Foreign Trade Fraud Prevention Guide: Careful Trading to Avoid Shortage of Money and Goods!
Recently, there have been several cases involving buyers from southern European country Y, with typical risk changes: the buyers may default on the payment after obtaining the goods and evade recovery; Or refuse to accept goods arriving at Hong Kong and wait for auction; Or apply for bankruptcy when the export enterprise calls for payment; No matter what kind of “scam”, export enterprises will face the difficult situation of “two empty goods”.
Collection fraud Company A, an export enterprise, shipped one ticket (canned food) worth about 160,000 US dollars to the buyer in country Y in May this year. The actual payment method is DP AT Sight. After the goods were shipped, company a sent the bill to the remitting bank designated by the buyer through the domestic bank twice, but both were returned. when the bill was sent for the third time, the courier company suggested that the destination information had higher security risks. company a suggested the buyer to pay directly or send the bill to the remitting bank’s head office, but the buyer refused to accept it and insisted that company a send the bill to its designated bank before paying.
Company A judged that the mailing information provided by the buyer was abnormal and suspected of fraud, so it immediately reported the case to China Credit Insurance Company and handled the goods in time after the approval of China Credit Insurance Company to minimize losses.
Goods fraud Another export company, company b, also shipped a ticket (casual shoes) worth about us $10,000 to the buyer in country y in may this year. after the goods arrived at the port, the buyer refused to accept them. company b then notified China insurance corp of the risks.
After receiving the case, China Xinbao immediately commissioned a local lawyer to intervene in the investigation. The buyer verbally acknowledged the full amount of the debt to the lawyer, said there was a cash flow problem, and promised to pay by the end of August. However, in the subsequent collection process, the buyer no longer responded and evaded recovery.
Due to the buyer’s delay, the goods delayed at the port will incur higher port charges. At the same time, due to the trade term of CIF, Company B has to bear the freight and all the delayed charges according to the endorsement clause of the bill of lading. The shipping company urged Company B to handle the goods and pay the charges. Company B finally had to choose to abandon the goods.
The day after Company B notified the shipping company to abandon the goods, the buyer immediately contacted the shipping company and expressed his willingness to purchase the goods, but the buyer always evaded the claims of China Insurance Company.
After sorting out and summarizing, several recent buyer cases in country y have the following characteristics:
1. Establishment of First-Time Transactions In the above-mentioned cases, the transactions between the export enterprise and the buyer are all first-time transactions. The buyer often uses the psychology of the export enterprise eager to accept orders and exploit new markets to cheat. According to feedback from some export enterprises, they met the new buyer through Alibaba International Station or various exhibitions, such as Canton Fair, etc., then they discussed the order with the buyer and carried out the transaction. Before the transaction, they did not further understand the buyer and verified the qualification background of the buyer. As a result, they fell into the “trap” set by the buyer.
2. The trade contract is not perfect. Some export enterprises have not signed a perfect trade contract with the buyer. The main problems include unclear payment method (for example, only T/T payment is agreed), and the buyer has not signed and sealed the contract.
3. Most of the payment methods are to release accounts. Some enterprises did not receive advance payment for the first transaction, that is, they adopted more radical collection methods such as large-sum release accounts, which led to higher risk of foreign exchange collection.
4. The email address suffix used by the buyer is usually hotmail, gmail and other non-corporate email addresses. It is difficult for export enterprises to determine whether the transaction subject is an individual or a company, and the buyer is also easy to avoid recovery.
5. The buyer’s attitude is changeable. In some cases, the buyer first verbally admitted the debt or promised to pay but later evaded recovery, even defaulted on the payment of goods to suppliers in Jiangsu, Zhejiang, Hebei and other places at the same time, amounting to nearly one million US dollars, triggering a chain reaction.
6. The export products are mainly light industry and aquatic products. The products purchased by the buyer in the above cases include light industry products such as shoes and clothing, bags and cases, and aquatic products. The buyer chooses these products mainly for OEM products or fresh products with short shelf life. Exporting enterprises find it difficult to resell them. Therefore, the buyer usually takes advantage of the difficulty in handling the goods, delays the time when the goods arrive at the port, or “plays missing”, or pressurizes the exporting enterprises to demand discounts, or waits for the customs auction to “cheat” the goods at low prices.
How to do a good job of prevention?
1. Be careful with new buyers and do not be careless with the first transaction.
It is observed that the probability of the buyer’s default risk upon the first transaction between the two parties is gradually increasing. Therefore, it is suggested that export enterprises must check the background information of the buyer in advance and grasp the latest credit status of the buyer before dealing with new buyers.
In addition, exporting enterprises can also use Google Maps to search for the location of the buyer’s company address or obtain reference information from banks or other suppliers.
Furthermore, exporting enterprises can ask the buyer for the passport information of the signatory of the contract, or ask their peers to know about the buyer and all aspects of the counterparty.
2. Pay attention to improving trade contracts and retaining favorable evidence It is suggested that export enterprises adopt a relatively conservative transaction method for the buyer of the initial transaction, and clearly stipulate the payment method in the trade contract, including the payment method and the accounting period. For example, it is clear that the payment method is 30 days after the shipment date, or 30% of the advance payment, and 70% of the balance is paid by a copy of the bill of lading.
No matter what kind of payment method, the agreement must be clear to avoid ambiguity and allow the buyer to take advantage of the loopholes. At the same time, the effective authorizer of the buyer’s company is required to sign and seal the trade contract to avoid the buyer defaulting afterwards.
3. Collect advance payment and strengthen written reconciliation For the buyer of the initial transaction, in order to control the transaction risk, it is strongly recommended that export enterprises collect part of the advance payment from the buyer or increase the proportion of the advance payment and obtain the buyer’s written confirmation of the remaining payment. With the help of the payer of the advance payment memo, the exporting enterprise can further confirm the transaction background, i.e. whether the buyer conducts the transaction in the name of the company, whether the buyer’s company account is normal, etc.
At the same time, try to wait for the buyer to confirm the delivery time in writing before arranging the delivery of the goods. If the buyer refuses to accept the goods for various reasons, such as inability to pay, request discount, etc., it is suggested that the enterprise contact other buyers immediately to try to resell or consider the feasibility of returning the goods. If the buyer has withdrawn the goods but has not yet made payment, it is suggested that the exporting enterprise should check with the buyer in time, strengthen the collection of accounts receivable, and pay attention to keeping all written materials.
4. Pay attention to the details of the buyer’s performance and keep alert at all times In the above several cases, some buyers have provided fake water bills to export enterprises, causing them to relax their vigilance, release the bills in advance and fall into the buyer’s trap. However, there are also export enterprises that, due to their vigilance and detection of changes in the buyer’s risks, report losses to Xinbao as soon as possible and actively deal with the goods, thus achieving a better stop-loss effect.
Therefore, during the performance of the contract, exporting enterprises should remain alert, pay attention to the details and not trust the buyer. In addition, after the goods are shipped,
exporting enterprises should follow closely the logistics situation and pay attention to the buyer’s feedback. In case of any abnormality, they should take immediate actions and stop loss in time.
Finally, once there is a danger, export enterprises should take the initiative to seek help from credit insurance and actively cooperate to minimize losses and protect their legitimate rights and interests.
Original Artical，Author：China Trade Agent，if repost，please give references ：https://offers-bg.com/trade-fraud-prevention-guide/