Iulianp: with the ongoing fraud in the HMS trade how does one safeguard themselves from fraud? I have worked with several sellers but everything falls apart when we get to the Draft contract. Every seller we've been working with either wants a deposit up front of minimum 1 months shipment OR a UNCONDITIONAL BG. No POP before opening of L/C, No proof of past performance, no yard visit. Is this usual?
Replying to [iulianap]: Hi . I beleive you are an expert in this business. Can you also explain ISRI Codes 50-65 or ISRI Codes 202 for me? Thanks in advance
Replying to [RSUH]:A friend of mine in China asked me to search used rails in US. As first glance, it was extremely attractive. Most of the deal on the web is 30,000MT x 12 month. Even if you make US$1 per MT as commission (many claim to have 2% even 3%), it would be US$360,000.
Trading, not to mention on scrape metal, is not my expertise but money sounds good so I dived into it. After one week investigation and research, which is my strength, into this business, I recommend my friend to stay away from it. Based on what I read on this forum, I believe many of you are decent people so I would like to share my thoughts with you. - First of all, nowadays by internet, it is very easy to find and understand used rails specifications, such as HM1, R50-R65, and financial terms, such as BG, PB, all kind of DLC, etc. With the basic understanding of this, I have moved to more difficult tasks. - There are so many selling and buying leads on all kinds of trading site, Tradekey, Allibaba, ec21 etc, etc. CIF price is between 200USD to 300USD for used rails R50-R65. I sent messages to ten individuals whom I believe more legit than others (higher CIF price and other selection factors) with a well crafted letter and good story (all real). To my amazement only two responded. - Further conversations made me uneasy. One first to claim to have materials in Europe but at the end of conversation changed it to USA. That is one technique I learnt to check on people. Ask the same specific question twice during the conversation to see if you get the same answer. I also left phone messages to two reputable companies in US (reputable because they are also doing lots of other deals and with longer history). I got no reply although I believe they were involved in used rails trading. So I am getting suspicious about this business and started thinking seriously. - I studied hundred of trading messages on the used rails and realized some patterns. The following is my best guess; I am 100% sure I am right. Oldest fraud is the “passport” if you go back to one more year on the trading site. Older scam is the one month down payment. The current method sounds so harmless at the beginning until I talked to one LC (letter of credit) expert. Many brokers insist on 12 month deal, which means automatic revolving DLC is essential. There is a danger that your 12 month payment only gets you one month goods. - For used rails R50 (51.67kg/m)-R65 (64.72kg/m), it is safe to assume average is 60kg/m. Typical claimed one shipment is 30,000MT. That is equivalent to 500 km worth of used rails. One year supply of 30,000MT per month makes 6000km. To have a sense of that distance, it is 1.5 times of that from New York to Los Angeles. I highly suspect there is such a huge pile of used rails sitting there. - Then I figure the companies that actually have used rails are the ones removing old tracks. I was able to identify no more than five in US. I called one of them. It happens to have and wants to get rid of 250MT of used rails because of incoming cold weather. I was quoted about $1000 per MT as FOB Chicago. Of course there is a room for negotiation but not that much, considering this is in US. So how on earth do brokers claim to have materials at CIF $200-300 ASWP for used rails R50-R65. - More research shows that in rails business, some people actually buy used rails to “relay”, that is, to use it again as tracks. If that is a viable business, the stocks for used rails as scrap metal is even less. - All in all, it does not make any sense to am any more about his business.
It is a long message and I am getting tired too. The moral of this story is that if it sounds too good to be true, it is. Of course someone can argue situation in places other than US is different. Then I wish you luck and am looking forward to hearing your successful stories.
![[em1]](http://img.alibaba.com/images/eng/style/icon/emoticons_smile.gif){kind=icon}
: very nice explanation
