There are many Asian suppliers who are able to efficiently and professionally fulfil your orders, but there’s also a risk that the new supplier who ‘sounds perfect’ is actually lying in wait to scam your business out of money, intellectual property, or both.
So, how can importers be sure that their new supplier is the real deal before placing their first order and wiring a deposit? By performing a quick and effective supplier legal records check to confirm their legitimacy.
Why perform an LRC?
You’re quickly able to eliminate potential suppliers that are not legitimate or have the wrong profile.
Here are examples of red flags the check will turn up that benefit you by allowing you to avoid the wrong supplier:
- They pretend to be a manufacturer, but that’s clearly incorrect
- They don’t even have a real company, or their address is not correct
- They might register the trademarks of their customers in their own name
- They look like a shell company (empty, with no real activity)
We check existing local-language legal documents about the supplier, usually in government databases. The supplier doesn’t know they are being checked. We gather some basic information that is usually sufficient to confirm whether a company is likely to be a manufacturer (rather than an intermediary), what product types they are authorized to work on, and who the owner(s) are.
We typically include the photo of the official business registration certificate, as well as some useful comments about it (in English).
You can also expect to get this information about Chinese companies:
- Official company name
- Company registration number
- Company creation date
- Registered address
- Invested capital
- Authorized business scope
- Legal representative (in China, not the same thing as CEO/GM)
- Shareholder names, and respective shares
- Any administrative penalties? What for?
- Any registered intellectual property?
In Hong Kong, Vietnam, Thailand, and India the information we find will differ from the above which is based on Chinese searches, but it is generally similar.
You should perform this check as soon as you have sourced the supplier and are assessing whether they’re a suitable manufacturing partner. For maximum peace of mind, perform it before placing orders, wiring payments, or giving the supplier access to any of your intellectual property.
Here are a couple of examples about Chinese companies (note that we also perform this service in other countries, but not all the same information can be gathered).
In this case, the company is clearly a trading company, not a manufacturer.
And, in this case, the company might display unscrupulous behavior (they were sentenced for improper management of dangerous materials, they have registered some intellectual property that may belong to their customers). If they don’t have good explanations, it is better to avoid them.
This is reported back to you in a detailed PDF document which gives you advance warning about any issues which may affect your decision to work with them.
We just need the company name and address in Chinese (or the local language of your supplier) and a little context about your needs, such as your product type, important requirements, intended order quantity, and so on.
We can check suppliers’ companies in China, Hong Kong, Taiwan, Vietnam, Indonesia, Thailand, India, and other SE Asian countries, too.
Each country has different types of documentation up to a point, however, the overall information we provide for your assurance remains basically the same.
- China, India: much information can be gathered from government sources, directly or indirectly.
- Hong Kong, Vietnam: same, but obtaining some of the information necessitates making payments to government departments, so a surcharge of 50 USD per company will apply.
- Thailand, Indonesia: possible, too, but longer lead time.
Even if you’ve validated a supplier, due diligence needs to be performed on a product (or component) that is already developed (or is being developed) to assure that they won’t lead to costly safety issues or recalls later on.
For this, get a quotation on a 360-Degree Product Risk Assessment.
How much does the legal records check on a company cost and when are the results available?
This check is just 99 USD per company* and the results are back to you in 2 working days.
*Hong Kong and Vietnamese companies require a $ 50 USD surcharge as their systems require this fee to obtain the information.
I have completed my supplier legal records check. What else can I do to assure safe purchasing?
We advise also doing a certificate & report verification where we will take your supplier’s certificates and testing reports (for example, certificates that products conform to various safety standards required by your countries like a CE certificate or NIOSH certification) and check their legitimacy with the issuing bodies. This gives you extra assurance that their products will be high-quality, safe, and ready for export.
If the supplier’s paperwork is in order, the next step is to audit their factory. By doing so, our technicians check the factory’s processes and infrastructure on-site and assure that they are a capable production partner.
Learn more about supplier legal records checks and due diligence
You may also find these solutions and resources helpful:
- Supplier Background Check [Sofeast solution] – More in-depth than the supplier legal records check for even more security, involves physical investigation of the supplier, takes 5 working days.
- New Factory Identification [Sofeast solution] – Our supply chain management experts source the best possible export-ready supplier for your requirements.