Types and analysis of fraud risk in overseas trade
Recently, the Chinese Consulate General in Karachi, Pakistan, has received a number of cases of Chinese enterprises seeking help due to trade fraud.
In order to reduce the risks of international trade and protect the legitimate rights and interests of Chinese enterprises, the Economic and Commercial Office of the Consulate General of China in Karachi has issued the "Warning on the Risk of Preventing Fraud in International Trade" for the reference of shippers and freight forwarding enterprises.
Common fraud
(1) Default on payment for goods
Taking advantage of the lack of understanding of the new market and the eagerness to expand the trade volume, the export companies demand to use payment methods such as O/A and D/A, which are risky for the seller. After taking delivery of the goods, for many reasons such as unqualified product quality and financial difficulties, delay, refuse to pay or even lose contact.
(2) Substitution of goods
In the course of trade, the foreign exporter actually supplies goods of lower quality and value than the original agreed products, or replaces the original agreed new products with old products, second-hand products, refurbished products, etc., and deliberately guides the importer to inspect only part of the goods without problems, while the rest of the goods are shoddy.
(3) False identity
1. The buyer is deceived
The buyer believes the seller's "wonderful" promotion at the exhibition, the "praise" on the e-commerce platform, or the seller is trusted by the recommendation, and pays the deposit without doing sufficient investigation. However, the "seller" is actually an offshore company or shell company, and after deceiving the deposit, the money is lost.
2. The seller is deceived
Using the name of a well-known international enterprise, or claiming to be the Pakistani subsidiary of a well-known enterprise, using its popularity and information to cheat, forge documents, signatures and staff identities, and defraud the seller to allow credit delivery, and the "buyer" loses contact with the goods after taking delivery, and the seller's money and goods are empty.
(4) A yin-yang contract
The importer fraudfraudently called the underpayment of tariffs and other taxes, requiring the signing of two contracts: a contract that is lower than the actual transaction amount, used for customs declaration, and another contract shows the real transaction amount, for the insufficient part, the foreign enterprise said that it will be made up through underground banks, carrying cash out of the country, borrowing personal wire transfer and other abnormal ways. However, after the buyer actually receives the goods, he refuses to pay the above insufficient part for various reasons.
Chinese companies originally wanted to take this opportunity to attract customers, but once there is a problem, often can not provide evidence of insufficient payment, while suspected of cooperating to evade tariffs, fall into the trap set by illegal foreign investors, can only eat the bitter consequences.
5. Play the long game to catch big fish
The buyer first obtains the trust of the exporter with a few small orders, and after the successful completion of several transactions, the buyer requires the completion of large orders in high-risk forms such as credit sales for reasons such as capital turnover. After the scam, he disappeared, never to be heard from again. Some big scams even lurk for 1-2 years, do dozens of small businesses first, and then implement large fraud schemes when exporters completely lose their vigilance.
Six suggestions
1. Effectively enhance risk awareness
It is suggested that enterprises strengthen risk awareness and improve self-protection ability. Do not take it lightly just because the other party is an old customer or has had a successful transaction. The evaluation on the e-commerce platform, the suppliers who require immediate contract signing and payment of advance payment at the exhibition, carefully screen, and understand the strength and credit level of the other party through multiple channels.
(2) Conduct comprehensive credit investigation
Before entering into a contract, it is an effective measure to prevent trade fraud to do due diligence and have a comprehensive understanding of the object of the transaction. Chinese enterprises can fully investigate the credit background of the transaction object through official channels or other commercial channels.
1. Chinese official channels
(1) China Export and Credit Insurance Corporation
China Credit Insurance is the only financial institution in China that undertakes policy-based export credit insurance business. On the basis of in-depth analysis of the business development and financial status of enterprises, and combining the basic information of enterprise executives, China Credit Insurance can evaluate their credit, provide users with credit investigation services for trading objects, and help customers make effective judgments in trading activities and prevent credit risks.
You can send an email to sinorating@sinosure.com.cn for more information about who you are dealing with. Or contact the local institutions established by China Credit Insurance to understand the credit status of the transaction object.
(2) China Inspection and Certification (Group) Co., LTD
China Inspection Group is established with the approval of The State Council, registered in the State Administration for Industry and Commerce, with "inspection, identification, certification, testing" as the main business of the multinational inspection and certification organization. The business network of China Inspection and Certification Group South Asia Co., Ltd. covers India, Sri Lanka, Bangladesh, Pakistan, Nepal and other countries.
2. Other channels
Conduct credit investigation on the transaction object through regular business investigation agencies by paying fees.
Check the Internet to see if there are any complaints against the company.
Verify the relevant business through the phone number provided by the official website of the company.
Ask your peers or trade associations to find out who you are dealing with. For the enterprises you know for the first time at the exhibition, you can focus on knowing the establishment time of the other company, whether there is a domestic purchase record and operation situation.
(3) Conclude the contract carefully
To participate in international trade, it is necessary to sign a contract. A written contract with legal subject, comprehensive content, standardized form and careful language is the main basis for safeguarding the legitimate rights and interests of both sides of the trade. For an international trade sale contract, the parties may agree on the price, quality and quantity of the goods, method of payment, mode of transportation, liability for breach of contract, governing law and arbitration clause. For the disputed terms or arrangements, should be pointed out in advance and jointly negotiated, if necessary, can entrust professional consultants to provide contract modification suggestions.
All material changes to the terms of the transaction are recorded in writing. The signature of the legal person or its authorized representative must be the same as the signature registered at the time of the registration of the company and the name of the official identity document.
4. Choose settlement methods carefully
As far as possible to adopt A safe and secure settlement method, the seller should try to adopt A letter of credit (L/C) settlement, collect deposit, advance payment and other less risky transaction methods, do not easily accept credit sales (O/A), documents against acceptance (D/A) and other higher risk transaction methods. The buyer should try to reduce risks by installment payment and other methods, and should not easily accept riskier transaction methods such as paying all costs before receiving the goods.
For network security reasons, it is recommended that the bank information be sent by letter when the first contract is signed. Before payment, confirm the relevant information with the transaction object by video or phone. Purchase import and export insurance from companies such as China Credit Insurance to minimize the economic losses caused by the default of trading partners.
(5) Carefully keep transaction records
Keep important supporting information related to the transaction, such as emails, social network communication records and other supporting materials. In the course of the transaction, any material changes, such as goods and payments, must be confirmed in writing by the authorized representative.
(6) Seeking legal remedies reasonably
If you suspect fraud, you should contact the bank on the payment channel at the first time, try to freeze the payment, and report to the police. If necessary, legal remedies can be sought through legal channels such as lawyer consultation and litigation.
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