Basic ways to find out Chinese business fraud before payment

China is not only the largest exporter but also the largest importer for lot of general commodities on the globe, suggesting that 99.99 % of the Chinese businessmen are quite honest and reliable enough. However, scammers do exist everywhere on the globe, as a professional auditor and sourcing expert in China, I'd like to share some basic skills on how to find out the Chinese business fraud before payment:

1. Homepage/Website/Full contact ways

Scammer and cheater usually rent an internet domain from an American or Chinese host for one year. After one year, the homepage does not exist any longer - as well as the company. No email-address, no phone-/fax-number works any more. The contact person (usually it is only one or two !) disappears completely and can not be reached by any means any more.

The homepage in each case is from the same‘mold’or‘standard’- it means a  ready-made/pre-manufactured one. Layout, design, functioning etc. of the site are almost the same in all cases - only the name of the company, phone number, email address, name of contact person are different.

90% of these scammers do not use a fixed office phone number, they just listed out a mobile phone number online. They used‘fake ID card’to buy a SIM card and get a mobile phone number, which could be disappeared at any time in China.

It is always mentioned on these sites only one single contact person, only one email-address, only one number which is phone and fax at the same time. There is no real, serious company presentation - only generalities which in all cases coincide to 90%.

There is nothing telling about the company history, company values, employee/staff, and management etc. They may know little English, or just use machine to translate or employ a young girl to work for them.

There is nowhere on the site mentioned any official registration number, tax number etc. as well as the contact data of the official governmental authorities where it can be proved that this company really exists and has all necessary legal licences. There are nowhere mentioned the bank coordinates, so that the company can be proved about its credit and reputation.

100% of the scammers use‘fake'or‘none-exist'addresses in China, they just created an address online and it cannot be reached at all. With a simple ‘on-site inspection’you can find out the truth, especially when the order is large enough.

2.Too low prices
Check the market price in China first before you IMPORT !
China is well-known for the ‘cheap or low’ prices for most of the items on the globe. However, please bear in mind that China is also the largest consumer for lot of luxury and high quality products. Almost every factory has different quality level products, catering for the importers from Europe, US, Middle-East and Africa, if you pay more, the quality will be good, and vise versa.

The scammers normally trap the importers with extremely low prices, far beyond the market prices. You have to check out market price and their export qualifications first before further discussion if you are offered a very low price.

3.Payment terms and bank account 
Scammer and cheater always ask for pre-payment, usually 30%TT in advance. It seems to be normal in the international business as they need cost to prepare the raw materials, however, the importer should have their registered information or export qualifications first before payment, especially when the order is very large.

LC 100% at sight is also not 100% safe now. Some professional scammers will use ‘fake documents’ to get the money, please read here to know more about such cases. They do not issue a PB of 2% - because they do not have the money and they are not credit worthy. Of course, the best solution is that you can use little money to employ local verification or auditing service to solve these troubles in China.

Another important thing is the bank account. We have witnessed several cases that some professional scammers use ‘UK, Dubai or HK offshore company’ to receive the money in China. For example, they can register an offshore company in Hongkong or UK or Middle East, the company name is exactly the same with a big company name or well-known company name here in China. Then the client is required to pay to their offshore trade company account (which does not exist in Mainland China), they will disappear after they get enough money and repeat the scam story again and again. In this case, company bank account verification is also very important now, espcially for large orders.

4.Licences and export qualifications
In China, every factory or exporter must have their own Business License, from their official Business License, you can find out their authorized business scopes in China, you can also find out whether they are a real factory or not in China. In this case, a basic verification service is very important before payment if you know nothing about Chinese.

Scammer and cheater are not able to present a business licence - not a company licence, not an export licence, not a production licence, even if they state, that they are direct producers/manufacturers. Some used a ‘fake’ license to trap you. If they present one, it is only in Chinese and no European buyer will understand what kind of licences it is and what it is written in this licence.

Except for the business license, some other certificates or licenses are very important as well in doing international business in China, say, Export License, Export Quota (for some special items), CE, SGS, UL, Halal, ISO certificate etc. Do not forget to check out their export qualifications and bank credit before payment! A formal purchase contract, on-site factory auditing or inspection service, pre-shipment QC inspection and loading process supervision service etc play a very important role in doing safe and smooth business in China !

Source: STIN Verification Team and Dr. Harald Dasinger, a sourcing expert from Germany

Rules you need to know for China Trademark Application

The behaviors of copycat are widely existed in current market, such as “the free-riding against the well-known brand names” and “the imitation of famous brand-name”. The existing of copycat not only disrupted the market order, but also brought the economic and reputation cost for many consumers and enterprises due to its quality issues. Especially in manufacturing countries like China, an enterprise can be widely accepted by majority relying on the important role of trademark. Enterprises registered trademark needs to be approved by the China Trademark Office, the applicant can obtain the exclusive rights of the trademark.

 

In accordance with the provisions of “China Trademark Law”, non – Chinese people can register trademarks in China can gain their trademark rights in accordance with the law protected by Chinese law. In recent years, due to China’s rapid economic development and the magnetic properties of the Chinese market, the number of registered trademarks in China by foreigners is also on the rise. According to statistical data of Trademark Office of the State Administration for Industry and Commerce, the trademark applications were more than 154,000 registered by foreigners by the end of 2010, the registration amount was far more than the Chinese enterprises in overseas trademark application. Only in the year of 2010, foreigners have submitted 98727 trademark applications in China. Obviously, applying for trademark protection for their own brands in China has been attached more and more the attention from the global enterprises.

 

Those enterprises wish to register trademarks in China, they need to understand and be familiar with the rules and precautions of Chinese trademarks, to avoid the lack of specificity in the registration process as well as the cost waste for individual or enterprises due to the blind registration.

 

Rules you need to know for China Trademark Application:

Where two or more applicants apply for registration of identical or similar Trademark for the same or similar merchandises, the trademark will be given to which preliminary approval, after examination, is obtained and to which the announcement of the application therefore is made first. Where applications are filed on the same day, the trademark will be given to which preliminary approval, after examination, and to which the announcement of the use thereof is made first. The dismissal of the applications of the Trademark by others will not be announced.

Any person may, within 3 months from the date of the announcement, file an opposition against the trademark that has, after examination, been preliminarily approved. If no opposition has been filed after the expiration of the announcement period, the registration will be approved and the trademark will be issued a certificate of trademark registration and announced. Where an application for trademark registration is dismissed and trademark will not be announced, the Trademark Office will notify the trademark registration applicant in writing.

If the trademark registration applicant refuses to accept the dismissal, he may apply to the Trademark Review and Adjudication Board for review within 15 days from the day on which the notification is received, and the Trademark Review and Adjudication Board will decide and notify the applicant in writing.

 

Moreover, you can enjoy the right of Priority of China Trademark Registration meet following requirement:

Where an applicant applies for registration in China of the same trademark for the same merchandises within 6 months from the day on which it first filed an application for registration of the same in a foreign country, he may enjoy the right of priority in accordance with any agreement entered into between that foreign country and China or any international treaty to which both countries are parties, or according to the principle of mutual acknowledgement of the right of priority.

Where a trademark is used for the first time on the merchandises displayed at any international exhibition sponsored or acknowledged by the Chinese Government, the applicant applying for registration of that trademark may enjoy the right of priority within 6 months from the day on which the said merchandises are displayed.

Any applicant requesting for the right of priority shall file a written declaration when submitting its application for trademark registration, and shall provide copies of the application documents submitted when it first filed the registration application for the trademark or the name of the exhibition at which its merchandises are displayed, the evidence proving that the said trademark is used on the displayed merchandises and supporting documents for the date of exhibition within 3 months; the applicants who fail to file written declarations or provide copies of the application documents for trademark registration within the prescribed time limit shall be regarded as not having request for the right of priority.

 

Tips for you to do safe and smooth business in China....

Doing business in China is profitable but also a challenge for some businessmen worldwide as there are too much trouble involved without enough Due Diligence work. 90% of the Chinese suppliers require 30% deposit before production and 70% of rest balance before delivery in China. Also sometimes the supplier use high-quality samples to attract the order but use worse materials for bulk production, we have witnessed countless trade disputes every year in China and sometimes it is quite risky for a foreign enterprise to purchase directly from a Chinese supplier. Here are the right steps for you to do safe and smooth business in China: 

 

First, if you have not found any reliable suppliers, then you’d better book an On-site Professional Sourcing service from a third-party local service company like:

http://www.chinabizservices.com/service/Suppliers/On_Site_Sourcing_Service/

Sometimes only local experts can find out the truth for you in China. 

 

Second, if you have sourced some suppliers by yourself, before you pay any deposit, you'd better book a third-party Basic Verification or Factory Inspection service like below to fully check out your suppliers.

http://www.chinabizservices.com/service/Verification_and_Investigation/Basic_Verif/ 

Or 

http://www.chinabizservices.com/service/Verification_and_Investigation/Factory_Ins/

The purpose of any verification service is to discover their real registered information and export qualifications etc in order to avoid future trouble. 

Third, if your order is very big, sign a formal Purchase Contract with them before paying the deposit. A formal Purchase Contract both in Chinese and English is very important as China is NOT an English speaking country, local courts only regard Chinese version of contracts as the official ones. 

Fourth, if your order is very big, book a third-party During-production or Pre-shipment QC Inspection service like below before paying them the rest balance.

http://www.chinabizservices.com/service/Management/Pre_shipment_QC_Inspection_Serv/ 

Fifth, book a third-party Loading Process Supervision service to protect your interests after you pay them the rest balance in China.

http://www.chinabizservices.com/service/Management/Loading_Process_Supervision_Ser/ 

Sixth, try to use your own 'shipping forwarder' like STIN in China ( STIN can contact a shipping agent, arrange shipment and clear the customs for you for FREE if you use STIN 'purchasing agent' service in China, by this way you will control everything at your end.)

 

Of course if you need a ONE-STOP business solution service from China, you can simply book a third-party ‘purchasing agent’ service, then they shall act as your own buying office and all above services can be covered in this service. 

http://www.chinabizservices.com/service/Purchasing_Agent_Service/ 

A qualified professional purchasing agent service may help you smooth every step in following aspects in China in person: 

Sourcing new suppliers or factories; 

Sampling; 

Supplier verification and auditing; 

Management of suppliers; Price negotiation; 

Delivery support (Logistics); 

Formal contract documentation support; 

Quality Control management; 

Loading process supervision; 

After-sale Service support; 

Other services may be available upon request. 

A good purchasing agent service is different from a trade company and they can benefit you much more from following two points: 

1. A trade company will protect their own interests at any time during the business in China. They will not allow the clients to buy directly from their verified factories. They will 'buy' from the factories and add their own profit, then 'resell' the products to the clients worldwide, the profit of trade companies is normally 10-50% against invoice value in China, varied in different products. While a purchasing agent service, take STIN (www.chinabizservices.com) for example, will simply act as their own 'assistants, office and eyes 'etc in China, STIN service will protect the customers' interests from the beginning to the end during any business activities in China. All the service charges are fixed and transparent and the commission for STIN service is only around 5%. They only charge a small amount of service fee order by order or case by case, apparently the customer can profit more as they can buy directly from any qualified factory sourced and verified by STIN in China. The client is free to contact the factories for any question related. 

2. Trade companies normally do not have their own team of quality control inspectors, factory auditors and lawyers etc. STIN has a team of professional quality control inspectors, auditors, buyers and lawyers etc in China and apparently STIN can offer better ONE-STOP business solution services for their clients worldwide.

Tips for you to verify your Chinese suppliers online...

We have checked out hundredss of Chinese companies for clients worldwide this year. Some of the companies, even the Gold members of Alibaba turned out to be a business scammer in China. Your business cannot legally protected by Chinese government authorities if you're dealing with illegal Chinese companies. Hence, it's very important to verify your business partner as there are more and more business frauds coming forth in China. Here are my tips for you to verify a Chinese company:

Generally speaking, there are some links online for you to check out companies in China:
www.yp.net.cn
www.chinaeall.com
www.cnaic.org.cn
www.114win.com
etc
However, there is no English version of above services so far in China, you have to know a little Chinese to check it all by yourself. Also some of the companies did not register themselves with above yellow pages. So yellow page is not the key way to judge a business scammer in China! The best way to check out a supplier in China is to visit them in person or check them out with local government authorities in China or you can book a Basic Verification or Supplier Inspection service from a third-party service company like STIN: www.chinabizservices.com

If you don't know Chinese, still you can pre-verify your business partners from following aspects:

1. Contact information
Please note that whether their contact information is right or not, most of the scammers don't offer a right address, tel and fax number online. Some of the tel numbers are empty and some add and tel don't exist at all, they don't offer a company tel number, a private number or mobile phone number instead.

2. Registered corporate number
Every legal company in China has to register itself with Chinese government authortities and obtain an unique company number. If your business partner cannot offer you a unique registered corporate number, definitely he is a scammer, of course, he may submit you a fake number, so you have to check it out with local administrative government organs with the number he offered. There is a Chinese organ called Bureau of Industry & Commerce ( have branches at all levels ), which is the only government organ responsible for the registration of legitimate companies or enterprises in China. For example, for any legitimate companies from Changsha or Hunan province, you can contact the local administrative organ for confirmation: http://www.csaic.gov.cn/ Tel: 86-731-2891606 or http://www.hunancom.gov.cn/ Tel: 86-731-2287058 , the problem is you have to report your case in Chinese sometimes because most of the local officials do not know too much English in China.

3. Incredibly low prices, esp for international brands
Most of Chinese scammers usually entice foreigners with a very low price. If the prices they offered is too low to believe, you may have a further investigationon your partner to know why their prices are so low. Most of the scammers in China profit a lot by selling  or fakes of some branded goods to the overseas market, this is very risky because the goods shall be confiscated or detained by Chinese customs houses in case it considered illegal in China. By the way, please remember that the price for authentic /original brands like Sony, Apple, Nokia, Dell etc should be almost the same at anywhere on the globe. You cannot import from the unthorized brands distributors with cheaper price in China. They must be selling relicas,  ones or copies of brands etc ! Please simply forget such suppliers in China !

4. Payment and shipment terms
The scammers never accept L/C as their payment terms, they prefer Western Union, Paypal and T/T etc. Also they never deliver goods through formal channels in China, they prefer to deliver samples by Express like Fedex, TNT, EMS to avoid more examinations from Chinese customs house. Most of the scammers use Private Bank Accounts in China!

5. Warranty and after sale services
Scammers never take some measures to guarantee their quality and after-sale services after your payment, they may promise you a lot before payment. It's lip-services only!!!

Be careful with some of the Chinese suppliers!
By the way, I have to mention that, it does not mean the manufacturer has the right to sell or buy in case he has obtained a legitimate unique company number from local BIC in China. In China, all the enterprises with the right to import and export has to apply and obtain a certificate called Certificate of Import & Export from Ministry of Commerce of PRC and its authorized local organs in China after their registration at local BIC. Also a formal trade company has to register with Chinese Customs House and its branches before his formal business with foreign counterparts in China. Then he has to register himself with local Bureau of Inspection & Quarantine in case his products are in need of quality control. Without the registration from above local government authorities from China, no company can deal with you in formal channels in China. STIN verification or auditing service (www.bizinchina.cc or www.chinabizservices.com ) can help you out if you know nothing about Chinese!

Some important Government Organs (official websites) regarding doing safe business in China

When you’re doing business in China, you might need help from local officials, say, verification of business licenses and export licenses, you can contact SAIC (www.saic.gov.cn) for help, when you have trade disputes with your Chinese suppliers, you can obtain help from Ministry of Commerce of P.R.China (China Mofcom: www.mofcom.gov.cn), here is the list of some important government organs for your reference:
China IPO: www.sipo.gov.cn ( to register your Patent in China)
SAIC: www.saic.gov.cn (to check out your suppliers in China)
China Trade Mark Office: www.ctmo.gov.cn ( to register your trade mark in China)
CHINA CUSTOMS: www.customs.gov.cn (to check customs data from China )
AQSIQ: www.aqsiq.gov.cn ( to apply quality certificate in China)
CHINA MOFCOM: www.mofcom.gov.cn ( to solve trade dispute issues )
CHINA FOREIGN AFFAIRS: www.fmprc.gov.cn ( to solve foreign affairs )
CIFA: http://210.51.174.103:801/ywb/ (www.cifa.gov.cn) ( to source a good shipper or shipping agent in China)
China Quality Certificate Centre: www.cqc.com.cn ( to apply CCC certificate in China )
CFDA: www.cfda.gov.cn (www.sda.gov.cn) China
MPS: www.mps.gov.cn (to report your case to local police station)
China Commodity Net: http://ccne.mofcom.gov.cn (suppliers officially verified from China)
CCPIT : www.ccpit.org (China Council for the Promotion of International Trade)
China Arbitration Commission: http://www.cietac.org.cn or www.cietac.org ( to obtain arbitration service)
ACLA: www.acla.org.cn ( to find out enough qualified lawyers from China)
China Court: www.court.gov.cn ( to take legal actions against your suppliers in China when necessary) We are consultants from local markets in China, any question is welcome. Verification (safety), Price, Quality and After-sale service play nearly the same role in doing business in China.

Benefits of operating business in China

Since its open-door policy of the late 1970s, China has rapidly become a rising global economic power. more and more foreign investors start to do business in China mainly in high-tech, agricultural, forestry, telecommunication and energy industry. China's WTO entry marks a watershed in its ongoing reform and modernization program, seeing the country adapt its legal and regulatory framework of foreign trade and investment in line with its WTO commitments. as a major emerging market which embraces new business opportunities and challengers, foreign investors are more likely to start doing their business in China. The advantages in doing business in China: Major emerging market; Large trained labor pool; Favorable business atmosphere; Dynamic fast-growing economy; Rapidly increasing consumer wealth; Very low employment costs; Furthermore, as a dynamic market and international investors and buyers can find a wide range of quality products at very competitive prices to start their business. for instance, lots of investors start doing business in China in producing textiles, apparel and footwear; raw materials, metals and chemicals; toys and handicrafts; and foodstuffs, among others. Besides the obvious potential for selling consumer goods, China has a requirement for a wide range of agricultural and industrial raw materials, high tech components, capital goods and services. due to the rapid development of the Chinese economy, it offers sellers ample opportunity to place goods in this fast growing economy to expand their worldwide business. many top brand names from across the world can now be found in the local high street of most major Chinese cities. STIN (www.chinabizservices.com) Service is aiming to help you invest in China smoothly with their professional services: Market Survey, Consulting, Biz Investigation, Incorporation Service etc.. Our mission is to save you more and reduce the risks in your business in China!