What sourcing from China actually costs

Before you price anything, it helps to see the whole list at once. A completed order from China draws on eight distinct pots, and only one of them is the price per piece.

One: development. Samples, sample freight, and — if the product is customised rather than picked off a catalogue — tooling or moulds. Two: the goods themselves, at the unit price, times the quantity, which is the number most quotes lead with. Three: the sourcing fee, if a person or a company is finding, vetting and managing the supplier for you. Four: quality. Inspection during or after production, and occasionally a factory audit before you commit at all.

Five: getting the goods to a port or airport, including collecting from several factories and repacking them into shippable cartons. Six: international freight and insurance. Seven: the border — duty, import taxes such as VAT or GST, customs brokerage, and any certification or testing your market requires before the goods may be sold. Eight: the costs that never appear on a quotation at all — bank charges, the spread on the currency conversion, and whatever it costs when a batch is wrong.

Most unpleasant surprises are not the result of a supplier behaving badly. They are pots four, seven and eight arriving after a budget was built on pot two.

A sample almost always costs more per unit than production will, sometimes by a wide margin, and that is not a supplier being opportunistic. A single piece pulled off a line, or made by hand because the line is not set up yet, carries the whole setup cost on one item. Many factories will credit the sample cost against a later order; whether yours will is worth agreeing in writing before you have four couriers in flight.

Expect to pay for sample freight separately, and expect it to be disproportionate. Express-couriering one unit halfway around the world can cost more than the sample. Ordering samples from three candidate suppliers at once is usually money well spent even so, because it is the cheapest test of the thing you actually care about — not the product, but whether the supplier does what they said they would.

Tooling is the bigger commitment and the one that most often reshapes a plan. If your product needs a custom injection mould, a die or a fixture, that is a one-off cost paid before the first good unit exists, and it is charged whether you subsequently order once or twenty times. It is also where two questions matter more than the price: who owns the tool, and where does it physically live. A tool you have paid for and cannot move is a tool that quietly locks you to one factory.

The practical consequence is that tooling changes the arithmetic of your first order. A mould cost spread over 500 units is a large addition to each piece; spread over 20,000 it may round to nothing. That is why a supplier quoting a low unit price at a high minimum order quantity and a competitor quoting higher at a low one are frequently offering the same deal in different clothes.

A first quotation from a Chinese factory is an opening position based on an incomplete specification, and it moves when the specification firms up. That is not a trick; it is what happens when a buyer asks for a price before deciding on a material, a finish, a packing configuration or a certification.

The things that move it most are quantity, specification and packaging. Quantity is the obvious one and works in steps rather than smoothly — prices tend to fall at the points where the factory can run a longer batch or buy a component in a larger lot. Specification is the one buyers underestimate: a different grade of plastic, a slightly better battery cell, a printed rather than a plain box, or a certification that requires a specific component can each move a unit price more than a hard round of negotiation will.

Packaging deserves its own thought because it is charged twice. Once as the box, the insert and the printing, and again as volume: a carton designed without regard for how it stacks costs you freight on every unit for the life of the product. It is one of the few places where spending an hour early saves money on every shipment afterwards.

Finally, be clear what the price includes. A price quoted at the factory gate is a different number from one quoted with the goods delivered to a port, and different again from one that includes freight and duty to your door. Those are defined terms, and agreeing which one you are talking about is the single most common way two quotes stop being comparable.

If you are working with a sourcing agent or a trading company, their fee is a line in this list rather than a tax on top of it — the work has to be done by somebody, and doing it yourself has its own cost in time, travel and mistakes.

The common arrangement is a commission on order value, and the usual range is roughly 5–10%, lower on large or repeat orders and higher on small, technical or heavily customised work. The alternatives are a flat fee per order or per supplier found, a monthly retainer, or a markup on the factory price where the agent buys at one price and sells to you at another.

The percentage matters less than which model you are on and who is paying it, because that is what decides whose side the agent is on when a quote arrives. That question is a whole subject of its own, and this site treats it properly in a separate guide on what a China sourcing agent charges — including the arrangement where the factory, rather than you, pays the agent.

One arrangement this guide cannot survey is the marketplace model, because there the buyer is not the payer at all: the factory pays the platform a membership and a commission on a closed deal, and the buyer pays nothing to anyone but the supplier. That is how this site works, and it is why there is no rate card here to compare against.

Inspection is the line most often cut to make a quotation look competitive, and it is the only line that catches a problem while the goods are still in China and still the factory's problem. Once a container has sailed, the same defect costs a shipping cycle to fix instead of a phone call.

The standard arrangement is an inspection at a defined point — commonly during production and again before shipment — billed by the man-day, with the number of days set by how many units, how many models and how far away the factory is. A statistical sampling standard is normally used rather than checking every piece, and agreeing the acceptance levels before production is what makes the report mean something afterwards.

A factory audit is a different and earlier expense: someone visiting the plant to confirm it exists, that it makes what it says it makes, and that its processes and capacity match the order you are about to place. It is a small cost against a first order with a new supplier and a pointless one against a repeat order with a known factory.

The honest way to think about both is as insurance with a known premium against an unknown loss. What is not honest is treating them as optional and then treating a failed batch as bad luck.

Freight is where costs vary most and where general figures are least useful, because the same shipment can differ several-fold in price depending on the mode, the season, the route and how full your carton is.

The first fork is air or sea. Air is priced against weight and chargeable volume and suits small, urgent, high-value or low-volume shipments; sea is priced against volume and suits everything heavy, bulky or plannable. The break-even between them is a property of your specific consignment, not a rule of thumb, and it moves with fuel costs and capacity.

Before that, there is domestic movement. If you are buying from more than one factory, someone has to collect the goods, receive them, check the cartons and consolidate them into a single shipment. That work is real and is billed, either explicitly by a consolidator or invisibly inside an agent's fee.

Two further things move the number more than most buyers expect. The first is how efficiently your cartons fill a container — unused space is space you pay for. The second is timing: rates rise sharply ahead of the Chinese New Year shutdown and around the October holiday, when everyone is trying to ship before the same closure. A product ordered without regard to that calendar can pay a premium that dwarfs the negotiation it took to get the unit price down.

Insurance is small and frequently skipped. It should not be: the goods are yours, in transit, for weeks.

The costs on your side of the border are the ones most often left out of a budget entirely, and they are the least negotiable of all — they are set by your government rather than by anyone you are talking to.

Duty is charged on your goods according to their tariff classification, which is a code assigned to the product itself. Two products that look similar can attract very different rates, and the classification is decided by what the goods are, not by what the invoice calls them. It is worth establishing the right code before ordering rather than discovering it at the border.

On top of duty, most markets charge an import tax — VAT, GST or the local equivalent — usually calculated on the value of the goods plus freight plus duty rather than the goods alone. There will also be a customs broker or clearing agent, port or terminal handling, and delivery from the port to you.

Then there is compliance, which is a cost of selling rather than of importing but lands in the same budget. Depending on the product and the market, that can mean testing, certification, marking, registration, documentation for batteries or chemicals, and labelling requirements that must be built into the packaging you already paid for. Discovering a certification requirement after production is one of the genuinely expensive mistakes in this business.

Payment. An international transfer carries a bank charge at both ends, and the currency conversion carries a spread that is rarely disclosed as a fee because the spread simply is the fee. On a large order the spread can exceed everything else in this paragraph combined.

Rework, replacement and returns. What happens when a batch fails inspection, who pays for sorting, repacking or re-manufacture, and how it is resolved when the goods are already at sea, is the single most valuable thing to settle in writing before an order rather than after one.

Delay. A shipment that misses a season is a cost even if every invoice in it was correct. So is a product that arrives without the paperwork its market requires and sits in a bonded warehouse while somebody obtains it.

And your own time. For a first order with a new supplier, the specification, the sampling round, the chasing and the reading are a genuine expense. It is the cost people are usually buying out when they pay somebody else 5–10%.

The number worth building is the landed cost per unit: everything above, divided by the units that survive inspection. It is the only figure that can be compared against what you can sell the product for, and it is the reason a cheap unit price can be the more expensive option.

Build it in the order the money is spent. Start with the one-off development costs and decide how many units you are amortising them over. Add the goods at the quoted unit price for the quantity you will actually order, not the quantity that gets the best price. Add the sourcing fee on whatever base it is calculated on. Add inspection. Add domestic consolidation, international freight and insurance. Add duty, import tax, brokerage and delivery. Add payment costs and the conversion spread. Then add a contingency, because the first order with a new supplier is the one where something is discovered.

Do that arithmetic before the sample arrives rather than after the deposit is paid, and two useful things happen. Quotes that were not comparable become comparable, because you are now pricing the same scope. And the questions worth asking the supplier change: not "can you do better on the price", which invites a cheaper specification, but "what is in this price, what is not, and what would change it".