A factory quotation is not a distributor business model. Before committing to a first order, both sides need a shared record of the product, price basis, delivery point, payment schedule, channel rules, warranty obligations and conditions for future territory rights. If one item remains undefined, the importer should assign an assumption, cost and owner rather than treating it as free.
This checklist is designed for commercial review after a product has passed an initial demand screen. It supports negotiation, but it does not replace a contract reviewed for the destination market.
1. Freeze the quotation scope
Request a version-controlled quotation that identifies:
- Legal seller, invoicing entity, bank beneficiary and manufacturing entity.
- Exact model, specification, accessories, packaging and included documentation.
- Unit price, currency, quotation validity and volume breakpoints.
- Minimum order quantity by model, colour and packaging version.
- Tooling, samples, labels, localization and certification charges.
- Production lead time, capacity assumptions and seasonal constraints.
- Named Incoterms rule, named place or port, and rule year.
“FOB China” is incomplete because it does not identify the port, shipment arrangement or version of the rule. The ICC Incoterms 2020 rules allocate specified costs, risks and obligations; they do not set payment, title transfer, product conformity or warranty terms. Those subjects need separate clauses.
When a supplier proposes DDP, apply the separate DDP quote audit to identify the importer or declarant, customs record, included and conditional charges, and the final-delivery handoff before payment.
2. Build landed cost per sellable unit
Use a model that can be changed when freight, duty or exchange rates move. At minimum, include:
- Product and packaging cost.
- Origin transport, export handling and inspection.
- International freight and cargo insurance.
- Duty, customs fees, broker charges and non-recoverable taxes.
- Testing, registration, labels, manuals and local packaging work.
- Destination handling, inland delivery, warehousing and fulfilment.
- Financing cost from deposit date to cash collection.
- Expected damage, returns, warranty labour, replacements and spare parts.
- Marketing contribution, marketplace fees, retailer rebates and sales commissions.
Divide total expected cost by sellable units, not shipped units. If 2% is reserved for damage, demonstration, replacement and early failure, the denominator must reflect that loss. Run base, downside and stress cases for freight, exchange rate, sell-through and return rate.
3. Test the channel margin waterfall
Work backwards from the realistic net retail price after sales tax and expected promotions. Deduct retailer or marketplace margin, local distribution cost, marketing, service reserve and distributor target margin. The remainder is the maximum sustainable landed cost.
Ask four questions:
- Can the product survive routine promotional discounts?
- Is there enough margin for every channel layer actually required?
- Who funds launch discounts, demonstrations, listings and returned stock?
- What happens if the brand sells directly or appoints another channel at a lower price?
A recommended retail price is useful positioning guidance, not proof that customers will pay it or that competition law permits a particular pricing practice. Obtain local advice on resale-pricing and channel restrictions.
4. Negotiate payment against milestones
Record deposit, balance, inspection and document-release milestones. Define the event that triggers each payment: purchase-order acceptance, sample approval, production completion, passed inspection, shipment or receipt of specified documents.
Use the approved sample and bulk-production release workflow to define the evidence required before the balance becomes payable.
- Confirm currency, bank charges and exchange-rate exposure.
- Verify that bank beneficiary changes require an authenticated approval process.
- Specify remedies for late delivery, failed inspection or short shipment.
- Agree whether deposits are refundable or credited when the supplier cannot meet an approved specification.
- Do not treat a future credit term as certain unless it is documented.
5. Define order flexibility and delivery performance
MOQ should be reviewed alongside product mix, cartons, replacement stock and forecast accuracy. A manageable total order can still create dead stock if each colour or model has a high sub-MOQ. Use the controlled first-order sizing method to set the importer’s binding ceiling before accepting the supplier’s headline minimum.
Agree the order cut-off, forecast process, approved changes, production completion window, partial shipment rules and evidence required for delay notices. Define on-time delivery using a measurable date and location. Clarify who pays for expedited freight, storage or re-labelling when a preventable supplier error causes delay.
6. Separate territory from exclusivity
A territory clause should define countries, customer types, named accounts, online channels, cross-border sales and existing partners. Exclusivity should then state what is exclusive, for how long, and under which performance conditions.
- Initial trial period and review date.
- Purchase, sell-through or active-account targets.
- Marketing and service obligations for both parties.
- Data and reporting requirements.
- Cure period when a target is missed.
- Rules for direct sales, tenders, global accounts and marketplaces.
- Inventory, customer and warranty treatment after termination.
Do not exchange a large opening order for vague exclusivity. A controlled pilot with transparent performance milestones protects both sides and creates evidence for a longer appointment.
7. Allocate warranty, returns and spare-parts cost
Warranty language should answer operational questions, not only state a duration:
- When does coverage begin and which end-user proof is required?
- Which failures are covered, excluded or treated as misuse?
- Who diagnoses, authorizes, repairs, replaces and communicates with the customer?
- Who pays labour, parts, two-way freight, duties and disposal?
- What replacement stock and spare parts are included with each order?
- How quickly must technical questions and claims be answered?
- What happens to open claims if the agreement ends?
Create a warranty reserve in the margin model even when the supplier promises free replacement parts. Local labour, logistics, downtime and customer communication still have a cost.
For machinery and other service-dependent equipment, use the machinery warranty, spare-parts and local-repair verification workflow to test the support route against an exact machine and a harmless sample incident before the commercial terms are accepted.
8. Attach schedules to the agreement
Keep changing commercial details outside the main legal text where appropriate. Useful schedules include the approved product and price list, specifications, territory and channels, order process, service-level matrix, warranty workflow, spare-parts list, marketing commitments, performance targets and compliance-document register.
Also address intellectual property use, confidentiality, data protection, product changes, audit and inspection rights, recalls, insurance, limitation of liability, dispute resolution and termination with qualified counsel.
Final pre-order checklist
- The legal seller, payment beneficiary and brand authority are verified.
- Every ordered SKU has an approved specification and sample reference.
- The Incoterms rule and named place are complete.
- Landed-cost and margin models include downside cases.
- Payment milestones are linked to evidence and acceptance events.
- Territory, channels, direct sales and exclusivity conditions are explicit.
- Warranty labour, freight, parts and response times have owners.
- Compliance documents and remaining approvals are listed by model.
- The first order is sized as a controlled commercial test.
- Unresolved assumptions have a named owner and deadline.
Sources and tools: ICC Incoterms 2020 for delivery-rule responsibilities and EU Access2Markets for product-specific EU tariffs, procedures and requirements. Confirm current customs, tax, competition and contract treatment with qualified destination-market advisers.
