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How to Resolve a Dispute with Your Supplier

dispute resolution in China

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Picture that you’ve paid up thousands of dollars upfront, only to receive a delayed and defective batch of products. Or, what if your supplier decides to double the price, halfway through production?

Sending angry emails at 1 AM will not get you far, but there are methods that can help you gain the upper hand in a dispute with a contract manufacturer.

Methods that I will present in this article.

But first, we need to draw the line between you being disappointed, disputes and outright frauds.

This is how I define a supplier dispute

If you the supplier has failed to comply with the written product specifications, quality requirements and order terms – signed and stamped in a contract – and refuse to comply, then you are in a dispute. Continue Reading →

Supplier Scams in China: How to Get Your Money Back: By Kai Xue and Li Xianyun

Supplier scams

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Small businesses importing from Asia get scammed everyday. You’ve heard the stories, so that probably doesn’t come as news. Most people would assume that there is no recourse, if you are scammed by a fake supplier.

But, I know two Chinese lawyers that don’t agree.

This week, we publish a practical ‘how to guide’ for reporting scams directly to the Chinese authorities and getting your money back – co-authored by Mr Kai Xue and Mr Li Xianun – both lawyers working for DeHeng Law Offices in Beijing.

In this article, Kai and Li explains how you should deal with fraud situations, including how you should manage the scammers and how to file a police report (that will actually be accepted).

Kai Xue and Li Xianyun, please tell us a bit about your backgrounds and roles at DeHeng Law Offices

Kai Xue (Read more) (Left photo) is a transactional lawyer advising mostly in cross-border finance and outbound mergers and
acquisitions. Li Xianyun (Read more) (Right photo) is a litigation lawyer representing clients in general commercial arbitration or litigation, including disputes stemming from foreign trade.

Aside from our professional interest in being engaged in legal matters, we are enthusiastic about providing better public information on smoothly conducting business in China, and if necessary, catching bad guys. Continue Reading →

How to Make a Telegraphic Transfer (T/T) to a Chinese Supplier

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Telegraphic Transfer (T/T), which commonly called ‘Wire transfer’ is still the most common payment method, when transferring money internationally.

Yet, making Telegraphic Transfer payments is not without risk. In fact, the risks involved are far bigger than most importers might think.

In this article, we explain why a slight misspelling could result in tens of thousands of dollars being withheld by the receiving bank – and why you should never pay privately held bank accounts.

Keep reading, and learn how you can avoid payment delays, scams, and other Telegraphic Transfer related issues.

1. Get the beneficiary name, address and other account details right

When writing money to your supplier’s bank account, you need to make sure that all beneficiary and bank details are correctly, and fully filled in.

If, for example, the beneficiary name is not correctly typed in, the money will be withheld by the Chinese bank – and finally returned back to you.

This is indeed a good security measure, but this will cost you at least 2 to 3 weeks. In addition, you don’t get the bank transaction charges from neither your bank or the suppliers. But, that quite irrelevant, in comparison to what a month long delay could cost your business.

So, why is this even an issue to begin with? Continue Reading →

Procurement and Purchasing Agents in China: A Complete Guide

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The Procurement Agent is a freelancer, or part of a larger organisation, arranging various aspects of the trade between China and the buyers around the world. There is no set standard for what exactly a Procurement Agent shall do. For the sake of clarification, I list a few examples below:

  • Supplier Identification & Price Research
  • Sample & Prototype Development
  • Quality Assurance & Quality Inspections
  • Social Compliance Audits
  • Product Compliance Consulting & Product Testing
  • Shipping & Logistics
  • Customs Procedures & VAT

This industry, which has grown very big in Asia in the last few decades, includes everything from rogue agents to major trading houses. The purpose of this article is to explain what a Procurement Agent can be expected to do for your business, and how they differ.

Continue Reading →

China Company Verification: How to Vet Suppliers in 4 Steps

China Company Verification

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All too often I hear Buyers making supplier selections on highly arbitrary factors, primarily the responsiveness the sales rep on the other side. Such factors are largely irrelevant. A supplier selection without the right data is often the root cause of quality issues further down the road. In this article, we explain how you can perform a China Company Verification by analyzing their documentation. This procedure can be managed from your office, and doesn’t require an on site visit.

Consider it a first step of the selection procedure, as there are limitations to what can be done from a distance – as compared to more comprehensive, and far more expensive, factory audits. The ideal outcome is identifying a number of potential candidates. In this article, we look into two sets of documentation, company related documents and product related documents, and the role of buyer references and US customs data. Continue Reading →

Payment Methods when Importing from China – Complete Guide

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About to pay a manufacturer in China? The payment method, and the process, often has a major impact on the outcome. In fact, it can  spell the difference between success and failure, when buying from overseas suppliers. In this article, we introduce you to four common payment methods, used when transferring funds to Chinese suppliers.

Telegraphic Transfer (T/T)

The Telegraphic Transfer is standard bank transaction, placed either through your internet bank, or in a local bank branch. This payment method is accepted by all Chinese manufacturers with a bank account. Virtually all, that is. Albeit common, it offers no protection by itself, unlike the Letter of Credit, which I’ll get back to in a bit. That is, however, not saying that T/T is necessarily an unsafe payment method. Continue Reading →

Payment By Letter of Credit in China – A Complete Guide

Letter of Credit

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By default, most Chinese manufacturers require a 30% deposit before production. When, something turns out to not go as planned, the deposit, as if by magic, suddenly turns into a non-refundable down payment, never to be seen again. To avoid undertaking such risks, many importers rely Letters of Credit (L/C) to pay their suppliers, which requires no such deposit. Instead, the payment is released only when the goods are shipped.

In this article, we explain how a Letter of Credit can act as an extra layer of security when buying from China – but also why importers cannot blindly rely on an L/C as the ultimate safety mechanism.

How a Letter of Credit Can Protect Your Business

Unlike a regular T/T transaction, an L/C guarantees that a seller, for example a Chinese manufacturer, will receive a payment in full once certain conditions has been met. For importers, an L/C removes the risk of making an upfront deposit payment, before production, while the supplier can be sure that they will indeed receive the money when the batch is completed. Well, that’s at least how it works in theory. Continue Reading →

Shipping Scams In China: How to Protect Your Business

Shipping scams in China

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During the last 6 months, we have received several reports from importers being defrauded by Chinese freight forwarding companies. Since mid August, the frequency of these shipping scam reports has increased rapidly. Thus, we decided it was time to issue a warning to our readers, and explain how you can best protect your business from scammers.

The scammers exploit the Bill of Lading

Let’s begin by introducing you to how the shipping process usually works, when no scammers are involved. Most importers buy according to FOB (Free on Board) terms, which means that their Chinese supplier takes care export clearance and delivery to the Port of Loading (e.g. Shanghai or Shenzhen). Continue Reading →

Alibaba Supplier Scams – 3 Common Types & How You Avoid Them

Alibaba Scam

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There are still plenty of stories about buyers being scammed by suppliers listed various online directories. Alibaba does not turn a blind eye to such scams, but there are limitations to what they can do in order to help victims of fraud. In this article we look into 3 common types of Supplier scams and explain how you can prevent the scammer from evading your compensation claim.

Scam #1: Payment Frauds

This type of scam has been on the rise in the last few years. The first time I came across a payment fraud was in late 2011. The principle is simple. The scammer hacks the suppliers email account and determines which orders are about to be paid. From the supplier sent email box, they download recently issued Proforma Invoices and make their own versions. It looks exactly like the “real” Proforma Invoice – the only difference being the beneficiary details. Continue Reading →

Payment Fraud in China – How to Avoid Going Bankrupt

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A true story from Qingdao

Afraid of losing (all) your money when you’re importing from China? You should be, and you’re not alone. Paying frauds are one of the most common forms of scam, and they are targeting small to medium sized businesses sourcing products on Alibaba.com and other online B2B platforms. In the last few years I’ve seen small importers losing hundreds of thousands of dollars in this type of scam.

The first time I had to handle a payment fraud case was in late 2011. It was late on a Friday evening and I’d barely opened my first beer when I received a desperate phone call from a long term client. She had, without telling us, contacted a suppliers, in Qingdao, selling food supplements. They had previously imported the same product from this supplier and my client experienced no problems whatsoever. This time she wasn’t so lucky. The supplier stated that they did not receive a single dollar from her, something which made my client nervous considering she had transferred around US$ 40,000 two weeks before she called me. Continue Reading →