How to preventing the import companies from commercial fraud?

Due to failure to receiving the satisfied goods from Chinese export companies, many American or European import enterprises turned for aid to Lawyer Xu Baotong. In order to reduce the international trade risk and safeguard the legitimate rights of overseas companies with practical instance, Lawyer Xu Baotong remind his American or European principles to guard every kind of risk in international trade.

1. Commercial Fraud

Recently, various commercial frauds in the social and economic activities arise now and then. The law-breakers mislead and defraud overseas enterprises of their money and property by means of making up false facts, disclosing false information and concluding false contracts, etc. as well as by illegally engaging in international trade practice. Such acts have directly injured the lawful rights and interests of the foreign purchasers. ’Commercial Fraud’ mainly includes the following:

（1） Refusing or Delaying in delivery. Due to import companies’ lack of knowledge of new market and import overseas enterprises being eager to expand the trade, many Chinese export suppliers did not send out goods after receiving the whole or partial advance payment.

（2） Giving you a cheaper model. Chinese export companies supplied goods that were lower quality or second-hand products instead of new products pursuant to the contracts. Sometimes, they deliberately supplied partial qualified products to examine.

（3） Fake identity. Lacking preliminary survey, foreign import purchasers trusted Chinese export companies’ promotion in the exhibitions or good evaluations on the e-commerce platform, and paid whole advance payments. As a matter of fact, these export companies were off-shore companies and they would be loss of communication after receiving the payment. Furthermore, they signed a contract in the name of a fictitious unit or in the name of another famous company.

（4） Two contracts for one deal. Chinese export companies maybe insisted sign two contracts. One was for CUSTOMS in order to less pay tariff and another was for real deal with the real amounts.

（5） Playing a longer game. Chinese export suppliers wormed their way into import companies’ confidence. After some orders with little amounts, exports obtained a big deal from overseas import companies and they would be loss of communication after receiving the advance payment.

2. Suggestions.

For the purposes of protecting the lawful rights and interests of American and European companies, practically preventing and resolving commercial fraud risks, and promoting the sound and sustainable development of international trade, Lawyer Xu Baotong shared legal experience for the readers based on the actual circumstances.

（1） Enhance risk awareness. Our legal team suggested that American or European import companies should strengthen the risk awareness. Don’t let your guard down because of the past business relationships or casual successful transaction records. Specially, your company should take precautions against some export companies that urged import purchases to sign contracts or pay the advance amount.

（2） Investigate credit standing. Before entering into a contract, it is necessary that American or European companies should take measures to know well about the other contractual party. The quality of due diligence is better, there is more pressure from export company to do good deals.

（3） Sign contacts or order. According to the ’Civil Code of the PRC’ or ‘United Nations Convention on Contracts for International Sale of Goods (CISG)’, the contents of a contract shall be agreed upon by the parties, and shall generally contain the following clauses: A. titles or names and domiciles of the parties; B. subject matter; C. quantity; D. quality; E. price or remuneration; F. time limit, place and method of performance; G. liability for breach of contract; H. method to settle the disputes. It is necessary for entrust a consultant to revise the contract. It is important that the revised clauses shall be in written instead of oral. It’s worth noting that the signing bar and signature shall be the same as the official certificate.

（4） Attend the method of payment. International import companies should adopt safe and appreciate payment methods such as L/C, T/T 100% 90 days after shipment date, or 30% advance payment. It’s not recommended that pay the whole amounts before shipment date likewise. Moreover, the beneficiary account shall be written on the contract instead of in email due to preventing Hacker from revising the account. Last but not the least, in case the contractual party breached the terms of the contract, buying the Import & Export Insurance was a wise choice for reducing the financial loss.

（5） Retain the trading record. It is important to keep the records relevant to the deal such as email, WhatsApp, skype, WeChat,QQ, etc. If the parties modified the terms about items or payment method, they have to get the permission of all authorized representative.

（6） Seek the method to settle the dispute. According to Lawyer Micheal Xu’s experience, the victim should contact the bank to freeze pay. When necessary, cross-border import company can seek legal action to compensate themselves such as consulting lawyer or bringing a lawsuit.

The anti-fraud work aims to protect the lawful rights and interests of companies, maintain the order of the international trade, and promote the sound development of the international industry.