I cannot take credit for much of the following - it was posted anonymously in a business forum that I belong to and is some of the best advice anywhere on how to verify Chinese suppliers or buyers. If the anonymous poster to that forum would like to contact me and have his bio added to this valuable information, I would be happy to do so. I have edited the remarks to some degree, but the majority is just as it was posted:
Most Chinese business people are good and trustworthy, but like bussinesses and individuals in all countries, some fraudsters or liars do exist. A lot of business people outside of China are often confused by the business registration and credit status of Chinese companies and find it difficult verifying information about them. Based on my 8+ years of business experience *(the forum poster) with our Chinese suppliers and partners, I have summarized some useful and practical tips as follows:
- Checking the contact information - In order to avoid being traced by law enforcement authorities, most scammers will not offer genuine registration information online. They will provide a false company address, telephone number and fax number or persuade buyers to contact them by mobile phone only.
You should be aware of the companies that only provide you with mobile phone number (such as 86-1580000 0000). Normally, legitimate businesses will use a land line telephone instead of mobile phone number. Some Chinese friends told me that you can buy hundreds of mobile phone numbers if you like, and there are no restrictions or limitations. That is why scammers always use mobile phone numbers instead of landline telephones. Take a standard China telephone number for example, such as 86 755 3333 3333, “86” is the country code of China, “755” area code, and “3333 3333” telephone number. Therefore, you can do some basic check of the location of the telephone number using “area code”.
- Checking their business license and credit status - Legal companies in China have to register with the Chinese government authorities and obtain a unique company registration number. If your business partner cannot offer you a unique company registration number, it is risky to deal with them. To check the registration number your supplier provided, you need to visit their local administrative government website with the number they provided. However, you should be aware that most government websites in China are written in Chinese. You can also contact their local Bureau of Industry & Commerce, which is the only government organization responsible for the registration of legitimate companies or enterprises in China. You can ask friends in China to help you verify this company.
You can also use a third-party authentication service company in China to help you verify information, such as OrientCredit, SMR, Inter-credit, or some other credit reporting companies in China. NOTE FROM RON COBLE: you may also wish to contact a Chinese trade representative at the Chinese embassy in Washington DC - you can find their contact details at http://www.embassy.org/
- Incredibly low prices or high commission rate - most Chinese scammers will lure buyers with very low prices. If the prices they offer are too good to be true, you should investigate why their prices are so low. Most scammers in China make a profit by selling replicas or fakes of branded goods to overseas buyers. This is very risky because the goods could be confiscated or detained by Chinese customs if they are considered illegal in China.
- Payment and shipment terms - the scammers never accept L/C as a term of payment. They prefer Western Union, and T/T etc. They also never deliver goods through formal channels; preferring instead to deliver samples Express by Fedex, TNT, EMS to avoid examinations from Chinese customs. Scammers never accept Letter of Credit (LC) payments but there are some small factories they don't have their professional foreign trading staff, so they do not dare to accept LC as they could be refused by negotiating bank, and because they are small and do not have enough operating funds so they would like to receive T/T 30% or 50% in advance. For sample orders and smaller shipments, consider using an escrow service or Western union.
- Visit their company or factory in person - everybody agrees that the best and ultimate way is to visit these companies; you can't know much about a company unless you visit it. But I think this is some kind of second stage of negotiation. Because you may receive a lot of offers by many different Chinese suppliers, and it’s impossible for you to go to all of their factories one by one and therefore you should narrow your selections before deciding to visit their office or plant in person.
PS: During (forum poster's) years of business experience with our Chinese partners, we found that it is very important to acquire the credit information of them at the first stage and then you may determine whether you to resume the negotiations or not. Because you should not trust the information published by suppliers on B2B website because in most instances it is misleading. Some researchers have said (I am not sure about the data, because I am not a researcher.), only about 53% of verified companies are the same as they described in B2B Websites; 21% of them are overstated for their business condition; and 26% of those companies, even some Gold Members in Alibaba turned out to be a scammer. Finally, there is an old saying, “An ounce of prevention is worth a pound of cure”; you should always keep in mind!"