How to Validate That a Chinese Supplier is a Factory and Not a Trading Company?

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How to Validate That a Chinese Supplier is a Factory and Not a Trading Company?

The one and only question that pesters companies are- “are we dealing with a factory or a trader?” Since Chinese suppliers assert to be a factory, comprehending their statements is very much difficult. To help you filter out, here is a list of ways, to verify the same.

1. Scrutinise its business license

The easiest way to decipher is by checking out the Chinese supplier’s license. Usually, words such as “manufacture” or “producer” float on its business scope. This is something absent in a trader’s business license.

2. Take a look at VAT invoice

The most effective way to distinguish between a factory and a trading company is through a VAT invoice. The Chinese government often encourages export by issuing drawbacks on exporting products. However, to take advantage of the same, a 17% VAT invoice is mandatory. This is only possible in a factory, so if the supplier you are seeking fails to assist you with the same, then stay away from such a supplier. Nonetheless, if it hands over the same, check whether it has the company name mentioned over it. If by any chance, it matches the name written on the supplier’s license then you can be sure of its authenticity.

3. Make sure it has a higher MOQ (Minimum Order Quantity)

The MOQ of a factory generally lies around 1000. Only a trader accepts orders less than that. So to ensure whether you are dealing with a trader or a factory, test your supplier by placing a small order. If it accepts your contract, then be assured it’s a trading company. Stay away from them, if you wish you to capitalise on Chinese sourcing.

4. Look through the product catalogue

A product catalogue shows the kinds of goods manufactured by the supplier company. If by any chance, it manifests a huge range of product, then the concerned company is undoubtedly a trader. A factory usually supplies fewer varieties and specialises in manufactures of commodities, in large numbers.

How to Validate That a Chinese Supplier is a Factory and Not a Trading Company

5. Vet factory audit reports

Generally, suppliers brag about their past orders, the ones made to world companies such as Walmart and similar such corporate giants. If such is ever the case, always ask for their factory audit reports, to verify the company name against that mentioned on their business license. A slight hesitation on their part will clearly prove that theirs is a trading company and not a factory.

6. Look over for ISO 9001 certification

Trading companies generally don’t have ISO 9001 Certification. Only a factory boasts such a certification but nowadays, trading companies issue the same and specialise in a single product category. In such a situation, it becomes quite difficult to distinguish between a factory and a trader. However, since the prior usually owns it, checking for an ISO 9001 certification clears up the confusion to some extent.

7. Check the supplier’s exact location in China

Almost every product has its own industrial location. Generally, the entire supply chain of those products lies in one city. As a result, factories are positioned in those cities, instead of other places, to save excess cost. Now, if the supplier you are seeking, functions from a different location, then it’s probably a trader.

Although verifying seems easy here, in reality, it’s not a job for amateurs. Only a China sourcing agent qualifies for it. From validating the authenticity of a Chinese supplier to determining whether it’s a factory or a trader, the agent does it all.

This brings us to the conclusion that ‘how to check company is registered or not?’ is not the only query searched on Internet the most. In fact, how to differentiate between a trader and a supplier factory is another question flooding the search engines now. However, with this write-up, the doubts are likely to clear up.

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