Supplier Risk
Everything that can be checked before you pay is public, free, and takes an afternoon. What cannot be checked is whether they still care about your order in March.
Contents
The business licence is the first document to ask for and the one most often skated over. It is a single page, and every field on it answers a question you would otherwise be guessing at.
The name and the 18-digit unified social credit code identify one legal person and no other. The establishment date tells you how long the entity has existed, which is not the same as how long the people running it have been in the trade, but it is a fact rather than a claim. The legal representative is the person who can sign for the company, and the name should match whoever signs your contract. The registered address is where the company is registered, which is frequently not the plant. The business term shows whether the entity is still live.
Registered capital deserves a warning. Since the registration system moved to subscribed capital, the figure on the licence is what shareholders have promised to contribute, not what is in the bank. A company with a large registered figure and fifteen employees is common. Treat the number as a filing detail, not a measure of size.
Chinese company records are public through the National Enterprise Credit Information Publicity System, and the entries that matter are narrow but useful.
Court judgments are published separately, and coverage is uneven. A clean search is weak evidence; a hit is strong evidence.
The scope of business on the licence lists what the company is permitted to do. Read it before you accept the word factory.
A manufacturer's scope includes production or manufacturing of the relevant goods. A trading company's scope is sales, import and export, wholesale, retail. Plenty of suppliers describe themselves as factories while holding a trading licence, and this is not automatically a problem: a trading company that works with three factories can consolidate your order, absorb small quantities and handle the export paperwork better than a plant that ships twice a year.
What it changes is the paper. The exporter named on the customs declaration, the shipper on the bill of lading and the applicant on the certificate of origin are the entity with export rights, not necessarily the company that made the goods. If the certificate of origin has to be issued for a specific manufacturer, and the licence belongs to a trader, ask how the origin document will be issued before you pay, not after.
The registered address on a licence and the place where goods are made are often two different addresses, and sometimes two different cities. Ask for the plant address separately, then look at it.
Satellite imagery answers the first question cheaply: is this an industrial building with a loading yard, or an office tower with a lobby. A factory that claims a production line inside a business centre needs an explanation. Ask for a short video walk through the workshop with the loading door open, filmed in one take, and watch whether the machines and the people match the catalogue.
A video call has a second use. Ask them to hold the licence up next to a window. It confirms the document exists in the building, which is a lower bar than it sounds and higher than most buyers set.
To export from China a company registers with customs as a consignor and receives a ten-digit code that appears on every declaration it files. Without that registration it cannot be the exporter, and somebody else will be.
Ask for the code, and ask which entity will appear as shipper on the bill of lading. If the answer is a freight forwarder or a trading company you have never heard of, that is the name your bank, your broker and your certificate of origin will have to deal with. It is a workable arrangement, and it should be a deliberate one.
Customs also publishes an authorised economic operator list. Advanced certification is a meaningful signal about record keeping and compliance, and its absence means nothing at all, because most good small factories do not hold it.
A photograph of a certificate is not a certificate. Some can be checked against a public register in a minute, and some cannot be checked at all, which changes what they are worth to you.
Test reports are a separate matter: they belong to the batch tested and to the laboratory that issued them. Ask for the report number and the laboratory, and check whether the report covers the exact model you are ordering.
A failed check is not always a reason to walk. It is a reason to change the shape of the order.
If the licence is real but the entity is young, reduce the exposure rather than the ambition: a smaller first order, a higher inspection level, and a balance released only against a passed inspection. If the payee is a third party, get the stamped authorisation and verify it by phone. If the record shows penalties for the product category you are buying, that is the one finding worth walking away from, because it describes the thing you are actually buying.
The arithmetic helps. A deposit lost is the whole order. A delayed order is a week and a phone call. Buyers who skip the checks usually do so to protect a schedule, and the schedule is the smaller thing at risk.
Four things are invisible to a public record, and they are the four that decide whether the order arrives.
Capacity: whether the line can absorb your volume in your month, which only a production schedule or an audit answers. Consistency: whether the fifth container matches the first, which only history answers. Financial health: whether they can buy raw material before your deposit is spent, which suppliers rarely disclose and which shows up as delay. And continuity: whether the salesperson who promised you everything will still be working there in six months.
Those four are what an audit and a trial order are for. The public checks come first because they are free, fast and they filter the cases where a trial order would be wasted.
Q Is registered capital a sign of how big the company is?
No. Registered capital in China is subscribed rather than paid in, so the figure is a promise by shareholders. Headcount, plant size and years of export history describe a supplier better, and the first two need an audit or a visit to confirm.
Q The company was only established last year. Should I walk away?
Not automatically. A new entity may be the second company of experienced owners, which the legal representative's other holdings can reveal. A new company with no traceable history and a large first order is a different proposition from a new company asking for a trial order.
Q How do I check a supplier that only has a trading licence?
Ask which factory produces your item, then check that factory's licence and product certificates separately. The trading company is your contractual counterparty and the exporter; the factory is where the quality risk sits. Both need to be known.
Q Can I check whether a Chinese company has been sued?
Court judgments are published, but coverage is uneven and older cases are often missing. A hit is worth reading closely; a clean search tells you less than the database implies. For anything large, a local lawyer can run a wider search.
Q Does my supplier need export rights to ship to me?
They need customs registration to be the exporter of record. Without it, a trading company or forwarder takes that role and its name appears on the bill of lading and the certificate of origin. Workable, but it has to be arranged deliberately.
Q What if the supplier refuses to send the licence?
That refusal is itself information. The licence is a public document that any company can produce in a minute. Reluctance usually means the entity you are talking to is not the entity that would invoice you.
Related pages
Send us the supplier's licence and the shipping plan. We will tell you which entity has to appear on the export documents, and what that changes for your import entry.
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