Jul 20, 2023

How to Know if a Product Supplier is a Factory and Not a Trading Company?

When you import from another country, you mostly deal with suppliers remotely unless it’s urgent to fly down and talk to them.  Due to this, many importers wonder if their foreign suppliers are traders or manufacturers.  Like others, you can have these doubts when you are in the US and need a supplier in China.  Since physically going to the place and investigating the matter will cost time and money, you would want to explore this uniquely.  Having a manufacturing company or factory as a supplier can help you with easy customization of the products and their consistency.  Your inventory will not be at risk of getting out of stock.  That means you can continue to fulfill your e-commerce orders hassle-free.  So, let’s figure a way out.

The registered capital of the supplier

If you let experienced China sourcing agents handle these things on your behalf, most of your workload will reduce.  You can focus more on improving your business’s efficiency and footprint.  Otherwise, you will need to hire an in-house person or do it yourself to investigate these matters.  Suppose you want to verify if a supplier is a factory or not.  Some advise that a factory will have more registered capital recorded against its name than a trading company.  In truth, it can be over CNY 500,000, no matter who it is.  If you have a local source agent in China, you can tell them your requirement, and they will work on this. 


Another way to ensure this is by asking for samples from chosen suppliers.  You can dig into the quality of the product and find the company’s office address.  If the registered address in the business license matches the office address, you can assume it to be a factory and not a trading company.  Again, there is a hitch.  Many countries like China don’t mandate that the factory’s and the registered business’s address have to be the same.  Many small-mid-sized companies rent places without updating the records.  Then, some may have workshops in one city and offices in another.  So how do you get there?  Of course, collaborating with a sourcing agent agency can be the best thing to redeem yourself of this headache.

Additional points for consideration

When you scan a potential supplier’s business license, you can focus on ‘business scope.’ It contains terms like produce or manufacture.  A trading company will not have this.  Since the information can be in Chinese, your sourcing agent can easily manage this.  You will not have to look for contacts or hire a translator, who would demand a few dollars for this job.  As sourcing agents help find suppliers, selecting someone based on your requirement will be their duty.

Another pointer can be MOQ (Minimum Order Quantity).  A trading company will be ready to take smaller orders, but a factory will take only larger orders.  Suppose you ask your supplier for 300 glass mugs.  If they are traders, they will accept it.  But factories will only go ahead if you order at least 1000 mugs.

As evident, it’s a lot of additional work.  You can hand over these tensions to your local sourcing agent in China.  They will take care of these and various other aspects on your behalf for a reasonable fee.

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