Short‑term export credit insurance, as a special type of insurance product, shields export enterprises against payment risks of overseas buyers. It enables exporters to conclude transactions with overseas buyers under flexible payment terms, and has become a powerful tool for enterprises to explore overseas markets. At present, one‑third of China’s general‑trade exports are covered by export credit insurance. In the first half of 2020 alone, China Export & Credit Insurance Corporation (Sinosure) paid out USD 760 million in indemnities to export enterprises, effectively safeguarding Chinese exporters’ interests. Nevertheless, trade fraud cases triggered by some overseas buyers taking advantage of Chinese enterprises’ over‑reliance on export credit insurance have occurred from time to time. Meanwhile, some export enterprises suffer non‑coverage due to improper operations, resulting in irreversible losses for the insured. Drawing on real‑world cases, this article illustrates major operational risks in export trade to raise readers’ awareness.

01 Credit Limit Application: Mismatched Buyers

Well‑aware of the common risk‑prevention practices adopted by Chinese exporters, certain overseas buyers actively suggest that Chinese exporters take out short‑term export credit insurance and provide relevant information for Sinosure’s credit‑limit application, in an attempt to induce exporters to deliver goods on open‑account terms. Since they cannot pass Sinosure’s investigation and credit‑limit approval under their true identities, they resort to identity fraud and deception.

Case Study: When export enterprise S developed a new overseas client, Company T, internal risk‑control protocols required it to collect corporate information on Company T. Subsequently, Company T sent emails furnishing its corporate name, address, contact details and unaudited financial statements. It informed Enterprise S that other Chinese suppliers had obtained Sinosure coverage for its transactions and urged Enterprise S to apply for Sinosure insurance as well.

To exercise caution, Enterprise S requested Company T to provide corporate registration documents and legal‑person authorization papers. Company T repeatedly made excuses, claiming that relevant information could be verified via EU‑based websites and shared a corporate website link, yet never supplied the required valid documents. After cross‑checking basic information on the website provided by Company T, Enterprise S deemed the buyer a strong local distributor and proceeded to apply for Sinosure coverage.

After receiving the goods, Company T cut off all contact. Sinosure launched an investigation and found that the buyer information stated in the trade contract signed between Enterprise S and Company T was similar yet not identical to the counterparty for which Sinosure had approved the credit limit. By impersonating a well‑established local buyer to win Enterprise S’s trust, Company T absconded with the delivered goods.

Tips: How to Identify Identity Impersonation

Q1. What documents should buyers provide for buyer‑due‑diligence investigations?

When verifying the identity of international‑trade counterparties, cross‑reference key elements including buyer name, address, contact information and registration/tax identification numbers. Where necessary, request official corporate registration documents and authorization papers for contract signatories.

Q2. Are transactions safe if there is a proven track record of secure payment collection from the buyer?

In some fraud cases, overseas buyers avoid detection by applying for small‑value credit limits first. They build trust with exporters through genuine deals and successful collections, setting up long‑term traps. Some scams may lie dormant for several years. It is advisable to stipulate partial advance payments in trade contracts and require payments to be made from the buyer’s corporate bank account.

Q3. Are buyer registration numbers or tax IDs unique like national ID numbers?

In some federal states such as Germany, there is no unified national registry. Different entities may share identical local registration numbers, and one enterprise may hold multiple valid registration numbers from different jurisdictions. Full‑element cross‑verification of buyer information is strongly recommended.

Q4. What other points should be noted when verifying buyer information?

Stay alert to the following red flags: discrepancies between consignees and contractual buyers; new buyers met at trade fairs or via online trading platforms; clients who proactively inquire about Sinosure credit limits; inconsistencies between traded goods and the buyer’s actual business scope; mismatches between Sinosure‑approved credit‑limit information and contractual‑buyer details; and payments made via personal, third‑party or offshore accounts.

02 Export Declaration: Omission

Under the insurance‑policy terms, insured exporters shall submit export declarations. Failure to declare all insured export shipments in a timely manner, whether intentional or negligent, constitutes an omission in declaration.

Case Study: In December 2019, staff at export enterprise A reviewed shipments under overseas buyer B and discovered that one November shipment had not been declared to Sinosure. Buyer B was a long‑term high‑quality client with a solid payment track record, and no credit losses had occurred under this buyer since policy inception. The staff therefore decided against notifying Sinosure or filing a supplementary declaration.

In March 2020, buyer B defaulted on payments, and Enterprise A filed a loss notification with Sinosure. Sinosure’s investigation confirmed that cash‑flow pressures stemming from the pandemic had rendered Buyer B unable to settle outstanding debts.

Since the November 2019 shipment had never been declared and no premium had been collected for it, no indemnity was available. Enterprise A faced total loss of both goods and receivables.

Tips: For short‑term export credit insurance policies requiring export declarations, exporters must declare all shipments to covered buyers within the stipulated time frame and in accordance with the policy‑specified declaration procedures.

03 Goods Delivery: Prior Knowledge of Buyer Risk

Exporters continue to ship goods to a buyer when they know or ought to know that insured‑risk events specified in the policy have already materialized.

Case Study: In May 2020, buyer D emailed export enterprise C, stating that local pandemic‑control measures had created temporary cash‑flow shortages and that outstanding payments would be settled once end‑customer payments were received.

Given their long‑standing relationship, the fact that Buyer D had never previously defaulted and the relatively small amount of the so‑called “temporary” overdue payment, Enterprise C chose to stand by Buyer D and shipped further consignments per Buyer D’s instructions.

The so‑called temporary default persisted unresolved, and payments for subsequent shipments also fell into arrears. As these later shipments were dispatched after Enterprise C became aware of existing risks, such losses fell outside Sinosure’s scope of indemnification.

Tips: Losses arising from continued exports undertaken when the exporter knows or ought to know that insured risks have occurred, or where the buyer has fundamentally or prospectively breached the sales contract, are excluded under the insurance policy.

04 Export Transactions: No Valid Policy Coverage

One fundamental prerequisite for Sinosure coverage is that goods are exported under the sales contract during the policy‑validity period. Conversely, exports occurring outside the policy term are not eligible for coverage.

Case Study: Export enterprise E held a Sinosure SME‑oriented export‑credit‑insurance policy. No buyer claims arose during the policy term, and Enterprise E gradually paid less attention to insurance matters. It failed to renew the policy upon expiry. In 2020, amid global pandemic outbreaks, Enterprise E reassessed risks and reapplied for export credit insurance. When an overseas buyer subsequently defaulted on payments, Enterprise E submitted a loss notification to Sinosure.

Claim review revealed that the relevant exports corresponding to the buyer’s defaults took place after the expiry of the previous‑year policy and before the new‑year policy came into force. Losses sustained by Enterprise E were not indemnifiable due to delayed policy renewal.

Tips: Under short‑term export credit insurance policies, “export” means delivering goods to a carrier or to the buyer pursuant to the sales contract and completing export customs formalities in compliance with laws, regulations and regulatory documents of the People’s Republic of China; or other forms approved by the insurer. Such export activities must occur within the policy‑validity period.

05 Indemnity Claims: Discrepancy between Customs‑declared Value and Actual Transaction Value

Some export enterprises file low‑value customs declarations or issue low‑value customs‑clearing invoices at the request of overseas buyers, to help buyers reduce import‑tax liabilities. This creates inconsistencies between actual receivable losses and customs‑declared values.

Case Study: Prior to shipment, export enterprise F received an email from its overseas buyer requesting a low‑value customs declaration and corresponding commercial invoice to facilitate the buyer’s import clearance. Enterprise F believed that the buyer’s written request would not undermine its creditor rights and complied with these instructions.

After receiving goods, the buyer defaulted on payment, and Enterprise F filed a loss notification with Sinosure. Sinosure’s local‑channel investigation found that the buyer insisted that its liability was limited to the low‑declared amount, citing the low‑value commercial invoice issued by Enterprise F as evidence. Pursuant to Chinese laws and regulations, completion of export customs formalities constitutes a core prerequisite for qualifying as an “export”. Accordingly, Sinosure will in principle cap indemnified losses at the customs‑declared value.

Tips: More and more jurisdictions have enacted regulations targeting under‑declared exports to curb import‑tax evasion. Meanwhile, China Customs strictly prohibits misrepresentation of export‑product prices. For goods eligible for export‑tax rebates, customs‑declared values are closely linked to VAT‑invoice issuance and foreign‑exchange settlement.