Accurate China Insight: China business scam – Beware of unusually large Purchase Orders

A growing number of small to medium sized companies both in the Republic of Ireland and in Northern Ireland have recently contacted Accurate Group to seek our assistance in verifying the existence of China-based companies (many of which are operating out of the Shenzhen area of Guangdong Province) with generic names such as Brightway, etc., that are sending unanticipated, yet conceivable (and therefore tempting), large purchase orders, with attractive upfront payment terms of up to 50%. Following minimal correspondence, the Irish company contact (usually the Managing Director) is invited to travel to China to sign a contract. However, once in China visiting buyer’s office (which appears to be legitimate, but is merely a respectable cover for a criminal activity), and the initial deposit is due, the seller is asked to pay upfront half the bank fees for the transfer, or a commission in cash. Upon return to Ireland the seller will find no initial payment has being transferred and the party they have been communicating with has disappeared as has any cash they have been paid.

Accurate China Insight - China business scam -Beware of unusually large Purchase Orders

The Irish company usually contacts Accurate after a number of email exchanges with the Chinese company, which points to a level of sophistication on the part of the Chinese entity. They have done their homework and know industry specific terminology across a range of sectors including renewables, electrical filaments, and animal feed.

DON’T BE FOOLED BY SUCH SCAMS

  • If the size of the P.O. from a company in China you’ve never heard of reads too good to be true, that’s because it is!
  • There are easier ways to win in China. If you have never dealt with a Chinese company and just want to be sure they are bo na fide then you should contact a long-term hands-on Ireland China business consultancy with offices and Chinese speaking staff on the ground in China.  As veterans of doing business in China, an Irish China business consultancy, knowing the wily tricks played by Chinese companies, can be of invaluable assistance when verifying the true credentials of a Chinese buyer, supplier or business partner

… and, assuming, the Chinese prospective (product buyer, supplier, partner) company is genuine, an Irish China business consultancy can help you to negotiate and make the sale!

  • Never travel to Company to meet a company without verifying the integrity of the product buyer, supplier, or partner company that has invited you to visit them. In any case such a company will need to supply you with a Letter of Invitation (chopped / stamped with the official Chinese company name – any company doing business in Mainland China should be properly legally established [such as a company, a rep office, a branch, etc.] for tax and invoice issuing purpose), which you need to provide to your local Chinese Embassy when applying for a China entry visa. 
  • Even if you have received a contract in English, assume there is always a contract in Chinese. Ask for a copy and have if verified to ensure that contracts are exact copies of each other.

Incidentally it’s not just small and medium companies who fall prey to sophisticated China scams. No company doing business in China is immune: Look at what happened to Caterpillar who recently had to write off most of a China deal after uncovering “deliberate, multi-year, coordinated accounting” fraud (Source:  http://www.reuters.com/article/2013/01/19/us-caterpillar-siwei-idUSBRE90H1C520130119)?

Do note that these kinds of difficulties are experienced by very few Irish companies doing business in China. Follow your gut instinct, use commonsense and take the same precautions as you would doing business anywhere else.

Accurate China Insight - China business scam -Beware of unusually large Purchase Orders 2

Source: http://accuratelimited.com/blog.view.php?id=t8/dwXC9GMw=

Niall O’Reilly

Managing Director, Accurate GroupIreland China Product & Business Development (Export, Source, Import, Partner Due Diligence) Consultants doing business in China for over 24 years

China Office : 1-3 Ying Hui Xing Zhou, Jiang Nan Shui Xiang Lian Sheng Road, Yu Hang District, Hangzhou. China 310023| O: +86 571 8709 1253

Ireland Office: 93 Upper Georges Street, Dun Laoghaire, Dublin, Ireland| O: +353-1271-1830

1 Comment

Filed under Accurate China Insight, Business, China, Corruption

One response to “Accurate China Insight: China business scam – Beware of unusually large Purchase Orders

  1. Very grateful for this article. Please note that our UK company was approached for the purchase of £140,000 leather hides by a Chinese company. It all looked legitimate, but the company had a very new website.
    Their real mistake was they accepted our first quotation without attempting to negotiate the price, which is not the normal Chinese way!
    I’ve also read the same scam has been attempted on video production companies too.
    Seller beware!

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