I receive frequently some request from overseas people who query me about their genuineness of their potential vendor in China.
Quite often they spot some potential vendors on online b2b platform and are about to send their money to perform a purchase.
It sometimes happen that a vendor doesn't even have a business license but their price given are ultra competitive. The dilemma between attractive opportunities vs risk taken is then on the spot.
What to do in this case ?
Measuring the risk is the answer. Are you ready to take more risk for a better profit? After all, import export operation is all about risk management.
In china and in many others countries people try to do business without being registered legally as company. They try to sell as individual.
There are several reason for this , the main one is for cost. Of course of you are not registered, you don't pay taxes, you don't pay registration fees for company and it lighten your cost.
What are the risks then ? A fee of them :
- People can disappear with your money and you will never find them . Even you would , you could not do much because you have not a transaction contract in place.
- They might not be able to export the goods because lack of documentation, registration etc...as they are not legitimately registered some extra cost will be add up on the top of the bill in order to pay an export agent who will be in charge of laying the taxes and VAT. The deal become less interesting suddenly.
I have myself one time conducted a transaction with a vendor who was not registered legally. We were operating in a transparent way with our clients who know the vendor and who accepted to take the risks in order to save on the cost. Fortunately, the transaction happened well
I will explain in another post how to manage with vendors who are not registered with business license etc...
And you what is your experience about dealing with Asian vendor without business license?