Online shopping has become the need of the hour. The pandemic has paved a way for many shopping enthusiasts to shop online and get the products delivered to their doorstep. Many a time, you might have come across ads promoting exquisite products at discounted rates from Chinese manufacturers. You might have been tempted to purchase the product, but knowing it is a Chinese manufacturer you might have got sceptical.
China is a large exporter of products and services. It is also notorious for selling fake products or scams. If you do not want to fall victim to such scammers and want to do business with genuine Chinese manufacturers, then you need to understand how to verify Chinese sourcing company.
It all boils down to research. When you make a list of Chinese manufacturers you want to do business with, ensure that they are not trading companies. Many people tend to get confused between the two. A trading company does not manufacture the product, but they act as middlemen between you and the manufacturer to procure the products from them and resell them at a higher price.
Trading companies are generally located near manufacturing units and have many branches. They can also be manufacturers dealing with buying, selling, and delivering products to retailers in other countries.
Manufacturing companies, on the other hand, have factories with lots of employees and equipment for the production of their products. Their main focus is to provide high-quality goods and live up to their customers’ expectations. This is one of the reasons they keep upgrading their products to be ahead of their competitors and to hold a niche in the market.
Trading companies require low capital when compared to manufacturing companies. Manufacturing companies will only deal with one type of product due to the cost of machinery and other factors. Manufacturing companies generally will have the name of the city and town they are headquartered at.
Manufacturing companies rarely have a product catalogue as they deal with only one product. Trading companies will have product catalogues with different types of products and features.
So how do you know which company is a trader and which one is the manufacturer? There are certain tactics that you can apply to find out the same:
Go through the businesses licenses and check for the “term” manufacturer” in their agreement
Drop-in a technical question. If they are a trader, they will not be able to answer
Ask for a factory visit. A genuine manufacturer will always welcome any factory visit
Check if the supplier has attended any Chinese trade fairs. This is a sure indicator that they have international experience
Another added benefit of a factory visit is that it allows you to visit the factory and inspect the working conditions, product samples. You can even place an order and negotiate the prices with the supplier directly.
There are a lot of websites and directories that you can take help from when it comes to any Chinese sourcing company verifying. If you have short-listed a few manufacturers, you can always check for reviews or ratings shared by other customers.
Other ways to determine the credibility of Chinese manufacturers are by:
Make use of search engines to check the background and business experiences of the vendors
Many websites even offer complete information about the company including address, no. of employees, ownership, and brands owned by the company
Check the vendor website to see if they have a landline number listed on it. The Chinese code is 86
Verify the vendor license. Genuine Chinese manufacturers have an 18 digit business license along with a Unified Social Credit Code
When you contact the manufacturer ensure to ask for references and samples of their products
If your manufacturer passes all the above criteria, but you are still sceptical about the company, then you can do a final verification based on money and audit factors. When you are negotiating with the manufacturer, tell them that you will make cash on delivery after the product is picked up. If they are genuine manufacturers, they will willingly agree to the same. If they are traders, they will outright refuse and ask you to make the payment first.
Similarly, you can even ask permission for a factory audit. This is the standard procedure followed by most manufacturers and they will readily agree to it. A factory audit includes the product to be inspected before finalizing the shipment. A trading company will never agree to the audit and might find reasons to postpone the same.
Audits are a great tool when you want to understand how to verify Chinese sourcing company. This ensures that ethical practices are followed by the company which complies with government rules and regulations. It also ensures that good quality goods are produced as per the clients’ requirements.
Your audit should cover the following points:
Checking for valid business licenses
Validation of their QMS certificate
Company profile with complete address, phone, and contact information
Reviewing their HR policies, workplace conditions, and employee’s contribution
You can even ask for their factory audit reports that will consist of information such as:
When was the factory audit conducted?
What was the outcome of the audit?
Were they any issues that arose?
How has the company improved since then?
A QMS, also known as Quality Management System, is a collection of business functions and processes that can help in improving the quality of products and services to meet the customers’ expectations. One of the popular QMS certifications is the ISO 9001.
You might have the impression that since you know how to distinguish between trading companies and manufacturing companies, nobody would be able to scam you. Here is where most people go wrong in their assumptions.
Smart trading companies can easily produce false license agreements and still be able to scam you. You need to be one step ahead and learn how to read the license. Now, you know that a genuine Unified Social Credit Code comprises 18 digits, but do you know what they stand for. Let us break down the same:
Digit 1 represents the registering authority assigned with the digit 9
Digit 2 represents the registered entity type, whether State Owned, Individual, or private enterprise
Digits 3 - 8 represent the registering region code, also known as the administrative division code
Digits 9 -17 represent the organization code which comes from the China Organization Code Certificate
Digit 18 represents the check digit which can either be a number or letter
It is necessary to follow the right checks when you want to when you need to verify Chinese sourcing company. In the future, you will be purchasing products from them and without verifying their authenticity you could be leading your business to a loss not only in matters of profits but also in customer loyalty.
All genuine Chinese manufacturers are registered onto the National Enterprise Credit Information Publicity System (NECIPS). If you already have the business license of the manufacturer and want to verify its credibility, you can always rely on this website to help you.
You can go to their website and enter the 18-digit license number onto the search bar. To determine whether you are a robot or a human, the websites will ask you certain questions that you need to answer. When you pass this milestone, it will display all the relevant information of the manufacturer for you to verify.
The business license will have complete information such as:
Business registration number
Company name
Date of Incorporation
Type of entity
Date of issue
Date of expiry
Official address
Legal Representative
Invested Capital
If the information on the license does not match that displayed on the website, you are dealing with a scammer. This is one of the major red flags that you can identify which can help you on your quest on how to verify Chinese company.
You can even authenticate the business license of Chinese manufacturers through AIC. AIC is the full form for Administration for Industry and Commerce. How is AIC going to be useful for you? Well, AIC not only controls the local dealings in Chinese with their counterparts but also helps provide official registration records depending on which Chinese jurisdiction the company falls under.
Below is the list of province-level company websites that can come in handy when it comes to the Chinese sourcing company verifying process:
Anhui (安徽): http://ah.gsxt.gov.cn/
Beijing (北京): http://bj.gsxt.gov.cn/
Chongqing (重庆): http://cq.gsxt.gov.cn/
Fujian (福建): http://fj.gsxt.gov.cn/
Gansu (甘肃): http://gs.gsxt.gov.cn/
Guangdong (广东): http://gd.gsxt.gov.cn/
Guangxi (广西): http://gx.gsxt.gov.cn/
Guizhou (贵州): http://gz.gsxt.gov.cn/
Hainan (海南): http://hi.gsxt.gov.cn/
Hebei (河北): http://he.gsxt.gov.cn/
Heilongjiang (黑龙江): http://hl.gsxt.gov.cn/
Henan (河南): http://ha.gsxt.gov.cn/
Hubei (湖北): http://hb.gsxt.gov.cn/
Hunan (湖南): http://hn.gsxt.gov.cn/
Inner Mongolia (内蒙古): http://nm.gsxt.gov.cn/
Jiangsu (江苏): http://js.gsxt.gov.cn/
Jiangxi (江西): http://jx.gsxt.gov.cn/
Jilin (吉林): http://jl.gsxt.gov.cn/
Liaoning (辽宁): http://ln.gsxt.gov.cn/
Ningxia (宁夏): http://nx.gsxt.gov.cn/
Qinghai (青海): http://qh.gsxt.gov.cn/
Shaanxi (陕西): http://sn.gsxt.gov.cn/
Shandong (山东): http://sd.gsxt.gov.cn/
Shanghai (上海): http://sh.gsxt.gov.cn/
Shanxi (山西): http://sx.gsxt.gov.cn/
Sichuan (四川): http://sc.gsxt.gov.cn/
Tibet (西藏): http://xz.gsxt.gov.cn/
Tianjin (天津): http://tj.gsxt.gov.cn/
Xinjiang (新疆): http://xj.gsxt.gov.cn/
Yunnan (云南): http://yn.gsxt.gov.cn/
Zhejiang (浙江): http://zj.gsxt.gov.cn/
Last, but not least, is to validate the import/ export license. Every Chinese company dealing with imports or exports needs to have a valid China Import and Export License. There are 2 different licenses required:
China Customs Registration Certificate
China Foreign Trade Registration Certificate
The China Customs Registration Certificate permits any Chinese company to be actively involved in foreign trades. The Foreign Trade Registration Certificates allow Chinese companies to handle their customs declaration without the involvement of a third party.
Asking the Chinese manufacturer to share a copy of the above-mentioned licenses can also be an essential factor on how to verify Chinese sourcing company.
The Chinese ministry also has certain classifications in place when it comes to the import and export of goods and services. The classifications are based on:
Permitted Goods – The license is valid for 6 months and is automatically granted
Restricted Goods – Approval of the license is required for import or export of electronics, or natural raw materials
Prohibited Goods – No license is given for prohibited goods such as toxic chemicals
Verification of any manufacturer can be a tedious task but is necessary. A small mistake on your part can be detrimental to your business. If you have friends or peers, you can ask for their recommendations or learn tips and strategies on how to verify Chinese company.
Now the most important question that might pop up in your head is how to know whether the certificates published on AIC and other websites are genuine and not photoshopped. Well, if you know various photo editing software and their technicalities, then you can use the Error Level Analysis (ELA) to conclude.
This analysis helps in detecting photoshopped images that have been digitally modified. This method can prove to be effective to verify Chinese sourcing company. You can download the license or certificate from the official website and run it through the ELA software.
If the certificate or license is in a .jpg format, then the compression levels might vary indicating that the document has been digitally modified. If it is genuine, then the compression levels will be the same.
If you do not have the software, but know how to use this tool, then many websites offer online decoding tools. You just need to upload the image URL and wait for the site to scan the document.
Another method of verifying if the companies are genuine is through background checks. You can hire the services of background check companies to conduct the verification for you. The verification will be done discreetly.
You can even take the help of local lawyers who are familiar with the business laws and regulations in China. They will go through the company profile and fish out any discrepancies or red flags. Genuine suppliers will not mind the background checks conducted on them as they have nothing to hide.
If you are dealing with scammers, they might get offended and refuse to do business with you. This can be a sure shot indicator that the company might be indulging in fraudulent practices.
Below are certain red flags that can help you in identifying a fake Chinese supplier:
The prices for the products will be low as compared to other companies
When you contact the supplier for queries, they will dodge your questions
All the answers to your queries would be a “Yes” or “No”
Their main objective would be asking for deposits
There will be only one point of contact
They will not share any references of their foreign clients
All their documents will be in Chinese making it difficult for you to interpret
The company name would be different on their website, back accounts, and other official documents
They will ask you to transfer the deposits into their bank account
You can even browse through Chinese Supreme Court databases to check if the company has any criminal offense against them. You might require the help of a local agent as all the information would be in Chinese.
The supplier turnover and the production capacity can also help you to verify Chinese sourcing company. Chinese companies hesitate to say “no” to anything. They will go out on their way to please their clients and try to accommodate their orders even if they are incapable of fulfilling them.
Some of the key questions to ask here would be:
What is the total turnover of the company?
What is their MOQ (Minimum Order Quantity)?
Year of establishment?
The total turnover of the company can help you understand the financial stability of the company. You definitely would not want to deal with a company that is on the verge of bankruptcy.
Secondly, many of the Chinese suppliers work on MOQ. This is the minimum order they can supply no matter how much is your requirement. You might need to purchase in multiples of their MOQ. If you have an order for a large volume, the supplier must be in a position to supply the same at the stipulated time.
Ensure that you work with Chinese suppliers who have been long in the manufacturing sector. This gives you confidence that you are dealing with professionals and you will not be scammed.
To gain the tax benefits, Chinese suppliers also need to generate a VAT invoice. You as an importer can ask for their VAT invoice to check for its legitimacy.
You can become an expert if you follow the above-mentioned strategies to verify Chinese sourcing company. Be rational, but also trust your instinct when it comes to dealing with any suppliers.