International Business Study

These 10 rules will help importers to avoid mistakes and to not become the victim of a fraudulent company.

1. As a professional in your industry you are expected to always be updated about the current market price of the product you are buying. When your new partner is offering you a price 30-50 % lower than the market price, be careful. Miracles happen very seldom nowadays. You will either receive goods of lower quality or of different specifications, be given fewer than ordered, or, probably, will get nothing at all. Ask your potential supplier why the price is so low and listen carefully to the explanations.
2. What are the payment terms? Often the supplier will ask for 5-50%, or even higher prepayment, and the remainder must be paid upon faxed copies of the export papers. We advise to start the business with a new supplier using L/C or L/G. This method of payment will give you higher security than direct transfers. If the supplier insists on prepayment alarm bells should start ringing. Investigate the supplier using our “company check” services in order to build a picture of this company. If the financial report is missing or the company is weak, be careful. You might easily lose your prepayment.
3. “You should decide immediately or we will sell the goods to another buyer!” Have you heard these words? This is a strong signal that something is wrong with this deal. The supplier is pressing you to make a decision fast, to commit yourself by signing the contract and making payment arrangements. Why should the seller be interested in selling the goods especially to you if he has another buyer? Be extremely careful in this situation. It is probably better to stop the negotiations and obtain more information about the supplier. If you are dealing with a fraudulent company, they will press you for the deal without giving you enough time to check them out.
4. If you do not have experience with a supplier, do your best to ensure that you will receive the goods according to your specifications and in the ordered quantity. You can always ask the supplier for the inspection reports from an independent inspection company. It is even better if you find this company yourself and order the inspection. If the inspection is ordered by you, the inspection company will follow your instructions for the inspection and will report only to you. We also recommend mentioning in your contract with the supplier that the deal is void if the inspection company finds out that the goods are not in accordance with the given specifications. Include a clause stating that if the goods are not of the given specification, the supplier must pay the inspection costs. If you are dealing with an honest supplier, who knows his product and is sure of its quality, any kind of inspection is not a problem.
5. Paperwork. When dealing with a number of countries the paperwork is extremely important. Such locations include Russia, China, EU countries (when importing from a non-EU country), Ukraine, Egypt, USA, Nigeria and many others. Be sure that you supplier knows how to correctly complete all the papers; otherwise you may be in trouble. We recommend you send the supplier a full set of export documents you need (do not forget to remove the real names, goods descriptions, prices etc. from the documents!) before the goods are shipped. Be sure that your supplier understands what he must do. If you are not sure, insist on L/C. In this case you can be almost sure that the paperwork will be prepared properly.
6. Insurance. If you are buying EXW, CFR, FOB, DDU or other terms, where insurance is not included, make sure that the goods are insured either by you or the supplier. Extra insurance is never a bad thing. It is better to pay several hundred Euro/USD to an insurance company, than to lose the whole cargo. If the cargo is lost or damaged in transit, it will be very hard to obtain any compensation from the shipping company. Usually the insurance covers 110% of the cargo value, but the coverage can be increased.
7. Inspection upon arrival. We always recommend making the inspection before the goods are shipped. If the inspection was not done at that point, be sure that the goods are inspected immediately upon arrival. All the seals should be removed from the container/hold/truck/wagon when the inspector is present. By doing this all parties involved will be sure of the quality and the quantity of the goods. No claims can be made if the inspection shows that the goods comply with the contact terms. We strongly recommend performing the inspections both before shipping and upon arrival of the goods. This is a bullet-proof method, which will cost you a bit extra but will give you 99% security in your operations.
8. If you are asked to pay to a personal bank account instead of the company’s bank account, we recommend stopping any communications with this company or person. Either an employee of the company is trying to acquire some extra money personally or you are dealing with a scammer. Both scenarios are bad.
9. Be sure to make a written contract with your supplier, even if you know him from previous business or obtain excellent references on him. Oral contracts can be binding in many countries, but they are almost impossible to prove. Just make a written contract your standard policy and explain it to the supplier in case they ask “don’t you trust us?”
10. You are communicating with one company, but the invoice or proforma invoice for the goods is coming from another company, and, even worse, from another country. We know this practice and even though it is frequently working with suppliers from certain counties, our advice is not to proceed with such a deal. If things go wrong, it will be very hard for you to find out who is actually responsible for the goods and which company is bound by the contract. Again, take your time and check your supplier using our “company check” services.