How To Run Background Checks For Chemical Suppliers In China?

Background checklist for all chemical suppliers in China

How To Check the Backgrounds Of Your Chemical Supplier?

Above is the most thorough background checklist for all Chemical Suppliers In China.

If you want to make sure your supplier is reliable, please read on. We will break down each point one by one below.

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1. Business License

Any company should get a business license to do business.

In this basic license, you can see a lot of useful info, the address, starting year, the legal representative, the registered capital, etc.

If your supplier doesn’t have a business license, think twice before you work with them.

2. Registered and Paid-in capitial

You can see the registered capital amount on the business license, but what you can’t see is the real-paid capital.

Registered capital doesn’t mean everything, the real deal is that registered capital is fully fulfilled.

For example, if one company is registered with 10 million CNY, the paid-in capital is only 0.001 million, something is not right.

3. Founded year

The earlier the company was founded, the more reliable it is.

There are tons of companies closed for bankruptcy every year.

The survival rate of a five-year-old company is 7% for all enterprises in China.

If one company can survive fierce market competition for many years, at least you have the company name you can ask around.

If the company is too new, very few people in the same trade know them.

4. Company size

By company size, we mean the suppliers’ office area, the number of people working there, and whether they have their office building.

Though it doesn’t mean they are trustworthy, at least to have their company building is better than leasing one office, right?

5. Number of Insured Staff

Since you see the number of workers in the office and workshops, how many of them have social insurance?

Remember The number of insured staff are regular employee number, not the number you see at first sight.

If your supplier’s website says they have 1000 employees, but their insured staff number is only 4, you may want to pay more attention.

6. Current suppliers

It brings you no harm to ask your suppliers about their suppliers.

Check if they have a stable supply chain, and what contingency plans they have in case their main supplier can not deliver.

This is very important. If they are sourcing from trustworthy manufacturers you know, they are more reliable.

7. Current customers

If your supplier is already working with many customers in your country, it doesn’t hurt for you to ask around if their customers are satisfied with them right?

If they don’t have any in your own country, what about customers from other countries who can vouch for them?

8. Yearly Turnovers

This is something not all your suppliers want to share with you.

If they are willing to share with you, see if you can get details for the last 5 years.

Once you have this data, compare the data to see if the margin and turnover are getting bigger each year.

If it is the other way, pay some extra attention.

9. Lawsuit/dispute/court notice

It is important to check if your suppliers are entangled in any lawsuits.

If they are not, good!

If they are, pay attention to their identity.

Being the defendant or plaintiff is very different.

If you see your suppliers are always sued for not paying their suppliers, it is a red alert for your suppliers’ credibility.

If your suppliers have many lawsuits against them from their former employees due to work injury etc, it means your suppliers’ relations with their employees are in tension.

The tension won’t be a good thing to maintain a stable product supply.

10. Credibility records

If your supplier is on the blacklist of poor credibility, you better not work with them.

11. Equity relationships

If your supplier is wholly owned by very famous or big companies, it means they have a credible background, their mother company vouches for them.

12. Trade marks registered

If your suppliers have very famous trademarks registered, it means they have a good social reputation.

It is a bonus for their credibility.

13. Administrative Punishment

Administrative punishments can be from the Tax Bureau, Construction Bureau, Safety Bureau, or EPA(Environment Protection Agency).

If your supplier was fined by the Tax Bureau, it is a minus for their credibility.

If your supplier was punished 1 or 2 times lightly by EPA, stay calm.

At least it means your supplier is a real chemical manufacturer.

In the past few years, many chemical manufacturers, including well-known companies, have been fined by EPA, some small chemical factories were even closed for not meeting EPA’s correction requirements.

Please note, that 1~2 punishments of a small fine are not a big problem.

If they were fined over 5~6 times, it is not good.

14. Credit deficiency records

If your supplier has Credit deficiency records and they were subject to law enforcement paying others, you better be careful if you still decide to work with them.

To sum it up, those 14 points about the chemical supplier are necessary for a basic company background check.

In the next post, we will share How to Run Background Checks for Chemical Manufacturers.

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