International Trade Risk in China
Author of this article: attorney of Win and Win Law Firm
Supplier be careful of several means of fraud in China: Intenational trade fraud, risk control, about the agent or middleman, the risk of release of cargo with B/L, pick up the cargo without B/L, the risk of port custom, and bank transaction risk.
- Disguising as Agent of Reputational Buyer
There are two kinds of Intermediate merchant (middleman), one act as the agent who does not assume responsibility; and the other act as buyer who purchases by itself who needs to assume responsibility.
Fraud case: Some middleman purchases products, declaring he is agent of some reputational buyer, and misleading of seller who believing he signs contract with well-known buyer. After that, this middleman delays payment and disappears, seller learns that well-known buyer is not buyer, but is middleman.
Suggest: According to the international practice, international trade contract needs signed by individual, without company seal. So it is difficult to distinguish two kinds of middleman. So if someone declares he is agent, then request him to present the authorization document which shall sign with principal’s seal and signed by of legal representative.
- Delivery of Goods without B/L
Seller (shipper) can control the risk of non-payment if he can control the B/L. However, it is common that B/L is in hand of shipper, but cargo had been picked up by buyer. The exporter (shipper) often holds of B/L issued by cargo forwarder not by carrier. Using the term of FOB, cargo forwarder is appointed by buyer (consignee), buyer contacts with cargo forwarder who obeys the instruction of buyer. Many of those cargo forwarders does not register in shipper’s country, at last, it is impossible to recovery the damage from cargo forwarder.
- Using Sea Document which does not Represent the tile of Cargo
When using letter of credit and D/P, if some unconformities of the LC or rejecting by bank, then the documents shall be returned back to exporter (seller), then seller can controls the title of cargo. However some international transport documents do not equal to titles of cargo, controlling sea documents does not mean control the title of cargo. Carrier can deliver the cargo to consignee without the sea documents. Under such situation, carrier does not violate the international practice. And you will not win if you sue carrier. Some fraudsters took advantage of this situation, rejected accepting documents but picked up the cargo.
- Special Regulation of Custom for Returning of Cargo
Many countries have special regulations about the return of cargo. For example, if the cargo were rejected by buyer, seller wants to ship back or transports to other country, he shall obtain the written content from buyer. If seller does not obtain the content of buyer, or certify the title of cargo by other means, the cargo will be auctioned by destination port custom. Some fraudsters take advantage of this special regulation. These defrauders do not reject the cargo, but delay the payment by all means. Their purpose is delaying until auction time, when auction is coming, they will ask for very low price.
- Bank Violation International Payment Practice
LC and D/P are safe payment. But in some bad financial countries, some bank’s practice does not conforming with international rules. Without payment or confirmation of buyer in the D/P, bank also delivers the B/L to buyer.
- Through international Bank Payment Collection
According to instructions of collecting bank, remitting bank sends the whole set of documents by courier to collecting bank, after the collecting bank receives the documents, asks drawee (buyer) to pay or confirmation. However, some defrauders (buyers) disguise as employee of collecting bank, give fraud information of collecting bank’s place to remitting bank, so remitting bank sends the documents to defrauder who picks up the cargo without payment.
