Based on your description of the operations, it sounds like the insured's operations should perhaps not be limited to a single classification, but two. Since you state that "they cause the makeup to be manufactured with their labels in both the US and China", and they are putting their branding on the product, any of the manufacturing portion of the operations should be separately rated and classified apart from their mercantile operations (supplies distribution). Both of these classifications are rated by ISO based on gross sales.

Otherwise, according to ISO Rule 29, a mercantile operation described as a combined dealer and distributor operation must be classified and rated under the higher rated classification unless separate records are available. Therefore, if the gross sales cannot be split out between the manufacturing portion and the mercantile portion, then the entire risk would need to be classified and rated as a manufacturing operation, since that is the higher rated classification.

Aside from this information from ISO, some companies have their own specific classification and rating systems.

In any case, it would be the company's determination as to how they would classify this operation, but it is important that the insured's entire operations be described to the insurer in detail so that it is properly classified and rated.

In the event the insurance company has not been made aware of any of the manufacturing of the insured's operations, then that could subject the agent to an E&O claim. It is possible that the company would consider this a material misrepresentation of the risk and if so, that could cause them to void the policy and/or perhaps deny a claim.