It appears as though Alibaba is on its way to becoming the largest B2B marketplace in the world, and therefore, buyer protection is one of the topmost concerns for Alibaba. This is where the Alibaba Trade Assurance comes into the picture. In this guide, we will take you step by step through the whole process and answer all possible questions that you may have.
The first step in grasping the Alibaba Trade Assurance is by understanding the most common terms employed in the whole process:
What we will discuss in this guide:
- What exactly is the Alibaba Trade Assurance mechanism?
- How are buyers protected by the Alibaba Trade Assurance?
- How are payments made through Alibaba Trade Assurance?
- Is Alibaba Trade Assurance truly reliable?
- What are the fees involved in making use of the Alibaba Trade Assurance?
- Are all suppliers covered under the Alibaba Trade Assurance?
These are some of the pointers that will be covered in this discussion, along with other vital information that will prove to be helpful to you in transacting through Alibaba.
What exactly is the Alibaba Trade Assurance Mechanism?
The Alibaba Trade Assurance is a mechanism introduced by Alibaba to safeguard the buyers who transact with suppliers listed on Alibaba. Since there remains a layer of skepticism when transacting with suppliers in China, especially regarding the quality of the products involved, Alibaba has made it easier for buyers to order without having to worry about losing their investment to substandard quality products or excessively delayed shipments. Through the Alibaba Trade Assurance, Alibaba itself acts as a third-party middleman between buyers and sellers that meet through its platform.
To put it simply, buyers no longer need to pay the initial deposits or payments to the suppliers directly where they fear losing their money; instead, they deposit the funds to a designated account stipulated by Alibaba that is with the Singapore City Bank.
The funds are only passed on to the buyer only once the goods have passed an initial quality inspection and have been shipped (before or on the stipulated deadline). This way, the buyer is assured of protection against any fraud.
However, it is important to make note of the following Clauses:
- The funds are refunded to the buyer if there is a delay in shipment beyond the stipulated deadline.
- The funds are refunded to the buyer if the initial inspection finds that the goods ready for dispatch are of substandard quality and do not meet the requirements as expressed by the buyer.
So to say, the Alibaba Trade Assurance is somewhat similar to the mechanisms of a letter of credit, such that it provides a similar function- however, in certain cases, it can be very different, so it is suggested not to think of it as a substitute to a letter of credit.
How are Buyers Protected by the Alibaba Trade Assurance?
Simply put, there is no mechanism available by which a buyer can revert his funds to his account if the seller compromises on the quality of products or fails to ship the products in the decided timeline. However, when a buyer uses the Alibaba Trade Assurance, it attains the ability to have funds transferred back to himself in case of any of the above-mentioned irregularities occur by the seller. Alibaba thereby provides peace of mind to the buyers, knowing that their funds are being safeguarded by an established third-party that is in place to protect its interests.
How are Payments made through Alibaba Trade Assurance?
The first question that may come to mind for any buyer is, “how do I pay through the Alibaba Trade Assurance?”.
To answer this, the process of Alibaba Trade Assurance has been outlined below:
Step 1: The buyer places an order through the Trade Assurance banner.
Step 2: The buyer uses the Alibaba Trade Center (situated under ‘My Alibaba’) to interact with the supplier and come about a mutually agreed transaction.
Step 3: The buyer makes a Purchase Contract through Alibaba.com
Step 4: The contract is confirmed
Step 5: The buyer makes the payment through a Telegraphic Transfer or a Credit Card. This should only be made to the stipulated bank account in Singapore.
Note: It is important to keep in mind that this contract relates to the buying and selling of products only. The Alibaba Trade Assurance does not have coverage over other elements of a transaction such as warranties, replacements, or any other contracts made between the two parties (buyers and sellers).
The next question that may pop into a buyer’s mind is regarding the mechanism through which the Alibaba Trade Assurance safeguards buyers. The answer is simple:
- It safeguards buyers in the case that the products do not comply with the standards and specifications agreed to in the contract.
- It safeguards buyers in a scenario where the shipment of the products is delayed beyond the date agreed upon in the contract.
However, to avail of this protection, it is imperative that the parties involved in the transaction draft a clear contract that thoroughly outlines the product specifications and quality requirements.
As may be obvious, Alibaba cannot intervene to allow a refund to the buyer without solid grounds being present to do so. Simply because the buyer does not wish to be a part of the transaction any longer, or because he does not ‘like’ the products aren’t reasons sufficient enough to revert funds. In fact, in more than a few cases, it is the buyer who is at fault rather than the supplier. As much as buyer protection is important and must not be compromised under any circumstances, it is equally vital to safeguard the interests of the suppliers. Especially since Alibaba’s major source of revenue is through the membership fees paid by all the companies that are listed in the ‘Gold Supplier’ list.
It should be remembered that a lot of times any quality concern that arises in the products is a result of buyers being disorganized and incomplete in their product descriptions.
When a buyer enters the Trade Assurance agreement, he will be prompted to specify the decided shipping date as well as specify that the order must meet all the quality requirements agreed to in the purchase contract.
Specifying these details will prompt the option of order confirmation. Once that is done, it is the supplier’s turn to upload a copy of the mutually agreed upon contract which lays out all the quality standards and specifications for that particular order. This is perhaps the most important step of the entire process because if the product requirements are not stated clearly and unambiguously then it might create problems for you later on if you wish to claim a refund.
Therefore, Alibaba is unable to offer its buyers a refund simply because they do not like the quality if there is no standard against which to measure this quality.
Pre-shipment quality inspections:
In cases where the quality requirements are ambiguous and not specified clearly, Alibaba has a certain approach that it adopts: appointing a third-party inspection company to thoroughly inspect the product and report whether it thinks that the products meet the minimum industry standards to decide if the quality is up to mark or not. This is what happens when the quality standards specified in the contract are not quantifiable.
Nonetheless, as a buyer, you can book a quality inspection from one of Alibaba’s trusted quality control partners.
To avoid such a situation, your contract needs to be crystal clear and thorough, with no room for ambiguities.
How to draft a proper product specification:
The term ‘good quality’ is full of ambiguities; what may be good quality for you may not constitute as such for another person, and vice versa. To avoid falling into such a trap of ambiguous terms, it is strongly recommended that you draft a clear product specification with the technical language employed in it.
For example, you wish to import notebooks. A few of the product specifications might look like this:
- Style: Hardcover
- Cover Material: Leather
- Inner Pages: 80 Sheets
- Material: Paper/PU Leather
- Size: A5
- Color: Pantone #d74894
- Inner Page: Ruled/dot grid/blank
- Inner Sheet: Multiple of 8
- Package: Shrinkwrap
- Certificate: BSCI and FSC
- Single Package Size: 22x12x1.5cm
This way, all the specifications regarding the notebook are clearly defined, leaving little room for ambiguity regarding what would constitute a breach of the contract. If the seller fails to meet any of the requirements stated in the description above, then the buyer has the option to demand a refund. It is suggested that you leave no aspect of the product unrecorded in the product description, no matter how seemingly insignificant it may appear. Leaving behind loopholes in the product description may cause you a lot of trouble in the future- it makes no sense to act against the supplier or a request that you did not specify in the product specification, to begin with.
If such a scenario does occur, Alibaba will request a third-party quality control inspector to inspect the shipment and give a verdict regarding its quality based on the ‘general quality standards’. However, these ‘general quality standards’ may not be meeting your specific requirements or compliant with any specific regulation that you may have regarding labeling requirements or substance usage, etc.
An important checklist:
So, as you can see, the whole process isn’t as simple as just going online and buying a shipment. The following checklist will help you make a smart transaction- keep these questions in mind before placing a final order:
- How will the product specifications for my order be drafted?
- Is my supplier in a position to comply with my product specifications?
- How can I confirm that the supplier can comply with my product specifications?
- According to my target market and consumers, which product standards and regulations would apply to my products?
- How can I confirm if the supplier would be able to meet all my requirements regarding applicable regulations and compliances?
In case of dispute resolution and refunds:
As previously stated, in any such scenario where a dispute arises concerning the quality standards of the products, Alibaba appoints a quality inspection company to see if the products meet the specified quality specifications.
If the company finds that the products do not meet the specified description, then the buyer is notified and then the buyer may file for a dispute on the website. Starting from the date on which the dispute is logged, the supplier is given 15 days to resolve the dispute, or else Alibaba will step in to intervene.
If Alibaba finds that the quality concern is not catered to in the 15 days then the buyer will be provided with a refund.
Instances where Alibaba may reject a refund:
- The buyer did not provide a clear product specification
- The buyer did not book a quality inspection when placing the order
- The buyer came across the quality concerns only after the shipment was received into his country.
Payment Methods available for Trade Assurance:
- Telegraphic transfer to Singapore City Bank
- Credit card
- Western Union
- Alibaba Pay Later
- Alibaba Online Payment
- Boleto
Is Alibaba Trade Assurance truly reliable?
As explained earlier, without a middleman involved in international transactions, transactions amounting to thousands of dollars may be risky. Therefore, having the assurance that such a big platform is present to safeguard buyer interests is certainly a relief.
What are the fees involved in making use of the Alibaba Trade Assurance?
Trade Assurance Fees:
Although the Trade Assurance service is free to use, the following fees apply:
- Credit Card: 2.95% of the order value
- Telegraphic Transfer: US$30 – US$50
- Western Union: US$4.9 – US$45
- Alibaba Pay Later: Free (the US only)
Are all suppliers covered under the Alibaba Trade Assurance?
No, only Alibaba Gold Suppliers are covered under Trade Assurance.
The amount, covered by the Trade Assurance, is also limited, and often ranging between US$10,000 to US$30,000. That said, it is often enough to cover the initial deposit order, which is mostly set at 30% of the total, FOB, order value.
Summary:
To summarize this guide, the following pointers must be kept in mind when making use of the Alibaba Trade Assurance.
Although the Alibaba Trade Assurance service is a great service present to safeguard buyers, this can only be done in the presence of clearly defined product descriptions and specifications.
All buyers must present clear product speciation and read the contract fully to avoid any disputes that might arise later. It is important to keep in mind that Alibaba will need some solid grounds to award the buyer with a refund, it cannot do so simply because the buyer does not like the products.
It is also vital for the buyer to carry out a product inspection before shipment to claim the Alibaba Trade Assurance. It is not valid once you import the products into your country.
In conclusion, please note that this service only applies to the products and not about the warranty, etc. It is still up to the buyer to take care of these details. Additionally, buyers are strongly suggested to carry out thorough research before transacting with a supplier as it is the best way to avoid frauds and any hassles in the future.