I am a trustpass member since two years.
I got into a trade agrrement with a chinese company which was listed as Gold member at Alibaba.
Company details:
Dongyang Weishan Huanqiu Metallic Yarn Factory/ zjhuanqiu metallic yarn factory
Contact Person: Ms. Minxiao Wu
Website or URL:http://www.zjhuanqiu.en.alibaba.com
TradeManager ID (Member ID): cnzjhuanqiu
Email: zjhuanqiu@yahoo.cn
Postal Address: Baitan 2nd Village, WeishanTown, Dongyang, Zhejiang, Zip: 322109
Tel: 0086 57986985148
Fax: 0086 57986985091
Mobile: 15858921833
My company placed an order of Metallic yarn with this company, on behalf of some buyers in . The order was to be directly executed in the favour of the buyers and we were to receive the commission in the said deal from the supplier. All the payment terms, terms of delivery, prices etc. were negotiated and signed through a contract. The supplier had an export agent involved at their end to facilitate them in execution of this order. The copy of the contract is attached for your reference.
The order details are as follows:
Quantity: 2 containers with net load of 10368 kg per container.
The Negotiated price for the containers were USD 36206.40 and USD 36806.40
Both the containers were for two different buyers, for which my company was an agent.
The negotiated payment terms were 30% deposit and balance was against D/P through the bank.
The Containers were to be shipped one at a time.
My buyers had paid them the initial deposit of USD 21450 to start the order.
But after the receipt of the deposit money, the supplier refused to accept the payment terms as D/P, and demanded prepayment of the balance money before dispatch of the goods, which was not acceptable to us. We decided to talk and try to negotiate with the supplier which wasted lot of time, and finally it was agreed that we will open an L/C at sight for the balance money per container. Where the supplier will ship one container and then receive the second containers L/C.
We gave an additional USD 7000 and opened the L/C for USD 14515.20 from our buyers Bank “HDFC Bank Ltd” which is a very renowned bank in , but then the supplier refused to accept the L/C stating that they don’t trust the bank.
So I again amended the L/C and got a confirmation added to the L/C through their bank (China Bank of Construction), which again they refused to accept and the shipment was delayed again and again.
The supplier seemed to be ignorant about the L/C and its execution, so I personally had to call the Manager at China Construction bank, and then he helped me to convince the supplier that the L/C is good and there is no harm in accepting the L/C. This matter was sorted till Sept 25, till which the last date of the shipment was expired and so I again made the amendment to the L/C to increase the date of shipment till 10 Oct. 2008. But since there were holidays in , the supplier agreed to ship after the holidays.
But later the supplier refused to ship one container at a time and wants us to ship both the container at one time only and is demanding more money from us.
And now the supplier is black mailing us that if we don’t pay the total money for both the containers, they will cancel the order without return of the deposit money which is USD 28500.
We have been in regular contact with the supplier, but they are not ready to listen and only want more money before dispatch.
We think the supplier is trying to cheat us since they have not followed the agreement from the beginning and all our efforts are in waste to convince him to ship the goods.
We have requested them to ship at least one container for which they have received the whole money and the L/C, which has already been Okayed by their bank, but they are refusing and insisting to pay more money and then they will ship both the containers together. But now we are afraid seeing their performance so far, and sense that they are only trying to cheat us of our money.
Can anyone suggest if any Chinese Govt. organization can help us in this matter, since we are taking heavy losses due to this deal.
Also is there no credibility of the company which the ALIbaba approves and certifies as GOLD Member, since the present company had very little knowledge of International business practices.
Please help.
Thanks and Regards
Tarun Dalmia
email: tarun@tdoverseas.com
What a terrible situation to be in? There are possibly a few things that you could have done differently in hindsight, but overall this situation is something that could happen to anyone so is a good warning for others.
First off alibaba Gold Supplier and Trustpass mean nothing as far as the reliability of the supplier. Every new member in China is now required to pay for full membership which automatically includes Gold Supplier and Trustpass even for new members with no verification. Perhaps one day legitimate suppliers that are paying a fortune for these titles at alibaba will question why it is so easy to get this status.
I think that your best bet is to contract a Chinese lawyer to use China law to put pressure on the supplier. You may seem some mention of a contract only being legally binding if you have stated certain clauses in that contract but in my experience an agreement is a legally binding contract and the law in China will recognize this as being the case. It seems that you have a lot of the terms in writing which will help your case as your lawyer will be able to understand what was agreed to.
It seems to me that any further money should be directed to your legal help and not to the factory.
As far as possible ways to avoid this type of situation in the future perhaps the following may help:
a. I would always be suspicious of a China based supplier that was willing to accept any other payment term other than TT or LC on a first order. There are plenty of payment terms out there, but as can be seen in your case, if you try to do things 'outside the norm' the supplier can sometimes regret their decision and create the mess that has been created here.
b. In line with the above if you had started out with an LC at sight payment term then there would have been no cash deposit payable and as the supplier has failed to deliver the product they would not have received any payment. So on a big order such as this one it is probably wise to avoid 30% TT deposit if at all possible and I am confident that large and legitimate suppliers would understand and accept this. You will often get pressure from a supplier to pay a cash deposit so that they can purchase raw materials but the simple answer here is that the supplier can use the LC to borrow money from the trading company that they are exporting through if they do not have the cash themselves. This is actually one advantage of dealing with a factory that does not have export rights themselves.
Good luck with this and I really hope that it works out for you.
I totally agree with you on the questionable role played by Alibaba.com, as being the B2B channel. If the site is charging money and certifying the members, then it should be done after through checking and investigations, so that such situations may be avoided.
I regularly do Internatinal business with many countries since many years. And we prefer the down payment/ * as terms of payment since it saves us lot of costs that are involved in the LC to both the parties.
But you are correct that I should have been more careful with a new supplier whose credibility was not known.
After all the correspondence and communication, it seems that this supplier doesn't know anything about the international business, and as such they dont deserve to be given any such verified status.
Getting in legal system can be very expensive and time consuming, but I have this as the last resort if nothing is being solved.
Thanks for your reply.