When a factory applies for onboarding and does not successfully pass the due diligence process, the obvious question that follows is about the refund. Specifically, why is the full amount not refunded?
The answer is straightforward.
If a factory fails the onboarding process, Hula Global refunds the amount paid, deducting only the service charges. The deduction is limited to 25% of the onboarding fee plus applicable taxes. These taxes may include, for example, GST in India or foreign exchange (FX) charges in Bangladesh, depending on the jurisdiction.
The key point here is that the refund is not withheld in full. The majority of the onboarding fee is returned. Only the service charge and related taxes are deducted.
The reason for this deduction is directly tied to the due diligence process.
When a factory applies for onboarding, Hula Global initiates a due diligence review. This process involves reviewing the information submitted by the factory and verifying it. Even if the factory ultimately does not pass onboarding, the due diligence process has already been carried out.
Due diligence requires time, review, verification, and administrative effort. These activities are not conditional on approval. They are performed as part of the onboarding evaluation itself. The service charge is deducted to offset the costs incurred during this process.
In other words, the service charge is not a penalty for failing onboarding. It is a recovery of the costs associated with conducting the due diligence.
The structure is simple:
A factory applies and pays the onboarding fee.
Due diligence is conducted.
If the factory does not pass, a refund is initiated.
25% service charge + applicable taxes are deducted.
The remaining amount is refunded.
The deduction percentage is fixed at 25% of the onboarding fee, along with the applicable taxes relevant to the factory’s location. For example, in India, this may include GST. In Bangladesh, it may include FX-related charges. These examples illustrate that tax treatment depends on geography, but the service charge component remains consistent.
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