in color.
million of them. We’ll pay you two dollars each,”
Another thing that you can do is value add. When and the factory said, “Okay.” So, I run away from
I was in the home décor business, we used to buy new mass-market widgety, cool items because the
candles from one factory, and then have them chances are somebody else will pick up that thing.
shipped to another factory where they would put Those guys have infinite buying power.
a bamboo wrap around them, shrink wrap them,
We used to buy candles from a factory that sold
tie them with a bow, and put a tag on the side
them to all these other retailers. However, when
of them. The two factories worked together: you
we got our candle in, we put it in a little pot and
shipped from one factory to the other. That way,
had a wrapper on it, we had the bamboo thing
there was nobody else selling the same kind of
around it, and we had the tie on it. All that only
product when it got to the States.
cost about 20 cents a candle to do but it meant
When I’m walking through the Canton Fair to buy that nobody else had what we had. It’s called

32 CHINA IMPORTING SECRETS

the “blue ocean theory.” You want to have the watches only cost about three dollars apiece. And
only one of your widgets that there is. We had guess where they make them? China!
the only one around and it allowed us to go into
places where nobody could say, “Oh, I’m already AVOIDING TRADEMARKS AND PATENTS
buying that for a dollar.” No, you’re not. You’re
I’m very risk averse in the importing business,
buying a stripped-down, ugly version of it for a
but there is one area in importing where you
dollar. You could buy my beautiful one that sells
can really lose all your money. This is with
three times better for $1.50, and you’ll get more
trademarks and trade regulations. You can go
money for it. That way, you’re comparing apples
out and bring in a product from China that just
to apples and oranges to oranges.
looks like the most awesome product in the whole

Another thing you can do with branding is wide world. We almost did. We were going to

establish a name brand. We had a product we buy a container of big luggage carts for hotels. In

were bringing – a stanchion product – some the midst of it, we were sending out a couple of

time back and we branded it. So, we own our feelers to our customers, sending them a picture

own brand name of those. If you go to the brand of the luggage carts. We had Harrah’s Casinos

name site for that product, they’re $170 apiece. and a bunch of other people that were customers

It’s a very corporate-looking Web site. Guess of ours. Evidently, one of them had a good

how many get sold from there? Practically none, relationship with a guy that owns this company

because we don’t promote that site. here in the States that makes luggage carts, and
happens to have a patent on this particular type
We’ve got a discount site that sells other people’s
of luggage cart. Before we could even buy the
stanchions and our stanchion. On that site, we
container we got a Cease and Desist letter from
sell our stanchions, discounted 60% off, for $77
the manufacturer of the patent holders. They said,
apiece. If they don’t believe our 60%-off price,
“We have a patent on this. You can’t sell them.”
all they’ve got to do is go over and look at the
corporate Web site that lists how much they are. The Chinese factory would have never told us

It’s called “decoy pricing.” Basically, it really that. All the Chinese factory did was buy one of

works well, and a lot of companies do it. There’s this guy’s luggage carts in the States, bring it to

nothing odd about it. It’s the way the outlet China, and knock it off. They don’t care about

mall business works. You’ve got Kenneth Cole trademarks, patents, and all that. In a lot of

selling a watch in a department store for $200 cases, it doesn’t apply there. They would have

so he’s establishing the value of that watch at very easily sold us those. We could have gotten

$200. When you go into the Kenneth Cole Factory them here, we would have paid for them, and we

Outlet and that watch is $60, you snatch it up, would have gotten them to our warehouse and

no questions asked. For what it’s worth, those paid the freight. The day we went to sell them…

33 CHINA IMPORTING SECRETS

If you get a Cease and Desist letter and if you’re
violating a patent, you can’t even liquidate those
good at that point. They are boat anchors. As
a matter of fact, you typically will have to pay
a company to destroy them, in addition to the
legal costs and all the crap that’s associated with
that. The same is true with trademark issues.
Right now, you can go over to China and buy
an iPod knockoff that is an absolute duplicate
in every way to an iPod Shuffle for about three
dollars. There are people doing it and selling it
in the States. I wouldn’t touch those with a ten-
foot pole. You could bring in a container of those
things, and it could get stopped at the border and
Customs not even release it. Then Customs sends
you a bill for destroying it.
So, you need to be keenly aware of those two things.
Trademark and patent issues are really big deals
when it comes to bringing in products. If you’ve
got something that you have a big question about,
send it to a patent attorney and get their opinion on
it. Also, ask in China if they pattern the thing after
something else. That’s usually where these things
will come into play, and it does happen all the time.
As far as trademarks go, you can go to the U.S. Patent
and Trademark Office http://www.USPTO.gov. If
you’re planning on using a particular trademark
name, you can go there to search. That’s not the
most thorough search, though. If you’re really go-
ing to use a trademark name you plan on investing
a lot of money in, I would get a lawyer to do a full
trademark search for you. On the website, you
can search the direct name exactly as it is, but that
doesn’t always cover you. We got a domain name
34
not too long ago, and there’s a plural to the domain
name already registered. I didn’t see it, so we bought
this domain name and paid a lot of money for it.
Now I own a domain name I can’t use.
With products, once you’ve printed them
you’d have to label over that name or do some
remediation work to be able to use it. We were
bringing in products for a big retailer one time.
I won’t say the name of the retailer, but you’d
know it if I told you. They asked that on this
candle they were bringing in that they have a
topper put on a candle with their company name
printed in the corner. They were buying three
or four million of them a year from us. We said,
“Okay, sure. We’ll do whatever you want. Just
tell us what you want to do.” That’s what you do
when somebody wants to spend several million
dollars a year with you. So, we made all these
candles. One day, the new planogram came out
and they said, “We’re not going to buy candles
from you anymore.” We said, “Wow. That sucks.
We’ve got 200,000 candles on the floor right now
with your name on them.” They said, “We don’t
want them, but if you sell them to anybody else,
we’ll sue the snot out of you.”
We literally had to take each one of those can-
dles, open the top of the candle, and replace it
with a different topper. The labor to do it was
almost more than the candle was worth. Just
remember that anytime you’re printing bar code
tags, price tags, or special brand label tags for
retailers or stores, you really could have an issue
with that.
CHINA IMPORTING SECRETS

3: NEGOTIATIONS
So, you’ve toured the factory, you’ve checked out
the quality, and you’ve reviewed the prospectus.
You’re ready now to absolutely get down to your
price for your first order.
I always say that take-its-or-leave- its don’t work
when it comes to China importing. At this point,
you can start to request the real price. You’ve
been to the factory, you’ve really checked the
quality, you’ve really checked the prospectus,
and they’ve given you a quote already. You can
sit down with them now and just begin to explain
that you like the product and you like the quality.
You compliment them a lot. Tell them how well
their product is built. Tell them how much you
like their factory and the professionalism of their
staff. Give them a lot of compliments. Then say, “I
would love to buy from you. However, I can’t pay
more than $15 a unit. The math just doesn’t work
for me.” That will start the negotiation process.
Don’t expect to buy for $15 if you start at $15.
You’re going to meet the ground somewhere in
between. You already know about what their
hard cost is, though. It goes from the first quote
that they give you. They’re going to give you a
quote at roughly three times their hard cost. If
it’s $20, that means they have about six bucks in
it. So, offering them $15 is not an insult.
As a matter of fact, in a situation like that, you
can tell them easily, “I’ve gotten quotes on similar
products as low as $12,” if you’ve got legitimate
quotes. Sometimes they’ll ask you who the company
is. If you can reach in your bag and pull out one and
really show them, most of the time, they’ll meet it,
almost every time. However, if you’re just B.S.ing
your way through, they’re not going to buy that.
35
They’re good negotiators, they know a lot of their
competitors locally. They’re going to know when
you’re full of bull and when you’re not.
Sometimes I will write them a buyer’s order and just
state a price. I don’t like to do that in a live negotiation,
but I’ll do that after I get back home. If I’m getting close
to where I want to be – if they got close to my $15, $12,
or $10 – I’ll literally enter a buyer’s order at $10 and fax
it into the factory and ask them for wiring information
of where to send the deposit. Sometimes they take it
and sometimes they don’t.
You’ve got to remember this: these Chinese facto-
ries are all about paperwork. Words don’t mean
anything. They can walk into their boss and
say, “Boss, look. I got an order for 1,000 of these
things, but they want them for $12.” Now, in
their mind, they have a bird in the hand. Before,
they were just talking numbers back and forth.
It really didn’t matter: it wasn’t real math. Now
they have a bird in the hand. So, when you’re just
orally communicating and negotiating, you’re
probably not going to get your best price there.
It’s probably never going to happen.
Let’s assume, now, that we’re ready to make the offer.
If you’re going to do it there live, I want you to say,
“Okay. I’m going to give you the terms you want
on this first order, and I’m going to try to make
money with it. If it doesn’t make money for me,
then we’ll have to talk about whether we’re
going to continue our relationship or not by the
time we place the next order.”
Let them know right up front that if the price
doesn’t work out, you’re going to go elsewhere.
Just don’t let them think that you’re agreeing to
the price they’re giving you forever.
CHINA IMPORTING SECRETS
 4: CUSTOMIZATION AND EXTRAS
Here’s what you can do now. Once they’ve
agreed to the price, then we want to go back
and work on the specs. These are some of the
coolest things that you would probably never
think to do in a million years when it comes
to importing. Number one is to ask for special
packaging. You can usually get them to print
you a box, full color, with your images, your
pictures, or whatever on the outside of the box
for your product to go in. It will usually cost you
nothing or very near nothing to have that done.
You’ve been in Wal-Mart before and picked up
a ceiling fan. You see the whole side of the box
is full-color graphics. That stuff in China costs
almost nothing. It costs a couple pennies more
than a regular box. They’ll just give it to you.
It’s almost no sweat off their back at all, but it
can make a huge difference for you when you
go to sell. Remember this: if they agree to that,
you’re going to have to get artwork over there in
enough time for them to get your box printed.
I also always request double boxing. I want my
product boxed, then I want it put inside another
box. That will eliminate as much as 90% of your
damage in freight. Typically speaking, again,
they’ll do that for free or very close to free. If
you’re talking about a dollar item, they may not
do it for free. If you’re talking about a $20 or $30
item, they’ll almost always do it for free because
it costs practically nothing.
Then ask for free add-ons that you can then
36
sell. We’ve had experience with heat sealers
with that. When we were importing these heat
sealers, they had a heating element. Over time,
the heating element would go out. It’s normal. It
wasn’t anything that was specific to our brand
or the company that we imported from. That’s
just what happens to these particular items.
They were a cheap item, from a manufacturing
standpoint. It was almost considered a
throwaway cost item.
It was about $4-20, our cost and we sold
them for $20 to $70. From a manufacturing
standpoint, it didn’t cost a whole lot of money.
Typically, people would throw them away and
buy another one. However, we started getting a
ton of calls asking for replacement elements in
these particular items. What we were able to do
here was to go back to the factory and negotiate
individual kits of three or four additional
elements in the package. We just complained to
the factory that the elements were burning out.
They said, “Okay. Next time, we’ll just put four
extra elements in.” I said, “How much is that
going to be?” They said, “No charge.” They cost
two or three cents apiece.
Here’s what we’d do. When we would sell one,
we would ask the customer, either on the phone
or on the Internet, “You’re buying the heat sealer.
It’s $29.95. Is that right?” They’d say, “Yeah, that’s
right.” We’d say, “Sometimes the heat elements
burn out in them. You can get four extra heat
elements for them so it will last a whole lot
CHINA IMPORTING SECRETS
longer, and you’ll never be out of heat elements,
for another $9.95.” We’d say, “Most people,”
and this is big piece of verbiage you need to
remember. The vast majority – almost 70% of
people – would say “Yes.” You’ve got to imagine
this. We took something we got for free, and sold
it for $9.95, along with the $30 item. Guess how
much the $30 item cost? It cost us four bucks. The
up-sell alone paid for the entire purchase and, in
most cases, the shipping of the doggone item. We
made 100% of the purchase price. If that doesn’t
turn you on, I don’t know what’ll turn you on.
That’s hot stuff.
You can do that in a lot of cases. We did it
with rubber stamps. Through a rubber stamp
manufacturing company, we were making
rubber stamps. We’d sell people a rubber
stamp for $12.95 or $13.95 that cost us about
two dollars. We got bottles of refill ink from the
factory and we would offer the refill ink for the
rubber stamp for $4.95. Almost everybody took
the refill ink, which paid 100% for the cost of the
rubber stamp and the refill ink. If you grasp that
concept from consumer goods, you will go very
far in importing. I don’t care if you’re a little bit
slow, but if you can sell products and make 100%
of the money, you’re going to do okay.
It’s like a house builder: they don’t want to give
you the home at a drastic discount because
they’ve got other people who are basing
their price somewhat off what you’re paying.
However, they’ll be willing to throw in upgrades.
37
5: ORDERING POLICY
When you write your specs, here’s something you
really need to remember. If you have a contractor
friend, you might have them come over and help
you write your first order. The bottom line is this.
I believe if you ordered a car from China and
you didn’t tell them in the spec that it needed a
steering wheel, I don’t think it would have one
when it got here. They literally are going to go by
the order to the letter of the order.
If you have a contractor buddy, they’re used to
that. They’re using to dealing with subcontractors.
Subcontractors are the same way. They’ll brick
your house without mortar if you don’t ask for
it. They’ll just stack the bricks up along the wall.
Those contractors know they have to write very,
very, very, very specific instructions with that
letter. When you’re writing that order, you need
to be ultra-specific. You need to talk about what’s
included. You need to talk about the gauge of the
metal that’s used. The quality of everything needs
to be totally gone through.
Another thing: you need to absolutely get hard
completion dates, along with penalties. Typically
speaking the standard manufacturing time in
China for most everything is 20 days. You need to
have is an automatic cancel, or financial penalty,
or something built into that order to make sure.
That is what the big guys do. The big guys say,
“Look, you want $10,000 for this order, okay. I’ll give
you $10,000 and it has to be delivered on the 20th.
For every day that you’re late there is a $100 penalty
that we will take off of the rest of the invoice.”
CHINA IMPORTING SECRETS
 something in writing most of the time they will
follow through with it. If they don’t agree to
something in writing and you get damages, well,
there you go. “Sorry about that. You never said
anything about that. You mean you want it to
work? You never mentioned that part.”

You definitely want to have a damage policy that

says “In case the freight comes in damaged or
not as described the factory agrees to remediate,
send new merchandise, pay for return shipping,
or replacement,” whatever the case may be.

When I’ve had problems with factories in the

past, for the most part they try to make it right.
What happens is if your order is sitting there and
It’s not like Wal-Mart. You’re never going to be
a big guys order is sitting there and they have
able to walk into the store and return it with
a penalty for his order and they don’t have a
no questions asked without the packaging or
penalty for your order, guess which one they’re
going to do first? the original receipt. You’re going to end up
communicating in the middle of the night when
The thing is, you’re going to pay some money
you’re not very excited about communicating
down when you place your order and you have a
because the time is so different. It’s much, much
cost of money that starts ticking that day. When
easier to deal with the situation if you deal with
you pay your money your biggest objective is
it right up front in the beginning. Clearly spell
getting it made and getting it across the water.
out what happens if this product is poor quality,
Pre-selling it across the water. You definitely
or is not as described, or doesn’t work, or is
want hard completion dates if everybody agrees
damaged. The reason you want to have a contract
to it and signs off on it.
with them is you can’t go to the freight carrier
Finally, you want an established written damage
and get satisfaction. They have to get satisfaction
policy with the factory and you also want that
from the freight carrier and they reimburse you.
with your freight company, or you may want to
choose freight insurance. The truth, between The factory is packing your container, too, that
you, me, and the fence post, if they tell you to is something to keep in mind. We’ve argued
go p--- off there is not a whole lot you can do with people before, “Oh, you can fit more in that
about it, but for the most part if they agree to container.” Sometimes you can, and sometimes

38 CHINA IMPORTING SECRETS

you can’t. I tell people that if they don’t have
quality control on the China side, don’t go into
the import business period.
One of the ways that you’re going to avoid a
lot of problems with that is, if you don’t know
somebody in China that you’re already dealing
with, you need to hire a third party company. A
good one is SGS Testing Laboratories. They are
in all the major ports in China. You can have
your sample sent to them so they can go to the
factory, make sure that it works, they’ll bring
a 110V generator to plug in electrical things to
make sure they work, they’ll go to the factory as
the product is being built, they’ll mike the metal,
they’ll check the paint, they’ll send you photos
and videos. They’ll actually go there while the
container is being loaded to make sure that it
is being loaded safely and tightly so that there
won’t be any damage in the sea vessel. They’ll
watch the container being sealed off with the
proper count of product on it, All that is going
to cost you maybe 20% of your shipping costs. It
is the best money that you will ever spend. And
when you tell your people in your order that
quality control will be handled by SGS Testing
Laboratories, guess what? They know you’re no
joke. They’re not going to mess with you at that
point. You’ve done everything throughout the
entire process to show that you’re a professional,
all the way down to having a reputable company
coming out to do quality control.
39
6: MONEY
I’ll tell you, importing from China is not a
business for the faint of heart. You have to have
a little gut on you. There are basically two ways
that money is sent to China: letters of credit and
LETTERS OF CREDIT
This is a simple document where you go to your
bank or a bank that does letters of credit. It has
to be a credible bank that is known in China. If
you’re at the Bank of Schlockdaw, Mississippi,
they might not be willing to take a letter of credit
from you, but any national bank: Chase Bank,
Citicorp, Wells Fargo, any of those guys.
If you are an incredibly creditworthy individual
with tons of assets and the banker is in love with
you, then perhaps they will give you a letter of credit
to let you go buy goods in China without putting up
money. I have never had that particular experience.
Typically what you do is you go in and say, “I want
to buy a container of products that is $30,000 and
I need a letter of credit for $30,000.” Your banker
will say, “That’s fantastic. I’m happy to do it. All I
need is $30,000.” They’ll put the $30,000 into an
account that you don’t have control of anymore,
although the money is still there in your local
bank. They’ll issue the letter of credit to the fac-
tory and the factory will take it to a Chinese bank
and that bank will give them a loan on your letter
of credit so they get the money to buy the raw
materials to build your order. They will build your
order and it will ship to the United States.
When the order gets to the States you can’t
CHINA IMPORTING SECRETS
open the container until the documents have your stuff. That’s why I know how much money
been released to you to open the container and they have in it. They’ll take the $10,000 and start
take ownership of it. The letter of credit has to building your product.
transfer at that time. The container lands in
When it’s built, they load it on the container
the States, the letter of credit transfers and is
in China, put the lock on and seal it, and the
converted to cash, and the factory in China gets
document is created that it is coming to the States,
their money and you have your merchandise. It’s
and at that point you’re required to send them
sort of like an escrow service, for lack of a better
another third, another $10,000. You’re sending
term. You still haven’t opened that container yet.
them $10,000 today, and if they perform in the
It could be filled with marshmallows, but for the
proper time another $10,000 in 20 days. I like this
most part it’s not. They would be committing a
form a lot better because they don’t get all the
pretty big fraud against their bank at home in
money up front. They’re not as slow. They want
China and all of that. It’s not going to happen.
the next $10,000 so they’ll hurry up and get the
order made. Then the order is on the ocean on its
TIME OF TRANSFER PAYMENTS
way to the US or Canada or Australia or Europe
In truth, the first way is for chickens! For what
or wherever you are. It’s on the ship coming to
it’s worth, the second way is the way I do all
you. While it’s on the ship coming to you the
my business in China. As a matter of fact,
vessel company has your documents. When the
almost everybody I know that does business in
container arrives at your port it’s frozen until you
China does business this way now. It’s called
have the documents to go take possession of the
TT Payments: Time of Transfer Payments. That
container: the original bill of lading.
means that I’m going to wire some money to a cat
in China and hope that he sends me something. In order to get your documents released you’re
going to have to pay the final payment of $10,000.
If you’re wondering why you would want to do
At that point the shipping company will release
that, there is an inherent reason: they make it
your documents and the container is yours.
advantageous for you to do that. Why wouldn’t
You still have to deal with customs. I’ve had one
they? What they do is allow you to have terms
container of goods inspected by customs. It’s not
at that point. Let’s say you’re buying that same
really a big deal. That’s the way that most people
$30,000 container of equipment. You would TT
buy. After you’ve established some purchases
or wire transfer the money, the factory or the
with Chinese factories, a lot of times you can
broker – and I don’t like dealing with brokers
start negotiating those credit terms.
because I trust the factories more than I trust
the brokers - $10,000. They’re going to take that I have good friends that have 30-day net terms
$10,000 and go buy the raw materials to make from time of landing in the United States. It

40 CHINA IMPORTING SECRETS

depends on how big a percentage that Chinese
factory’s business you become. They will do
anything they can to keep you as a customer.
They won’t do so much to get you as a customer.
They’re more interested in keeping their
customers, keeping their customer base, and
keeping their turnover up.
Chinese factories don’t make any money through
the year. Most of them don’t work on much of
a profit. What they do is at the end of the year
for every dollar of merchandise that they sell,
the owner of the factory gets a rebate from the
government. It’s anywhere from eight to 15%
of his total gross sales. They don’t really care a
whole lot about how much money they made
selling to you. They care a whole lot more about
how much volume they do. That’s the reason that
their export business is so robust. They reward
their factories and their companies for exporting.
They know import dollars coming in is what will
make their economy grow like a weed. That is the
reason for the mentality they have. They’re really
interested in volume and if you’re producing
volume with them it is really easy to go back and
negotiate further terms.
One more codicil for you if you get really big in the
importing business: if you have a licensed Chinese
company like a Hong Kong trading company, or a
Shanghai trading company, you can get a rebate
from the government for your own exporting.
In other words, you would buy your products
domestically by having your Chinese company buy
the products domestically in China and you pay the
price the factory wants. When you export the goods
out of China to the States you can apply for those
government rebates at the end of the year. If you’re
41
doing millions of dollars in exporting a year and
importing a year, it’s really worth doing though
there is quite a bit of paperwork involved. It’s for
an advanced importer.
If you’re savvy enough sometimes you can find
trade partners. If you can find a broker or agents
almost all of them are set up with these rebates
and it is another way they are making money on
you. Tell the agent, “Tell you what. I would like to
use you but let’s split the rebates.” At first they’re
going to say, “I don’t know what you’re talking
about. What do you mean rebates?”
The way it works in China is when you go to
manufacture something, every time you buy a part
or raw material the factory pays sales tax on it. We
don’t do that in the States. Over there they all pay
sales tax on that stuff when they build the product.
When they go to sell it, basically the money they are
getting back from the government is money they
paid in. If they export those good out of China they
get a refund for 100% of all of that tax. If they sell
it domestically they don’t get that refund, but the
trading company does. The trading company can
export and then get the refund for eight to 15% of
the full-face amount. That’s a big deal.
If you’re dealing with an agent say, “Hey, look.
Why don’t you split the VATs with me? Let’s split
the VATs. If you want my business you’ll split VATs
with me.” A lot of times they will. I didn’t get that
little piece of data right there until I had been to
China at least six or seven times. This could save
you tens of thousands of dollars, or even millions
of dollars over time if you’re a big importer.
CHINA IMPORTING SECRETS
 7: SHIPPING AND DUTIES
When you get into shipping you’re going to have
to deal with a couple of things. When you have
your product ready to go you’re going to have
to determine who is going to be your freight
forwarder. They are the companies that handle
your documents for you. They clear customs
for you, they shuffle all of the product and
paperwork around and all of that. You do not
want to do any of that yourself: it is a paperwork
nightmare. The companies that do it are really
have offices in L. A., in Memphis, Tennessee, where
good at it, and they’re very inexpensive.
all the rails meet because most freight travels by
One trick that we learned on buying a bond. It rail once it’s in the States. They also have offices
was about $500 a year where you avoided paying in China. They have a quality control arm and
a $200 per import fee. As an importer you have also a consolidating warehouse in Shanghai and
to have a bond. The government makes you Guangzhou, which means if you’re using HYC they
buy a bond which is basically insurance in case can pick up a pallet of something for you, put it on
they have to destroy the container or charge you one of their containers, and bring it to the States.
more duty because you didn’t tell the truth. If There is going to be an additional fee for that, and
you fly the coop and they can’t find you, then it’s going to be more expensive, but at least they
the insurance company that sold you the bond is have the capability of doing that.
on the hook. Like Richard said, we were paying
What To Ask Your Freight
several hundred dollars for bond every time we
brought in a container. Once they realized we
Company
were bringing in multiple containers a year they
WHAT PORT DO YOU SHIP FROM?
said, “Hey, why don’t you just buy your bond one
You want to order from their FOB-VAT port. If
time for the year?” Five hundred dollars a year to
you order from their factory, a lot of times the
buy our bond and if we brought in 500 containers
inland freight in China can be more than the sea
it would cover us on all of them. You’re going to
freight to get something to you. China is a very
need a bond, and freight forwarders are going to
mountainous country and you can have a remote
help you with that. The best thing you can do is
factory that is 500 miles away from a port and it
talk to a freight forwarder.
has to go by train through a mountain, around
The one we like the most is HYC Logistics. They a branch, and up and down here all just to get

42 CHINA IMPORTING SECRETS

to the port. You may pay $500-600 just to get the
product moved from the factory to the port. You
want to make sure you have your prices quoted
FOB their nearest port. The fees to ship products
in China are going to be different based on the
port, so you’re going to want to look at a Chinese
map and see where ports are available. Usually
this is something your freight forwarder can
help you with. It costs more to ship from the
Guangzhou port than it does from the Shanghai
port; at least it used to. You want to make sure
you get the most advantageous port.
WHAT ARE THE DUTIES ON THIS?
Almost every product coming into the United
States has some sort of a duty on it. A duty or
tariff is the same thing. It’s a tax. It’s saying,
if you’re bringing this product from China we
charge a percentage of the total invoice amount
as a duty. You’re freight forwarder is going to
pay it and you’ll pay them back. That is another
thing that they will handle for you. Once you
go to China and you get ready to buy, you’re not
going to finalize anything until you talk to your
freight forwarder. If you want to get the duty
charges call the freight forwarder and say, “What
are the duties going to be on this?” There are
some things that you can bring from China at
different times that have extremely high duties.
Those are things that have a high duty on them
as a penalty. Meaning that there is strong lobby
or labor union here in the States, and maybe in
your country, that has lobbied Congress to get a
43
huge duty put on something. The candle business
is good example of that. For a while because of
safety and other things, there was a 70% duty
on candles. If I bought a candle from China
for one dollar I had to pay seventy cents to the
government for the privilege of bringing it into
the country. Believe it or not, it was still cheaper
than making the candle in this country, but a lot
of the time it’s not.
Harmonize Codes
All products that come from China (or anywhere else)
have something called a harmonize code. There is an
online service from customs where you can find a
harmonize number for your particular goods.
When I started bringing wax from China to
make my candles with, I brought in a couple of
containers of wax and the duty was zero. So I’m
bringing in one container of candles and I’m
paying 70% duty, and I’m bringing in another
container of wax and I’m paying zero duty. I ain’t
the smartest guy in the world, but believe it or not
I did that for a year. One day I’m waking up in the
morning and this ding went off in my head and I
said, “What is a candle?” I called up customs and I
said, “Can you tell me, when you’re looking at the
classification of the harmonize code for a candle,
what constitutes a candle?” “The definition of a
candle is wax with a wick in it.” I said, “So you’re
telling me that if I brought in candles that had no
wick then those would be wax, right?” “Absolutely.”
This is a big deal. You have to ask them for a
binding letter when they give you a ruling like
CHINA IMPORTING SECRETS
that. They may tell you anything on the phone
and if you go do it you can get really screwed.
You want a binding letter from customs that that
is indeed the case, so you write a confirming
letter saying, “This is a confirming letter that the
conversation I had this morning with Agent ____
that I understand it this way. Will you please
confirm this and send me a binding ruling.” They
sent me back a binding ruling so from then on
I would have them drill a hole in every candle I
got and on the end of the container, guess what
I had? Boxes of wicks. I would bring the candles
into my factory here in the States, we would
unload the container, open the boxes, and my
staff would drop a wick in every one of the holes
and seal the box back up. My duty was zero
dollars. That saved me $14,000 per container
of candles. I had an absolutely unbeatable
advantage in the candle business. In the import
candle business I killed them. I killed them for
two or three years. It was forever before people
figured out what I was doing.
What you have to understand is that
harmonization codes are somewhat open
to interpretation. That doesn’t mean your
interpretation. It means that items can be
classified most of the time under different codes.
We were importing DVD media storage cases,
which were classed as “blank DVD cases”. It was
an inexpensive item and on a $.20 item it was four
cents duty, almost a quarter of the value. This is
another commodity type item so already you’re
44
dealing with a lower profit margin, so every
penny counts. We used a third party auditing
service that was recommended to us by our
freight forwarder, HYC Logistics, to come in and
go over everything we were importing, look at the
harmonization codes we were using, and suggest
any changes. They told us we could classify them
as empty storage containers, which took us from
a 23-24% duty all the way down to three or four
percent. It was a huge difference. We didn’t have
to get any binding ruling. We brought in so many
of these: there were 160,000 DVD cases on a
container and we brought in multiple, multiple,
multiple containers of them. We saved a nickel
apiece. That’s a whole bunch of nickels.
Freight Forwarding
So, the freight comes in and you get a call from
your freight forwarding company. They will
say, “Hey, you’re container is in port. Have you
made your last payment yet?” You’ll make your
payment and the documents will release to the
freight forwarder. The freight forwarder is going
to move your container over to customs and
ask them, “Do you want to take a look at this?”
Customs only looks at about 1:200 containers.
It’s pretty random. If they say no, usually the
container will clear customs in two to three days.
Then the freight forwarder is going to arrange
your inland transportation. How do you want to
get the container from where it is to where you
need it to be? We’re in Texas and they would
arrange freight for that container to go from
CHINA IMPORTING SECRETS
Los Angeles to Texas. Nine times out of ten they Carolina and then have somebody place an
aren’t going to truck that container and if they order in L.A. They aren’t going to ship the freight
do, you’re going to pay through the nose for it. back to L.A., right? What a lot of people will do
Instead, they’re going to put it on the rail and is have stocking warehouses, which are public
send it to you via railroad. warehouses that will rent you space and they
will do fulfillment for you. It’s call Pick, Pack, and
In the port of L.A. they have these giant cranes.
Ship. One of the biggest in the industry is Federal
If you get into the importing business going to
Express. You can contact Federal Express. They
the port of L.A. is a lot of fun. They literally are
have warehouses in Los Angeles where they will
pulling off thousands and thousands of these
break a container up by individual boxes and
containers off ships each day like they’re tinker
ship one to everyone in North America if you
toys. They’re moving them from the ship to the
want them to. And if you’re willing to pay for it! I
train. They’re able to move that container all that
believe HYC Logistics also has fulfillment services
way from California to Texas for $500-600 by rail.
in L.A. If they don’t they can put you in contact
If I had that done by truck it would cost me at
with people in L.A. that can do fulfillment
least $2000. They’ll put it on the rail, bring it to
services and public warehousing for you.
me here, and then they’ll back it up to the dock.

There is going to be a “diberge time.” Usually it’s

Trade-Free Zones
two hours per 40 foot. You have a bus to move. The port of L.A. has a lot of warehouses that have

You have to have people ready. They’re going to something called a “trade-free” zone. When you
bring a container of merchandise into the US that
drop that container off, and when they drop it off
is an asset at that point. You own that and you
you have a couple of hours to get that container
could owe taxes on that depending on where you
unloaded. You can pay for a couple of extra hours
are. In a trade-free zone, the government allows
but it’s pretty expensive. If you have a truck stop
you to leave that merchandise in the trade-free
near you, go to the truck stop and ask if there are
zone without any taxes until you ship it out of the
any “lumpers” that want to do any work. They
trade-free zone. In other words, you don’t have
usually have some guys hanging around truck
to pay tax on inventory that is just sitting there.
stops that do nothing but load and unload trucks.
A lot of times it’s the duties as well. So instead of
You can get some lumpers to help you come and
paying on an entire container, you only pay on
unload your container into your warehouse. the part that moves out.

If you choose coastal distribution, you may have

Partial Containers
warehouses all over the country. It really sucks
If you go with someone like HYC, they will have
to move all your freight from California to North

45 CHINA IMPORTING SECRETS

a consolidation service for you on the China
side where you can have freight brought in by
the pallet load. When it gets into the States you
can have it shipped back out by the pallet load.
You can stack pallets very high on a shipping
container although you want to make sure that
you don’t stack the pallets so high that they won’t
fit on a truck when they come to the States. Ask
me how I know!
There are several kinds of containers. When
you’re shipping something into the US from
China, 99.9% of the time you’re going to have
three different kinds of containers to ship on.
You’re going to have a 20-foot standard con-
tainer, which holds small lots of stuff like the
guy that brings in key fobs. He may not want to
bring in a whole 40-foot container. Usually what
you use short containers for are things that are
very, very heavy. The reason you do that is be-
cause no matter how big the container is it can’t
weigh over 56,000 pounds. If you have a 40-foot
container and you’re bringing in car batteries, a
huge percentage of the container is going to be
wasted because you’re going to have more car
batteries in weight than you fill in space. There
is a way around that where you can make that
work for you if you’re pretty savvy, but for the
most part what people will do if they’re bringing
in something really heavy is they’ll bring them
in on 20-foot containers. The 20-foot container
is about 2/3 of the cost of a 40-foot container. It’s
not an even half. You’re going to pay more for the
20-footer, but it’s still cheaper.
46
Top Loading
Alternatively, you can put your goods on a long
40-foot container and do something called “top
loading.” Let’s say that you have 40, 000 pounds of
stuff that you could put on a 20 foot container, but
instead you put it on a 40-foot container because
you have 8,000 pounds more you can put on. You
might fill that with feather pillows, or something
that is lightweight. We used to bring in stanchions
that always weighted out. We could have brought
them in on a 20-foot container, but we also
brought in these key control boxes that are big
hollow metal boxes for holding keys. They don’t
weigh anything. We would top load the container
with the empty, hollow boxes, and the bottom
would be loaded with the heavy metal bases and
the container would come in chock full.
The bottom line is you have a certain amount
of cubic feet and you’re going to have a certain
amount of that on a container and you’re going
to try to fill every inch of that cubic feet that you
can, for two reasons. One is efficiency. You want
to get the most for your money. You’re paying for
it you might as well use it. Two (and this one is
almost as important if not more so) you want that
container packed, jammed up, and jelly tight.
You don’t want any room for movement inside
the container as that is where damage happens.
Look at the way movers pack houses. When you
get professional movers to move you from one
city to another they won’t use the whole truck.
They’ll push everything to the front of the truck
and they’ll have everything so squished in there
you think it’s going to turn into one big blob of
CHINA IMPORTING SECRETS
something. The reason they do that is because
they know that if they have stuff packed in tight
that it can’t move around and can’t shift a lot.
Partial containers can go in, in China, and we
can consolidate them anywhere and come out in
the US the same way. There are a couple of good
freight lines that carry less than truckloads that
can ship these pallets. They typically don’t go by
rail. They typically go by truck. We’re in Texas
and we paid about $350 per pallet from California
using ABF Truck Lines, or Yellow Freight.
If you’re dealing with trucking companies, don’t
ever call them up and ask for a quote. Call and
ask what your freight discount is because freight
is typically automatically discounted 60% from
trucking companies. If they give you a book
rate just say, “What’s my discount rate?” and by
saying that they will typically take 60% off the
original quote. Don’t ever pay normal quote fees.
Your freight forwarder can act like a broker on
that as well. That’s what they are there for.
Air Freight
There is a lot of freight now that is being done
by air. Sometimes it’s better to airfreight stuff
than it is for ground transportation to bring it. It
depends on what you’re bringing in. The guy that
does the key fobs is an example. If he’s buying
key fobs for three dollars and selling them for
$20, rather than be out and not be able to sell
any I would start air freighting boxes in rather
than waiting on a container. You just have to
do the math in your head. You’re going to pay
somewhere around four dollars per kilogram to
47
airfreight products in.
There are two ways to get airfreight done: first,
through your freight forwarder. Sometimes they
can get you a discount on airfreight. Federal
Express is probably going to be your most
expensive solution, but it’s going to get there. If
you have to use FedEx you’re going to pay four to
five dollars per kilo depending on where you are
coming from to most of the destinations in the
States You have to have something that is pretty
valuable and pretty light. If you’re importing
feather quills this will probably work out.
If you go to a normal airline, and the Chinese
airlines are particularly good about this – China
Southern, Air China, China Eastern – they all have
cargo freight departments and you can call them
up and get a quote on a per kilo basis. They’ll give
you a decent quote, but they’ll give you better
and better quotes depending on how much of a
contract you want to give them, how long you plan
to use their services, and how long you guarantee
you’ll use their services. You can get airfreight
down to around two dollars and change per kilo
if you’re willing to sign a contract with one of the
major airlines saying “I’ll guarantee to bring in so
many pounds of air cargo per month.”
I’ve seen a lot of businesses that have made that
work. The company I mentioned before that does
the dental work, they get all the molds taken for
dentures or crowns, and literally box those up in a
FedEx box and FedEx them to China. China makes
the dental work in a matter of 10 days or so, and
then ships it back in a FedEx box. Can you imagine
CHINA IMPORTING SECRETS
how many thousands of dollars worth of dentures
and crown molds you can get in a 10-kilo box? A
lot. It costs them a couple hundred dollars to send
a box and they have $10,000 worth of dental work
in the box. Air freight is worth it then.
There are some things you just don’t want to
bring in and ship if you can help it. Big pieces of
framed art are a pain in the neck. Dry erase and
chalkboards are a pain in the neck. I’ve sold all of
these things and imported them from China. The
damage is almost more than the actual worth of
the goods. It seems like the bigger the product,
the more broad and narrow that the product is,
the more difficult it is to bring in
If you’re bringing in a piece of equipment that
is more than $400-500 I would definitely de-
mand that it be put in a crate. When you get it
here have someone else un-crate it. We found
bugs and all kinds of crap in those crates, and
throw that wood away because sometimes it just
plain stinks. The wood crates have to go through
fumigation which kills the bugs that are in there
but it doesn’t vacuum them out, it just kills them.
Just be sure to be careful. If you’re going to have
something brought in that’s worth at least $400-
500 then have it crated.
I’m not going to go into the duties on this and
the duties on that and get into real detail. To be
honest, the freight forwarder handles all of that. I
never had to learn it. I’ve brought more products
into the States than most people have and if I’ve
never had to learn about duties and all that, you
shouldn’t have to either. It’s not really a big deal.
48
8: DAMAGED GOODS
You are going to have damage in your container.
What do you do? Do you just throw it away?
As a matter of fact, I’ve made a lot of money on
damaged goods before. Sometimes I’ve made
more money on damaged goods than I’ve made
on “good” goods. You’d be surprised. If people
get into a bidding war in an auction situation,
sometimes they will pay more for stuff you don’t
want than you would have ever gotten anyway.
A friend of mine has a site and he imports
tapestries, really nice tapestries from China. He
does a lot of business. People return them, or
he’ll overstock in one that he thinks is going to
sell and it doesn’t sell as well as the others do.
Sometimes you’ll liquidate just to balance
inventory. We’ve had three models of something
and one model will sell out in two weeks, but the
other two will take forever. You’re just willing to
sell them out so you can reorder. The next time
you reorder you’ll know to go heavier on the
model that sold the most, but you didn’t know
that the first time out so you just liquidate out
these others as quickly as possible to give you the
capital to reorder.
eBay And Craigslist
What I will do is take a look at a lot of my
damaged goods or overstocked goods and I’ll
determine what the best strategy is to liquidate
the product. Number one, I go to eBay. You’re
not going to get any more out of the product that
you’re liquidating then you are going to get out of
CHINA IMPORTING SECRETS
it on eBay. You’re going straight to the consumer
at that point. The same is true with Craigslist.
The friend of mine that does tapestries is
fortunate because he has 1000 tapestries. When
he gets returns back that are overstocks or
damaged, he has one or two of this one and one
or two of that one and he can have 100 auctions
going on eBay for 100 different tapestries and
that works for him. If you have 100 of exactly
the same thing you can’t put 100 auctions up
on eBay for it because you’ll destroy the market
and nobody will buy it. It’s a slow going process,
but if you want the most money out of your
additional freight eBay does a good job.
Scratch-n-Dent Sales
The second thing is scratch-n-dent sales. If you
have a customer base, in most cases you’re going
to have a list. We did this with equipment one
time. We had a list of customers and we got in
a shipment of fillers that we didn’t sell a lot of.
We, or the factory, had made a mistake on the
order. We meant to order five of one filler and
20 of another because we already a bunch of the
one we had just ordered five of, but they in-
verted the order and we ended up getting almost
none of the ones we needed and a whole bunch
of the ones we didn’t. We just went to our best
customers and said, “We’re having a scratch-n-
dent sale,” everything coming in gets a scratch or
a dent on it somewhere, “and we have these 20
fillers, and if you want one we’ll sell it to you for
half price right now.”
Remember, I can dock up to half price on an
49
expensive piece of equipment and guess what I’m
still making? Money. My first cost is one third of
my sale price? I’m still making a 40 margin. I was
able to go out and liquidate at half price all of the
additional fillers that I didn’t want in one day just
by going back to my core list.
Here’s the thing. You can’t just go in and say I’m
going to give them to you at half price. There has
to be a reason why. “I’m closing my warehouse.”
“I’m consolidating shelving.” “They’re scratch-
n-dent.” “I’m overstocked.” You have to have a
reason why or you’re just discounting the prod-
uct. One thing you have to be aware of when
you do that: if you’re selling to customers who
consistently buy from you each month, and you
give them a deal to come in and buy a bunch
of your overstock or a bunch of your damaged
goods or a bunch of your scratch-n-dent, you’re
going to take them out of the market for a while.
That sucks. That’s exactly what happened here.
We had a guy in South America that was buying
about four fillers from us every month. He was
paying us $3500-3700 a filler. We offered him
these scratch-n-dent fillers for $2000. He bought
them all, but then he didn’t buy anything from
me for five months. You have to be sure you want
to do that when you do it.
Overstock Companies
Another thing is to go to retailers like Big Lots
and Overstock.com. Overstock.com will give you
a bid on practically anything. You can send them
a photo and some specs of what you have and
they’ll give you a bid on it. Many times Overstock
will not even move the merchandise. They’ll
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just pay you to pack it and ship it for them. Big
Lots, if it’s a reasonable good, a consumer good,
this type of company will make a bid on it. They
will make you an embarrassing bid but they’ll
make you a bid. Here’s the deal with them. When
you’re starting to deal with guys like them and
brokers, they’re like us, they’re going to look at
that and say, “He made about a dollar for that.
Let’s give him $.80.” They’re going to make you
bleed a little bit. But I would much rather lose
$.20 on the dollar and turn over my cash than let
it set there and ride that train all the way into the
ground. I’d rather turn it and burn it while I can.

Liquidation Auctions Asset Recovery Auctions, or Asset Reduction

Auctions. You can bring in your container of
Try local brokers and local discount people.
stuff and let somebody bid on it at an auction
There are a lot of them around and if you want to
and sell it right there. Again, you might not get
find them here is a really great tip: make friends
everything that you want out of it.
with some trucking company managers in town,
and people who handle damaged freight for Insurance
trucking companies. When the trucking company
I told you before that sometimes I would make
have a damaged load they pay an insurance
more money. This is pretty interesting. If you
claim to whoever the damaged claim was going
get freight insurance on a product, particularly
to and they keep the goods. Then they try to
inland freight, and it gets damaged between
recoup some of their money is by calling surplus
California and wherever you are, you are going
brokers and saying, “Hey, this is Jimmy over at
to get a claim with the inland company, the
Passville Truck Lines, and I have a truck load of
trucking company, or the rail company that
light switches. What will you give me for them?”
brought it in. If you can show that that is the
The guys who run the trucking company docks
case, they’ll usually make you two offers. “We’ll
know all the liquidation dealers in town.
give you $20,000 and we keep the freight, or

Most cities, or most larger cities have liquidation we’ll give you $17,000 and you keep the freight.”

auctions. They’ll usually have them once a week I’m pretty good at liquidating so if I can do it

or at least once a month. They are often called I’ll take the lower amount from the insurance

50 CHINA IMPORTING SECRETS

claim and then I’ll sell off the scratch-n-dent
merchandise, which in a lot of cases there isn’t
a whole lot wrong with it. I’ve had situations
where I’ve actually made more money from a
losing container than I’ve made from a winning
container because I have $.90 on the dollar for
the goods and got a $17,000, $18,000, or $25,000
check from the freight company. There is a
possibility that can happen. Is that a business
model? Hell, no. It doesn’t happen most of the
time, but occasionally it will happen.
Recouping From The Factory
With damaged goods though, your number one
avenue is to try to get the factory to make it right.
Most of the time they will do their very best to
make it right if there is any possible way that
they can. If I get damaged goods in and I am able
to overcome it, when I place my reorder I will
ask the factory for a credit for whatever it was
that it cost me. “I’ll tell you what. You guys really
messed me up on that last order.” They’re going
to start calling and emailing you, “Are you ready
for another order?” “No, you really messed me
up on the last order. It cost me $10,000 to get that
crap fixed. If you want to give me a $10,000 credit
on that last order I might try you again. I might.”
Don’t ever give them a sure thing. “Oh, okay,
okay.” Normally they will do it and they’ll cover
whatever it was that cost you to remediate on
your side of the fence. That is another way that
you can make money on damaged freight.
51
CONCLUSION
S
o: that was the whole process. Sourcing.
How to get your samples. How to get a great
quote and a great price. Customizing your
products and value-adding and getting the most
apples to oranges comparisons that you could
possibly get. How to place your final orders, how
to get proper quality control, how to negotiate
great terms with the factories, how to work with
freight forwarders, and how to deal with shipping,
customs, and tariff issues. Even what you can do if
you happen to get damaged goods.
That is everything you need to know to be an importer,
and that’s assuming you probably want to go to China.
Good documentation, talk to the right people, and
negotiate fairly and I think you’ll do just fine.
I love, love, love being an importer. It’s a cool
business to be in, first of all. It is sexy. You never
run out of stuff to talk about at parties. You do
have some damn interesting stories if you do this
enough times. Some weird stuff is going to happen
to you. I had a friend of mine that got locked in a
Chinese toilet for almost an hour once.
Why do I do it? Complete, 100%, market
domination. I don’t like to play on an even field,
bottom line. I’m an importer. I don’t care who you
are for the most part, you can’t beat me. If you
want to manufacture against me I will beat your
brains in. I have no labor costs to speak of. The
factories that we use in China and the factories
that are mine in China, we can just kill anybody
as far as manufacturing goes. If you’re going to
import against me you’re probably not going to be
as good as I am. You’re not going to know all the
CHINA IMPORTING SECRETS
things I’ve learned in the last 10
or 11 years doing this. I love that.
If you’re trying to retail against
me, again, I’m going to kill you.
You’re buying up a supply chain.
I am the supply chain. I get to be
ultra prime all the time.
I can make money all the way
up the list. I can decide that I’m
just going to rep containers for
people and make five percent of
the profit and take no risk. I can
decide that I’m going to bring the
products in and be a wholesale
distributor and make 50% profit,
take some risk, and know that I’m
feeding a supply chain where I’m
still cheap and I can liquidate. I
can decide to be the retailer.
Look at Old Navy stores, for
example. Old Navy, Kohl’s,
Ashley Furniture, some of the
biggest retailers in America
right now are giant direct
importers. IKEA, everything
they sell fundamentally comes
from China, but they sell it
direct in their own retail stores.
You can’t touch them. They are
selling a couch for $499 that
they have $60 into. The guy
down the street selling a $400
couch paid $350 for it. You can
just absolutely slaughter your
competition. There is just no
way they can possibly compete
with you on the consumer end.
People come up to me all the
52
time and say, “What should
I do? Should I be a retailer,
a wholesaler, a broker? The
answer is, yes. You do all three.
If you do it smart and handle it
the right way, you have different
brand names, different compa-
nies, and different sites and you
can retail, wholesale, and help
people. With brokering you’re
selling your connections. The
bottom line is that there are
people that badly need those
connections, and badly need
to know how to handle the
paperwork, cross the t-s and dot
the i-s because they don’t know
how to do it and they’re too
damn scared to ever try.
You can just be a service-based
provider like the guy we talked
about that does the aluminum
extrusions. That’s the easiest
thing. I don’t see how you can’t
win with that. You literally walk
in the door and say, “Hey, would
you like to pay half for that?”
“No, I like paying full price.” It’s
aluminum! My aluminum is
aluminum too. It’s pretty simple.
This business has an unlimited
amount of opportunities. The
other reason that I absolutely
love it is because I get bored
really easily. I’m an importer,
but this week I’m importing
something else, and next week
I’m importing something else. I
buy and sell companies, I create
companies, I create brands, and
I’m never, ever, ever bored. I
could be selling blow dryers
one day and condoms the next.
I don’t know what I’m going
to be selling, right. I never get
bored in this business because
there is always something
different about it.
The other thing that has some
real intrinsic value is selling
private label to other companies.
We’re able to come in and
source products and brand
them to their stores. We’ve
talked before about bringing
in a piece of equipment or
merchandise or whatever that
turns into a business in a box
where a person can go and put
somebody into business.
Right now we’re considering
beginning to buy hair salon
equipment because Richard has
experience in the hair salon
business. We can bring in an
entire salon of equipment for
under $4000. We could just
sell the equipment, and there
are people out there that do
that. I personally think that is
stupid. What we will do in-
stead is create a brand name,
get an industry expert to write
us a guide, create a special-
ized pallet of colors, bring a
designer in to design a store,
and we’ll sell them a design
package, a brand name, all the
CHINA IMPORTING SECRETS
art work for their signage and
for the embroidery and all of
that, and all their equipment for
$9999.95. You can get a Beauty
Shop-in-a-Box.
Let’s say I can buy this for
$3800. Guess what I’m going to
do? I’m going to charge them
$3800 down and the balance
on delivery. Duh! Their other
alternative is dropping $30,000-
40,000 in equipment. With me
they give me $3000-4000 and I
pay for 100% of the equipment.
It gets here and drops off at
their door. Guess how much of
that second check I get before
they get their stuff? All of it.
Other people’s money. No risk.
In those situations we tell them,
“We build it out for you in our
factory in China and it takes six
to eight weeks.” Tell them right
up front. What are they going to
do, go to China? I don’t think so.
They’re cutting hair. That is their
business. That is what they do.
If you think about every big brand
of consumer goods in America
right now: Eureka vacuum
cleaners, RCA telephones, double
computer monitors, whatever you
have in your home or business,
guess where they’re made? China.
Those brands have been built
based on Chinese manufacturing.
53
What do you think those brands
are worth? They are worth a ton.
I built a brand name company not
too long ago and ran the brand
for less than a year and sold the
brand name off for $350,000.
It was just a brand name of a
product that I was bringing
in from China. I didn’t sell the
inventory, I just sold the brand
name. That’s pretty remarkable.
People buy these businesses.
The exit strategy for an import
business is establishing product
in the market as the product in
the market, or one of the top three
or four products in the market.
You don’t have to be number
one. Being number two or three
would be pretty cool. Being one of
the top brands in the market for
whatever it is that you sell, and
literally just selling your company
and your brand. Do you know
who is going to buy you? Probably
the guy that is number one.
Somebody is going to buy you and
envelope you into what they’re
doing especially if you become
enough of a fly in the ointment.
I’ll never forget when I started
importing and I was working
really hard. This was years
ago and I was down in Destin,
Florida, where I took my family
on vacation. We went into the
grocery store that night to get
food for the condo, and we
went into the discount store
next door and we were going
to get some floating toys and
stuff for the kids. I walked by
and did a double-take when I
looked down on the shelf at this
store in Florida and there was
my product. I thought, “I’ll be
damned. That’s cool.” I didn’t
know anything about this store.
They had bought from one of my
distributors. The whole time I
was in Florida every time I went
into a store I would look for my
product. In about eight out of
every ten stores I had product
on the shelf. That was probably
the coolest feeling I’ve ever had
in my entire life. There was a
store out there that I had never
even heard of selling my stuff
with my product sitting on the
shelf. They’re actually pushing
my stuff making me money
every day while I’m somewhere
else asleep and I don’t even
know they exist. That was a
really, really, really wicked cool
thing about importing.
Anyway, that’s pretty much it.
Get out there and get started
and get your feet wet. Let me
know how you do. I’m dying to
hear about your success and
what you’re able to accomplish.
Have fun importing.
CHINA IMPORTING SECRETS