A story from life, why it is necessary to check Chinese cooperation partners.
I wanted to start by saying that there are dishonest companies in all countries, not just China. This is the story of a conflict arose between Latvian company, where contracts were signed to purchase raw materials from a Chinese manufacturer, the value of the transaction was more than $200,000.
The companies agreed among themselves that the payment would be a bank transfer, 50% payment when the cargo was checked, all documents were received and it was loaded in the port of Shanghai, and 50% payment after receiving the goods in Riga.
The Latvian company made a 50% payment, the raw materials were sent out.
But and after some time the Company received a letter from the Chinese supplier that, due to the poor financial situation in connection with Covid19 restrictions and supply chain problems, the remaining 50% payment should be made immediately.
The goods were received in the port of Riga, but the Chinese manufacturer continued to refuse to issue the original documents so that the goods could be cleared in Riga.
A few weeks later, the Chinese company announced that the real reason for not sending the documents was that the actual value of the item was not $200,000, but $600,000, and asked for $500,000 payment.
The Latvian company refused to pay the amount and the Chinese supplier disappeared and stoped communication.
The Latvian company managed to open the containers, but their contents were not ordered raw materials, but waste.
Moral of the story:
- Check suppliers and work only with reliable ones! The Latvian company did not check the supplier by attracting experts, solving this situation when checking the Chinese supplier it was found out that it is an empty shell company and with a bad credit history.
- Carefully check each point of the contract to avoid different interpretations of the same text.
- If you are being offered products at 3x below market value, turn on your critical thinking.
- If there are problems, act quickly, do not continue communication with the Chinese supplier, engage Chinese market experts and lawyers from China. In this situation, by reacting quickly, the bank account of the Chinese company could have been blocked and the money received back.