Hello and welcome back!
So without any further ado, let’s get to it!
First things first – what is Alibaba Trade Assurance?
Well it’s a service run by Alibaba that’s “designed to help create trust between buyers and suppliers.” Trade Assurance covers eligible orders on Alibaba.com with full payment protection if either:
- The quality of your products do not conform to the agreed standards;
- The supplier fails to ship your products on the agreed shipment date.
Sounds good, right? But, how much does Alibaba Trade Assurance cost to use?
It’s 100% FREE – and by free, I actually mean free – for both buyers and sellers, so it doesn’t add any cost to your order at all even though it’s basically an insurance in case anything goes wrong.
However, Trade Assurance doesn’t cover all orders on Alibaba – as it’s only eligible for suppliers who have signed up to the service and promise to abide by the Trade Assurance rules.
You can easily see which suppliers/products are covered by Trade Assurance by looking out for the Trade Assurance logo when searching for products and suppliers on Alibaba.
In this example search (and no, I don’t suggest you actually start selling iPhone cases!) you can see that while the first listing isn’t covered by Trade Assurance, the second one is:
When you hover over the Trade Assurance logo, you’ll be able to see another very important piece of information – the coverage amount for that supplier:
This is also known as the supplier’s Trade Assurance limit and this amount is set by Alibaba, not the supplier! It’s based on the supplier’s qualification status and also their historical sales volume, so the higher this amount the better really.
Just to be clear – you’ll only be covered up to the Trade Assurance limit amount for your specific supplier. So if their limit is $20,000 and your order is worth $30,000 – then you’ll still only be covered up to $20,000.
But in practice this is never really a problem as the vast majority of the time the Trade Assurance limit will be well above your order amount anyway.
Okay, so now that we’ve covered what Trade Assurance is, who it applies to and the coverage amount – how do you actually use the Trade Assurance service?
Here’s how it works:
1) Find a supplier
Search for a supplier with the Trade Assurance icon and check that your order amount is within their Trade Assurance limit.
2) Negotiate and confirm your order
Agree on all aspects of your order – such as price, the total amount to be covered by Trade Assurance, payment terms, shipping date, and if you want to be covered for product quality, select either pre-shipment or post-delivery coverage and make sure your quality requirements are contained in the contract.
3) Make payment
Confirm the Trade Assurance contract and make payment via Alibaba.com
Now we’ve already covered finding a supplier who’s enrolled in the Trade Assurance service, but I want to talk more about point no.2 as it’s actually the most important part of Trade Assurance.
What exactly do Alibaba mean when they say “make sure your quality requirements are contained in the contract”?
The answer to this is very, very important – the Trade Assurance coverage is based on the details that you and your supplier agree in your purchase contract.
You can’t start a claim for late delivery unless you specify a delivery date for your order.
You can’t start a claim for product quality unless it’s against a specific and measurable detail, as laid out in your contract.
For example, you can’t say the colour is wrong unless it’s specified exactly what colour the products should be in your contract.
And you need to be as accurate as possible – don’t leave anything up for interpretation! If you’re ordering some children’s tablets and you say “long lasting battery” and they arrive with 2,000 mAh batteries, then there’s nothing you can do.
However, if you specify that the tablets should have batteries that are at least 3,000 mAh then you would be able to make a claim!
You need to be as specific and detailed as possible in your contract.
Specify all of the following:
- The shipment date
- The size of the product
- The materials to be used
- The colour
- The packaging
- The branding
And anything else that is important/that you can think of!
Also – include images! Images of samples, images to illustrate what you’re expecting… these are both incredibly useful.
And the thing about this is that this is good practice anyway. Yes, you have to do this if you want to be fully covered under Alibaba Trade Assurance but it’s what I recommend you do with every order from China anyway!
There’s honestly no downside to doing this – it makes your expectations clear, it makes your supplier’s job easier, and it’s essential for both your pre-shipment inspection as well as for settling any disagreements or disputes.
So please don’t take this part lightly as it is the most important step when ensuring your order from China is protected by Trade Assurance.
Next, let’s look at the two different types of cover and which one you should opt for.
Pre-shipment coverage vs Post-delivery coverage
Previously to be eligible for Trade Assurance you had to organise a pre-shipment inspection – it wasn’t like eBay or Amazon where you could receive and inspect the goods yourself before making a claim and really that was completely fair – after all this isn’t a retail site – these are b2b, wholesale orders travelling thousands of miles!
However, even taking all of that into account, Alibaba have now made it possible to instead have “Extended Trade Assurance until Arrival at Port/Place of Destination”.
But I actually don’t recommend this at all. I strongly suggest you stick with the typical “Trade Assurance up to Shipment Date”. The reason for this is very simple – if there’s a dispute, then Alibaba will designate an inspection company to come and inspect the stock and write a report, which is what Alibaba will then use to make their decision.
You, as the buyer, as responsible for paying for this inspection initially (it is refunded to you if the claim is later found in your favour) and as I’m sure you can imagine, the cost of doing this in the UK is many times more expensive than doing it in China.
Plus it’s just so much easier to deal with any problems when the stock is still with your supplier – particularly if you’ve agreed 50/50 payment terms where half the money is paid upfront and half is paid prior to shipment. That way you have more leverage and you can work on fixing any issues directly with your supplier, rather than having to go through Alibaba.
So that’s why I always recommend going for pre-shipment coverage and arranging a pre-shipment inspection in China before you’ve paid for your products and before they’re shipped to you.
I’ve covered pre-shipment inspections in great detail previously, so if you need any help with that, please take a look at these posts:
What payment methods are available for a Trade Assurance order?
You have three different options for payment:
This is the payment methods recommended by Alibaba. You create an account online and transfer money directly to the company’s designated bank account. It has a fixed transaction fee of $15. (currently only available to people in the US).
2) Credit Card
This is the payment method I suggest if you want complete protection. It does have a transaction fee of 2.8% (so it’s more expensive than e-Checking for orders above $540) but at the same time it means that you always have the option of starting a chargeback with your bank/card company if everything else fails.
3) Telegraphic Transfer
Lastly there’s the option of simply transferring the money directly from your bank account to the company’s designated Citibank account.
So we’ve now covered pretty much everything you need to know about Alibaba Trade Assurance apart from something that you will hopefully never need – how to make a claim!
As I’ve mentioned a few times, even if you have Trade Assurance, you should always try and resolve any issues directly with your supplier. Most of the time if will be a genuine mistake and they’ll be more than happy to alter/fix/replace it for you.
If however you’re very unlucky and that isn’t the case, then you have no choice but to get Alibaba involved.
The process for opening a dispute is actually very simple:
Login to My Alibaba > Go to Order Management > Click on All Orders and from there you can select to Open a dispute.
After you submit a dispute, your supplier has 3 days to respond. If the supplier doesn’t respond within 3 days, you can escalate the dispute manually. If you or the supplier don’t respond within 7 days, then it will be automatically escalated.
You then have to pay for one of Alibaba’s three designated inspection companies to perform an inspection of your order. These three companies are:
Bureau Veritas, TUV Rheinland, and SGS.
These companies will carry out an inspection based on the details in your contract (hence why that is so important!).
They’ll follow international industry standards in terms of the number of samples and the maximum allowed no. of defects:
AQL 4.0 refers to Minor Defects – i.e. a defect that does not reduce the usability of the product, can be noticed only after careful examination, and may reduce the saleability. It is a workmanship defect beyond the defined quality standard.
AQL 2.5 refers to Major Defects – i.e. a defect that is likely to result in failure, reduce the usability and saleability and can easily be detected by the customer.
Then there is also AQL 0 – Critical Defects – i.e. a defect likely to result in a hazardous or unsafe condition for an individual using the product or fails to meet mandatory regulations. There are no AQL 0 defects allowed at any lot size.
After they’ve completed their report, it will be sent to both companies and Alibaba will then use it to make a decision on the dispute.
If your claims were found to be correct, you’ll be refunded your order amount as well as the amount you paid for the inspection.
And there you have it! An eBay/Amazon like dispute service, but for Alibaba.com.
And before anyone points out that there aren’t so many requirements for making a dispute on eBay or Amazon… that’s just common sense! Alibaba is a site for bulk, business orders so it would honestly be crazy to expect the same level of buyer protection as you get on marketplaces like eBay and Amazon.
In my opinion Alibaba Trade Assurance is still an amazing service and a great extra layer of protection. Even if you never have to actually make a claim, the whole idea of creating a contract that details all of the order expectations between you and your supplier will result in higher product quality and significantly less issues.
That’s all for today!
I’ll see you on Friday for this week’s Reader’s Question post.
All the best,