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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

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Accurate China Insight: How much does a China sourcing consultancy typically charge in fees or commission for supplier identification, negotiating, inspecting, and product shipment?

It’s unlikely you will receive a public declaration of charges by a ‘consultancy‘, which is akin to asking how many drops of water are in a bucket. Charges (whether hourly, fixed fee, or on a commission basis) can vary that much.

If you think it’s expensive to hire a professional consultant to advise you on doing business in China wait until you hire an amateur to do the job

“If you think it’s expensive to hire a professional China business consultant to advise you wait until you hire an amateur to do the job”

Here in China many dubious consulting companies claim to offer the services you require, so the first box you need to tick is making sure the sourcing consultancy you eventually work with can reduce your overall costs, reduce your time to market, and improve the quality of your product, thus making the charges worth it. Actually, the sourcing consulting company should be able to save you and your company money overall, even with their charges.

In general, experienced and reliable sourcing consultants, who are not ‘fly by night,’ should make the overall supplier identification, negotiation, inspection and shipping (product import) processes faster, cheaper, and result in better quality control.

Simply put, when it comes to separating fact from fiction says Niall O’Reilly, a China business consultant with over 24 years ‘on the ground’ China business experience:

“If you think it’s expensive to hire a professional China business consultant to advise you wait until you hire an amateur to do the job!”

Accurate Group an Ireland and China-based business advisory and sourcing consultancy dedicated to building new opportunities for foreign businesses in China

“要知道怎样前面的路怎么走,最好问从前面返回的人” “To know the road ahead, ask those coming back” (Chinese Proverb)

So you may now be asking yourself “how do I distinguish average sourcing consultants from the professional?”

The average sourcing consultancy will only contact factories and manage communication between you and the factory…and little else.

The best professional sourcing consultancy will employ its considerable experience to evaluate the strategy of your company and engage in a strategic sourcing process that ensures your particular company needs are met. They will not only manage communication with factories in China, but they will anticipate potential risks, and either resolve the problems or develop contingency plans for such issues before they occur. If unforeseen problems do occur, and here in China they will occur, the sourcing consultancy is there to solve the problem and improve procedures so it is controlled in the future.

The Chinese Proverb “一分钱一分货” (pronounced “yi fen qian, yi fen huo”), which translates literally as “one cent gives you one cent’s worth of goods”, succinctly sums up the answer: “you get what you pay for”!

Source: Accurate China Blog – http://www.accuratelimited.com/blog.view.php?id=aFcU1cUL1jw=

Accurate China Business Advisory and Sourcing Consultancy: 24 years "on the ground in China"

Accurate Group is an Ireland and China-based business advisory and sourcing consultancy dedicated to building new opportunities for foreign companies in China

So here is a public declaration of Accurate Group’s consulting fees: We have a basic charge for the opening consultation and initial advice. Thereafter, for a formal engagement our fees are structured according to our clients  specific requirements.  The fee arrangements can be hourly, contingency, flat-fee, or commission-based.

Niall O’Reilly

Managing Director, Accurate GroupIreland China Product & Business Development (Export Sourcing Import) Consultancy

Tel: +353 1271 1830 / +86 152 5719 4468

http://www.accuratelimited.com

This Accurate China Insight originally appeared in the Hangzhou Business Network (HBN) forum: 

http://www.linkedin.com/groups/Hangzhou-Business-Network-HBN-803177/about?trk=anet_ug_grppro

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