I wrote before about ways to run a background check on a Chinese company. We recently had an interesting experience and it serves as an interesting example for those buyers who are afraid of lies and trickeries so common in this part of the world.
One of our regular clients was planning to buy for $50,000 of motorized vehicles. They asked us to run a quick check on the supplier’s company as a safety measure.
Apparently, all was in order. The supplier has a well-designed website, an Alibaba Gold status, and an “onsite check” label by Alibaba that includes a business registration number and an ISO 9001 certification.
One of our analysts checked the supplier in a bit more depth. Here is what we found:
- The business license information was in fact that of another factory. Same thing for the ISO 9001 certificate. These documents are all in Chinese so most oversea purchasers don’t verify anything.
- The supplier was operating without a company!
- We asked the factory whose name was on the documents for information. It appears the “supplier” is simply a couple of people working in an apartment.
- A Google search revealed one complaint on the Internet.
To confirm our findings, we called the supplier directly. Their reaction confirmed our suspicions. The supplier hung off after 3 simple questions.
This story begs a few questions:
Is it unsafe to work with a trading company? Not much more than working directly with a factory.
How about a small trading company that consists of 2 guys in an apartment and that pretends to own a factory? Yes it is definitely something to avoid!!
How about a supplier that discloses nothing about their Chinese company name and shows another company’s legal documents? Prepare for the worst.
How do suppliers with a poor reputation keep their Alibaba Gold status for years and keep fooling foreign buyers? Very easy. They keep the same Chinese company name and they change the English translation. In China, the English name of a company is not official and can be changed at will. (Same thing for people’s names, by the way.) That’s why foreign buyers should check the reputation of the Chinese company name.
When should importers proceed with a background check on their suppliers? Usually it is done before issuing a first order. In case you have confidential documents (e.g. about your cool new product) to share with a new supplier, doing a background check first will also ensure you don’t send the information to a broker that will then send it to 15 manufacturers… while signing your NDA that is probably not enforceable in China.
What do you think?