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Importance of Supplier Verification in China for Importers

2024-06-27
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Most business companies prefer Chinese goods as they are available at very low prices, therefore, they like to import or outsource their products from China. However, dealing with any Chinese company takes a lot of work. There are several reasons why most companies in Western countries need help dealing with Chinese companies. Firstly, they are located far away, and the language and the business culture are quite different.

When you are looking for a Chinese manufacturer, it is quite common to search for them online. However, when you search for a company, you are wondering whether it is an actual manufacturer or a trader. Besides that, there is a high chance that you may get scammed, too.  

That is the reason supplier verification is extremely important when you are dealing with any Chinese company. You also need to verify whether the supplier that you have identified is capable of manufacturing the product as per your specifications or not. Quality is also one of the main issues, and for that, you need to evaluate their products thoroughly.

This post will go over how to do research and what to look for when confirming the legitimacy of a Chinese supplier, among other things. Importers can make sure they are working with a dependable source by using the supplier verification techniques described in this article.

How do we verify Chinese suppliers?

The following are a few important steps necessary for supplier verification when you are dealing with any Chinese company for the first time.

1. Use search engines as well as Chinese supplier directories

The following are a few things to check when you are dealing with any Chinese supplier for the first time

- What is their physical location?

- Is it the same as indicated on their website?

- What is their return policy for defective and damaged supplies made by them?

It is also crucial to perform a comprehensive internet research for any unfavourable reviews or remarks from other distributors and merchants by entering the firm name followed by using the keyword like "scam" or "dishonesty" in search engines like Google or Bing.

Often a few Chinese wholesale suppliers create profiles on a number of B2B directories, including:

- Alibaba
- Global Sources
- Made-In-China.

In these directories, you can check the reviews of Chinese companies to get a first-hand idea about them. You may get a few references too, which can be useful to you to whom you may contact and get feedback about the company.

You should be particularly careful whether the company that you are dealing with is actually a manufacturer or a dealer who is projecting him as a manufacturer. Also, try to know how long they have been in this business. They should have at least 2 to 3 years in the business.

B2B sites like Alibaba and Global Sources also offer services to verify Chinese companies, which can make your job simpler. They will provide you important supplier verification data that answers questions like:

- When did the company start its business?

- What is the number of employees?

- Whether they own any factory?

- What is their brand name?

- What is their sales turnover?

If the company that you are targeting is found to be regularly attending various trade shows, then it is a good sign, and you can be sure that the company is supplying products on a wholesale basis.

2. Do a factory audit

Before you deal with any Chinese manufacturer, you must tell them that you are visiting China to conduct a factory audit. If the Chinese company readily agrees to welcome you for a factory audit, then it is a good sign. On the other hand, if the supplier makes different excuses, then it is a red flag. Better avoid such companies.

Conducting a factory audit is always better if you are going to enter into long-term business relationships. If you have a trustworthy sourcing agent in China, then you can also ask him to audit the factory and send you a detailed report.

3. Check the Chinese business license

One useful method for online verification of Chinese companies is to look for their licenses. Chinese suppliers need to apply for a distinct company registration number and register with the Chinese government.

Dealing with a supplier who is unable to give a distinct Chinese business registration 18-digit number is too risky. Visit the local administrative authority's website or get in touch with the Industry and Commerce Bureau to confirm the registration number.

A legitimate supplier will gladly provide a copy of the license. The supplier needs to give a copy of the license. Since it offers basic details about the organization, the business license of a Chinese company can be used to assess the legitimacy of the enterprise.

One can use the NECIPS database to confirm the business license of a Chinese supplier. Local AIC branches upload the official registration records of businesses onto this database. Since the official authorities upload the information, it may be trusted to be accurate.

4. Make a direct call to verify the company

The majority of scammers conceal their true internet registration details in order to evade being discovered by law authorities. For example, they will offer fictitious phone numbers, fax numbers, and business addresses, or they will convince customers to reach them exclusively through mobile phones.

It is advisable to phone the Chinese supplier's landline and get the business license and company registration numbers. It is suspicious if the supplier has only a mobile number and not a landline.

In China, there are no limits on the purchase of hundreds of mobile phone numbers. For this reason, scammers always use mobile numbers rather than landlines.

5. Confirm before making any payment

You may tell your Chinese supplier that you want to make payment through your agent in China, who will also pick up the delivery and see their reaction.

A few scammers may propose you make 100% payment through Western Union. After receiving the payment, they will raise the price and demand more payment. So, before making a payment, you should be very cautious.

A few scammers may also give false information about their location. Many scammers want to deal only through their mobile phones.

A few important questions to ask your potential Chinese suppliers

The following are a few questions that you must ask for your Chinese supplier verification.

1. Where is your factory located in China?

Certain industrial products are specialized in a few locations in China. It would be simpler for you to confirm the factory's address by carrying out the audit or locating the facility on the China industry map if you know the precise address.

2. Are you a manufacturer or a trading company?

It is important to ensure from the beginning whether you are dealing with a manufacturer or any trading company. Generally speaking, buying goods from a trading company entails a higher risk but typically lower MOQ constraints. Since it is not a direct manufacturer, it is difficult to hold them accountable for defective items. It makes perfect sense, therefore, to confirm who your supplier is.

3. Can you show your business license?

It is wise to request a copy of a Chinese business license in order to reduce the possibility of falling victim to fraud. Since the document is frequently falsified, you should ensure that you obtain a high-quality colour scan of it and double-check the information it contains (the paperwork is entirely in Chinese).

4. Can I see your products?

Since product samples might not match the batch that is really made for you, a sensible way to confirm that will be to perform a QC check in the China factory. The inspections can happen at different phases of the manufacturing process. The seller loses credibility if they refuse to allow an inspection to be conducted (of course, they are entitled to do so). It would be wiser to select a different supplier in that situation.

Most likely, your product will be traveling for a considerable amount of time. To ensure that your order will withstand the rigors of transportation, you might ask your supplier for pictures of the products packaged for other customers.

5. Do you supply OEM or ODM?

How much you want to alter the original concept, its design, and the production method is something you should bring up in your talks with a business partner. OEM and ODM are their definitions.

OEM is a short form of "Original Equipment Manufacturer," which stands for a supplier who creates his own product based on their own design and trademarks.

On the other hand, ODM, or "Original Design Manufacturer," supplier will supply you with products as per your requirements and design. It is important to figure this out early on in negotiations with a potential supplier if you want to customize the product to fit your brand.

6. What is your acceptable MOQ?

The MOQ is one of the basic questions you ought to clarify from the supplier. The minimum quantity of products required to fulfil an order is known as the MOQ. Because most orders are placed in bulk, the price fluctuates in tandem with the quantity of goods requested.

You can receive a better deal if you order more product items. Since the unit price is dependent on the order volume, you should be interested in the MOQ before the price. It is important to remember that the supplier may decide to alter the MOQ during discussions and that firm adherence to the MOQ is up to them.

Suppose you are dealing with an unscrupulous Chinese vendor. In that case, there is every chance that he may supply inferior quality products to make up his profit margin for reduced quantity supply.

7. Which Incoterms will you use, and how will you transport the goods?

International Commercial words are shortened to "Incoterms," which are globally standardized words. You should ascertain your supplier's and your own commitments beforehand.

Knowing the method of transportation your supplier employs is also beneficial. The delivery time will vary based on the mode of transportation selected. It is worthwhile to negotiate over those issues so that they suit your preferences.

8. Do you have any product quality certificates?

It is important to find out if your business partner has completed audits or holds any certificates. If you ask a few open-ended questions, you can get more information than you had expected or anticipated. This will offer you an opportunity to ask a few more questions about their certifications.

Suppose you are a company based in any European country. In that case, while importing your products into the EU, it is necessary to ensure that your product meets the necessary safety standards. It should also meet certain quality standards needed to sell in the European Economic Zone. Additionally, keep in mind that you should verify the legitimacy of the received certificate.

9. How much experience do you have with foreign trade?

In order to verify what your supplier stands for, you should enquire about their clientele, find out if they ship goods overseas on a regular basis, see if they can provide references from previous clients, or request that they provide you with a list of their clients.

Conclusion

Supplier verification and auditing is very important if you are venturing into this new territory. If you are planning to have a long-term business relationship with any Chinese company, then pay a visit to China and perform a factory audit with your own staff.

Buyers can reduce risk and obtain the products they require to satisfy their own demands by verifying that their suppliers can fulfil their requirements and spotting possible problems. You can make sure that your potential Chinese suppliers are prepared to handle the difficulties and establish a reliable supply chain by posing a few crucial questions.

A better solution than going in person to China is to hire the services of China based sourcing agents. They provide end-to-end solutions with respect to product designing, sampling, factory audits, quality checks, QC inspections, warehousing, and shipping. It is the best option for small and medium size importers that do not have the capacity to setup their own office in China.

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