12 · Vetting, Negotiating & Terms

Weeks 11–12 · 25 hours

Objective

Choose a manufacturer you can trust with your money, and agree terms that protect you — without the leverage of volume.

Why it matters commercially

You are about to send a stranger, probably on another continent, a meaningful fraction of your total capital. The cost of getting this wrong is not a bad shoe; it is losing everything and having no product. Vetting is the highest return-on-time activity in the entire curriculum.

Core concepts

The vetting checklist

Score every candidate. Do not skip lines because someone seems nice.

Identity and legitimacy

• Legal company name and business licence provided (China: a Business Licence with a Unified Social Credit Code; verify the name matches the bank account exactly)
• Physical address that resolves to an industrial site on satellite view
• A live video call walking the production floor — not a pre-recorded video, not photos. Ask them to point the camera where you say
• Company website / trade show presence / third-party listing consistent with their claims
• Bank account is in the company’s name. Never pay a personal account. Ever. This is the single clearest scam indicator

Capability

• They make footwear of your construction type — ask for photos of shoes they’ve made, and ideally sample pairs
• They can source or already use your shortlisted sole mold
• They have or can get your matched last
• Number of lines and workers, monthly capacity
• In-house capabilities: cutting, stitching, lasting, and which specialty processes (screen print, embroidery, no-sew, vulcanizing oven)
• In-house QC and any in-house testing equipment
• They have made product for a brand you can verify

Commercial

• MOQ stated in writing, per style and per colour
• Price quoted against a specific tech pack version, with FOB clearly defined
• Development/sample charge stated, and whether it’s credited against a bulk order
• Lead times in writing
• Payment terms
• What happens to unused material and molds

Ethics and compliance

• Any third-party social audit (BSCI, SMETA, SLCP, WRAP, ISO 9001/14001) — ask for the report, not just the logo
• Willingness to sign your code of conduct
• Adhesive system: water-based or solvent
• Willingness to provide material test certificates

Relationship

• A named merchandiser/contact who replies in under 48 hours
• They ask you technical questions back. This is the best single signal. A factory that asks about your lasting method, your bite line, your lace length by size, is engaged. One that says “yes no problem” to everything is not reading your pack

Reading quotes

You will get a spread. Interpreting it:

• One quote 30%+ below the others — assume a misunderstanding or a substitution. Go back line by line. Sometimes it’s a genuine capability advantage; usually it’s cheaper material, a different sole, or a trading company that will “clarify” the price after your deposit.
• A quote with no breakdown — ask for a cost sheet. A factory that won’t break down its costing is either hiding margin (fine, but you can’t negotiate) or doesn’t have one (worse).
• A quote that ignores your spec — they didn’t read the pack. This predicts everything about the relationship.

Payment terms and how to be safe

The industry standard for a new small customer is 30% deposit on order confirmation, 70% balance against copy of Bill of Lading (i.e. after goods are made and shipped, before you can collect them).

Your protections, in order of practicality:

1. Pay the balance only after a successful third-party inspection. Write this into the PO. This is your single strongest lever and costs $200–400 for the inspection (Module 15).
2. Alibaba Trade Assurance if you’re transacting there — genuine escrow-like protection, worth using for a first order even at slightly worse pricing.
3. A small first order. The cheapest insurance is a limited downside.
4. T/T (wire) to a verified company account only. Confirm bank details by video call, not email — email interception and invoice fraud is a real and common attack on small importers. If bank details “change” mid-transaction, treat it as fraud until proven otherwise by voice/video.
5. Never accept a request to pay a personal account, a third-country account with an unrelated name, or via cryptocurrency.

What to actually negotiate

Price is the least productive thing to push on at 200 pairs. More valuable:

Ask	Why it’s winnable
Development charge credited against bulk order	Standard practice; just ask
Lower first-order MOQ as a trial	Factories want new customers; frame it as the first of several orders
Payment against inspection	Reasonable and professional
Free or cheap extra sample rounds	Cheaper for them than a rejected bulk
Material sourcing help	They buy better than you do
A named contact and a weekly update	Costs them nothing, transforms your experience
Their technical suggestions to reduce cost	They’ll often find 5–15%

Documents to have in place

• NDA — modest protection in practice, but signals seriousness and costs nothing.
• Manufacturing agreement / terms — covers ownership of tooling, patterns and lasts; confidentiality; no manufacture of your design for others; quality standards; remedies for defects; ownership of your IP. Even a simple two-page version is far better than nothing.
• Purchase Order — the operative document. Must reference the tech pack version, quantities by size, price, Incoterm, delivery date, payment terms, inspection condition, packaging spec.
• Code of conduct — your labour/environmental expectations. Adapt a published one; don’t write from scratch.

Templates and structure in Templates. For a manufacturing agreement involving real money, have a lawyer review it — Module 17 covers when legal spend is worth it.

Do this

1 · Score every candidate (6h). Build the checklist as a spreadsheet, one column per factory. Fill it in from their replies. Chase gaps.

2 · Video calls (6h). Do at least three live floor-walk calls. Prepare five technical questions from your tech pack’s section 17. Note who asks you questions back.

3 · Request their work (3h). Ask your top three to send a sample pair of something they’ve made. Pay shipping if needed. Physical evidence of their finishing quality is worth more than any certificate.

4 · Reference check (3h). Ask for one brand reference each and actually contact them.

5 · Terms package (5h). Prepare your NDA, code of conduct, PO template and draft manufacturing terms.

6 · Decide (2h). Write a selection memo: who, why, what the risks are, and what your fallback is if they fail. Have a named fallback.

Deliverable. A completed vetting scorecard for all candidates; notes from three floor-walk calls; at least one physical sample of a factory’s existing work; a signed NDA with your chosen factory; a selection memo with a named fallback.

Self-check

• What is the single clearest scam indicator?
• Why is a quote 30% below the others a warning rather than a win?
• What are standard payment terms, and what’s your strongest protection?
• Name five things more worth negotiating than unit price at 200 pairs.
• What’s the best signal that a factory is actually engaged with your project?

Traps

Being charmed. Warmth and responsiveness are necessary but not sufficient. Run the checklist anyway.

Skipping the video floor-walk because it feels awkward to ask. It is completely normal and any legitimate factory will do it.

Email-only bank details. Business email compromise is one of the most common ways small importers lose their entire budget. Confirm by video.

No fallback. Factories go quiet, get busy with a bigger customer, or fail. Keep your number two warm.