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ThreeSixty Sourcing

Supplier Manual

www.threesixtysourcing.com

http://www.threesixtysourcing.com/

Table Of Contents INTRODUCTION 1. SOURCING PROCESS ................................................................ ..4

1.1 Supplier Sourcing & Selection………………………………… ……….4 1.2 Supplier Souring Guideline………… ……… ………………… ……….4

2 QUOTATION ............................................................................. ..5

2.1 Request for Quotation ................................................. 5 2.2 Non-disclosure Agreement ........................................... 6

2.3 Intellectual Property Rights.......................................... 6 2.4 Quotation .................................................................. 7

3 PURCHASE ORDERS .................................................................... 8 3.1 Purchase Order Overview ............................................ 8

3.2 PO Terms and Conditions ............................................ 8 3.3 PO Release ................................................................ 9

4 PRODUCT DEVELOPMENT ........................................................... 10 4.1 Overview ................................................................. 10

4.2 Timeline .................................................................. 10 4.3 Product Approval ...................................................... 10

4.3.1 Product Specifications ............................................... 10 4.3.2 Tooling.................................................................... 11

4.3.3 Samples .................................................................. 11

4.3.4 Product Testing ........................................................ 11 4.4 Pilot Run ................................................................. 12

5 QUALITY .................................................................................. 13 5.1 Quality Assurance..................................................... 13

5.1.1 Overview ................................................................. 13 5.1.2 Supplier Assessment ................................................. 13

5.1.2.1 Supplier Assessment Overview ................................... 13 5.1.2.2 Codes of Conduct ..................................................... 14

5.1.2.3 Cost of Assessment .................................................. 14 5.1.2.4 Pre-assessment Documents ....................................... 14

5.1.2.5 Assessment Process .................................................. 15 5.1.2.6 Assessment Result ................................................... 16

5.1.2.7 Ongoing Re-assessment ............................................ 16 5.1.3 Signed Sample Policy ................................................ 16

5.1.4 Inspection ............................................................... 17

5.1.5 Classification of Defects ............................................ 18 5.1.6 Acceptable Quality Level (“AQL”) and Sampling ............ 19

5.1.7 Selected Testing Standards ....................................... 20 5.1.8 Use of Subcontractors ............................................... 20

5.1.9 Quality Feedback ...................................................... 21 5.2 QC INSPECTION ....................................................... 21

5.2.1 Inspection Criteria .................................................... 21 5.2.2 Inspection Arrangement ............................................ 21

5.2.2.1 In-line inspection ..................................................... 21 5.2.2.2 Initial Inspection ...................................................... 21

5.2.2.3 During-Production Inspection ..................................... 22

5.2.2.4 Final Random Inspection ........................................... 22 5.2.3 Inspection dispositions .............................................. 23

5.2.4 Local Delivery Inspection ........................................... 23 5.2.5 Third Party Inspections ............................................. 23

5.2.6 Customer inspection for Direct Import (“DI”) orders ..... 24 5.2.7 Non-Compliance Charges .......................................... 24

6 LOGISTICS ............................................................................... 25 6.1 Overview ................................................................. 25

6.2 Booking .................................................................. 25 6.2.1 Booking Arrangement ............................................... 25

6.2.1 Advance Shipping Notice (“ASN”) ............................... 26 6.2.2 Normal and Direct Import Order document flow ........... 26

6.3 Documentation ........................................................ 26 6.3.1 Introduction ............................................................ 26

6.3.2 Timing of submission of documents ............................ 27

6.3.3 Required documentation ........................................... 27 6.3.3.1 Document submission form ....................................... 27

6.3.3.2 Commercial invoice .................................................. 27 6.3.3.3 Packing List ............................................................. 28

6.3.3.4 Bill of lading ............................................................ 28 6.3.3.5 Any other relevant documents ................................... 28

7 PAYMENT ................................................................................. 29 7.1 Payment mechanics .................................................. 29

7.2 Beneficiary of Payment ............................................. 29 7.3 Payment Terms and Letter of Credit ........................... 29

7.4 New Suppliers .......................................................... 30 7.5 Documentary Requirements ....................................... 30

7.6 Deductions / Claims .................................................. 30

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Threesixty Sourcing 16-10-2015

A. About this Supplier Manual

ThreeSixty Sourcing (“ThreeSixty”) provides its North American and European

customers an unparalleled sourcing solution for consumer and commercial hard

goods manufactured in Asia.

Our supplier network is one of our greatest assets. We are continually seeking

to add capable manufacturers to our network of suppliers, whether for existing

or newly-developing product categories. We expect our suppliers to share our

vision and work together in partnership to grow our business together.

This Supplier Manual provides definitive standards and guidelines for helping

suppliers develop and supply products to our customers in line with the

requirements of ThreeSixty. It covers all aspects of our relationship including

quotation, purchase orders, product development, quality, logistics, payments

and ethical and environmental standards. The instructions in this Manual

should be consistently complied with in order to avoid unnecessary costs and

delays.

Confidentiality

This manual and its contents remain the property of ThreeSixty and must be

regarded as confidential. The contents must not be disclosed to any other

party either in part or in total without the prior written consent from

ThreeSixty. Suppliers must take adequate steps to ensure the confidentiality of

this manual is maintained and only disclose the contents of it to those persons

in its employ or its directors on a need-to-know basis. Suppliers are required

to return the manual to ThreeSixty upon request.

B. About ThreeSixty

ThreeSixty provides the world’s best product sourcing solution for consumer

and commercial hard goods manufactured in Asia with a full, 360° circle of

service to our customers:

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a) Services:

ThreeSixty has company offices in Hong Kong, Guangzhou, Shanghai,

Ningbo, Shenzhen and Vietnam, and a network of independent suppliers

throughout China and Asia.

As a major global sourcing operation, we have over 20 years of experience

in hard goods product sourcing for customers in North America and Europe.

ThreeSixty serves as the “Asia office” for our customers, who typically rely

exclusively on ThreeSixty for 100% of their product sourcing needs.

Dedicated ThreeSixty professionals are organized onto account teams

servicing the needs of each of these customers to ensure clear

communication throughout the supply chain.

b) ThreeSixty’s Product Categories

ThreeSixty’s customers boast well-recognized brands and leading market

shares in their respective business segments. This leads to significant

ThreeSixty volume across most of the categories in which we make

purchases. Some of the fields we currently supply include:

Aquarium products Kitchenware

Art supplies Knives

Audio equipment Luggage

Automotive accessories Office stationary

Bathroom accessories Outdoor signage

Bathroom scales Pet supplies

Camping equipment Picture frames

Children’s books Promotional items

Cookware Plush and animated plush

Corrugated displays School and office equipment

Digital audio Seasonal decoration

Digital photography Sporting goods

Display racks Tools

Flashlights Toys

Giftware Watches

Greeting cards Water purification & treatment

Home appliances

Household cleaning

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C. ThreeSixty Core Process

Virtually all products sourced by ThreeSixty will follow a consistent process,

from initial quoting of a product through the final payment. To facilitate

suppliers’ understanding of our process, we have divided it into six steps, as

shown in the graphic below:

Chapter 1

Account Team &Sourcing Team

Quotation

Chapter 2

Account Team

Purchase Orders

Chapter 3

Account Team &QA Team

ProductDevelopment

Chapter 4

Quality ControlTeam

Quality

Chapter 5

Shipping Team

Logistics

Chapter 6

Finance Team

Payment

As the graphic suggests, suppliers will interface with different parts of

ThreeSixty during the process. Much of suppliers’ interaction will be with our

Account Team, but quality assurance and control, for example, are overseen by

independent teams within our company. The chart below explains which

functions fall under our Account Teams:

Sourcing Product Development

Customer

Supplier

Quality SupportOperations

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1 Sourcing Process

1.1 Supplier Sourcing & Selection

a. Shop-Around event used regularly & for key projects to ensure absolute

competitive costs, typically conducted in multiple locations: Guangzhou,

Shanghai and Ningbo;

b. ThreeSixty also has extensive records detailing thousands of supplier

quoting and PO interactions, suppliers key statistics including past

pricing, delivery and quality;

c. Suppliers shall comply with Section 1502 of the Dodd-Frank Wall Street

Reform & Consumer Protection Act (the “Act”), which prohibits sourcing

tantalum, tin, gold & tungsten (“Conflict Minerals”) from the Democratic

Republic of Congo or adjoining countries. Every supplier is required to

disclose to ThreeSixty if they are using Conflict Minerals and provide

country of origin documentation for all materials upon request. All

suppliers will need to sign a Conflict Minerals Certificate of Compliance

as a condition of doing business.

d. Every supplier must provide a complete Bill of Materials (BOM) for every

product supplied to ThreeSixty. ThreeSixty will provide a BOM template

for completion by supplier.

1.2 Sourcing Process Guideline :

Fair and respectful: Suppliers are partners and are treated fairly and with

respect at any time.

Transparent: The levers, approaches and tactics used during negotiation,

the commitments made, the compromises accepted need to

be clearly communicated.

Documented: The terms agreed during negotiations are confirmed in

written.

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2 QUOTATION

This section covers ThreeSixty’s Quotation process and requirements.

2.1 Request for Quotation

Suppliers will receive our Request for Quotation (“RFQ”) from ThreeSixty

Sourcing/Account Team either by e-mail or fax depending on the supplier’s

preference. For e-mail, the RFQ will be in Adobe Acrobat (.pdf) file format.

In some cases, product samples will also be delivered to suppliers for

reference. All reference samples must be returned to ThreeSixty upon

request after quoting process. ThreeSixty will determine whether to allow

suppliers to disassemble the sample on a case-by-case basis.

In each RFQ, key information of the item to be quoted will be listed:

a. For each quotation

RFQ number and version number

ThreeSixty’s contact person and contact details

Remarks for version changes, if any

Need by date for Quotation

Validity for quotation

Delivery term (FOB or Local Delivery)

Payment terms

Additional information to be attached, if any (e.g. artwork, technical

specification, etc)

b. For each item

Item description

Packing requirements

Quantities of master carton, inner box or inner poly-bag

Specific test required, if any

Number of samples requested, if any

Needed by date of those samples, if any

Target ship date, if any

Unit of measurement (“UOM”)

Target price, if any

Required quantities

Product photo or diagram

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2.2 Non-disclosure Agreement

In obtaining quotes from Suppliers, ThreeSixty from time to time may

provide confidential information to Suppliers. As a condition to having

access to the confidential information, Suppliers are required to enter a Non-

Disclosure Agreement with ThreeSixty.

Under the Agreement, Suppliers agree that they will not in whole or in part,

directly or indirectly, in any manner whatsoever, without the prior consent of

ThreeSixty first had and obtained:

disclose, sell, part with or otherwise permit the use of the confidential

information to or by any third parties;

exhibit, advertise, show or in any other manner whatsoever permit,

authorize or cause the confidential information to be exhibited,

advertised or shown in any trade show, magazines, newspapers and

newsletters, the internet or websites, catalogues, showrooms or

warehouses or otherwise;

use, copy, with or without variation, or otherwise convert the confidential

information for the Suppliers’ or their representatives’ own purposes or

benefit.

2.3 Intellectual Property Rights

Intellectual Property Rights are important to ThreeSixty and our customers.

Intellectual Property Rights include: patents, patentable rights, copyright,

registered and unregistered design rights, trade marks, trade names, rights

in know-how and confidential information and all other intellectual and

industrial property and similar rights existing under the laws of any country

and all pending applications for and right to apply for or register the same.

In the T&C, ThreeSixty’s suppliers acknowledge that ThreeSixty and/or its

customers are the lawful owners of certain trade/service names or marks

(the “Marks”) to be provided by ThreeSixty and/or its customers in respect

of the products. Suppliers are authorized to use the Marks on the products

and their packaging only as specified by ThreeSixty and/or its customers for

purposes of the manufacture of the products in accordance with the PO only.

Suppliers shall have no right to assign, license, display, market, advertise or

use the Marks or any image thereof for any other purpose nor shall supplier

have any right or interest in the Marks.

Suppliers further acknowledge that ThreeSixty and/or its customers shall

retain all intellectual property rights relating to the products, including any

enhancements. Suppliers shall assign all such rights to ThreeSixty and/or its

customers on demand.

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2.4 Quotation

Suppliers are required to check all information of the RFQ in detail and

understand the requirements. Suppliers must submit the quotation to the

contact person stated in the RFQ either by e-mail or fax. The following

information must be provided:

RFQ number

Supplier details

Factory name and factory location

FOB price in USD for each requested quantity (if it is a quota item, please

submit quote with quota)

Delivery terms

- Port of loading; or

- Local Delivery

Minimum order quantity

Tooling charges in USD, if any

Tooling lead time, if any

Production lead time

Packing Reference

- Quantities of master carton, inner box or inner poly-bag

- Inner and outer dimensions and volume in cubic meters (CBM)

- Net weight and gross weight

Suppliers should clearly state on their quotation when quotation was

submitted under a different standard due to manufacturing process or

material supply from the market.

ThreeSixty Sourcing/Account Team will evaluate quotations and make

recommendations to our customers based on multiple factors including price,

expected quality and delivery, terms of purchase, supplier capabilities, and

past supplier performance and cooperation. Simultaneously, supplier

assessment may also be arranged by ThreeSixty (see Section 5.1.2).

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3 PURCHASE ORDERS

3.1 Purchase Order Overview

If a supplier quotation is accepted by our customer, that customer will

forward a Purchase Order to ThreeSixty. ThreeSixty’s Operations Team will

typically send an e-mail or fax to the selected supplier with order details.

Suppliers are required to check all information in detail and ensure they can

meet the requirements.

After this clarification process, the supplier will receive an official Purchase

Order (“PO”) from ThreeSixty.

3.2 PO Terms & Conditions

The PO and the PO General Terms and Conditions (“T&C”) form the

agreement between ThreeSixty and suppliers. Any PO’s placed with

suppliers by ThreeSixty are bound by all the terms and conditions contained

therein.

Each PO is subject to ThreeSixty receiving a copy of the PO and T&C signed

by the supplier within seven days from the PO date, failing which the PO

shall cease to have any force and effect (unless otherwise agreed by

ThreeSixty in writing).

The T&C is a detailed contract between the supplier and ThreeSixty that

governs the transaction represented by the PO. The T&C will prevail in the

event of any conflict between the T&C and this Manual. Suppliers are

advised to review the T&C detail.

In case of a revised PO, no additional T&C will be sent. The T&C previously

sent with the original PO (bearing the same PO number) will apply to the

revised PO and be binding on the supplier.

For those regular suppliers who prefer to sign the PO General Terms &

Conditions as a Master Manufacturing Agreement instead of having to sign

every time as and when a PO is placed, please refer the agreement. With

this executed agreement, all orders are bound by the terms contained in the

agreement. Thereafter, the supplier is required to sign the PO only.

Remarks:-

a. Suppliers shall comply with the Conflict Minerals Act, which prohibits

sourcing tantalum, tin, gold & tungsten from the Democratic Republic of

Congo or adjoining countries. Every supplier is required to disclose to

ThreeSixty if they are using Conflict Minerals and provide country of

origin documentation for all materials upon request. All suppliers will

need to sign a Conflict Minerals Certificate of Compliance as a condition

of doing business.

b. Every supplier must provide a complete BOM for every product supplied

to ThreeSixty. ThreeSixty will provide a BOM template for completion by

supplier.

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c. The purchase order will confirm a supplier’s obligation to meet all target

market regulatory compliance obligations relevant to the product

supplied. These obligations include but are not limited to , the

requirements of the Consumer Products Safety Improvement Act, the

Federal Hazardous Substances Act, California Proposition 65, and the

Conflict Minerals Act. Every supplier must provide a complete BOM for

every product supplied to ThreeSixty. ThreeSixty will provide a BOM

template for completion by supplier.

3.3 PO Release

PO Release is a document used to instruct suppliers when and how to ship

the orders. It also delivers the required information that needs to be shown

on the Bill of Lading and/or on the Forwarder Cargo Receipt as per our

customers’ instructions.

No shipments may be made without a valid PO Release.

For each PO, ThreeSixty’s Operations Team will e-mail or fax the PO Release

to the supplier upon receiving the customer’s shipment information.

Suppliers are required to check all information in detail and ensure they

understand and can meet the requirements. PO Release should be signed

back to ThreeSixty within seven days upon receipt. Below is the key

information which will be shown in the PO Release.

Ship Quantity

Consignee

Forwarder

Delivery Term

Port of Discharge

Shipping Deadline

Ship To

Notify Party

Transportation Mode

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4 PRODUCT DEVELOPMENT

4.1 Overview

ThreeSixty customers each have unique requirements and timelines for

product development. This section provides suppliers with general product

development guidelines but does not replace the need for effective

communication regarding specific requirements and timelines with our

individual Account Teams.

4.2 Timeline

The time required for product development can vary greatly depending on

product nature and our customers’ requirements. To avoid delays and

potential confusion, suppliers should submit samples and other relevant

documents as early as possible in the development process.

Suppliers must maintain a product development timeline showing critical

milestones leading to the first shipment date. The timeline should be

constantly reviewed and updated. Suppliers are responsible for immediately

notifying ThreeSixty of any changes that may affect the target shipment

date.

4.3 Product Approval

4.3.1 Product Specifications

Suppliers are required to review all relevant specifications and

drawings and/or any reference sample provided by ThreeSixty and its

customers prior to developing a product design. Particular

consideration should be given to:

the manufacturing capability (equipment, personnel, quality

systems) required to produce the product according to the

specifications and drawings including the dimension tolerances; and

any mandatory standards required of the product by the country of

import and customers (such as UL, FCC, FDA, ASTM, EMC, CE).

Suppliers should provide a technical specification as part of the

approval process for each product. In addition, suppliers must provide

ThreeSixty with a detailed Bill of Materials upon request.

Product specifications must be agreed with ThreeSixty before

production.

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4.3.2 Tooling

For products that require fabrication of tooling, suppliers should

provide ThreeSixty with a tooling plan, which should include:

Tool material,

Tool life,

Tool drawings,

Number of molds and number of cavities per mold,

Description of the product component for each cavity,

Run rate and cycle time, and

Fabrication time-line for first shot approval.

Where required, tooling drawings should be submitted to ThreeSixty

for approval prior to fabrication.

ThreeSixty will require first-shot samples. A first article report

detailing the actual dimensions measured according to the parts’

drawings may also be required upon request.

Generally any mold or tooling specifically made for manufacturing of

the products is sole property of ThreeSixty and/or its customers and is

to be used for purpose of manufacturing the products subject to the

relevant PO only. Suppliers shall label the mold or tooling with

ownership of ThreeSixty and/or its customers in designated ThreeSixty

format. Suppliers should contact ThreeSixty for specific instructions

and arrangements.

4.3.3 Samples

For new products, suppliers are required to provide ThreeSixty with a

prototype (i.e., mock-up sample) for design approval.

Suppliers are required to forward the final version samples or print

proofs for printed products to ThreeSixty for approval prior to

production.

Suppliers should proceed with production only after receipt of written

approval from ThreeSixty.

All development and approval samples should be provided free of

charge to ThreeSixty including courier cost.

4.3.4 Product Testing

Before a new product starts production, suppliers are responsible for

submitting samples to independent laboratories for any tests which

have been specified and to provide passing test reports to ThreeSixty.

For electronics and electrical products, suppliers are required t o have

the product tested for vibration according to ISTA requirement and

forward the report to ThreeSixty for review.

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Pre-production testing must be scheduled such that the product

shipment dates will not be delayed. Beyond pre-production testing,

the appropriate intervals for third-party product review shall be

established at the sole discretion of the customer in conjunction with

the applicable regulations and laws of the destination country.

As a prudent buyer, ThreeSixty only recognizes testing results from

internationally-recognized parties, e.g. ITS, SGS, BV, TUV Rheinland

and Reliance. ThreeSixty always reserves the right to pull products

directly from the production line and send units to third-party labs for

confirmation testing at the supplier’s cost. Under some circumstances,

the end customer may require testing be performed at a designated

laboratory. Please feel free to contact our account team for further

details.

4.4 Pilot Run

The purpose of a pilot run is to ensure that the factory’s manufacturing

system can produce products in accordance with applicable specifications

and requirements.

For products other than repeat items, it is a best practice that suppliers plan

a Pilot Run before mass production. During the pilot run, suppliers should

use the actual production line, equipment and personnel intended to be used

for mass production.

Suppliers should provide ThreeSixty five working days notice to ensure

ThreeSixty personnel will be available to attend the pilot run.

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5 QUALITY

5.1 Quality Assurance

5.1.1 Overview

ThreeSixty believes that good product quality is the result of a good

manufacturing process that includes:

the use of proper materials,

the use of proper equipment,

specific work instructions and check-points, and

trained personnel.

Working together with our suppliers, we will strive to ensure that

products shipped:

serve their intended functions,

are cosmetically appealing to consumers,

comply with the relevant legal requirements,

are safe to use, and

are of the quality and specification required by our customers.

Our goal is to consistently meet or exceed customers’ expectations.

5.1.2 Supplier Assessment

5.1.2.1 Supplier Assessment Overview

To provide ThreeSixty with the greatest possible confidence that

products supplied will meet specifications and comply with all

relevant regulations, ThreeSixty will conduct supplier assessment,

at the beginning of ThreeSixty business relationship or at any stage

where assessment or reassessment becomes necessary to maintain

or regain confidence.

There are three types of assessment:

Preliminary assessment (usually called section A assessment) –

an assessment aims at obtaining supplier’s profile.

Formal assessment (usually called section A + B assessment) –

an assessment that covers supplier profile, social compliance and

quality assurance process.

One of the above assessments is usually arranged at the initial

stage of our business relationship or as early as after a supplier

submitting quotation to ThreeSixty. The purpose of the

assessment is to ensure that the supplier is legally registered,

and it meets basic legislative requirements on social compliance.

At the end of the formal assessment, a grade will be concluded

to represent supplier’s overall achievement compared to

ThreeSixty’s standards.

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Assessment to supplier’s Code of Conduct compliance against a

standard set by ThreeSixty’s end customer (for example, a US

retailer). If a ThreeSixty’s end customer demands specific

standard on Code of Conduct, ThreeSixty’s assessment team will

conduct the assessment on their behalf. Our assessor will

benchmark status of the supplier when comparing to the

standard, and most importantly, to find out what needs to be

further improved in order to meet the requirements. At the end

of the assessment, detailed corrective action recommendations

will be made by ThreeSixty’s assessor, commitment from the

supplier on when these actions are to be completed will need to

be obtained.

Most of our suppliers find our Code of Code (“COC”) assessment

to be very beneficial as this helps them gain more competitive

advantages (i.e. meet more buyer’s needs) at a minimal or even

no cost.

5.1.2.2 Codes of Conduct

As a matter of principle, ThreeSixty requires that suppliers comply

with all local laws, regulations and environmental requirements and

meet ThreeSixty’s Code of Conduct. ThreeSixty’s or its end

customers may have addition requirements of which ThreeSixty will

notify suppliers as appropriate.

5.1.2.3 Cost of Assessment

Unless under special circumstances, ThreeSixty’s initial assessment

services are free of charge to suppliers.

5.1.2.4 Pre-assessment Documents

To ensure a smooth and effective assessment process, ThreeSixty

requires that suppliers prepare the following documents prior to the

assessment:

A “Booking Form” will be sent from ThreeSixty’s assessment

team; the form should be completed and returned to ThreeSixty.

For section A+B assessment, supplier should prepare documents

according to the attached “Document List for Section A+B

Assessment”.

For assessment on Code of Conduct, supplier should prepare

documents according to the attached “Document List for COC

Assessment” .

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5.1.2.5 Assessment Process

To initiate the Supplier Assessment Process, ThreeSixty will contact

the supplier to indicate the type of assessment required and

coordinate the delivery of the pre-assessment documents discussed

above.

ThreeSixty’s assessor will arrange and run an opening meeting with

senior staff of the supplier. To ensure that information is shared

efficiently and effectively, it is essential for following staffs to be

available at the opening meeting:

Supplier’s business manager involved in the ThreeSixty business

relationship,

Factory manager,

QA/QC manager, and

HR/Personnel manager.

For the duration of the assessment project, the supplier should

provide a guide, whose function will be to assist the assessor in

obtaining answers from appropriate sources. The guide should

have sufficient knowledge of the safety and quality systems and an

understanding of management policies and administrative, HR and

operational procedures.

ThreeSixty’s assessor will visit all relevant departments and assess

documents and systems used. Interviews with relevant staff will be

conducted where appropriate. Findings will be recorded on

ThreeSixty’s assessment check list. ThreeSixty’s assessor will need

a private room to summarize all findings and to write up

assessment report.

A closing meeting will be held to present the findings of the

assessment to the staff who participated in the opening meeting.

For COC assessment, ThreeSixty assessor will make

recommendations for corrective actions, and the supplier should

commit to a specific timetable for implementation of corrective

actions.

If the corrective action is critical to the acceptance of the final

assessment done by ThreeSixty’s end customer, ThreeSixty’s

assessor will conduct follow up assessment(s) to ensure timetable

is strictly adhered to.

To support our suppliers, ThreeSixty’s assessor will generally

participate in the final assessment conducted by the end customer’s

assessment team.

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5.1.2.6 Assessment Result

ThreeSixty’s assessor will determine a grade to reflect a supplier’s

capabilities as compared to ThreeSixty’s standard. One of the

following grades will be given:

Class I - Supplier meets all class II requirements below and either

their Quality and Environmental System has been accredited by

international accreditation bodies, or supplier has complied with

ThreeSixty’s end customer’s specific requirements

Class II - Supplier meets all class III requirements below and has

established and effectively implemented written Quality and

Environmental Systems.

Class III - Supplier meets fundamental requirements reflecting

ThreeSixty’s standards including:

legally registered,

cleanliness & safety, and

does not violate the basic social compliance principles.

Pending Probation - Supplier needs to take corrective actions

immediately, with re-assessment needed upon completion of

corrective actions.

5.1.2.7 Ongoing Re-assessment

To ensure consistent compliance to ThreeSixty’s standards, we

reserve the right to re-assess the suppliers from time to time. It is

expected that a re-assessment will be conducted at least once per

18 months.

5.1.3 Signed Sample Policy

As an integral part of our quality standard for individual products,

approved samples signed by ThreeSixty’s customer “Signed Samples”

will be required prior to commencing production for each new product.

This is to ensure that our customer, ThreeSixty and our supplier have a

common understanding of the expected form, fit, function, and quality

level of every product being produced. The Signed Sample represents

the minimum quality standard required of the product.

Prior to commencing production of products, suppliers must provide

ThreeSixty with four production-version samples, complete with

packaging. If approved, the samples will be signed by ThreeSixty and

distributed as follows:

one to supplier as reference for production,

one to our inspection team as reference for inspection,

one to ThreeSixty’s customer as reference standard, and

one to be retained by ThreeSixty as reference standard.

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A tag will be attached to the sample, along with an authorized

signature on the sample itself.

For products that may have color variation due to the nature of the

manufacturing process (such as printing and ceramics kilning), signed

samples should include a range of acceptable color variations or high-

and low-limit color samples.

Recognizing that their quality will deteriorate with time (with the

effects of humidity, temperature and light), Signed Samples are only

valid for twelve months from the original signature date. Beyond this

period of time, new samples must be prepared and re-distributed.

5.1.4 Inspection

It is each supplier’s responsibility to ensure that every single piece of

product shipped meets the applicable quality standard. To assist in

suppliers’ meeting this responsibility, ThreeSixty also frequently

inspects products to help monitor their quality. Four types of

inspections may be performed, as detailed in Section 5.2:

Initial,

In-line,

During production (“Dupro”), and

Final.

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Inspection done by ThreeSixty’s quality team is part of the

quality process that ThreeSixty employs to minimize quality

risks. ThreeSixty’s inspection does not relieve supplier’s

responsibility of fulfilling contractual agreements made

between various parties. According to the contractual

agreement, ThreeSixty’s suppliers are responsible for ensuring

that products meet the required specifications, regardless of

whether inspection has been performed by ThreeSixty.

5.1.5 Classification of Defects

ThreeSixty and our customers believe it is important to itemize

potential defects and categorize them according to severity. Defects

are classified in four categories: Safety or Critical Defects, Functional

Defects, Major Defects, and Minor Defects.

Safety or Critical Defect

A safety or critical defect is one which under normal conditions of

product use would create a safety hazard for the user, or cause

the product to fail to meet the specified requirement for product

safety. One such defect may constitute a basis for rejection of the

entire lot.

A broken needle in a cut-and-sewn product would be categorized

as a safety and critical defect, as would be sharp metal burrs on a

die-cast product.

Faulty electrical appliances and products, electronic items, and

other products where safety is compromised also fall under this

category of defect. Examples include incorrect electrical markings,

high current leakage from accessible parts and electrical insulation

missing or improperly installed.

Functional Defect

A functional defect is one which under normal conditions of use

would result in the reduction of electrical or mechanical

performance, thus rendering the unit unsaleable to any customer.

Example includes a loose socket in a portable lamp.

A functional defect may render a product or product function

inoperable. A stereo that does not function at all or has excessive

hum and buzz would be classified in this category of defect, as it

would be a pop-up book that does not “pop up” when opened.

A functional defect would also exist if accessory parts essential for

operation are missing.

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Major Defect

A major defect encompasses several types of potential flaws. It

would include a defect which may result in a reduction in electrical

or mechanical performance. An example would be the protective

cover on an electric bench grinder wobbling while running.

A major defect is one which under normal conditions of use

renders the unit unsaleable to a discriminating customer. An

example would be a missing operating manual for a product.

An aesthetic defect which renders the unit unsaleable to a

discriminating customer would also be classified in this category of

defect. Examples include severely damaged packaging, incorrect

brand name, water marks on packaging or product, dirty or dusty

product, or incorrect color on printed products.

Minor Defect

A minor defect is one that results in a deviation from specifications

but would seldom be objectionable to a customer. Examples

include non-permanent finger marks which can be easily removed,

a paper label in a product placed in an inverted position, or slight

dirt on secondary surfaces such as the side and back of a photo-

frame.

The General Inspection Criteria lists the inspection points and

classifications of different types of commonly found defects.

Specific Inspection Criteria may also be designed for specific

products and would be used in conjunction with the General

Inspection Criteria.

5.1.6 Acceptable Quality Level (“AQL”) and Sampling

During an inspection, specific quantities of samples are drawn

randomly from the completed production based on the internationally-

recognized Standard Sampling Method ANSI/ASQC Z1.4, Single

Sampling Plan.

Unless otherwise specified, the AQL standard utilized by ThreeSixty is:

0 for safety or critical defects

1.5 for functional defects

2.5 for major defects + functional defects

4.0 for minor defects

Level 2 Single Sampling is applied. It is important that suppliers

prepare sufficient packaging materials (including blister packs, etc.) for

re-packaging inspection samples.

If a Final Inspection fails or is incomplete, a re-inspection will be

necessary, utilizing Level 2 Single Tightened sampling.

At a minimum, the number of cartons to be opened for sampling is the

square root of the total number of cartons in the lot to be inspected

(e.g. 10 cartons will be opened for sampling from a shipment totaling

100 cartons). Cartons will be randomly selected from various locations

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among the batch of products being inspected (including top, bottom,

front, back, and middle).

To maximize the efficiency of the inspection process, we expect

suppliers to provide assistance in pulling cartons and unpacking and

repacking samples.

5.1.7 Selected Testing Standards

Specific quality standards will be applied to specific products.

However, certain standards are commonly applied to all products as

appropriate:

Drop test – To assure that products are not damaged during shipment

our standard final inspection includes a shipment carton drop test. The

ISTA 1a standard is used. Details can be referred to in the General

Inspection Criteria, section 10. It is important that the supplier assures

proper packaging so that it will meet this standard. Failure to do so will

lead to a failed inspection.

Moisture content test:

Natural products (wood, bamboo, rattan, wicker) – These will be

tested for moisture content during inspection. A mini Ligno

(Lignomat) moisture meter will be used to determine the moisture

content; the current standard ranges from 8% to 14%. It is

important that the supplier assures proper kilning of the product so

that it will meet our standards.

Paper products (books, planner, etc.) – These will be tested for

moisture content during inspection. A mini Ligno (Lignomat)

moisture meter will be used to determine the moisture content. The

current maximum humidity standard is 12%. It is important that

the supplier assures proper drying of the product so that it will

meet this standard.

Bar code test – Bar codes on the product and packaging will be tested

with a bar code scanner during inspection. It is important that the

supplier assures the scannability, the correct number and the format of

bar codes used.

5.1.8 Use of Subcontractors

Where subcontract factories are used to produce products for

ThreeSixty, suppliers must:

Identify and understand the physical subcontractor manufacturing

sites,

Notify ThreeSixty in advance with detailed address, including

business license of the manufacturing site or sites to facilitate

inspection,

Obtain approval from ThreeSixty for each individual subcontractor

prior to use, and

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Inspect all subcontractors’ shipments at the subcontractors’

factories to ensure conformance to quality standards prior to any

ThreeSixty inspection.

Suppliers should regularly visit the subcontract manufacturing sites to

ensure they adhere to our Code of Conduct, to monitor product quality

and to ensure production status is consistent with the committed

timeline.

5.1.9 Quality Feedback

It is important that ThreeSixty and our suppliers communicate closely

on quality issues. A standard Corrective Action Request (“CAR”) form

is used in the event of major quality issues to facilitate record keeping,

follow-ups and future traceability.

On receipt of the CAR, suppliers should respond within two working

days along with a preliminary action plan for current production, as

well as a description of the likely cause of the problem. Within five

working days suppliers should provide a detailed cause analysis and

corrective action plan (“CAP”) based on all known facts relevant to the

problem.

5.2 QC INSPECTION

5.2.1 Inspection Criteria

At the time of negotiating a purchase order, specific product standards

should be agreed between the supplier and ThreeSixty. It is strongly

recommended that such standards are then reflected in objective

inspection criteria which both the supplier and ThreeSixty will

subsequently utilize to determine shipment quality.

5.2.2 Inspection Arrangement

At discretion of ThreeSixty, four types of inspection may be arranged

depending on particulars of the situation:

5.2.2.1 In-line inspection

In line inspection will be performed when ThreeSixty’s customer

and account team need tight monitoring on production.

ThreeSixty’s inspectors will perform production process monitoring

as well as inspection on parts and final product.

5.2.2.2 Initial Inspection Initial inspection may be performed when 10% of shipment

quantity has been produced. Inspection may cover not only final

product, but also parts as well.

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5.2.2.3 During-Production Inspection

During-Production Inspection (“Dupro”) will be performed when at

least 50% of the shipment quantity has been completed. As with

Initial inspections, our inspection may cover not only final product,

but also parts and components.

5.2.2.4 Final Random Inspection Final Inspection will be performed when 100% of the shipment

quantity has been produced, with at least 80% packed into the final

shipping cartons.

ThreeSixty’s order coordinator will coordinate inspection

arrangement with the supplier. In some cases, Container Loading

Supervision may be arranged in addition to the above inspections.

Each supplier is required to e-mail or fax the “Inspection

Requisition Form” (IRF) no fewer than three working days in

advance of the inspection date to ThreeSixty’s Shenzhen office to

allow proper scheduling of inspection.

Any cancellation of inspection must be made at least 24 hours prior

to the scheduled inspection date via e-mail or fax to ThreeSixty’s

Shenzhen office or a “Missed Inspection Penalty” will be charged to

the supplier to reimburse ThreeSixty for the cost of sending

ThreeSixty’s inspectors for the scheduled inspection.

At the end of each inspection, it is common that ThreeSixty’s

inspectors will send shipment or defective samples back to

ThreeSixty offices for future reference or for proper judgment. It is

expected that suppliers will facilitate logistic arrangements for the

timely forwarding of these samples to appropriate ThreeSixty

offices.

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5.2.3 Inspection dispositions

After the inspection, one of the below three dispositions will be

concluded:

Accept – it means that problems found during our inspection, which is

conducted on the basis of randomly drawn samples, are within our

tolerance level.

Reject - it means that problems found during our inspection, which is

conducted on the basis of randomly drawn samples, are beyond our

tolerance level. Suppliers are not allowed to enter subsequent

shipping process. Suppliers should wait for further instructions from

ThreeSixty account team, which may include possible re-work on

defective goods at the cost of the supplier.

Pending - it means that at least one discrepancy was found during our

inspection, it will lead further clarification (s). Suppliers are not

allowed to enter subsequent shipping process. Suppliers should wait

for further instructions from ThreeSixty account team, which may

include possible re-work on discrepancy at the cost of the supplier.

At the end of the inspection, ThreeSixty inspector will ask supplier’s

representative to sign on the inspection report. This will help ensure a

clear understanding of the findings and hence proper follow-up action.

Should our inspector discover that the presented quantity does not

meet with our minimum requirement specified under 5.1.6, an

“Abnormal Inspection Report” will be issued.

5.2.4 Local Delivery Inspection

Should the goods passed our final inspection, procedures will be the

same as the above under “Accept” of 5.2.3.

If the disposition is either “Rejected” or “Pending” and that no re-work

will be carried out due to request of urgent delivery, or no inspection

was carried out prior to the delivery, a “Notice of Deferred Inspection”

will be issued, payment will be on-hold until final inspection at

assembler reveals satisfactory result, under such circumstances a

“Notice of Payment for Previous Deferred Inspection” will be issued.

5.2.5 Third Party Inspections

Under certain circumstances, ThreeSixty may appoint a third-party to

conduct inspection. In this event, suppliers will be given prior

notification of this arrangement. It is expected that the third party

agent will be treated the same way as if they were from ThreeSixty’s

own inspection team. Unless otherwise agreed, ThreeSixty will pay for

expenses of the third party.

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5.2.6 Customer inspection for Direct Import (“DI”) orders

DI orders are those orders that shipments are made directly to

ThreeSixty’s end customers e.g. Wal-Mart, Dollar General, etc. For DI

orders, ThreeSixty’s end customer may conduct inspection(s) by

appointing either their own inspectors, or a third party company,

ThreeSixty will notify supplier in advance of the arrangement. Supplier

shall provide assistance to ThreeSixty to ensure that such inspection is

conducted smoothly. Such assistance may include possible direct

liaison with our customer on inspection arrangement.

Should the inspection disposition unsatisfactory, supplier is requested

to put on hold all subsequent processes and to wait for further

instructions.

For DI orders, costs incurred due to the unsatisfactory inspection result

will be charged to the supplier.

5.2.7 Non-Compliance Charges

For each missed inspection, a Missed Inspection Penalty of US$150

plus costs of accommodation and air travel will be billed at costs will be

charged to the Supplier.

If products must be re-inspected after a failed final inspection,

ThreeSixty will charge a re-inspection fee at the same rate as a Missed

Inspection Penalty. Suppliers can avoid these costs by ensuring that

products meet quality requirements at the time of inspection.

The above rates may be changed from time to time.

Under special circumstances where a rejected or pending shipment

does not need to be re-worked prior to the release, an “Inspection

Approval Document” will be issued.

Without our approval, if shipment is released without our “Accept” final

inspection, a “Notice of Unauthorized Shipment” will be issued,

payment will be held until products are fully examined by the end

customer with satisfactory result, all cost incurred will be charged to

the supplier.

The final inspection fee is US$25 per trip.

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6 LOGISTICS

6.1 Overview

It is critical that suppliers deliver products on time and in full quantity to

customer-designated freight forwarders including carriers. Suppliers should

fully comply with ThreeSixty logistics requirements as described below at all

times. ThreeSixty will seek to recover from suppliers compensation for any

costs resulting from non-compliance.

6.2 Booking

Suppliers are responsible for the booking of ocean and/or air shipment with

ThreeSixty customer’s assigned forwarders or carriers.

In order to avoid errors on bookings, suppliers are required to fax the

booking to our shipping team for verification before providing comprehensive

details of shipping containers to forwarders or carriers. Suppliers must be

aware of all requirements, including US customs, impacting the required

timing for bookings.

6.2.1 Booking Arrangement

Suppliers are required to send bookings to the customer’s assigned

appointed forwarders/carriers 14 days (or 7 days for air shipment)

prior to on board date to arrange space and equipment with assigned

forwarder/carriers.

All bookings must contain the following information:

shipper (as supplier shown on PO),

contact person and telephone number and fax number of supplier,

consignee, notify party and Ship To (refer to PO Release),

customer PO number (refer to PO Release),

item description (refer to PO Release),

gross weight and measurement,

quantity – piece count per item,

port of discharge,

final destination,

ship mark,

freight terms – collect or prepaid,

container number and size of container, if for Full Container Load

only,

letter of credit number (if applicable), and

any other information pertaining to regional or commodity-specific

requirements (for example: confirmation of solid wood packing

materials used, visa).

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6.2.2 Advance Shipping Notice (“ASN”)

Suppliers have to e-mail or fax the ASN Booking to our Order

Coordinator and Shipping Team within one working day after request

for the booking with the assigned forwarder / carrier. Suppliers need

to inform us if there is any amendment or cancellation of booking.

6.2.3 Normal and Direct Import Order document flow

There are two types of ThreeSixty orders, namely Normal and Direct

Import (“DI”) Order. The document flow is summarized as follows:

All DI Customers have their own procedures documented in their

shipping manuals. Generally suppliers must not provide their invoices

and packing lists to end customer’s assigned forwarder/carrier directly

for DI orders. Please familiarize yourself with the materials and

contact ThreeSixty shipping team for specific details and procedures.

6.3 Documentation

6.3.1 Introduction

Accurate and on-time documentation is of paramount importance to

the product delivery at the destination and crucial to the completion of

the production and sales process. If a complete and accurate set of

documents is not available when the products arrive at the port of

discharge, it will cause late delivery to our ThreeSixty customers.

Suppliers are required to prepare the complete set of documents in

English. It is their primary responsibility to ensure the accuracy and

timely submission of the documents to ThreeSixty. ThreeSixty

Shipping team will verify its accuracy.

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6.3.2 Timing of submission of documents

Suppliers are required to submit the shipping documents in complete

and accurate fashion not later than the timelines as stipulated below:

Description

Schedule

(working day)

On-board date Day 0

Suppliers to send a faxed copy of a full set

of documents to ThreeSixty for verification Day 2

Suppliers to send four full sets of original

documents to ThreeSixty Day 5

A late document penalty of US$500 may be imposed on suppliers if the

above timelines could not be met for each late submission of

documents.

6.3.3 Required documentation

Suppliers are required to submit a complete full set of documents to

ThreeSixty timely. A complete full set of documents include:

Document Submission Form (one original copy),

Commercial Invoice (four original copies),

Packing List (four original copies),

Billing of lading or similar document (3 original copies), and

any other relevant documents.

6.3.3.1 Document submission form

A document submission form is a covering letter that lists out the

documents submitted by a supplier.

6.3.3.2 Commercial invoice

A commercial invoice must contain:

name and address of supplier (as supplier shown on PO),

name and address of ThreeSixty Sourcing HK Ltd (please also

refer to the name of purchaser on PO),

invoice date and number,

complete full description of each product as well as quantity

shipped,

accurate invoice amount and total invoice amount in US

dollars,

cost breakdown of multiple commodity items (for watch/clock,

a cost breakdown of components must be provided),

terms of Sale (i.e., FOB, C&F, etc.),

payment Term,

specific country of origin,

ThreeSixty’s Customer PO number and PO Release number,

specific statement if “This shipment contains no solid wood

packing materials” in case of no wood,

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no duplication of invoice number, and

signatures from supplier together with their company stamp.

6.3.3.3 Packing List

A packing list contains:

supplier name and address (as supplier shown on PO),

supplier invoice number,

number of cartons, PO Release number, ThreeSixty’s customer

PO number, description, gross weight per carton, dimension

per carton, number and size of container, if for full container

load only,

specific country of origin,

specific statement if “This shipment contains no solid wood

packing materials” in case of no wood,

quantities shown in accordance with the quantities actually

delivered and in accordance with the quantities shown on the

commercial invoice,

quantities shown in accordance with the quantities loaded into

the container and in accordance with the quantities shown on

the commercial invoice,

signatures from supplier together with their company stamp, and

the packing list must agree with the commercial invoice in all

aspects.

For quota merchandise, the packing list must show the

net/net weight breakdown for each unit or piece. In case of

a part of a set, the packing list must show the net/net

weight breakdown for each unit or piece (for the top and

bottom) separately. This is mandatory for U.S. Customs’

purposes.

6.3.3.4 Bill of lading

Bill of lading is issued by the nominated freight forwarder/carrier.

Upon receipt of the booking from supplier, ThreeSixty shipping

team will advise the supplier if any one of the following documents

is applicable:

Sea waybill

Forwarder’s Cargo Receipt

Express Bill

Air Waybill

6.3.3.5 Any other relevant documents

Suppliers are also required to submit additional documents as listed

in our Document Submission Form. Please check with ThreeSixty

shipping team for specific applicable requirements.

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7 PAYMENT

7.1 Payment mechanics

Payment will normally be arranged on Tuesday of each week. In the case of

a public holiday falling on Tuesday, payment will be arranged on the

following business day.

In normal cases, invoices will be denominated in US Dollars, and payment

will be arranged in US Dollars.

7.2 Beneficiary of Payment

Suppliers receiving our purchases orders are obligated to submit invoices

using their own letterhead. Under no circumstances are third party invoices

acceptable.

Normally, the payment beneficiary will be identical to the supplier receiving

our purchase orders. Suppliers authorizing us to remit payment to import

and export companies should state clearly on their invoices the relevant

remittance information. A separate letter from that designated import and

export companies confirming their acceptance of the payment arrangement

is required. No remittance to personal accounts is allowed.

7.3 Payment Terms and Letter of Credit

Generally ThreeSixty transacts businesses with suppliers on “open account”

terms, meaning the products and the relevant documents are sent by the

supplier before ThreeSixty makes payment within a certain period

thereafter.

Suppliers should quote at open terms. Single payment terms will be applied

across all purchase orders. Suppliers are requested to confirm and sign for

agreed upon payment terms.

Payment terms as stated on our purchase orders will be “x” days after

receipt of documents. Due dates for supplier invoices are counted from the

date of receipt of a full set of original documents.

Under rare circumstances and with prior approval from ThreeSixty, suppliers

may request that ThreeSixty utilize a Letter of Credit (“LC”) for a particular

transaction.

Letter of Credit will be issued 30 days prior to shipment. A supplier should

first contact our Account Executive, after receiving our shipment schedules,

for LC issuance.

All bank charges related to opening, amendment, and cancellation of Letter

of Credit will be for the account of the supplier. The amount will be

approximately 0.4375% of the issued, amendment or cancelled amount,

subject to prevailing rates being applied by our bank. In subsequent draws,

Suppliers are responsible for bank fee charged by issuing bank for

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documents examination fee, handling commission, telex charges, etc.

totaling around US$180 for each draw. When there is discrepancy in

presented documents, an additional US$75 will be charged by issuing bank

for each draw.

In submission of documents to bank for drawing on a Letter of Credit, an

inspection certificate is required. The certificate will only be issued after our

Quality Control team has performed our inspection with an acceptable result.

The inspection certificate will be dispatched by our shipping department to

supplier via courier upon receipt of faxed copy of invoice, packing list and bill

of lading.

The inspection certificate is issued for LC drawdown purposes only, and it

does not imply that goods are free from defects. The certificate cannot be

applied as defense for any future quality claim or in any legal proceedings.

7.4 New Suppliers

All new suppliers are required to provide information to allow ThreeSixty to

complete a “Supplier Pay Site Form” before purchase orders can be placed.

The following documents are required to provide for our records:

Business Registration, Certificate of Corporation (for Hong Kong

suppliers),

Business License, Certificate of Import and Export Right (for overseas

suppliers), and

Business License of a subcontracted factory (if any).

7.5 Documentary Requirements

For all shipments pertaining to issued purchases orders, invoices, together

with shipping documents, should be directed to shipping department for

verification.

Invoices billing for miscellaneous charges, such as sample charges, testing

charges, etc. should be sent to AE Team directly.

7.6 Deductions / Claims

Debit notes are issued to suppliers for all claims including those relating to

quality, late shipment, late document submission and missing inspections.

Supporting documents, if any, will be provided for your reference. The

debited amounts will be deducted from subsequent settlements.