Importing Private Label (ODM) Clothing from China

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Private label products are becoming increasingly common. Re-inventing the wheel is often unnecessary, especially considering the abundance of factory standard products to choose from in China, and other Asian countries. While a Private label product is, at least according to its original definition, based on a fixed set of specification, combined with the buyers branding, the lines blur in China’s apparel industry.
In order to avoid quality issues and severe misunderstandings when buying Private Label apparel from manufacturers in China, you must follow a strict procedure, involving selection of reference designs and fabrics, size measurements and labelling. In this article, we explain how to manage the ODM apparel product development process in two stages.

Step 1: What You Need From Your Private Label Apparel Manufacturer

a. Reference samples

A private label product is essentially a design template. Hence, the basis for your product is the factory design provided by the manufacturer. Private label samples can be selected directly from the SKU list in the supplier product catalog (i.e., their Alibaba page or print material). As explained in this article, the Reference sample can be customized to a varying degree – in terms of design elements, dimensions, materials and components.
As a complement to the reference sample, you shall attempt to obtain the suppliers design drawing. While this is not always offered, it’s an important complement to a sales contract.

b. Fabric Samples

The most important aspect to understand, when buying private label clothing from China, is that apparel manufacturers don’t have ‘fixed specifications’. What this means is that SKU A can be made of various fabrics, for you to choose.
Apparel manufacturers procure fabrics from a set of subcontractors, rather than producing fabrics themselves. Hence, the suppliers fabric selection is a reflection of their subcontractor offering. While many suppliers will not ship their fabric catalog overseas, you can request material samples. Before ordering, provide this to your supplier:

• Guideline specifications (i.e., 100% Organic Cotton, 200 – 240 gsm)or submit a reference fabric
• Price per square meter
• Minimum Order Quantity (MOQ)

When possible, ask the supplier to send as many fabric samples as possible, preferably together with the ODM reference sample. You may, as indicated above, also send a reference fabric sample to the supplier, for which they then provide a counter sample.

c. Size Table

The size table shows all measurements, and the manufacturer’s standard dimensions (if any) for each size. Normally, the size table can be modified, which is sometimes required due to size differences in different countries and markets (i.e., American sizes as compared to European and Asian sizes).

d. Order Terms

To avoid unpleasant surprises later on, you should begin negotiating order terms at an early stage. Preferably before you make any further investments by purchasing samples. This is what you need to know:

• Minimum Order Quantity: MOQ / SKU, MOQ / Fabric, MOQ / Color, MOQ / Size
• T/T Payment Terms
• L/C Payment Terms and Minimum L/C Order Value
• ODM Sample Cost (Including Tooling Costs, if any)
• ODM Sample Production Time
• Mass Production time
• Accepted Defect Rate

Step 2: What Your Supplier Needs from You to Make ODM Samples

a. Product Specifications

An ODM Apparel specification is generally a mix of various reference samples, standard fabrics, Pantone colors and components, it’s critical that the supplier is provided with an overly clear, and consistent, product specification. This must be included:

• Reference Sample SKU (As provided by the supplier)
• Fabric (As provided by the supplier)
• Pantone Colors
• Components (i.e., YKK Zipper)
• Size Table File (Modified or as provided by the supplier)

You may also consider returning sample units and material samples to the supplier, to reduce the risk of misunderstanding. However, keep at least one of each in your office, for future reference.

b. Logo and Embroidery Files

All logo, embroidery and care label files shall be provided directly to the supplier. You may use the standard dimensions and placements as on the ODM Apparel sample, or make changes to the design file (which is hopefully provided by the supplier). Also keep in mind that you must ensure that the care label file may need to include the Country of Origin (i.e., Made in China), the fiber composition (i.e., 98% Cotton 2%, Spandex) and Care Symbols (i.e., ASTM D5489).

• Embroidery File (.ai or .eps)
• Logo Print File (.ai or .eps)
• Embroidery / Logo Print Placement (on Apparel Design Drawing File)
• Care Label (.ai or .eps)
• Care Label Placement (on Apparel Design Drawing File)

c. Compliance Requirements

It’s not the manufacturer’s responsibility to keep track of applicable regulations in your market. It’s yours. Before entering development of pre-production samples (preferably even earlier) you must communicate which regulations your product must be compliant with. In the European Union and the United States, there are various substance regulations, restricting the content of chemicals and heavy metals – for example Formaldehyde, AZO Dyes and Lead. Below follows a brief overview:

• European Union: REACH
• United States: FHSA (Formaldehyde and AZO Restrictions)
• United States: California Proposition 65
• United States: CPSIA (Children’s Clothing)

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We help Startups & SMEs to get access to accurate information on unit pricing, tooling costs and lead times, for both ODM (Private Label) and OEM (Custom Designed) products. We have solutions tailored for the following industries:
 

Apparel & Textiles, Watches & Accessories, Electronics,
Home Products, Toys & Children, Materials, Parts & Tools

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CE Marking When Importing From China: A Complete Guide

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Importing from China to the European Union? Then CE marking, and compliance with at least one EN directive, may be mandatory. Yet, many small businesses importing from China remain unaware of how to determine whether CE marking is required for their products, and which party is required to ensure compliance.
In this article, we explain the basics of CE marking, including documentation, labeling requirements, regulated products and relevant EN / EC directives. What’s more, we also explain why companies importing from China, and other Asian countries, must never assume that their manufacturer is able to ensure compliance with EU standards and regulations.

What is CE Marking?

Many products sold in the European Union must be compliant with one or more EC or EN directives. Some EC directives apply to specific products, e.g. finger paints, while others are more comprehensive and include a wider scope of products, e.g. Electronics with an input or output voltage, between 50 to 1000 volts. ‘CE marking” is not a product directive, but a conformity marking signaling compliance with all applicable EC directives.
As each EC directive regulates specific products, their scope of regulation varies. Some EC directives regulate substances, while other regulate energy efficiency and electrical safety. Some directives also cover product and packaging labelling, other than the CE mark itself.
As such, compliance requires more than a printed CE mark. You must ensure that the items comply with all technical standards (which in turn are often based on IEC and ISO standards) and requirements, as outlined in the applicable EN and EC directives. Importing and selling non-compliant items in the EU is illegal, and may result in both a forced recall and serious fines. Assuming that the goods make it through customs in the first place.

Are Non-EU Based Importers Required to Have Their Products CE Marked?

No, as CE marking is part of European Union directives, importers based outside of the European Union are not required to ensure compliance with EU regulations. However, looking for previous ‘CE compliance’ when selecting a Chinese manufacturer is still wise – even for non-European importers. Previous CE compliance indicate a certain level of technical expertise. European compliance is also far more common among Chinese manufacturers, as compared to compliance with American, Australian and Indian standards.

Thus, buyers in these countries often have no choice but to primarily look for suppliers able to show compliance with EU regulations (i.e., previously issued product certificates and test reports), as a way to determine if the supplier is capable to comply with technical standards and regulations in their own countries (i.e., FCC Part 15).

CE marking is also required for items, not only shipped from China, but for products sold from any country to an EU member state. Therefore, it is indeed highly relevant to ensure CE compliance, if you are a non-EU company looking to re-export items to the European Union.

Which Products must be CE Marked?

Some EC and EN directives regulate specific products, but most are applicable to groups of products. We introduce the scopes of regulations for various directives further down in this article, but let’s begin by taking a look at the products, for which CE marking is required.

a. Electronics

• Appliances burning gaseous fuels
• Household refrigerators and freezers
• Ecodesign of energy related products
• Electromagnetic Compatibility
• Low voltage
• Radio and Telecommunications Terminal Equipment
• RoHS 2 (Part of CE, starting in 2013)

b. Toys

• Mechanical and physical properties
• Flammability
• Specification for migration of certain elements
• Experimental sets for chemistry and related activities
• Chemical toys (sets) other than experimental sets
• Graphical symbols for age warning labelling
• Finger paints
• Swings, slides and similar activity toys for indoor and outdoor family domestic use
• Organic chemical compounds – Requirement
• Organic chemical compounds – Sample preparation and extraction
• Organic chemical compounds – Methods of analysis
• N-Nitrosamines and N-Nitrosatable Substances

c. Machinery

• Machinery (general)
• Non-automatic weighing instruments
• Measuring instruments
• Cableway installations designed to carry persons
• Lifts
• Personal protective equipment
• Pressure equipment
• Pyrotechnics

d. Medical Devices

• Active implantable medical devices
• In vitro diagnostic medical devices
• Medical devices

e. Vehicles

• Recreational craft
• Bicycles
• Electric bicycles

f. Other Products

• Cableway installations designed to carry persons
• Equipment and protective systems intended for use in potentially explosive Atmospheres
• Explosives for civil uses
• Hot-water boilers
• Noise emission in the environment
• Simple pressure vessels

Note: CE marking is not mandatory for all products imported the the EU. In addition, there are product regulations which apply to items for which the CE mark is required, and for which it is not. REACH is one such regulations,restricting substances (i.e., Lead and Cadmium) in all consumer products.

Which Party is Responsible to Ensure Compliance with All Applicable EN Directives?

When products are manufactured overseas (e.g. in China), the importer is responsible to ensure compliance with the applicable EN Directive. This often comes as a surprise to European importers, as most EU authorities, and their websites, tend to refer to the “manufacturer” as the party responsible to ensure CE compliance. However, when items are manufactured overseas, the importer is considered being the manufacturer. Thus, the responsibility to ensure ‘CE compliance’ cannot be shifted to a Chinese manufacturer.

What Can Happen if We Import Non-Compliant Products From Overseas?

We have received several notifications of EU customs requesting CE certification documents, to prove that the imported items are compliant with all applicable CE directives. In cases when the importer could not produce the requested documentation (i.e., Product Certificates and Technical Documentation), the Customs authorities have refused to shipment to enter.
A few years ago we also received a similar report from a Swedish company, also importing toys. The difference in this case was that the items arrived several months ago, but when local authorities came knocking on their door – they couldn’t produce documents proving full compliance. As a result, the authorities forced a recall. Hence, the importer had to issue refunds to their retailers, essentially buying back the entire batch of ‘non-compliant’ goods. We’ve never heard from them since.

Are all Chinese Manufacturers Able to Ensure Compliance With EN Directives and CE Mark Our Products?

Short answer, no. It’s rather the opposite. In most industries, only 5 to 10% of the Chinese manufacturers are able to produce compliant goods. However, that is not saying that an entire factory can be “CE compliant”. CE marking only applies to specific products. Therefore, even the manufacturers that can show previous compliance (i.e., previously issued certificates and test reports), does not always make ‘CE marked items’ by default.
Thus, when selecting suppliers, we always look at previous CE compliance in order to determine if the supplier has the technical expertise and manufacturing capability to manufacture compliant products. Neither of these are to be taken for granted in China. Remember, previous compliance is an indication, not a guarantee that your items will be compliant.
There is no such thing as “compliance by default”. Before you place an order, you must make your supplier aware of “your” compliance requirements. If Chinese manufacturers do anything “by default”, it’s manufacturing items that are non-compliant with any foreign standard whatsoever. But simply referring to “CE compliance” and assuming that the supplier will know exactly which EC directives apply to their products is an extremely risky strategy.
You must confirm exactly which CE directives your products, and communicate this to the Chinese supplier. In order to verify compliance, you must also implement a testing and certification procedure. In most cases, importers cannot rely on ‘existing certification’, but must submit reference samples or prototypes to a testing company, before mass production.

Documentation

a. Declaration of Conformity

The Declaration of Conformity (DoC) (See sample) is a document issued by the manufacturer, stating that the item is compliant with all applicable EN or EC directives. The DoC shall also list the specific EN or EC directives of which the product is compliant. Apart from this, the manufacturers company name, address and product information shall also be present on the DoC.
For some products, the manufacturer is allowed to issue the DoC without the need for third party testing verifying compliance. This setup works fine, when it regards European, American and Japanese manufacturers. But what about Chinese manufacturers?
Fake product certificates and test reports are not unheard of in China, to say the least. Many Chinese suppliers issue DoC, claiming compliance, while they have not made any effort whatsoever to ensure compliance. A few months ago we received a DoC, issued by a Chinese supplier, claiming that their ball bearings were compliant with the Electromagnetic Compatibility (EMC) Directive.
The EMC directive regulates electronics, that may interfere with other electronics in its proximity. The problem here is that a ball bearing doesn’t have any electrical components, and is therefore unable to interfere with electronics. Thus, the EMC directive is not even applicable to a ball bearing. In essence, the Chinese supplier simply went online and copy pasted the first EN directive they could find on Wikipedia, hoping it would solve their compliance problems.
In the end, it’s the importer’s responsibility to ensure that the items are compliant. If the authorities find that your imported items are non-compliant, you will be held responsible – not the supplier. This is why third party testing, verifying that the DoC is actually valid, is important, even though such testing may not always be required by law.
However, in some cases, third party testing is required by law. This means that the Declaration of Conformity, issued by the supplier, must be based on third party testing from an authorized testing company.

b. Technical file

In addition to the DoC, the manufacturer is also required to set up a technical file. This document regards the technical aspects of a product, combined with testing and quality control procedures and documents. Below follows an overview of the information the technical file shall at a minimum include:

• Description of the items
• Concept designs, drawings, Wiring and circuit diagrams (if electrical), component schemes, sub-assemblies, part lists, etc.,
• List of standards applied in full or in part
• Testing (in house or made by third parties) and Quality control procedures
• Test reports and quality control records
• Marking and labelling copies
• User instruction copies

However, the specific information a technical file shall include is outlined in the applicable EN or EC directive. The technical file, unlike the Declaration of Conformity, must not be published or made available to retailers, or direct customer. The importer is required to present the technical file, only if requested by EU or local authorities.

Thus, the importer is legally required to obtain copies of the technical file from the Chinese manufacturer. But, as the technical file contains detailed product information such as circuit diagrams, virtually no suppliers are willing to hand it over prior to the buyer placing an order.
This opens up a world of problems, as the importer is facing the risk of first paying a supplier, only to find out that they don’t really have a technical file.

Labeling Requirements

The CE mark is essentially a label showing that the item is compliant with all applicable EN or EC directives. On the other hand, products that are not regulated by such directives, shall not be CE marked.
The CE mark shall be affixed to the product unit and its packaging and user instructions, if any. This shall be done during production, by the Chinese supplier. That said, don’t expect that they are aware of the specific labeling requirements applicable to your product. It’s critical that you provide your supplier with graphical files (i.e., in .ai or .eps format), dimensions and affixing position on the product.
The proportions of the CE mark itself shall also be according to the official layout set by the European Union, and a minimum diameter of 5 mm. That said, there are also exceptions. Naturally, the CE mark shall also be permanent, so a sticker is not enough.

EU Directives For Which CE Marking is Required

As explained previously in this article, CE marking is meant to show compliance with all applicable EN or EC directives. Below follows an overview of directives applicable to electronics, machinery and toys. However, keep in mind that this is not the full list of directives requiring CE marking.

a. Low Voltage Directive (LVD)

The Low Voltage Directive applies to electronics, and components, with an input, or output, ranging between 50 to 1000 volts AC, and 75 to 1500 volts DC. Thus, the Low Voltage Directive scope of regulations covers a wide range of products, including chargers, cables, home appliances and socket outlets. However, LVD is not applicable to battery powered devices, and other electronics with an input, or output, that falls outside of the specified voltage range.

b. Electromagnetic compatibility (EMC)

The EMC Directive is applicable to fixed electronic appliances, such as LED displays. The purpose is to ensure that electrical equipment don’t interfere with other electronics, and signals, in its proximity. While it’s impossible to completely eliminate electromagnetic emittance, the EMC directive sets strict limits – which in turn depend on the type of product, its usage and intended environment. However, products covered by the R&TTE Directive, are not regulated by the EMC directive.

c. Machinery directive (MD)

The Machinery Directive is applicable to machinery, interchangeable equipment and parts. The machinery directive primarily regulates mechanical design and electrical design, but also ropes, chains and other safety aspects of machinery. That said, motor vehicles and many types of consumer electronic appliances, are not regulated by the Machinery Directive.

d. Toy Safety Directive (EN 71)

EN 71 regulates toys, and other children’s products. It’s not one uniform standard, but divided into 13 different EN 71 standards. In most cases, more than one EN 71 standard is applicable. EN 71 regulates various aspects of toys and children’s products, including, but not limited to: flammability, mechanical and physical properties, chemicals and heavy metals. In addition, EN 71 also stipulates requirements for graphical symbols (e.g., age warnings) and other labeling requirements.

e. Radio & Telecommunications Terminal Equipment Directive (R&TTE)

The R&TTE directive is applicable to radio and telecommunication equipment. The scope of regulations includes both final products and individual components. Therefore, products with radio, WiFi and Bluetooth transmitters and receivers are required to comply. This includes, but is not limited to, Android tablets, Smartphones and WiFi routers.

f. European Eco-design Directive

The Eco-design Directive was put in place to reduce greenhouse gases. As of today, more than 40 groups of products are covered by the Eco-design Directive, including light bulbs and domestic electrical appliances. The directive also applies to non-electrical products, including windows and insulation materials.

g. Restriction of Hazardous Substances (RoHS 2)

The RoHS directive restricts the amounts of certain substances in electronics, including lead, cadmium and mercury. Starting in January 2013, RoHS is now part of the CE marking directive. Therefore, RoHS compliance is mandatory for all CE marked electrical items. However, there are few exceptions.

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Sourcing & Vetting Suppliers on Alibaba Using Available Data

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Alibaba.com is the most comprehensive database of, primarily Asian, manufacturers in the world. It’s also very misunderstood. While some expect it to be some sort of ‘one stop shop’, we prefer to see it as a comprehensive self service supplier database. In this article how to source and vet suppliers, using data available on Alibaba.com – including the Company Overview, TrustPass Profile and Third Party Supplier Assessment Reports.
Disclaimer: This guide only explains how to make an initial supplier selection. In other words, a shortlist. Before moving forward, the suppliers must be verified. The sole purpose of the initial selection is to ensure that you don’t waste time on suppliers that are obviously not qualified.

1. Company Overview: First Step of the Supplier Vetting Process

The company overview is, unlike the TrustPass profile, not made of up verified information. However, it can tell enough to decide whether or not we should further analyze this supplier:
Product Scope: This lists the suppliers ‘main products’. For clear reasons, you want your product to be mentioned here. Suppliers listing a very diverse range of products are mostly buying agents or trading companies, as manufacturers have far more narrow product scopes.
Certificates: Suppliers listing overseas product standards and certificates (i.e., REACH, Low Voltage Directive and CPSIA) are more likely to be experience manufacturing goods in compliance with EU and US product regulations.
Quality Management System & Social Compliance: Specifies whether the supplier is certified according to a Quality Management System (i.e., ISO 9001:2015) or complies with a Social Compliance Protocol (i.e., BSCI).
As mentioned, this information shall not be taken at face value. The suppliers are free to edit their Company introduction as they wish, and compliance and QMS documents must, for obvious reasons, be verified.

2. TrustPass Profile: Verified Company Information

All Gold Suppliers on Alibaba has a TrustPass profile, listing verified information, parts of which are very valuable when vetting suppliers on Alibaba. This data is pulled directly from their business license, and can be very telling about a supplier:
Registered capital: The Registered Capital indicates the suppliers scale of operations. A supplier with a very low capital (i.e., RMB 100,000) is most likely a trading company, while a supplier with, say, RMB 20,000,000, is likely a manufacturer.
Legal Representative: The name the legal representative of the company. This is the person that should sign, and stamp, your Proforma Invoice, NDA and Sales Contract.
Registered Address: The suppliers, registered, operational address. However, these often tend to be outdated.

3. Trade Assurance: An Extra Layer of Security When Buying from Alibaba Suppliers

The Alibaba Trade Assurance is in many ways similar to a Letter of Credit, without involving the bank. The funds are released to the supplier, only after the goods pass Quality Inspection, and the Bill of Lading is issued. Just as when paying by Letter of Credit, additional terms may also be added to the sales contract, which is the document reviewed by Alibaba before the payment is settled.
Trade Assurance is not available when buying from all listed suppliers, and it says nothing about the supplier’s manufacturing, design or compliance capabilities. It is, however, a bonus, and I think this will become more standardized and sophisticated in the years to come. Click here to read more about the Alibaba Trade Assurance, and how it can help your business when buying from Chinese manufacturers.

4. Supplier Assessment Report: A Third Party ‘On Site’ Audit

The Supplier Assessment Report is, mostly, provided by TUV Rheinland andBureau Veritas, two accredited European compliance companies, and long term partners of Alibaba. Suppliers on Alibaba.com can choose to have them audited and inspected, and in return they can publish a comprehensive Supplier Assessment report on their page.
Clearly, this attracts mostly ‘proper manufacturers’ that are confident enough to pass an on site audit. However, the report itself is of little use unless properly analyzed. This is what you should look at:

• Legal Status
• Premises Ownership
• Certifications
• Quality Management System
• Verified Main Products
• Production Flow
• Human Resources

Unlike the “Company Overview”, the Supplier Assessment report listsverified product certificates and test reports, thereby giving a hint about the supplier compliance track record (i..e, their experience and capability of manufacturing products in compliance with overseas safety standards).
That being said, for unknown reasons, suppliers tend to underestimate the value of listing such documents. As a result, this section is often left out empty. The only way to really find out is by contact the supplier, requesting and verifying their documents.

5. Main Product Lines Verification Report: A Complement to the Supplier Assessment Report

The Main Product Lines Verification Report is similar to the Supplier Assessment Report, but more technical in nature. It’s based on an audit of the manufacturers’ production lines. It tells us two things: The suppliers main products, and the supplier’s production capacity (i.e., if they are big or small).

What’s Next?

By vetting suppliers based on the information explained above, you should be able to shortlist somewhere between 15 to 20 candidate suppliers. That said, the number varies greatly between different industries. Considering that several hundreds, sometimes thousands, compete in the same product categories, that is a far more manageable number. Still, they are labelled as ‘candidate suppliers’ for a reason. Before you are ready to decide on one, or more, manufacturers – you must do the following:

• Verify Product Certificates (i.e., EMC Certificate of Compliance)
• Verify Substance Test Reports (i.e., REACH and California Proposition 65)
• Verify Quality Management System Certificates
• Verify Social Compliance Audit Reports
• Verify Bank Account Details

These documents can only be accessed by contacting the suppliers directly, as they are not available in a central database. While you’re on the phone with them, you should also get information on the following:

• Payment terms
• OEM and ODM Production Capability
• Sample Cost
• Tooling Costs
• MOQ (for your product)
• Production Time
• Packaging Options

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Pre-Production Sample Order Terms: A Complete Guide

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Developing pre-production samples is the only way to truly test the viability of a new design, and the manufacturers capability to produce it. It’s also a minefield, that can cost you months, sometimes up to a year, in lost time if not managed properly. The first step of the pre-production sample development is to draft Sample Order Terms. A well drafted document can save you thousands of dollars in development costs, and prevent severe delays caused by never ending sample revisions.
Keep reading, and learn how to draft a Sample Order Terms Documents, including product specifications, compliance requirements, sample revision and tooling ownership terms.

Product Details

a. Product Spec Sheet & Attachments

A product must exist on paper before it can be put together on the assembly line. Chinese manufacturers, being primarily OEM suppliers, expect the customer to provide all relevant product information, including the following:

• CAD files
• Design Drawing (ANSI or ISO Standard)
• Bill of Materials
• Size Table
• Color codes (i.e., Pantone or RAL)
• Reference product samples
• Reference material samples
• Reference color samples

Factories don’t host ‘in house’ design teams for buyers to use free of charge. Hence, any detail that is left out from the Sample Order Sheet will not follow through on the sample. Whenever I hear of severe delays and multiple sample revisions, this is very often due to the buyer’s failure to provide clear and consistent product specifications.

b. Product Safety Standards & Substance Restrictions

All applicable product regulations, including technical standards and substance restrictions, must be communicated to the manufacturer before they get started on the samples. If possible, the product sample shall be submitted for compliance testing upon completion. That said, that may not always be possible, for the following reasons:
1. Apparel & Textiles: The suppliers may not be able to purchase ‘compliant’ fabrics and components in small quantities. Hence, they may be forced to begin by making a sample for demonstration only.
2. Electronics: The supplier may not be able to get hold of RoHS compliant PCBs and other components when assembling a prototype. They may also lack equipment to test Electromagnetic Compatibility (EMC).
3. Children’s Product: The supplier may not be able to purchase ‘compliant’ materials and components in small quantities.
While you must still communicate all applicable standard and regulations to your supplier, don’t take for granted that they can, due to the reasons explained above, assemble a ‘compliant sample’. Get a word from your supplier before you call your testing laboratory, and make sure to get it on paper.
You must also consider how to deal with a situation where the sample fails to pass the relevant testing. A 2nd, or even 3rd, compliance test might set you back anything from a hundred to several thousand dollars.

c. Product Packaging & Labelling Requirements

Developing new product packaging is a challenge on its own. However, regardless of whether you buy Private Label (ODM) or Custom Designed (OEM) packaging, you must include the following:

• Artwork files (.ai format)
• Packaging Design File (.ai format)
• Bill of Materials

If you intend to buy a Private Label (i.e., factory standard packaging with your own artwork) you can request an Artwork template from the manufacturer. As mentioned, Chinese manufacturers expect the buyer to provide all building blocks – so make sure to design the packaging artwork incompliance with all applicable labelling requirements. Depending on the market and product, you may need to include one or more of the following:

• CE Mark
• FCC Mark
• Warning Label
• Country of Origin
• Batch ID / Serial Number
• EAN Code

Sample Order Terms

a. Production Time & Included Revisions

Samples rarely come out perfectly on the first try. Depending on the product and its complexity, two to three revisions are to be expected. However, you don’t want to end up in a situation where the supplier is asking you for more money, because they failed to get your approval on the pre-production samples. For this reason, include the following terms:
1. The supplier must produce an unlimited number of sample revisions (in case the previous sample batches don’t comply with the product specifications and quality requirements in this document).
2. The seller may not request additional payments from the buyer, unless the buyer makes changes to the product designs, materials, quality requirements or compliance requirements.
3. Pre-Production Sample Revision Time:

• 1st Sample: XX days
• 2nd Sample: XX days
• Nth Sample: XX days

4. If the supplier fails to produce an acceptable sample after X revisions, the buyer may request a full refund ($XXX) from the supplier.
5. If the supplier fails to produce samples within the time limits set under ‘Pre-Production Sample Revision Time’, the buyer may request a full refund ($XXX) from the supplier.
As you may already have figured out, the main purpose of these terms are to put pressure on the supplier to:

1. Comply with all design requirements and product specifications
2. Limit the number of revisions needed (as they end up on the losing side by neglecting your requirements), and thereby speed up the development process.
3. Limit the time spent to produce each sample revision

However, these terms are for obvious reasons void if you change the specification, after the supplier starts working on the pre-production samples. Again, get your spec sheet right before you move forward.
One more thing. Don’t think that you’ll actually get your money back just because it’s on paper. Still, they will (hopefully) take your company more seriously, thereby giving your pre-production samples a higher priority.

b. Mold and Tooling Ownership

When buying custom designed products, injection molds and other toolingare generally required. Tooling is always paid for by the buyer, and can make up a large share of the product development cost. As such, you want to avoid any of the following situations:

• The supplier using your tooling for other buyers
• The supplier refusing to transfer the tooling to you or your new supplier

The first scenario requires more than just a written clause. For further guidance on how to prevent suppliers from using your molds for other buyers, read this article. As for the second scenario, add the following two clauses to your Sample Order Terms:
1. All tooling (as listed below) is the property of the buyer, and may not be used in production, for the seller (supplier) itself or its other customers (domestic or international) without the buyers written approval.
2. The tooling may be transferred from to the buyer, or its representative in China, at any time. Upon such a request, the seller must send the tooling to the buyer within 3 working days. The buyer must pay for all transportation costs (Maximum $XXX).

c. Subcontracting

Half the point of buying pre-production samples is to test the manufacturers capability to produce your design. What if the manufacturer contracts sample production to another factory? Well, you have no indication of the supplier capability to actually make your products. Thus, new quality issues, that you thought were already corrected during the sample development phase, may arise.
This happens. While most horror stories of subcontracting in China refer to shifting mass production to another factory, you surely don’t want this to be the case for your pre-production samples either. Include this term:
1. The seller may not subcontract the sample production to any other party or company, entity (excluding procurement of components and materials).
2. The pre-production sample must be made in the supplier’s production facility at the following address: [Insert Address]
3. The buyer, or its representative in China, may inspect the seller’s facilities without prior notice, to verify that sample production is made at the specified address.
4. Failure to comply with the subcontracting terms shall result in an immediate refund ($XXX).

d. Payment Terms

If the sample costs are counted in the hundreds of dollars, product samples are usually paid for 100% upfront. However, more complex developments, for example OEM electronics and custom plastic parts requiring injection molds, can result in costs counted in the thousands – sometimes tens of thousands – of dollars. When the stakes are higher, risks must be managed accordingly. For these situations, we advise you apply the following terms:

• 40% Deposit before production of tooling and pre-production samples.
• 60% Balance after the buyers written approval of tooling and pre-production sample.

e. NDA (Non-Disclosure Agreement) Attachment

Assuming you’re developing a product with a new design, function or your own brand, you want to prevent the supplier from selling your product, or brand, to other buyers. Both domestically and internationally. This is why anNDA (Non-Disclosure Agreement) shall be added, as an attachment, to your Sample Order Terms. An NDA prevents, in theory, the supplier from doing the following:

• Selling products using your brand name
• Selling replicas of your product design
• Sharing details about your product with third parties
• Using your products as part of their marketing material (i.e., as reference products on their website or supplier directory page)

The purpose of the NDA is to make the supplier think twice before mass producing copies of your product. Then again, this is Asia, and pragmatism wins over ‘how things should be’ everyday. The NDA might buy you some time, but it’s surely not going to prevent the supplier to start making the product, using a different company entity, if that’s what they really want to do.
In the end, what really matters is design patents and trademark registrations. If your product is unique, and exposed to serious risk of being copied, do the following:
1. Applying for a design / functional patent in the United States, European Union and your home market (if not the US or EU).
2. Apply for a design / functional patent in the Peoples Republic of China
3. Register trademark for your brand name United States, European Union and your home market (if not the US or EU).
3. Register trademark for your brand name in the Peoples Republic of China

Final Comments

1. The purpose of the Sample Order Agreement is to give the supplier various incentives to deliver acceptable pre-production sample, with as few revisions as possible and within a reasonable time frame. It shall not be seen as an insurance policy for the sake of recovering money and lost time.
2. The supplier shall print, sign and stamp a paper copy of the sample order terms. Terms listed in an excel or word file carries no significance whatsoever.

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