Check the credentials of potential partners before engaging in business
Be sure to check the credentials of all potential partners before engaging in any business over the internet.
You can check the backgrounds of established manufacturers or wholesalers with trade institutes, local or online credit agencies, or online services such as D&B. Unfortunately, few resources are available to verify the legitimacy of newly established businesses. Be especially vigilant when dealing with new businesses.
Payment
Letter of Credit and Escrow are the recommended payment methods
Letter of Credit (L/C) A Letter of Credit is the preferred payment method. However, there is some possibility of fraud due to incorrect or forged shipping documents. Minimize the potential for fraud by contacting the L/C issuing bank. Be sure to check the L/C number, opening date, opening place, name and address of the issuing bank, shipping date, valid date, loading and unloading port, applicant, period of presentation, amount, as well as details of transshipment, partial shipment, etc.
Escrow Escrow.com is the transaction settlement service used by many of the leading e-Commerce sites, including eBay and eBay Motors. Escrow.com acts as a secure third party to protect the Buyer and Seller.
Avoid T/T (Telegraphic Transfer payment)
For Buyers: It is unwise to accept an overseas supplier's request for pre-payment. In most cases, a request for T/T payment involves attempted fraud.
For Sellers: it is unwise to agree to accept payment from an overseas buyer after they have received products. Once a buyer has received samples or products without payment, it is very difficult to get them back.
Avoid Payment by Western Union: Most of the fraudulent cases reported to EC21 involve payment via Western Union. After a buyer sends funds, the receiving breaks contact and party disappears. You cannot trace the real name of an account holder with a wiring service such as Western Union.
Make a clear contract : You should make a trade contract and keep it for a specific period to prevent argument. The contract should include sales conditions, payment method, an arbitration clause, quality inspection, etc.
Stay in frequent contact with business partners :Call the company's phone number and check that the person you are in touch with actually works for the company. Be suspicious of any trader who uses only an e-mail address and cell phone and is reluctant to reveal a telephone number.
Maintain frequent contact and ask in detail about price, quality, payment method, contracts, etc. Genuine traders will respond positively and promptly. Most successful internet traders maintain close contact with business partners and reply promptly to inquiries.
Check Contact Information
E-mail Address: Do not rely on e-mail to contact a business partner. Even if the company has its own domain name, you may not be able to trace its owner.
Fax Number: Look out for companies that use the same number for telephone and fax. They are likely to be small businesses. Also, it is best to avoid companies that list only a fax number in their contact information.
Website address: An impressive website does not guarantee the honesty or existence of a company. Don't be lulled into a false sense of security.
Samples
For Sellers: Request a nominal payment for samples. When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal pre-payment.
For Buyers: Request samples to check the quality of product. Order a sample before committing to a purchase order to be sure that the product meets your expectations. Don't forget to pay for samples.
Be Wary of Over-generous Offers Be wary of potential partners who offer a particularly high or low price in the first instance. It is easy to be tempted by such offers, but they are most often attempts to defraud. This method is most commonly employed in the mobile phone and computer-related business.
The following are some examples of international trade fraud and advice on how to avoid it.
Example 1 - obtaining samples fraudulently When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal payment for the samples. If the buyer refuses to pay the mailing costs, let alone the sample charge, you are advised to beware.
Example 2 - false promises leave the exporter with unsaleable stock Swindlers often try to convince a supplier that they are about to place a large order on an L/C basis. They encourage a manufacturer to go into early production on their specifications, claiming that is a test and promising early payment. However, once production is complete the buyer goes back on his word, and the manufacturer is left with unsaleable stock. To avoid this type of situation, when commencing business with unknown buyers, it is safer not to agree to early production, no matter how enticing the offer may be.
Example 3 - demanding discounts by invoking spurious conditions in documentation In order to create artificial conditions for refusing to accept goods or for reducing prices, some buyers deliberately include vague terms in the L/C and later claim an intentionally "UNPAID" clause. A variation is to place orders on L/C & D/A, but to withhold payment for the D/A part of the contract.
Example 4 - sending illegal job hunters disguised as buyers Some company may send job seekers disguised as buyers. If you have any doubts, consider the age and position of the person. Very young or low ranking buyers should arouse suspicion. When groups of buyers are encountered, the credibility of the company should be thoroughly checked.
Example 5 - refusing payment for the second part of a shipment After gaining the trust of an exporter in the first part of a deal by making immediate payment by T/T, the fraudster then refuses to pay for the second part of the shipment. When working on a T/T basis, once the shipment has been made, if the importer refuses to make the payment, there is no way for exporter to obtain the money. Therefore, if you think you're dealing with an unreliable partner, the T/T method should be used on a pro forma basis only.
Example 6 - uncollectable payment due to a financially unstable opening bank When accepting an L/C from an unknown bank in an underdeveloped country, be sure to check the credibility of the bank. If there are any doubts about its financial condition, it is advisable to request confirmation of the L/C from a reliable bank.
Example 7 - refusing payment for goods received on credit by establishing a new company Some importers deliberately shut down their existing companies and set up new ones in order to avoid payment, leaving exporters unable to collect money. If your partner suddenly changes his or her company's name and places a big order on credit, it is wise to check the company's legal status on the export contract and shipping documents.
Example 8 - commission fraud in exchange for a bigger order Luring an exporter with the promise of a big order, dragging out the negotiations to keep him hooked, and then demanding a fee for brokering the deal at the last minute is another common type of fraud.
Example 9 - securing goods at discounted prices by delaying the payment All transactions on credit should be avoided, no matter how small the amount. Even though an importer may not initially intend fraud, if the payment is delayed, the exporter may end up having to negotiate a discount in order to get paid, even though there is nothing wrong with the product.
Example 10 - 419 Scam Mail (Nigerian Scam Mail) 419 scam mail originated in Nigeria but now emanates from other countries, especially in Africa. The mail begs for help and offers a handsome return-typically over a million dollars-for the simple favor of using your bank account to transfer some money. Don't even think about responding-this is a scam of the worst sort. Learn about other types of Internet fraud at http://www.scambusters.com
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