We’re often asked, “How to Do Due Diligence on Chinese Suppliers?”
SupplierBlacklist.com would like to thank the lawyers at AsiaBridge.com for mentioning our blacklist in their article entitled “how to do due diligence on Chinese suppliers?”. Below are some of the highlights from their article.
You can read the full article at http://www.asiabridgelaw.com/2017/04/due-diligence-chinese-suppliers-sure-safe-business/
How To Do Due Diligence on Chinese Suppliers: Before you send money!
A good majority of the listing at supplier blacklist could have been avoided if the buyer conducted some basic due diligence. The good news is that this kind of research can be conducted for a low cost or even free.
How to be safe when buying overseas? How to do Due Diligence?
When we talk about verifying the legitimacy of a factory we are really taking a look at 3 distinct levels of security which fall under the general category of Due Diligence.
Scam Assessment: Is the company real?
If yes, move to level 2:
Corporate Assessment: Who owns the company? Does the seller have a good reputation? Are they financially stable?
If the research findings are positive, we move to level 3:
Quality Assessment: Does the supplier have the ability to product the products I want to buy?
Who Conducts Due Diligence and How Much Does It Cost
Affordable options for Scam Assessments
A Red Flag Assessment (RFA) is the ideal tool for clients who are buying from Chinese suppliers. The RFA will help you source safe, avoid scams and confirm that the terms of the deal are fair. Visit here to see a sample RFA and learn more about the service/fee structure.
Free/DIY Options For Corporate Assessments
Ask For References!
Most buyers skip this important step. But it doesn’t cost anything to ask for references and follow up with an email or phone call. Suppliers are unlikely to hand out their entire customer list, but if they can’t give you one or two happy clients…run away and find a new supplier!
Visit the Factory
This may be the single most important step in finding the right supplier when doing your due diligence on Chinese suppliers.
Sales people in China are very good at telling you what you want to hear. So visiting the factory can be a real eye opener and while you are there pick up a copy of the business license and verify that the name on the license is the same name as on the purchase contracts and matches the name on the bank account.
Free/DIY Options For Assessing the Factory’s Quality Systems
Without visiting the production site in person while doing your due diligence on Chinese suppliers, it’s hard to assess if the seller has the means to product the given product you want to buy. Do not just make it one time, but make it over and over again at the quality level, lead time and pricing point you need.
Managing Expectations about Due Diligence in China
Things change fast in China. If key managers leave or the product line is changed, good suppliers can go bad overnight.
So if you are paying for due diligence, ask how “fresh” it is!
In conclusion, if you want to protect yourself. Follow the rules the lawyers at AsiaBridgeLaw.com suggest:
Scam Assessment (Level 1): Is the company real?
Corporate Assessment (Level 2): Who owns the company? Does the seller have a good reputation? Are they financially stable?
Quality Assessment (Level 3): Does the supplier have the ability to product the products I want to buy?