Processing a claim against a factory – Part I

Reason for Claim

Quality problems are the last thing people want to deal with when it comes to their China supply chain, but many importers experience these types of problems.  And let’s be clear: if you receive bad quality merchandise from China, it is very disruptive and can have a huge impact on business, that is why we call this “the nightmare scenario.”

As a China supply chain management company, our No.1 objective in quality assurance is to prevent quality issues. All our systems are designed to ensure that zero quality issues occur when the goods arrive at our client’s warehouse.

But we have been doing this for nearly 40 years now and Murphy’s Law is still active, so people ask us, if there is a claim, what is the best way to deal with it?

First things first:  How did these quality problems happen? There are generally two main causes of quality issues:

1. One main cause is the factory’s lax supervision during the production process, and the lack of experience or efficiency of their Quality Control department (if they have one). This is quite common and it makes the pre-shipment inspection before shipment a crucial step.  A good approach is to always, always perform a pre-shipment inspection no matter how well you know the factory or how often the product has been shipped.  Note: A key part of the quality assurance process and one which greatly reduces quality control problems is the ISS (Inspection Specification Sheet) but we will discuss that later.

2. The other main cause is the factory’s poor supervision for releasing goods that have not passed inspection. Incredible as it may seem, this happens. For example, we recently performed a pre-shipment inspection and it failed. We requested the factory to rework the unsatisfactory units and wait for our approval to release the shipment. However, the factory shipped the goods without approval to avoid missing the vessel’s sailing date because the client had been pushing to get the goods as quickly as possible. They assured us that they had finished reworking all the units as requested but did not wait for our inspection to ship the goods. This is rare, but it happens. And if it happens, you get the factory to sign a letter to guarantee that the goods shipped all conform to the quality requirements. This way, if the quality does not meet requirements when the goods are received, at least you are able to process a claim.

Understanding WHY claims happen is an important step in moving towards how to handle it. Next week, we will dive further into how to process a claim.

In the meantime, how would you handle this type of claim? Share your thoughts with us in the comments below.

 

 

By Ruby Liu