You come across a Chinese supplier online. The organization looks alright. There’s potential for a business opportunity that could really take off. BUT there are many scams, fakes, and just plain bad Chinese suppliers out there to watch out for. So how do you make sure you’re doing business with a legitimate supplier you can trust?
Don’t worry; you’re not alone. Most of the businesses interviewed in this survey conducted by Global Sources said that verifying Chinese suppliers is the biggest problem they face when importing products from the country.
When you’re verifying a potential supplier you are essentially looking at these two aspects:
This article offers simple and effective strategies to answer these two questions – let's get started.
When checking out Chinese wholesale websites, go through all their policies (returns, damages, backorders), and make sure they have their contact information and physical address posted on their site.
Open Google or Bing and search “[company name] + scam,” “[company name] + dishonest,” and a few variations. Other distributors and retailers who had a bad experience with China wholesale suppliers often try to leave a trace about it on the web.
These places are a great start to look through reviews, get references and ask questions, but beware of members who are simply trying to self-promote. For example, look out for how long the supplier has been in operation (it’s good to do business with a supplier who has been in the market for at least 2-3 years).
Also, many B2B marketplaces usually offer verification services such as this one provided by Alibaba, so it makes your life a lot easier when it comes to determining if you can trust a particular supplier or not. Similarly, Global Sources checks important data of suppliers such as the start date, number of staff in each department, factory ownership, amount of sales, brand names, and so on.
Furthermore, with Google search, you might also come across information such as whether a supplier has participated in trade shows recently, which is a good sign that you’re dealing with reputable China wholesale suppliers. Renting a booth and attending trade shows can be seen as an investment in gaining new customers. Repeated presence in trade shows also means that the supplier is earnest in cultivating relationships with customers.
To avoid being traced by law enforcement authorities, most scammers do not provide genuine registration information online. For example, they will provide a false company address, telephone and fax number, or persuade buyers to contact them by mobile phone only.
Make a phone call to the China supplier’s landline and ask for the company registration number and business license number while you’re at it. An alarm should sound off in your mind if a supplier only has a mobile number and not a landline. In China, it is possible for people to buy hundreds of mobile phone numbers without any restriction or limitation. This is why scammers almost always use mobile phone numbers instead of landline telephones.
A standard Chinese landline will look like this: 86 10 3333 3333. “86” is the country code of China, “10” (or another 2-digit number) is the area code, and 8 digits for the telephone number. You can do a basic check on the location of the telephone number using the area code.
Chinese suppliers have to register with the Chinese government authorities and obtain a unique company registration number. If your supplier is unable to provide you a unique company registration number, it's too risky to continue dealing with them. To verify the registration number, visit their local administrative government website or contact their local Bureau of Industry Commerce.
To verify the supplier’s financial credit worthiness, ask for their bank’s reference letters. To check up on the supplier’s track record in producing top-quality items, ask for their previous customers as a reference and don’t hesitate to contact them too.
Likewise, if you know any other brands in your industry, why not contact them and ask for recommendations of any Chinese Suppliers they have used.
Whether you’re buying wholesale clothing in China or any other product, ask for a sample item – even if you have to pay for it. When you have a sample in your hands, you can check the quality to ensure the product is exactly what you are looking for.
Also, if you have to pay for the initial sample charge, insist on wiring money to your potential supplier’s company bank account. If they can’t provide you with that information, they are probably not serious about doing business.
Moreover, you can refer to the supplier’s Audit Reports (if available) for an independent onsite report of their manufacturing and trading capability.
6. Money matters
While we're on the topic of money, when it comes to payment, tell your potential China suppliers that you want to get your products picked up by your local agent from their address, and that they will pay cash on delivery. See if they allow for this. Scammers will never agree to it but real legit suppliers will.
In addition, TT, Western Union, and MoneyGram are the most common mode of payment in China, but good suppliers accept PayPal as well. Always be cautious of using untraceable wire service transfers with suppliers you do not know – these are highly risky and susceptible to fraud.
Tell potential suppliers that you’ll have their factory audited before any Purchase Order is issued, and later will want their production inspected before any shipment is authorized. Mention it right away in your first encounter or email. If the supplier refuses or starts making excuses why it wouldn’t be a good idea, that’s a red flag!
Factory audits are the right tool to verify a supplier’s claims about their production capability. Most quality control firms and some sourcing agents can audit a factory based on a checklist that corresponds to your needs. Prices range from 300 to 900 USD for a day of work in the main production areas.
Search through this database of the Chinese Supreme Court. Type in the Chinese name of your supplier and see if you find it there. You will be able to find out if they have been given a sentence and if they failed to pay damages. Unfortunately, this site is available only in Chinese. However, a Chinese contact or your Chinese sourcing agent should be able to help you with this translation step.
You can order a report from third-party authentication services such as GloBIS, where their business credit report service will provide information on your potential Chinese supplier, including legal representatives, shareholders, business scope, financial records from the last three years, and other information.
You can also try China Checkup, which offers very similar services and caters more specifically for foreign buyers’ needs.
This is the best way to verify your suppliers – you won’t know much about an organization unless you visit it. You can also discuss your products, prices, quality inspection, and delivery time expectations face to face. It’s impossible for you to go visit every potential supplier you have in mind, so go through the earlier steps outlined in this article, and narrow down your selections before deciding to jump on a plane and visit their office or factory in person.
The best way to reduce fraud (regardless of whether you’re trading online or offline) is for buyers and sellers to conduct proper due diligence and research before entering any transaction. Be meticulous with this verification process, and you will know if your potential supplier can be trusted.
When it comes time to start discussing prices with a China supplier, follow our guide to negotiating with suppliers so you can secure the best deal possible and ensure your profit margins remain healthy.
Lastly, once you have developed a good working relationship with a reputable Chinese supplier, don’t forget to keep track of their ongoing standards by doing regular supplier QA checks.
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