14 Risks You May Ignore When Importing from Alibaba

alibaba risks

Table of Contents

Risks in Supplier Searching

Risk 1: Forget to Check Whether It Is a Middleman

Risks

  • Higher costs
  • Little control over final quality of the product
middle.man

How to Avoid

Hire a third-part agent for an on-site inspection.

Real-Life Case Analysis

Suzhou Hi-Liang New Energy Technology Co., Ltd is a verified supplier on Alibaba and has been selling for 4 years.

hi liang.20.yrs 1
Suzhou Hi-Liang on Alibaba

But we didn’t find “manufacture” in the business scope section of their business registery information. And it is against common sense that a company with a Paid-In Capital less than 100 thousand RMB is capable of manufacture electric bikes. Therefore, they are just a trading company disguised as a manufacture.

hi liang.lies .2
Business Info of Hi-Liang

Risk 2: Easily Buy Suppliers’ Lies

Suppliers on Alibaba often lie about their establishment date, scale, and production capacity.

Risks

  • Trust a small and weak supplier when you shouldn’t
  • Poor product quality
  • Potentially higher cost due to higher defect rate
  • Delay of delivery

How to Avoid

  • Hire a sourcing agent.
  • Cross-check their profile with public information from various sources
  • Buy a company verification report from a third-part company

Real-Life Case Analysis

changzhou dengyue sponge alibaba profile
Changzhou Dengyue Sponge Co., Ltd.

Changzhou Dengyue Sponge Co., Ltd claims to have over 100 employees on the Alibaba profile page. Just on the same page, according to the third-party verification service, it has 11 – 50 employees. This discrepancy should have set off an alarm already. After a little more research, we found that they only have 1 employee insurred.

changzhou.dengyue.sponge.info
Business Info of Changzhou Dengyue Sponge Co., Ltd.

Risk 3: Forget to Check Authenticity of Suppliers’ Certificates

Risks

  • Products not safe to use
  • Goods get confiscated at the customs of the importing country
  • Illegle to sell in the importing country
  • Heavy fines or product recall
  • Potential fraud
  • Losing money

How to Avoid

  • Verify their certificates by yourself
    • Whether the certicate is genuine
    • Whether the certicate has expired
  • Use a third-party Chinese company verification service

Real-Life Case Analysis

forged.certificate.0
An example of forged CE certificate

We checked the CE certificate provided by Changzhou Victory Machinery on the website of the isussing organization. Surprisingly, we found the certificate was issued to another company called Beirui Industrial Co., Ltd. The one on the left was obviously forged by Photoshop.

Risk 4: Trust Its Alibaba Selling History Too Soon

Risks

  • Low product quality
  • Delay of delivery

How to Avoid

  • Check the establishment date of the company. Compare that with the information on their profile page
  • Use a Chinese company verification service

Real-Life Case Analysis

Here is a post on a Chinese website selling/leasing a 7-year-old Alibaba seller account.

selling.alibaba.old .seller.account

When Negotiating

Risk 5: Negotiating without Product Specification Sheet

Risks

  • Unable to get precise quoations when negotiating
  • No reference for product quality inspection and control during production
  • Making it hard to resolve a dispute
  • Receiving products that are far from your expectation
  • The manufacturer may use inferior raw materials

How to Avoid

Create a full product specification before you start searching for suppliers.

Risk 6: Not Asking for Samples

Risks

  • Without samples, it is hard to make sure if the factory is competent to produce the products.
  • There will be no reference when disputes arise.

How to Avoid

Ask for samples before placing orders. Pay when necessary.

Signing A Contract

Risk 7: Not Specifying Price in Full Detailed Form

Risks

  • Extra costs may occur unexpectedly, potentially making your business model unprofitable
  • Scammers could trick you into paying more outside of the contract

How to Avoid

Specify all possible costs in detail in the price clause of the contract

Risk 8: Not Specifying Shipping Terms (Incoterms ®)

Risks

You may be tricked into taking more obligations and risks

How to Avoid

Risk 9: Forget to Check Authenticity of Company Stamps/Chops

Risks

  • Being scammed
  • Contract stamped with a fake chop would be invalid
  • Unable to protect your own right if anything goes wrong

How to Avoid

Read our article on Chinese Company Stamps

Payment

Risk 10: Full Payment in Advance

Risks

  • Losing all the money in case of fraud or dispute
  • Losing advantange in case of quality problem or further negotiation

How to Avoid

Do no make full payment before the deal. Pay a deposite of 30%, and balance the payment when you finish the final quality inspection before shipment.

Risk 11: Using Insecure Payment Methods

Risks

Paying to Offshore Accounts of a Company

Could be troublesome if a dispute happens. The defendant is overseas, which is out of the scope of law enforcement of mainland China.

Paying to a Personal Account

Very hard to retrieve your money in case of a dispute.

How to Avoid

  • Only pay via secure payment methods like:
    • Alibaba Secure Payment (Escrow)
    • Paypal
    • Telegraphic Transfer (T/T) to Verified Mainland China Compnay Bank Account
  • Do not pay to an offshore account or a personal account
  • Verify the title of the account you are paying to, make sure that it completely matches the name of your seller.

Risk 12: Being Asked to Pay More After Placing an Order

Risks

  • Unexpected costs may make your business model unprofitable
  • Potential scam

How to Avoid

Specify all possible costs in the price clause of the contract

During Production

Risk 13: No Quality Control in Production

Risks

  • Higher defect rate, adding cost
  • Causing delay of delivery
  • Causing disputes
  • Receiving goods of low quality

How to Avoid

  • Hire a third-party quality inspection agent
  • Put quality control checkpoints in you product specification
  • Conduct quality inspection at various stages of the product
  • Iterate and improve the process based on the information collected in quality inspection

After Production

Risk 14: Not Conducting Quality Inspection Before Accepting the Goods

Risks

Lose the chance to claim for recovery of loss in case of broken products

How to Avoid

Always inspect the quality of the goods when you receive them.

Wrapping Up

After all those years of growth and development, Alibaba is not a jungle like it used be. It’s still full of traps and pitfalls and scammers. Do your due diligence and stay safe when sourcing from Alibaba.

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