Offshoring Gone Wild: Stories from the Front

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I ended my December 15 article, “A Look at China’s Unethical Business Practices,” with the following comment: “I would appreciate hearing about any experiences you have had or have had. know about Chinese business ethics ”.

Wow ! This statement must certainly have struck a chord, as I have heard from numerous readers who have provided me with twenty or so first-hand experiences related to this claim.

They are compelling on their own, so I am sharing a representative number (edited for spelling and grammar) of readers’ responses:

Worthy of laughter

On the import side from non-Chinese companies, we see goods stopped or slowed down due to various issues. I always don’t care about US tariffs against China because they have thousands of regulations that they can impose on foreign companies. When the United States imposes tariffs on Chinese products entering that country, it simply takes away one or more of those regulations and enforces them on our products. So, they don’t need tariffs. Most people are unaware of this since they do not announce their actions to the world.

Taken hostage

When our company tried to move our product out of China, local Chinese logistics companies did not release it. This represents millions of dollars in products. In trying to get the goods released, we had no real help from the local government to get them back to our company. These same companies also tried to bribe us to get these documents out; again, we did not receive any help from the government. When my employees in China tried to go to the warehouse to inspect our goods, the warehouse owner hired security and wouldn’t let us see them.

Disassembly required

Chinese customs officials often require manufacturers of imported products to reveal technology specifications and photos of supplier information, and then [customs officials] physically inspect it. Chinese customs have even built clean rooms to inspect imported products which generally cannot be opened in a normal environment. This would seem to imply that they or they disassemble them for inspection. They even asked my company for full access to our SAP.

Intellectual property theft

Intellectual property theft is the biggest problem in exporting goods to China. Chinese employees steal the key to intellectual property and set up their own competing businesses. The Chinese government is doing very little to prevent this from happening. Most of the high tech companies I have worked with keep high IP products outside of China. And we pretty much understand that we’re going to lose the old technology that we’re selling there.

Incredible grants

Through portals like Ali Express, small Chinese exporters can quote surprisingly low shipping costs, via a hidden government subsidy. I am located in Australia and can receive small commercial cargo in air parcels sent from China to Australia for only 5-10% of the amount Australia Post would charge to send them to my own city. Indeed, at the end of the expedition in Australia, the delivery must obligatorily be carried out by Australia Post free of charge! Why? Due to an agreement … within the Universal Post [Union]. This means that China, a member of the UPU, can set airmail postage rates for [Chinese] exporters, thereby subsidizing their businesses. Australia Post is obligated to deliver our imports to the last mile. Of course, any Australian exporter of small packets would have to pay the exorbitant Australian Post tariffs to send anything to China, so this is a one-way distortion.

Scam alert

My company is a manufacturer of gears / pulleys etc. We also sell bearings as a distributor. Me, the purchasing manager, and our bearing sales manager to go to a huge bearing show in Shanghai, China and of course we were inundated with suppliers who wanted to show us their factory and their products.

Read more of Paul Ericksen’s articles on supply chain management.

We set a meeting for the next day. This guy says it was his factory. We walked around and at the end got to the packing area. He asked us what brand of bearings do we want? They basically had all of the boxes of each bearing brand and just put the same generic bearing in a box identified as the bearing brand the customer was interested in.

The next day we organized another tour with another supplier. The guy we work with took us to the exact same factory we were at the day before, saying it was his factory… we kicked the shit out of China soon after. Anyone who does business in China asks for trouble. They have no integrity.

The crisps are falling

I was a production manager at an electronics company in Huntington, New York. Small place, maybe $ 3 million in sales. The main focus was the electronic controllers where we would find a machine maker that had knobs and knobs on their control panel and a redesign with a touch screen / LED display. Think of treadmills as an example.

We landed a contract with a company in New Jersey to redesign their controller for the dry cleaning machines. The owner of my business was also the lead designer. To reduce costs due to the expected volume, he planned to have the units manufactured by a Chinese company. The New Jersey company recommended someone they used in China. To my dismay, the owner of this business did not explode [make unreadable] the chips that were placed in the controller for evaluation … well the owner of the dry cleaning machines showed up two months later to demand a price cut because he had a newly designed controller coming from from China – and you guessed it already, the Chinese unit was a carbon copy of our unit. The guy from NJ was a complete jerk and he used the Chinese company to steal our design.

Backtrack

I was responsible for helping with export documents, having previous experience with harmonized tariff codes.

It seemed to be presented as a positive and progressive movement, but still seemed to be a destabilizing activity at the national level.

Chronologically, my work ended in February 2005 and the auction of the company’s assets took place in 2008. Too bad because the company started in 1932 and was bought in 1983.

Interestingly, what was left of the company was sold to a Chinese investor about five years ago who broke numerous deals, and there is currently activity to buy it back through the previous property.

It will be interesting to see how this plays out.

Paul Ericsen’s new book is Better Business: tear down the walls of the purchasing silo. Ericksen is IndustryWeek’s Supply Chain Advisor. He has 40 years of industry experience, primarily in supply management with two major OEMs.

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