Updated February 2026 | Supply chain verification
A US e-commerce brand was ordering a household product from what they called "their factory" in China.
They had:
They felt safe.
In their mind: "We know this factory. We're not beginners."
We did an on-site visit as part of a routine supplier verification and production follow-up.
The facility was real. The staff was real. The owner was real.
But something didn't match:
So we asked for:
They avoided the question.
Then we pushed harder.
And the truth came out:
They were outsourcing 40–60% of production to 2 undisclosed subcontractors.
No disclosure. No permission. No contracts. No oversight.
Just: "Don't worry, it's under our management."
They were not "partners."
They were:
And most importantly:
The subcontractors were using alternative materials and shortcut processes.
Because their only job was to hit a price and ship.
The client started seeing:
At first it looked like "bad luck" or "a bad batch."
But it wasn't.
It was two different factories producing "the same product."
This was an Amazon brand.
The product was getting:
And that triggers:
They were one step away from losing the listing.
Not because the product was bad.
Because the product was inconsistent.
Their contract was signed with "the factory."
But:
So legally, the client was exposed.
If something went wrong, the factory could always say: "We didn't do it. That's not our department."
Classic China move.
The client didn't even know what they were buying anymore.
This is the part buyers don't understand until it's too late:
Once subcontracting starts, you lose control over:
You're no longer managing a factory.
You're managing a network.
And you don't even know the network exists.
We forced 3 things immediately:
1) Full disclosure of subcontractors
Names. Addresses. Legal entity. Owner. Capacity.
No disclosure = stop production.
2) On-site visits to the subcontractors
We physically visited them.
One was acceptable (but sloppy). One was a disaster.
3) "No subcontracting without written approval"
Added to the contract, with penalties.
Not "please don't." Not "we prefer not."
Penalty-based. China court-ready.
The client didn't have a factory.
They had: A sales rep + a shipping pipeline.
And for 4 years, it worked… until volume increased and margins tightened.
Then the factory did what factories do:
They protected themselves first.
Subcontracting is not rare.
Undisclosed subcontracting is the default.
Factories subcontract for four reasons:
1) Volume surge
You place a bigger order than they can handle. Instead of saying no, they outsource the overflow.
2) Margin pressure
You negotiate price down. They maintain margin by outsourcing to cheaper workshops.
3) Process gaps
They don't have a specific machine or skill in-house. They subcontract that step without telling you.
4) Backup capacity
Their main line is running another client's order. They use subcontractors to keep your timeline.
All four sound reasonable.
But none of them protect you.
If you're sourcing from China, here's the reality:
Your factory videos are meaningless.
Videos show what they want you to see. Not what's actually happening when your order ships.
"Years of relationship" doesn't prevent subcontracting.
It just means they've gotten better at hiding it.
On-time shipments don't prove direct production.
They prove the sales rep knows how to coordinate multiple workshops.
Quality problems aren't always "one bad batch."
They're often "production moved to a different facility without you knowing."
Your contract is only enforceable if you know who's producing.
If production happens at undisclosed locations, you have no legal leverage.
Before production starts:
During production:
In your contracts:
Most importers do none of this.
Then wonder why quality collapsed or CBP flagged their shipment.
Amazon sellers: Listing suppression. Account health warnings. Review bombs. Lost buy box.
Traditional brands: Inconsistent inventory. Retail partner complaints. Warranty exposure.
CBP-regulated imports: Country of origin violations. Tariff reclassification. UFLPA red flags if subcontractors source Xinjiang inputs.
Everyone: No legal recourse. No supplier accountability. No way to fix it after the goods ship.
The factory wins. You lose.
Q: How common is undisclosed subcontracting in China?
Extremely common. Estimates vary, but 40-60% of mid-sized factories use undisclosed subcontractors for overflow or cost management. It's not the exception — it's standard practice.
Q: How can I tell if my factory is subcontracting?
Production floor activity doesn't match order volume. Warehouse stock is too thin. Quality inconsistencies appear. Packaging details change. Or you do what we do: on-site verification with document cross-checks.
Q: What should my contract say about subcontracting?
"Supplier may not subcontract any portion of production without prior written approval. Unauthorized subcontracting is breach of contract subject to [specific penalty]. Buyer retains right to audit all production locations."
Q: Can I prevent subcontracting entirely?
Not always. Some production steps (plating, laser etching, specialty finishing) are commonly outsourced. The key is: disclosed, approved, and audited subcontracting vs. hidden subcontracting.