Tips: Method of verifying suppliers in Alibaba.

Quoting from [wccholdings]:

I think you make a lot of good points in your post and it is likely very helpful for new comers.

There are a few points that I disagree with so please see my opinions below:

[There are many forms of POP, most commonly, as the supplier for past shipping records such as Bill of Lading with the same supplier name on it as shipper. If the supplier cannot provide one, it is very likely that the supplier is fake.]

I have only recently come around to the practice of getting past BOL evidence from suppliers. I agree that it can be helpful.

If you are talking BOL then great, but the same does not extend so well into courier tracking numbers from past shipments. Scammers will send stuff to buyers, just not what the buyer actually paid for. So even a scammer can provide a whole list of customers they have shipped to. Perhaps ask to see two different tracking numbers to the one customer at least a month apart as that would indicate repeat business and therefore product satisfactory.

[Rule #2: Ask for company registration certificate and export license. All companies in China require these two documents to export goods oversea. ]

Company registration - yes, export licence - no. Of course you can ask for the export licence and some factories will be able to produce this - in those cases great it will help you.

But many legit suppliers do not apply for export rights as there are tax advantages to shipping via a third party trading company. So just because a factory does not have export rights does not make them non-legitimate. In fact my guess is that probably 70% of factories that welcome foreign trade don't have export rights in China.


[Rule #3: If supplier sells branded products such as Apple computer...etc, always ask for Authorization Letter. If the supplier had provided one, check with Apple headquarter for example.]

Not bad advice as it will achieve the aim, but technically backward.

In order to buy from an authorized manufacturer of brand name products YOU the buyer need to be authorized to buy the product by the brand name company i.e. licenced reseller. Due to contractual agreements the factory cannot sell to you unless you can prove that you have the rights from the brand name holder.

If you were licenced to buy then you wouldnt need the factory to prove themself to you as you wouldn't be searching out such suppliers at alibaba - the brand name company would give you their contact details as you would be one of the brand name representatives.


[Rule #4: Never pay supplier with Western Union, Paypal....etc. The best payment method is Bank-to-Bank (e.g. T/T). Always sign a purchase contract with the supplier first.]

Agreed. Once you have completed your due dilligence on a supplier then TT is a standard payment method for a first order of USD5,000 or so. Make sure you pay to the company named on the registration certificate mentioned earlier OR the company named on the export certification if they are dealing through an outside trading company. Don't pay to accounts of individuals.


[Rule #7: Gold supplier is not Gold supplier. They are Gold suppliers because they pay the money.]

This is a very important warning in the case of alibaba as this is VERY misleading here.

Replying to wccholdings:

I fully endorse your Rule #7 and it's worth repeating:

"Gold supplier is not Gold supplier. They are Gold suppliers because they pay the money. Anyone can become a gold supplier or trust pass member in Alibaba as long as you pay. Alibaba doesn't know how to verify creditability of its member. Do not believe in it. This is purely a marketing thing from the management of Alibaba; it is a way for them to make money. It doesn't protect the buyers."

I know Aussie has provided some useful resources, but does any one have other resources for pre-shipment inspectors or Chinese Helpers?


Thanks,


Quoting from [Ranger]:


Replying to [wccholdings]: Actually you have some valid points but, sorry, There are some holes in your rules. Mainly #1 and #2


#1 POP is never a BOL it can serve as a reference but never POP the only true POP or Proof of Product is by a 3rd party inspector or helper in verifying that the supplier actually has the product.


#2 Mainland China has no central on-line database to verify business registrations. Of the places you can check I know of only 3 that are in English. Besides this these numbers and documents can be faked. The facts are that in any country this is only proof that a company is registered not that they can or will deliver products. Once again the only way to be sure you are getting what you paid for is a pre-shipment inspection. Furthermore there are countries that have no databases at all.


Ranger

Quoting from [wccholdings]:


I have been in the trading business for the past 5 years, and I have seen many people got cheated by fake suppliers in Alibaba. Hence, I have decided to write something here to let people know the best method of due diligence before anyone decided to wire money or begin the payment process.


Rule #1: If you are a buyer, always ask for proof of product (POP) before talk about price, quantity, spec...etc with the supplier. There are many forms of POP, most commonly, as the supplier for past shipping records such as Bill of Lading with the same supplier name on it as shipper. If the supplier cannot provide one, it is very likely that the supplier is fake. My suggestion is DO NOT BUY FROM SUPPLIER WHO CANNOT PROVIDE A POP, WHY SHALL WE BUY IF THE SUPPLIER NEVER ABLE TO PERFORM??


Rule #2: Ask for company registration certificate and export license. All companies in China require these two documents to export goods oversea. Once you have the copy of these two documents, you can check the number against the official China Government database for free via the internet. If the results on the database is not the same as what the export license and company registration certificate indicated, it is very likely this supplier is fake. This does not only apply to China, it also apply to other countries such as Hong Kong, anyone can conduct a simple background check with these database. (e.g. for HK, visit http://www.icris.cr.gov.hk).


Rule #3: If supplier sells branded products such as Apple computer...etc, always ask for Authorization Letter. If the supplier had provided one, check with Apple headquarter for example.


Rule #4: Never pay supplier with Western Union, Paypal....etc. The best payment method is Bank-to-Bank (e.g. T/T). Always sign a purchase contract with the supplier first. Once you have paid the money and the supplier cannot perform, then a Bank-to-Bank transfer with a fake supplier will end up like a BANK FRAUD. You can take action on the fake supplier and the fake supplier can end up to jail in China. Bank Fraud is a criminal offense, set them up before you wire the money. I have been sending fake suppliers to jail, protect yourself!


Rule #5: If the supplier quote you in CIF, then ask them for FOB price. Call up the shipping company and find out if the difference in CIF and FOB realistic. Most of the time, you will find that the shipping price fake supplier quote is unrealistic to what shipping company/forwarder quoted. These are likely to be fake suppliers.


Rule #6: Do not believe in ASWP (Any safe world port). Many suppliers quote to buyers with a CIF ASWP term. This means the shipping price will be unchanged regardless of destination. Do not believe in this, no such thing.


Rule #7: Gold supplier is not Gold supplier. They are Gold suppliers because they pay the money. Anyone can become a gold supplier or trust pass member in Alibaba as long as you pay. Alibaba doesn't know how to verify creditability of its member. Do not believe in it. This is purely a marketing thing from the management of Alibaba; it is a way for them to make money. It doesn't protect the buyers.


Rule #8: For those who did not know. Anyone can actually check the credibility of a supplier through the bank. Ask your bank to perform a "SOFT PROBE" which is a MT103. Your bank can tell you the account balance of the supplier in two days. However, you need to get the banking details from the supplier first to conduct such investigation. This will cost you a small amount of money, but a great way to protect yourself.

Quoting from [wccholdings]:


Rule #2: Ask for company registration certificate and export license. All companies in China require these two documents to export goods oversea. Once you have the copy of these two documents, you can check the number against the official China Government database for free via the internet. If the results on the database is not the same as what the export license and company registration certificate indicated, it is very likely this supplier is fake. This does not only apply to China, it also apply to other countries such as Hong Kong, anyone can conduct a simple background check with these database. (e.g. for HK, visit http://www.icris.cr.gov.hk).

Checking a company registration when dealing in China is only a small part of due dilligence. Of course the main aim of having a valid registration certificate is that you can identify the seller but it in no way should be relied upon as an indication that further due dilligence is required.

Unless you read Chinese characters asking for a business registration certificate from Chinese suppliers won't be very helpful. If you can arrange for someone to help you then you need to ensure that the Chinese name on the certificate is the same as the Chinese name of the company that you are dealing with. In most cases you may only know the English name of the company but as that name is generally not even registered the Chinese name is the important one. Check the suppliers website or name card for their Chinese name.

To check the authenticity of the certificate you will need to contact the local authorities in that city. The 'gong san ju' should be able to help. Ask your supplier for a link to the authorities website in their city - if they are registered they will be able to tell you this. Then contact the authorities - but once again this will need to be done in Chinese.

Once you have verified that the certificate is correct for the company then you are 10% there to protecting your investment.

Regarding free based email addresses - in China this is very much standard and is in no way an indication of a scammer. Many companies have website with no email addresses attached as they can get unlimited storage from the free servers for free. If you want to ensure that the person you are dealing with really works for the company that you want to deal with then pick up the phone and call the office number listed on their website - not a mobile phone.