Selling internationally can make or break your business. There are different reasons why things may go wrong but committing certain mistakes is foolish. Nobody’s perfect but what you can do is to know what things can financially disrupt your business and how to avoid them.
As requests of recovery help came in, we monitored the reasons why things escalated into a collection case. This experience revealed insights in international trade mistakes that we believe you should know and avoid at all costs. Hopefully, they’ll help you become a wiser exporter.
Which one of these mistakes have you made?
More than a mistake on your part, you can consider yourself a scam or fraud victim. Have you received an email from a presumed exporter in your sector promoting its products to you?
Or, maybe you received an email with unsigned purchase order from an importer in a distant country you never heard of before.
All looks official, right?
The website, the business name, the images showing their facilities, they way they wrote the email. You scan through their documents and web pages and all looks from a real business, with address, company registration and VAT number.
You start exchanging emails and all runs smoothly. The person on the other side is courteous, knowledgeable and friendly. When it comes to payment two things happen.
They Ask You To Pay The Order Via Money Transfer
Usually for small traders, it’s not uncommon to use money transfer companies to help immediate shipment of goods. This method of payment is fast, cheap, safe and requires full identification of both payer and payee.
On top, the money transfer company places great emphasis on making sure there’s no money laundering or suspected transactions across countries. They keep records about everything and if you are uncertain about something they will call up your file immediately. Read about common scams:
In fact, the problem is not about the money transfer method itself. It’s the fraud exploiting it that’s revealing. Pay attention of what happens.
a) The exporter/supplier tells you to pay a partial or full amount via a money transfer company to a named person. They send you all the details to complete the operation.
b) You comply and send the money to that person.
c) At this stage, if you paid a partial amount the fraud may continue to appear a legitimate transaction. They may say that they are preparing the goods for shipment, or, that in a number of days, just before shipment, they’ll need you to settle the balance.
d) Either way, whatever their goal was, communication stops abruptly.
e) You keep sending emails, attempt contact with unanswered phone calls and, nothing. No reply.
You’ve lost your money. This scammers are not a real business. They have setup a business website with a fake name and address. In some cases, the address might be real but it’s a hotel or a landmark in a city. Another option is that “America Avenue” in that location exists, but number “1340” is out of the range of numbers allocated to it. It simply doesn’t exist.
What are you going to do?
You could report the issue to the police but you can forget about recovering the money paid.
They Agree On Your Supply And Pay A Foreign Bank
One morning you open your mailbox and find a request of supply from an unknown importer. This may come in the form of a purchase order or just an email with a request for goods. Again, all looks official. Maybe you run a check on their website link and see it’s an existing company. The website maybe is not perfect but shows all contacts and address details.
Yet, you switch back to the email and read about their request. They may even offer you to pay an immediate deposit to you to secure the supply. But they ask you to open a bank account so that they can save on international payment fees, expenses or just use that bank for payments.
You happily agree and proceed with preparing your shipment and register on that bank website.
And here the trouble starts.
The online bank you are signing up for is not real. It’s a scam website. One technique used is that of replicating the look and feel of official banks websites so to create the same navigation experience. The colours, the layout, images, text and links.
The most prominent links will be clickable and leading to other pages where the scam keeps going on. But if you clicked on the more hidden links at the bottom of the page, for example, it’s where the scam reveals itself. They are either dead or recoursive links. That is, they lead you to another but unrelated page to what that link is supposed to take you.
Said that you follow the registration process and provide all your details. The website is well designed that you even get a confirmation email.
At this point, the “fake bank” in one way or another informs you that they received a payment for you. In order to release the money, they ask you to make a payment for account set up fees. However, they reassure you that these fees will be refunded to you along with your money.
But, strangely enough, they ask you not to pay via wire bank but via money transfer. At this point, two obvious questions arise:
Why would a bank ask you to make a payment via money transfer?
And why to an individual rather than the institution itself?
If you give in and start paying the first amount, whatever it is, you are simply sending money to a scammer. They may ask you to send more because of x and y and z reason and telling you that if not all fees are paid, they won’t release the money.
If you have found yourself in such situation, know that you are a victim of fraud. There is no importer. There is no bank. You are just dealing with scammers and likely criminals.
We want you to know how our service works. Please read our Terms and Conditions first.
This is one of the reasons the first case we examined happens.
When selling internationally finding a new customer is a good opportunity for growing your sales and market penetration. But there is one very important issue you must consider. Knowing who is your customer.
When dealing with a new customer, you must go through some checks to ensure you are selling to a real business establishment and that they can pay you.
Here’s a list:
- company legal name and type of entity(e.g. LLC, SpA, GmbH, Ltd, etc.)
- name of contact and owner(s)
- telephone numbers and email address
- company registration number and VAT
- address of main office and branch
- trade references, bank references, financial statements
If you are dealing with a one-man band, the best you can do is then request a copy of their passport or ID.
In this case, more customers lost money because of lack of proper identification of company and individuals. In some cases, the person was not a national of the country where they run the business. Once they get what they want, they leave the host country and become untraceable. In other cases, lack of identification makes it impossible to track them down.
During debt recovery actions having a document signed by a customer is a major advantage. For example, if your customer signs and puts the company stamp on a purchase order (PO), you are more likely to recover the money.
Even better if you have it in original copy. If you ever need to take legal action against your debtor, an original will make a world of difference and increase your chances to win the case.
For example, in some countries debt recoveries are more difficult because there’s no a very well established framework for out-of-court debt collection actions.
But having a document signed is a proof that it’s difficult to refute. It shows that there was an intention by the customer to acquire your goods and a duty to pay you.
Also, ensure that the signature is from a legal representative or an individual within the company who has authority to sign that document.
Our customer faced the situation where despite they had unwritten evidence the person they were dealing with was the owner of the buying company, lacking a signature on the purchase order they could not prove they received a sales order from the debtor. If a signature and even better a company stamp had been on the PO, the customer would have had more chances to get the money back threatening the debtor with legal action.
A promise is a promise but even when selling internationally you better get it in writing for a reason.
When things go wrong you can go back to that statement or promise and show there was a commitment or promise.
When things go very wrong, you have a document proving the other party’s bad faith. For example, if a shipment arrives in bad conditions, you should ask the customer to send you photos, copies of the inspection reports and a clear description of what happened. Make sure this is done immediately.
This is what happened to one of our customers. Evidence of broken boxes or bad assemblage was sent much later than receipt of shipment and was communicated over the phone rather than in writing. Photos alone do not mean anything.
While in the middle of agreeing a supply, tell the customer that you need their instructions in writing. This will avoid confusion and form a future proof that you acted according what’s agreed.
Do not rely on a telephone conversation only. Verba volant, scripta manent said the Romans and they were right.
In most cases problems arise when you haven’t managed to deal with a dispute in the right manner. Existing disputes can cause big trouble when it comes to settling invoices. The customer will feel entitled to receive some sort of compensation from you in the form of paying you less money.
If you instead try to handle the dispute earlier you are more likely to have a happy and faithful customer for the future.
In these cases, again, it’s still important to have a proper description of what happened and get it in writing. This way if it’s the other party being at fault, there’s no way they can go back on their own words.
Bear in mind that a dispute may not necessarily involve you as exporter. You may find yourself as importer and if you don’t make your claim, your disputed supply may cause you trouble.
One of our clients made an supply order for reselling the merchandise within its own country. The order involved three separate container shipments. When the first arrived, even if not that much, the client delayed in disputing the quality of the goods received. Since the supplier did not reply straight away, or they did not want to, the client received the second container. To avoid incurring in further costs, they had to pay for its release.
What are you options in each of the five cases?
Immediately report the scam to the police. This is most likely a criminal activity that needs police investigation. If you provided personal information, it’s better you do that. You could file a criminal claim but it’s unlikely you’ll recover your money and you will incur in additional cost to what you lost. The only positive side of it is that the name of the person is almost certainly real. But it’s also likely someone who does it as a profession and he’s on the police people list.
Unless it’s too late and you are trying to collect overdue money, ask them to provide as many documents as listed above. If it’s a one-man band import business, ask for passport or other ID form. If they refuse, stop the supply and tell them your policy requires such documents. Don’t worry if they don’t comply with such demands. It’s more likely that they are not good customers because your business relation should be based on trust.
Having a crucial document like a PO will save you lots of troubles. However, this should be part of your credit policy, if you have one. Always ask your customer to sign the purchase order and possibly put their company stamp along with the signature. This is a definite instruction of supply and intention to receive goods or services from you.
When dealing with non-paying customers, for example, save any communication exchanged. Emails, faxes and try to get as much as possible in writing from them. Whatsapp messages are also a good way to keep track of communication. Communication should be clear and any issues reported with all supporting documentation and explanation.
In your sales terms put a clause about order disputes. So the customer should communicate it immediately. For example if it’s about the quality of the goods, the customer should do it immediately after custom clearance along with a clear explanation why they are disputing. Any delay may affect the order, the business relationship and cost you more.
We want you to know how our service works. Please read our Terms and Conditions first.
Recoupera connects you to top debt collectors worldwide at reduced rates. Sign up free and start collecting your outstanding receivables and bad debts now.
This article contains general legal information and material for informational purposes only which are not intended and should not be taken as legal advice. Recoupera is not a collection agency and it is not a law firm or a substitute for an attorney or law firm. All informational material provided may not reflect changes in the law. For legal advice, contact a lawyer.