While the China market offers many business opportunities, scammers preying on unsuspecting business persons is a reality. Scammers love to operate internationally because it makes them more difficult to track and it also makes suing and collecting more complicated as well. International scams also seem to work better than domestic scams because the person being scammed too often thinks this is just how things are done in foreign country A because they do not actually know how things are done in foreign country A. Crossing borders increases confusion because of a lack of knowledge regarding language, culture, and regulation. All this combines to make international scams widely popular. In this article, we discuss some of the more common scams, and most importantly, we discuss how to avoid getting scammed.
1. Tricking someone to come to China to sign a deal
“Hello, my friend! We are pleased to inform you of our interest in your product and would like to make a purchase worth $2,500,000. Please come to China to discuss with us further and sign our contract as soon as possible. We look forward to seeing you!”
In this scam, an alleged Chinese company emails a foreign company to express a desire to buy a few million dollars of the foreign company’s product or service. The terms of the deals are too quickly resolved and the Chinese company suggests the foreign company come to China to sign the contract and celebrate the great cooperation and friendship the two parties have established. The foreigners get to China and are “treated” to a supper expensive meal at which the contract will be signed. After much food and drink the foreign company is told that Chinese custom requires the foreigner to pay for the dinner and buy the Chinese CEO an expensive gift and pay the notarization fee for the contrast. Finally, the foreigner is requested to pay a couple of thousand dollars for the dinner and another $3,000 to $8,000 for the notarization fee.
It isn’t until weeks later the foreigner learns there is no deal and (most of the time) there is no Chinese company either. The biggest lure of this scam is that the Chinese company will lure foreigners to China with a large order, sign a very real contrast, and have it notarized by a fake notarization agency. The thing that makes these scams so insidious and so successful is that the amounts of money they get usually range between $5,000 and $10,000. That is a relatively small amount, and it would be difficult for the foreign company to recover the money from China in a distant country. So the sad bottom line with these scams is that the scammers virtually always get away with them and this means they remain free to operate and to keep perpetrating them.
● Conduct rigorous due diligence on the “Chinese company”
● If your investigation reveals that the company is registered, contact the company to confirm the identity and authority of those who have approached you
2. Switching the bank account
“Dear regular customer! We will ship your recently placed order once we receive the balance of $25,000 as per our long-standing arrangement. For tax reasons, we would like you to pay in a different account than our usual one. Many thanks!”
Sometimes a foreign company may be asked by their legitimate and long-standing Chinese business partner to make a payment to a different bank account than the one normally used. Different reasons could be given to explain this unusual request: taxes, government loans, the need to secure foreign funds outsides China, etc. After the money transfer, the Chinese company denied that any payment has been made. In many cases, the Chinese company truthfully did not receive the payment, but it has been diverted elsewhere.
Different motives for this scam:
● Rogue employees from your Chinese partner aiming to make a quick buck
● Hackers have infiltrated your Chinese partner’s email account, possibly assisted by rogue employees
Before making a payment to an unfamiliar bank account, confirm with someone with supervisory authority from the Chinese company that the payment request is valid with a detailed explanation. Given the insecure nature of most email services, use the phone!
3.Getting a deposit for supplying products and then supplying nothing
This scam is often used by factories that are closing or going bankrupt. When some Chinese factories know they will be shutting down, they often use tactics that allow them to bring in as much cash as possible in the short term. The owner then takes the cash and shuts down the company.
Failing Chinese factories go to their buyers and offer to sell their products at a substantial discount. But the price for this discount is a substantial increase in the order amount or an increase in the deposit from 30% to 50%. The Chinese factory says:” It is a great deal for you. Make a full year of orders all at once and you will save big money.” Using this scam, the Chinese factory collects a much larger deposit amount and the owner shut down the factory and disappears.
4.There are many other ways that Chinese suppliers can scam foreign buyers, which sort into two categories:
● Disappearing after a deposit or a fee for a sample is wired
● Price increase after a deposit is transferred
● Price increase from one order to the next without relation to production cost increase
● Lack of respect for IP rights (selling the buyer’s design to other customers)
● Lack of transparency (subcontracting outsides of an approved facility, changing a component without notice, etc.)
Lack of competency/experience
● Lack of reliability: late deliveries, inconsistent communication
● Inability/unwillingness to reach the desired quality standard
5. How to avoid fraud and scams
● Mention that you’ll have their factory audited by a third-party agency. See their reaction. If they want your business and they are a serious factory, they will welcome this suggestion
● Mention that you’ll have their production inspected by a third-party agency before the final payment. Again, if they are confident in their abilities, they will say OK
● Open Google and search for “[company name] scam”
● Check several online directories (Alibaba, Global Source, Global Market, Made In China...) and see if their profiles on those different directories are consistent. If the information shown is very different (phone number, exact address...), it is not a good sign
● Request a sample, and request to pay for it in their company bank account. If this information is provided, it is a good sign. Then, ask them for the address for YOUR courier company to come and pick up the package. Does that address to match that their email or website address?
6.What can our company do for you?
● Who are we?
We have a factory of over 2,000㎡ in Dongguang, China, equipped with a complete production line, which can guarantee the quality of products and delivery time. We have nearly 100 employees in three offices in Shenzhen, China. We have a complete and professional business department, sourcing department, product quality inspection department, and logistics department, which can ensure that you have a good experience from inquiry, and order to product delivery.
● How can we guarantee quality?
Always a pre-production sample before mass production;
Always final inspection before shipment.
● What services can we provide?
Accept delivery terms: FOB, CIF, EXW, DDP, DDU;
Accept payment currency: USD, EUR, HKD, CNY;
Accept payment type: T/T, L/C, MoneyGram, Paypal, Western Union, Escrow.