About International Trade Fraud

What are the common types of international trade fraud? What are the methods for preventing and responding to international trade fraud? Common types of international trade fraud include letter of credit trade fraud, wire transfer fraud, processing trade fraud, and establishing branches in China. 1. Trade category of letter of credit

(1) Some companies often exploit China's trust in letter of credit trade. The means include threatening the issuing bank of our country to refuse payment. Under customer pressure, the issuing bank often finds faults and finds discrepancies in Chinese documents, leading to refusal of payment. Thus forcing China to agree to a price reduction or switch to wire transfer payment.

(2) Importers take advantage of the unfamiliarity of Chinese exporters with their legal environment, local interpersonal relationships, and loopholes in local law enforcement agencies to sue for letter of credit fraud in Chinese local courts, and apply for "property preservation" ("stop payment order") with relatively small amount of guarantee insurance bonds as collateral, requiring the issuing bank to stop payment.

II. Wire transfer category

(1) The most common way is to cast a long line to catch big fish. Firstly, you should give a few small orders to the Chinese company and make normal payments to win the trust of the Chinese side. Then, you suddenly place a large order and demand payment on delivery, citing a shortage of funds and tight delivery time. After the goods arrived, there was no news.

(2) After the imported goods arrive at the port, the importer refuses to make payment to the Chinese side due to quality issues, discrepancies in specifications, etc. In order to lower the price, some even require sales before payment.

(3) The use of domestic customs regulations for import, return, or resale requires the consent of the importer. Neither customs clearance procedures nor payment for the goods are processed, and the Chinese side is not allowed to return or resell the goods, resulting in long-term detention in Hong Kong and using the goods as a weight to threaten the Chinese side to reduce prices.

(4) Registering a company as a legal person in the name of another person, transferring the property (real estate) under the company's name and the person's name in advance, or mortgaging it to a bank, fraudulently obtaining payment for goods and immediately investing it in trade as operating capital, making it impossible for China to take property preservation measures.

(5) Utilize the weak management of local or small shipping companies or freight forwarding companies established within China, or collude with them, to induce them to release goods without a bill of lading. In some countries, these small shipping companies or freight forwarding companies are "shell" and have no assets to execute.

III. processing trade

Foreign parties often sign "double contracts", which include one set of contracts with normal processing fees and the other set of fake contracts that lower and falsely report processing fees during customs procedures. For the processing fees involved in the customs declaration contract, the foreign party shall make normal payments in foreign exchange. The shortfall shall be compensated by abnormal means such as underground banking, carrying cash out of the country, borrowing the name of idle social personnel, or using telegraphic transfer in the name of company employees within the personal foreign exchange limit. Once funds are tight, refuse to pay or default on the insufficient portion mentioned above. At this point, the Chinese side is often unable to recover such arrears due to suspected assistance in false customs declaration.

In addition, foreign parties generally take advantage of fierce competition among Chinese enterprises, requiring payment of processing goods first and then processing fees, in order to gradually delay payment and gradually trap the Chinese side, or suddenly place large orders, and the foreign party will no longer hear from the Chinese side after delivery. In addition, some of our small and medium-sized enterprises do not sign contracts with some foreign companies. Once problems arise, China is often unable to provide evidence of abnormal foreign exchange payments, and is suspected of cooperating in tax evasion, increasing the difficulty of recovering payment.

Four. Forms of establishing branches in China

Some foreign trading companies establish offices or branches in China to gain the trust of Chinese companies, and then close the offices or branches after the goods arrive and escape. Some foreign companies import goods from their own countries under the name of branches registered in China and require Chinese end users or our professional import companies to open letters of credit on their behalf, or prepay a portion of the deposit, and then

Secondly, it is necessary to fully evaluate risks and take avoidance measures. For example, one can apply for export credit insurance, or adopt more secure payment methods such as letters of credit, requiring the other party to provide guarantees or bank guarantees to reduce risks. The above risk expenses need to be included in the cost to measure whether income and expenditure are cost-effective, so you would rather earn less than blindly sign contracts.

Thirdly, in the process of trade, it is important to keep written documents. In addition to signing a formal contract with detailed terms, a series of small requirements such as modifying specifications, changing delivery dates, and changing bonded warehouses after landing must also be confirmed in writing by the responsible person of the other party. Suggest adding arbitration clauses in the contract (as there is no judicial agreement between the two countries, the enforcement of arbitration results in both countries is better than court judgments).

Fourthly, once the other party delays payment, cooperation should be immediately stopped and the other party should be required to make payment before proceeding with the next transaction. Avoid fluke mentality and the fear of the other party canceling the order.

Fifth, after a trade dispute occurs, it is necessary to collect various evidence in a timely manner and immediately request the other party to confirm the repayment responsibility in writing and develop a repayment plan. And closely monitor the other party's business and credit. If the situation worsens, our company should immediately notify the export insurance company to settle the claim or seek property preservation through local lawyers.

Based on the credit investigation results, our company should choose the most efficient way of recovery, such as criminal litigation (accusing the other party of fraud and forcing them to repay), civil litigation, and debt collection companies acting as agents for recovery. If the company's assets have not been transferred or mortgaged, enforcement is relatively easy, and the form can be door-to-door recovery or direct litigation. In some countries, companies, such as legal entities, are mostly limited liability companies. Generally, one cannot hold oneself and their spouse accountable for unlimited economic responsibility. If a foreign company fraudulently engages in loan fraud or delays payment, it will transfer relevant assets in advance and then go bankrupt (deregister the company), thus requiring strong pressure to achieve the purpose of recovery, such as criminal litigation.

However, due to the increasingly strict filing conditions for criminal proceedings, judicial institutions such as the procuratorate (instructing the police department) have to confirm the fact of asset transfer and whether it is suspected of malicious bankruptcy or fraudulent purposes through financial inspections to decide whether to take criminal detention. The procedures are complex, time-consuming, and the likelihood of success is low. Because civil litigation does not affect the freedom of action of foreign parties and can be appealed, the time is relatively long. It takes approximately one to one and a half years from prosecution to execution.