As a moderator at Alibaba Forum Community, I've posted enough tips on how to avoid being scammed in China, here are some of the leads related:
http://resources.alibaba.com/topic/22061/Another_typical_scammer_in_Fujian_China_Colorfulsteppe_trading_Co_Ltd.htm
http://resources.alibaba.com/topic/18831/Common_knowledge_to_judge_a_typical_Chinese_business_scammer_.htm
http://resources.alibaba.com/topic/21310/Typical_Chinese_buying_scammers__for_your_reference_.htm
http://resources.alibaba.com/topic/17530/Tips_for_you_to_verify_Chinese_companies_.htm
However, recently we've come across some different fraud cases from above typical scammers in China and I'd like to share some of them with Alibaba members here, hoping you'll learn a lesson from these cases in the future transactions:
Case One:
Product related: HDMI cables
Chinese supplier: Changzhou Best International Co., Ltd
( a so-called Gold and trust pass member at Alibaba, here is the link : http://www.alibaba.com/company/0.html?memberid=cnbestintl )
Case Details:
A UK buyer had a deep communication on all the trade terms and conditions with this supplier in China ( the direct contact is: David Lee ), later they reached an agreement on everything and got ready to make a deal, and the buyer –Mr. A ( True names are not allowed to display without permission ) remitted more than 2000 USD to Changzhou Best International Co.,Ltd in Oct, 2006, as a deposit or down payment to get the production started in China. Mr. A is very serious with his business and he has employed a local to offer a Basic Verification on this supplier in China before payment, and this supplier does exist in China ( confirmed with local officials), the problem is their credit is too bad ! Later the supplier could not meet Mr.A's buying demand and they didn't ship him anything. They promised to refund by T/T for several times when Mr. A claimed his payment back. They either ignored calls and messages or took it as nothing. So far they have neither shipped any goods to the buyer nor refunded…. They badly ruined their image in overseas market !
Countermeasures:
1.Employing a local Chinese to report their bad credit to local government authorities in China directly and get them punished or fined. Bringing an accusation against them if your order is large enough, please note that you may have to collect enough evidence, say a formal sales or purchase contract, verification report, payment receipt etc.
2.A legitimate company could also be a cheater in international trades, you'd better pay them in full only after a Pre-shipment inspection in China.
Case Two:
Product related: auto parts
Chinese supplier: Zhuji Hongxing International Trade Co.,Ltd
( a Trustpass member from another famous platform in China, but I note their website www.zhujihongxing.com has been closed recently. )
Case Details:
A USA buyer----Mr.B got their information online and contacted their CEO called Tony Lin by emails. They had several pleasant communications and Tony claimed that he was the real manufacturer in China and he seemed to be a professional in this field. Mr. B bought several samples from Tony without any due diligence work in China in April, 2007. The samples are quite good. Good quality, reasonable prices , fast delivery and good communications surprised Mr.B a lot and he fully trusted Tony then, in May, 2007, Mr. B requested an OEM service from Tony's factory and placed a large order, they reached an agreement regarding every trade terms and conditions and both parties seemed satisfied with it. Mr. B paid Tony 120000 USD within 10 days by T/T after they reached an agreement as a deposit to get the production started in China. The rest balance is nearly 200000 USD and would be paid after the production. One month later, Mr.B simply wanted to learn the production information and employed a local business service company to pay a visitation/inspection to Tony’s factory in China. Tony explained that he was abroad and unconvenient to meet his rep then for the first time, only a week later all his contact ways have been shut down ( telephone, website and mobile phones etc), Tony disappeared in the air. Finally the local auditor went to their factory without notice ( according to their address online, offered by the client ), to our great surprise, their company does not exist at all, nobody in the offices except an old man reading newspaper there. Their address is true but it’s for another company in China! That’s to say, the scammer is cheating others by using other companies' information ! So Mr.B lost more than 12000 USD. ( I guess the scammer Tony just bought the auto parts from other factories in China and tried to gain the trust from foreign buyers for the first time. )
Countermeasures:
1. Signing a formal contract with any of your suppliers for sake of better protect of your interests, esp when your order is large enough.
2.Fulfilling a Basic verification on your supplier to make sure he is not a scammer and qualified enough to be your business partner in China.
3.Fulfilling a detailed auditing service if you'd like to place large orders and a production inspection and a pre-shipment inspection is very important for such cases. A local expert can help you a lot in such cases.
Case Three:
Product related: human hair products (wigs)
Chinese supplier: China better hair co., ltd
( This is a SilverKey member from another well known platform----Tradekey, please find their link at: http://cn.tradekey.com/otherpages_premiumcompanies/page_no/31.htm)
Case Details:
A Portugal buyer----Mr.C got their information online and contacted Mr.Guo----the foreign trade manager from Better Hair in May, 2007. One month later Mr. C placed a trial order with them in China, amounting over 5000 USD. What Mr. C required is 100% human hair products and Mr. Guo is also selling authentic human hair wigs as well as synthetic hairs. Mr. C met lot of trouble in his market as he received lot of complaints from his customers in Portugal, claiming their product is not 100 % human hair and mixed with animal hairs and synthetic hairs etc. Mr. C suffered great loss owing to the quality issue.
Countermeasures:
1.The best way to avoid such cases is to perform a Pre-shipment inspection before delivery in China, esp when your order is large enough.
2.Don't forget to sign a formal contract with any of your suppliers, apparently this supplier is a trade company in China but they claimed to be a real manufacturer in this field. Why not audit them before payment? It would be much easier to control the quality if you deal with a factory directly.
I agree with Justin's comments - I am Mr A. It is best to do preshipment visit to inspect any goods before full payment is made. Companies in china can be setup to look real and may do some trading but once they got your money it up to them if the decide to send any goods. It always best to sign contracts and have inspection - it will cost more but you will get your goods at the end of the day.
I have learnt from my mistakes and always carry out these steps even with trusted suppliers.
Avoid these companies mentioned and don't deal with David Lee!
Take note: Signing a contract to Chinese Companies are not really worth it, they always not follow the contract and their Agreement/ contract are not notarized. So It's still not safe.
I just finished writing a book on Fraud, many of the cases were due to these simple mistakes you mentioned, inadequate pre-shipment inspections (SGS exists for a reason) and inadequate payment escrow.
As for legitimate companies committing fraud, happens all the time - international Law casebooks are full of such cases through history. Some amusing ones are featured in Schmittoff's "The Export Trade"
Due Diligence implies diligence, the opposite of laziness. Trust P *, etc, means very little in the end.
Inspect, verify, and use an L/C unless the order is absurdly small, then try to use a bank escrow service.
Almost all the registered companies abide by and honour the contract. The most important is that Formal Contract signed by both parties is a key evidence in such fraud cases. This is why you'd better sign a contract with your business partner home and abroad.
![[em1]](http://img.alibaba.com/images/eng/style/icon/emoticons_smile.gif){kind=icon}
Ranger
Me Tech Supply
ME Tech Supply a D. B. A provides sourcing solutions for both small and medium sized businesses. We are members of the GSAA whose Agents have verified more than 2. 5 million companies World WideWe offer low cos...
More
TT payment is secure but all that matters is conditions to be fulfilled beforeb pay ment is affected.All the steps must be foreseen and agreed in writing and then follow the business.I feel this is necessary.
vtulasiraj