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How to Effectively Verify Chinese Companies?

2024-01-26
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Businesses around the world are sourcing goods from China because of low manufacturing costs. Online shopping has become the need of the hour. More and more people like 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 you might have got skeptical about the quality. Nevertheless, there are many scams in China. Therefore, if you plan to import goods then it is essential to find a reliable supplier.

Keeping your eyes and ears open when purchasing products from China

China is a large exporter of consumer products. 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 companies.

It all boils down to research. When you make a list of Chinese manufacturers you want to do business with, ensure that they are indeed factories not traders. A trader 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.

You can ask permission for a factory audit. This is the standard procedure followed by most manufacturers and the true factories will readily agree to it. A trader will not agree to the audit and might find reasons to postpone the same.

Validation of licenses and certificates for Chinese companies

Audits are a great tool when you want to understand how to verify Chinese companies. 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
- Checking company profile with facilities
- Reviewing workplace conditions

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.

All genuine Chinese companies are registered onto the National Enterprise Credit Information Publicity System. 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 the website and enter the 18-digit license number onto the search bar. It will display all the relevant information of the manufacturer for you to verify.

If the information on the license does not match that displayed on the website, you possibly 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 a Chinese company.

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.

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 Chinese company 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 companies and avoid scams.

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 to conclude.

This analysis helps in detecting photoshopped images that have been digitally modified. This method can prove to be effective to verify Chinese companies. 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, you can find online tools on many websites. 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 company:

- The prices of products are significantly lower 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”, without full details.
- 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, bank accounts, and other official documents.
- They may ask you to transfer the deposits into their personal 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 or organizations that can provide Chinadirect sourcing services as all the information would be in Chinese.

Check the manufacturer’s digital footprint: Verify contact details on their website, browse through their catalogue and even read consumer testimonials. Visit their social media profiles and read customer reviews. Many manufacturers are on popular B2B platforms like Alibaba, so double-check the details there. Detail consistency is essential.

Ask for referrals: An easy method of verifying a Chinese company is to ask for their customer references and then contact them. It helps to get an idea of how committed the manufacturer is in terms of quality, lead times, and customer service. If they seem unwilling, then move to the next company on your list. 

The turnover and the production capacity can also help you to verify Chinese companies. 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.

The total turnover of the company can help you understand the financial stability of the company. You would not want to deal with a company that is on the verge of bankruptcy.

Many of the Chinese companies work on MOQ. This is the minimum order they can supply no matter how much your requirement is. You might need to purchase in QTY over their MOQ. If you have an order for a large volume, the supplier must be able 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.

Conclusion

You can become an expert if you follow the above-mentioned strategies to verify Chinese companies. Be rational, but also trust your instinct when it comes to dealing with any suppliers.

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