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Qualifying Your Chinese Supplier: Some Basics
Finding a China product supplier has never seemed easier. We now have a whole host of both foreign and Chinese online services to speed up this process for you, the buyer. It’s almost like speed dating.
However, as with beginning any serious relationship, you should take it slow.
Qualifying your China product supplier
We have warned you before (here and here) about the danger of buyers being seduced by the ease of finding Chinese suppliers online to the point of not conducting sufficient or any due diligence. What exactly do these online product “matching” services do to “verify” suppliers and to what extent can you rely them? Though there is assuredly a variety to the process the various online companies use to to promote “top suppliers” to you, it is important to know what that process is:
- Is the supplier merely purchasing a more expensive advertisement package with better search result placement?
- Is anyone visiting the suppliers in person?
- Does the customs data provided trace back to the actual factory that produced the product or to a broker?
- What is the legal name and banking preferences of the company that will eventually invoice you?
For all but the smallest purchases, we encourage companies that are outsourcing manufacturing to China-based suppliers to do the following:
- Do some hard work yourself. Spend the time to travel to go and see the potential factory and to meet people face to face. As we wrote in China Business Due Diligence, when you visit, take special notice of everything: factory details, names, signs, materials on site, etc.
- Bring a Mandarin speaker with you that you trust. This person should not actually be one of the parties in the deal, and it is best if you can arrange for a stealth translator.
- Conduct thorough research on the potential supplier before you sign anything. Know the exact Chinese company that will sign the contract, who actually owns the company (and its parent company), and get copies of all company documents and certifications, including the Legal Representative’s ID. Do not be afraid to physically inspect the original ID, as this is what Chinese businesses do.
- Confirm how payments will be made. Make sure the bank account information provided matches the company name. Also, understand if you will be paying a Mainland or Hong Kong bank, and what the ramifications are of that choice.
- Get your contracts in order. See China Contracts That Work.
- Don’t get too excited. Taking it slow means seeing through the dinners and nice words, and not getting caught up in ceremony and platitudes and the thrill of doing business internationally or in greatly reducing your costs. Be polite, but do not being easy. These guys are pros at working Westerners, and you just gotta keep your head.
Moving too fast results in only the Chinese partner being rewarded. It’s never the other way around.
The post Qualifying Your Chinese Supplier: Some Basics appeared first on China Law Blog.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.
Source: http://www.chinalawblog.com/2015/04/qualifying-your-chinese-supplier-some-basics.html
