How To Run Background Checks For Chemical Suppliers In China?
How To Check the Backgrounds Of Your Chemical Supplier?
Still Don't Know How? Let Us To Help You!
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.
Below, we will break down each point one by one.
1. Business License
Any company should obtain a business license to operate legally.
This basic license contains a wealth of helpful information, including the address, year of establishment, legal representative, registered capital, and more.
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 you cannot see the actual paid capital.
Registered capital doesn’t mean everything; the real deal is that registered capital is fully paid.
For example, something is wrong if one company is registered with 10 million CNY but has a paid-in capital of only 0.001 million.
3. Founded year
The earlier the company opens for business, the more reliable it will be.
Many companies go bankrupt every year.
The survival rate for five-year-old companies is 7% across all enterprises in China.
If one company can survive fierce market competition for many years, you will at least have the company name to ask around.
If the company is too new, very few people in the same trade are familiar with it.
4. Company size
By company size, we mean the suppliers’ office area, the number of people working there, the number of employees insured, and whether they have their own office building.
Although it doesn’t mean they are trustworthy, having their own office building is better than leasing one, right?
5. Number of Insured Staff
How many people have social insurance, considering the number of office and workshop workers?
Remember, the number of insured staff is the number of regular employees, not the number you see working there at first glance.
If your supplier’s website claims they have 1,000 employees, but their insured staff number is only 4, you may want to pay closer attention.
6. Current suppliers
It does you no harm to ask your suppliers about their suppliers.
Check if the suppliers have a stable supply chain and contingency plans in case their primary supplier cannot deliver.
It is critical. If your suppliers are sourcing from trustworthy manufacturers, they are more reliable.
7. Current customers
If your supplier already works with many customers in your country, it doesn’t hurt to ask 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
It is not something all your suppliers want to share with you.
If they are willing to share, see if you can get details for the last 5 years.
Once you have this data, compare it to see whether the margin and turnover are increasing each year.
If it’s the other way, pay extra attention.
9. Lawsuit/dispute/court notice
It is essential to check if your suppliers are entangled in any lawsuits.
If they are not, good!
If they are, pay attention to the causes of their lawsuits.
Being the defendant or plaintiff is very different.
If you notice that your suppliers are frequently in court for not paying their suppliers, it is a red flag for their credibility.
If former employees sue your suppliers for work injuries, their relations with your employees will be tense.
This tension won’t help maintain a stable product supply.
10. Credibility records
If your supplier is on the blocklist due to poor credibility, it is advisable not to work with them.
11. Equity relationships
If a famous or large company wholly owns your supplier, that supplier has a credible background, and its parent company vouches for it.
12. Trade marks registered
If your suppliers have registered trademarks, they have a good social reputation.
It is a bonus for their credibility.
13. Administrative Punishment
Administrative punishments can be issued by the Tax Bureau, Construction Bureau, Safety Bureau, or EPA (Environmental Protection Agency).
If the Tax Bureau fines your supplier, it hurts their credibility.
Stay calm if the EPA punishes your supplier lightly, one or two times.
At the very least, it means your supplier is a genuine chemical manufacturer.
In the past few years, the EPA has fined numerous chemical manufacturers, including well-known companies, and even closed some small chemical factories for failing to meet its corrective requirements.
Please note that 1~2 small fines are not a big problem.
If they get fined over 5~6 times, it is not good.
14. Credit deficiency records
If your supplier has credit deficiency records and is subject to law enforcement paying others, you should exercise caution if you still decide to work with them.
To summarize, 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.
