Business Support · China
China Supplier Scam: 4 Steps to Verify and Recover
Learn how to verify a Chinese supplier, preserve evidence, and decide the next steps if they stop responding. Take action now.
· 8 min read
Immediate Actions to Take
When dealing with a Chinese supplier who has stopped responding, follow these four steps before taking any further action:
- Stop Additional Payments: Do not make any new payments until you have verified that the contract party, invoice issuer, and bank beneficiary match, and the production status is supported by real-time or on-site evidence.
- Preserve Existing Evidence: Export all chat and email communications, save contracts, purchase orders (POs), specifications, signed samples, payment, and logistics documents. Archive web pages and factory photos.
- Divert Silence into Possible Causes: Consider the following possible reasons for silence: raw material procurement, salesperson change, peak season backlog, internal rework, hidden subcontracting, and true disconnection. Use multiple red flags to determine the next steps.
- Choose Verification Levels: Start with a paper check to verify the registration and transaction parties. If this does not provide enough information about the factory's operation, consider an on-site visit.
Risk Signals and Required Actions
Here are eight common risks, their signals, and the actions you should take:
- Fake Factory Shell: If the supplier only provides a business license image, cross-check it with official records and request real-time or on-site evidence. If the paper check does not match or cannot prove the existence of the facility, stop additional payments and upgrade your verification.
- Trader Posing as Manufacturer: If the supplier claims to have their own production line, request real-time or on-site evidence of the production line, work-in-progress, and factory. If the evidence only proves a trading relationship, do not assume it is a manufacturer.
- Good Samples, Poor Bulk Orders: If the samples have passed but the bulk order quality is poor, use signed samples, specifications, and pre-shipment inspection (PSI) records. Stage payments and hold the final payment until the PSI is complete.
- Sudden Bank Account Change: If the supplier changes the bank account at the last minute, compare the new and old accounts, contract party, and invoice issuer. Do not make payments until all three match.
- Hidden Subcontracting: If the production progress cannot be continuously proven, request dated production evidence or an on-site visit. Ask for clarification on whether there is subcontracting; if the supplier cannot explain where the goods and processes are, upgrade to an on-site visit.
- Fake Bill of Lading (B/L): If the supplier only provides an image of the B/L, keep it along with other documents such as the contract, PO, payment, and logistics files. Do not rely on a single image to confirm shipment.
- Fake Certificates: If the supplier only shows certificate images, ensure they correspond to the transaction and product specifications. If the correspondence cannot be established, count it as one red flag but do not conclude fraud based on this alone.
- Disappears After Deposit: If the supplier stops responding after receiving a deposit, gather payment receipts, SWIFT, bank beneficiary details, chat exports, and email headers. Stop additional payments and proceed with the next steps in the escalation ladder.
Diverting Silence into Possible Causes
Before concluding that a supplier is a scam, consider the following six possible causes for their silence:
- Raw Material Procurement: Request records of raw material procurement and arrival. Upgrade your assessment if the supplier cannot provide these records and cannot show dated production evidence.
- Salesperson Change: Ask for the new contact person and the handover status. If no one takes over the contract, PO, and paid orders, escalate your assessment.
- Peak Season Backlog: Request the current production schedule and the position of your order. Escalate if the schedule and production evidence are contradictory.
- Internal Rework: Request the rework status and dated work-in-progress evidence. Escalate if the supplier cannot explain the progress of the semi-finished products.
- Hidden Subcontracting: Ask if the supplier has subcontracted and where the goods and processes are. Escalate if the supplier refuses to explain or if the goods cannot be found on-site.
- True Disconnection: Check the company's operational status, raw materials, semi-finished products, molds, and buyer's materials. If paper checks fail and asset locations are unknown, arrange an on-site visit.
On-Site Verification Checklist
If you decide to conduct an on-site visit, here are seven things to check:
- Company Status: Confirm if the company is still in operation.
- Raw Materials: Verify if the raw materials have arrived at the factory.
- Production Status: Check the progress of the semi-finished products.
- Mold Status: Locate the molds for which the buyer has already paid.
- Buyer's Materials: Identify the location of the buyer's materials and whether they can be recognized.
- Subcontracting Status: Determine if the supplier has subcontracted and where the goods and processes are.
- Asset Protection: If possible, discuss moving the buyer's assets to a secure warehouse.
An on-site visit helps reduce unknowns but does not guarantee recovery, delivery, production restart, or any legal outcome. For more detailed on-site verification services, see our Consultation Services.
Written Notice Checklist
When sending a written notice, include the following:
- Reference the specific transaction using the contract and PO, and attach the specifications and signed sample photos.
- Specify the payment details, including the payment receipt, SWIFT, and bank beneficiary information.
- Request a written response on the company's operational status, raw material arrival, production progress, mold and buyer's material location, and whether there is subcontracting.
- Ask if the buyer's assets can be moved to a secure warehouse and document the response or lack thereof.
- The purpose of the notice is to fix facts and evidence. Specific wording and subsequent actions should be determined by a practicing Chinese lawyer based on the contract and company status.
Evidence Package Directory
Organize your evidence package into the following 13 categories:
- 01. Contract
- 02. Purchase Order (PO)
- 03. Specifications
- 04. Signed Sample Photos
- 05. Payment Receipts
- 06. SWIFT Messages
- 07. Bank Beneficiary Information
- 08. Chat Exports
- 09. Email Headers
- 10. Logistics Documents
- 11. Web Page Archives
- 12. Time-Stamped Factory Photos
- 13. Business License and Official Registration Cross-Check Materials
Recovery Actions Based on Payment Method
Depending on the payment method, follow these steps:
- Platform Orders and Payments: Check if the order was created and paid within the platform and if it meets the terms and application deadlines. Follow the platform's transaction protection terms to submit a claim. See our guide on factory audits for more details.
- PayPal: Ensure the transaction qualifies for PayPal's buyer protection and is not excluded (e.g., industrial machinery). Apply for protection according to the official conditions.
- Bank Transfer or SWIFT: Verify that the beneficiary matches the contract and invoice parties. Gather payment receipts, SWIFT messages, and beneficiary information. Consult a practicing Chinese lawyer for the next steps.
- Other Payments: Ensure you have complete evidence of the payer and beneficiary. Complete the evidence package and consult a lawyer to choose the appropriate path.
Types of Disputes
Classify disputes into the following four types:
- Quality Dispute: If the delivered goods do not meet the signed sample or specifications, this does not automatically mean fraud. Fix the samples, specifications, and inspection materials, and consult a lawyer based on the contract.
- Delay: If the delivery is late, this does not automatically prove initial fraud. Fix the schedule, production evidence, and notice records, and consult a lawyer.
- Insolvency: The company's inability to fulfill the contract and fraudulent transactions are different judgments. Check the company's status and asset locations, and consult a lawyer.
- Criminal Fraud: Distinguish criminal fraud from quality, delay, and insolvency issues. Preserve the complete evidence package and consult a practicing Chinese lawyer for the next steps.
What it looks like
Frequently asked
What should I do if my Chinese supplier stops responding?
First, stop making additional payments. Second, preserve all existing evidence. Third, consider possible causes for the silence. Fourth, choose the appropriate verification level.
How can I verify a Chinese supplier's legitimacy?
Cross-check the business license with official records, request real-time or on-site evidence, and ensure the contract party, invoice issuer, and bank beneficiary match.
What should I do if the supplier changes the bank account at the last minute?
Do not make any payments until you have verified that the new account, contract party, and invoice issuer all match. Compare the new and old accounts carefully.
How can I protect my assets if the supplier becomes unresponsive?
Request a written response on the company's operational status, raw material arrival, production progress, and asset location. Discuss moving your assets to a secure warehouse if possible.
What are the steps to take if I suspect a scam?
Stop additional payments, preserve all evidence, divert the silence into possible causes, and choose the appropriate verification level. Consider on-site visits and consult a practicing Chinese lawyer for legal advice.
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