Most sourcing disasters are not caused by bad luck. They are caused by a buyer who never established, in writing and in evidence, three basic facts: that the company exists, that it can actually make the product, and that the person answering the messages has authority to commit the factory to a schedule. This guide is the checklist we run before a supplier is worth a sample order.
Work through it in order. Each step is cheap; the steps get more expensive as you go, and each one is designed to kill a bad supplier before you spend money on the next one.
Step 1 — Establish that the company legally exists
Ask for the business licence (营业执照). Every legally registered Chinese company has one, it carries a unified social credit code (18 characters), and a supplier that hesitates to send it has already told you something important.
From that document, read three things:
- Legal name in Chinese. The English name on the website has no legal standing. Contracts, invoices and bank accounts must all match the Chinese legal name.
- Registered capital and registration date. A company registered three months ago is not automatically bad, but it changes what you should risk on it.
- Business scope (经营范围). If the scope says wholesale and retail only, with no manufacturing category, you are almost certainly talking to a trading company.
Then check that the bank account the supplier wants you to pay matches the legal entity name exactly. A mismatch between the contract party and the beneficiary account is the single most common structure in sourcing fraud — see Payment terms and how to avoid common scams.
Step 2 — Decide whether you need a factory or an agent
Trading companies are not fraud. Many are excellent, and for a small first order across several product categories, a good trading company is often the correct choice: they consolidate, they speak English, and they absorb the coordination burden.
What you cannot afford is not knowing which one you are dealing with. The cost structure, the negotiating room, the quality escalation path and the tooling ownership are all different.
Questions that separate them quickly:
- “Which building is the production line in, and can we do a video walk of it today?” A factory can improvise this. A trading company will schedule it — because it has to borrow someone else’s floor.
- “What else do you produce on that line?” Factories answer with processes. Traders answer with product categories.
- “Who owns the mould/tooling after I pay for it, and where is it stored?” A factory answers instantly and specifically.
- “What is your monthly capacity in units for this process, and what is your current utilisation?” Vague answers here are a real signal.
Ask for the export licence and check whether the supplier exports under its own name or through an agent. Neither is disqualifying; both change your paperwork.
Step 3 — Verify capability against your product, not their catalogue
A factory that makes something superficially similar to your product may not be able to make your product. Capability is specific.
Send a technical package — drawings or reference samples, materials, tolerances, finish, packaging — and ask for a written response that includes:
- the process route they would use (which operations, in which order, in-house or subcontracted);
- which steps are subcontracted and to whom (plating, heat treatment, printing, and specialty finishes are commonly outsourced even by real factories);
- the equipment that will run the job;
- the inspection points they run in process, not just at the end.
The written answer is the deliverable. A supplier that responds to a technical package with a price and nothing else has told you they intend to buy your product from someone else.
Step 4 — Check the certificates rather than collecting them
Certificates are easy to send and easy to forge. They are only worth something if you verify them.
- Management system certificates (ISO 9001 and similar) carry a certificate number and an issuing body. Certification bodies publish searchable registries; use them.
- Product test reports must name the exact model, the standard tested against, and the date. A report for a different model is not a report for your model.
- Test reports from major labs carry verification codes or QR links that resolve on the lab’s own domain. Follow the link from the lab’s website, not from the PDF you were sent.
If your product is regulated in the United States — children’s products, anything with food contact, cosmetics, electronics with radios — the supplier’s certificate is not your compliance. The importer of record carries that obligation. Read US import compliance basics before you assume a supplier’s paperwork covers you.
Step 5 — Look at the factory, remotely or in person
A live video walk is the cheapest high-value check available. Ask for it unannounced, at a time you choose, and ask the person holding the camera to walk a continuous path: gate, production floor, in-process inspection, warehouse, packing area.
What you are looking for is not a spotless facility. You are looking for coherence:
- Does the floor area match the capacity they quoted?
- Are there work-in-progress goods, or is the floor suspiciously empty?
- Do the machines match the process route they described in Step 3?
- Is anyone inspecting anything, and is there a written record at the station?
A third-party factory audit — a supplier-qualification audit rather than a social-compliance audit — is the paid version of this, and for a large first order it is usually worth several times its cost. If you are going to China anyway, our Canton Fair and sourcing trips guide covers how to structure factory visits around a fair schedule.
Step 6 — Test the relationship before the money
Before the first purchase order, run three deliberate tests.
The specification test. Send a small, unimportant change to the specification mid-quote. A capable supplier tells you the cost and schedule impact. A weak one says “no problem” to everything — which means you will discover the problem after production.
The bad-news test. Ask what happens if a shipment fails your inspection. The answer you want is a process: rework terms, who pays for re-inspection, how the delay is handled. The answer you do not want is “our quality is very good.”
The responsiveness test. Note how long replies take and whether the same person stays on the account. Sales turnover on your account during production is a schedule risk, not a courtesy issue.
Step 7 — Write down what you agreed
Everything above is worthless if the agreement lives in a chat thread. Before you pay a deposit, put in one document:
- product specification, with drawings and an approved reference sample identified by number and date;
- acceptance criteria, including the inspection standard and the sampling plan you will use — see Pre-shipment QC: a one-page protocol;
- price, currency, payment terms, and the exact bank beneficiary;
- Incoterms and who arranges what — the shipping side is covered in Shipping from China;
- lead time, and what happens when it slips;
- tooling ownership and where the tooling lives;
- packaging, labelling and country-of-origin marking requirements;
- intellectual property terms — see Protecting your brand and IP when sourcing.
A short field checklist
Copy this into your supplier file and answer every line before the deposit:
- Business licence received; Chinese legal name recorded; unified social credit code recorded.
- Business scope includes manufacturing of the relevant category.
- Beneficiary bank account name matches the contracting entity exactly.
- Factory or trading company — decided, written down, and priced accordingly.
- Process route received in writing, including subcontracted steps.
- Certificates verified at the issuing body, not just received as PDFs.
- Live video walk completed; floor and equipment consistent with the quote.
- Reference sample approved, numbered, dated, retained by both sides.
- Acceptance criteria and inspection standard agreed in writing.
- Tooling ownership and storage location agreed in writing.
None of these steps require a large budget. They require doing them in order, and being willing to walk away at any point — which is the only real leverage a first-time buyer has.
