China sourcing: How to verify factories

 

With the Canton Fair underway, many suppliers are contacting their agents and supply chain managers to ensure that the new contacts acquired at the fair are legitimate, qualified suppliers. Likewise, many of our clients often want us to verify that specific suppliers conform to their requirements.

These requirements vary from importer to importer and they range from requiring detailed and specific audits to simply confirming that the company is for real and in good standing.  Most of the times, one concern is: “Are we dealing with a trading company or a factory?”

How do you confirm suppliers are factory owners, or, in other words, are who they say they are, and do what they claim they do? Here are a few simple ways to validate suppliers:

1. Ask for Samples: This is an integral step before placing an order anyway. However, when you order samples, you can also confirm the address it’s coming from. If the address is different from the office address they provided you, they are more than likely a trading company, not a factory.

2. Check Business Licenses: This is no-brainer for most importers. However, be sure to always check the ‘business scope’ section and see if the company islisted as a manufacturer.

3. Request a VAT (Value-Added-Tax) Invoice: The Chinese government offers VAT reimbursements for many products to encourage exports. Ask your supplier to provide a VAT invoice in order for you to apply for the drawback. If they refuse or hesitate, they are more than likely not a factory, or a very small factory, as only a real and established factory can issue these VAT invoices.

4. Question the MOQ (Minimum Order Quantity): Most factories have higher MOQs than trading companies or agents. If the MOQ is low, you are likely not working with the factory itself.

5. Request a ISO 9001 Certificate: Ask your supplier for this certificate. Not all factories have this certificate, howevermany Ifthis certificate is supplied, you know youare working with a factory. If not, the explanation may be convincing as well. Trading companies don’t use this ISO management format.

6. Ask for a Product Catalogue: Factories specialize in specific types of products. You can ask for a product catalogue listing all of the products they are equipped to supply. If there are a vast number of different products, requiring different manufacturing processes,you are more than likely dealing with a trading company.

7. Request Audit Reports: You can ask your supplier for audit reports to ensure that the name of the factory is listed on the report just as it is on the business license. If not, or if your supplier cannot provide you with an audit report, chances are you are not working with a factory.

These are just some of the ways we verify information form a distance.  With a trusted China team in place you can of course obtain a very clear profile of each supplier but the above 7 points can filter out suppliers from the USA.

How do you determine whether your suppliers are legitimate? Share your tips with us in the comments below.

 

By Jocelyn Trigueros