Experience in preventing commercial fraud from foreign partners

Unloading containers at Cai Mep port cluster, Phu My town, Ba Ria-Vung Tau. (Photo: Hong Dat/VNA)

Commercial fraud is an act of lying, using tricks, and cheating in the commercial field through the buying, selling, trading, importing and exporting of goods and services for the purpose of making illegal profits.

Fraud or cheating in international trade is quite common.

Therefore, Vietnamese enterprises need to be fully equipped with the necessary information and professional skills to avoid risks and operate successfully in foreign markets, including Italy.

Speaking to a VNA reporter in Rome, Vietnamese Trade Counselor in Italy Duong Phuong Thao emphasized that in reality, when fraud and scams have occurred, it is extremely difficult to overcome them.

Therefore, Vietnamese enterprises need to improve their capacity to verify partners and draft foreign trade contracts to limit risks.

Regarding partner verification, Ms. Duong Phuong Thao stated that partner verification can be done through various sources such as checking the company's address via Google 3D, checking information about the company's business activities and financial reports via Google search, purchasing data from chambers of commerce or agencies where the business has registered its business activities, from consulting companies, credit rating companies, foreign law firms; asking Vietnamese Trade Offices abroad and foreign Trade Offices in Vietnam, it is best to go abroad to learn directly about the partner.

Businesses need to regularly share and update information, raise awareness of unusual signs such as buyers using free email addresses for transactions; buyers making urgent requests that change frequently; buyers avoiding direct meetings and contact; buyers ordering small initial shipments, paying in full, then suddenly ordering large quantities...

Counselor Duong Phuong Thao said: "In the context of e-commerce becoming an increasingly popular form of transaction, businesses need to be alert when the offering price is too low compared to the market price, or buyers are willing to accept the offering price without negotiation.

Many Vietnamese businesses seek support from the Vietnam Trade Office in Italy. Although the fraud is not too sophisticated, Vietnamese businesses lack business experience and are greedy for high purchase prices and low selling prices, so they ignore unusual signs during the transaction process.

Even with long-term partners, businesses should regularly check on the status of their partners."

Ms. Duong Phuong Thao shared that the Vietnam Trade Office in Italy has received many requests for support from Vietnamese import enterprises, who placed orders from regular partners, paid deposits but did not receive the goods because the partners went bankrupt but did not notify the customers.

In these cases, according to Italian law firms, the procedures are complicated, time-consuming, the possibility of getting money back is low, and the legal fees are quite high compared to the value of the imported goods, so businesses accept losing money, rather than suing according to the prescribed procedures of the court.

After verifying the partner, the important step is to sign the contract. According to Counselor Duong Phuong Thao, the contract should be drafted in detail, not general or sketchy, and should not use a ready-made template prepared by the broker or partner to avoid inserting unfavorable terms.

Businesses can ask partners to send signed contracts with other customers for reference.

For export enterprises working with partners for the first time, they should use safer payment terms such as prepayment of 20-50% before the goods are loaded on the ship, limiting deferred payment methods, even deferred L/C with new partners.

Vietnamese Trade Counselor in Italy Duong Phuong Thao answers questions from VNA reporters. (Photo: Truong Duy/VNA)

For import businesses, to avoid the situation of delivering poor quality goods, incorrect types, quantities... there needs to be provisions for appraisal and inspection of goods before delivery.

The person signing the contract must be a person with legal representative authority.

In the case of signing a contract with a broker, there should be a clause in the brokerage contract requiring the broker to commit to being responsible for the creditworthiness of the final buyer or seller.

In addition, businesses can purchase insurance for goods to reduce losses in case of risks or disputes.

Ms. Duong Phuong Thao recommends: "One of the methods to help minimize risks for import-export enterprises is to use logistics service enterprises as a 'safety valve,' whereby import-export enterprises build relationships with reputable, highly reliable logistics companies and carry out foreign trade activities through these logistics companies.

Vietnamese import-export enterprises should get used to using consulting services and legal services, considering foreign consulting companies and law firms as companions throughout the entire business process, not just when disputes arise.

This is the safest solution for businesses and the cost of hiring a lawyer compensates for the risk and damage of losing the entire shipment."

According to Ms. Duong Phuong Thao, fraud or cheating in international trade occurs not only in Italy, but also in countries around the world.

Over time, these activities have become increasingly diverse and sophisticated.

In Italy, fraud occurs in many different ways. These businesses are often very small, with a few employees, may have been active and are no longer active, or the company is in a state where it is impossible to determine whether it is active or not, or may be "ghost" companies.

Counselor Duong Phuong Thao said: "The 2022 cashew nut export fraud to Italy, with 67 containers of goods missing documents, of which 35 containers were shipped to Italy, is a typical example of the form of fraud of appropriating original documents on the road, the original documents were delivered to the bank for collection. The Italian companies (buying cashew nuts) in this case are mostly "ghost" companies.

Thanks to the great efforts of the Vietnamese side, as well as the enthusiastic coordination of relevant agencies in Italy, the case was successfully handled in less than 3 months.

Italian criminal and civil courts have issued four verdicts, returning all 35 containers of goods with missing documents to Vietnamese companies."

Recently, the Vietnam Trade Office in Italy has verified two cases of Italian companies showing signs of fraud, recommended that Vietnamese businesses stop trading and signing contracts, and supported a catfish exporting company that was cheated by its partner for not paying by connecting with a law firm, supporting it in suing its partner in court to get its money back.

Vietnam is currently Italy's largest trading partner in ASEAN and Italy is Vietnam's fourth largest European Union (EU) partner.

After the Free Trade Agreement between the European Union (EU) and Vietnam (EVFTA) took effect in August 2020, two-way trade turnover between Vietnam and Italy increased significantly, by 21% in 2021 and 11% in 2022, reaching 6.2 billion USD.

The Italian Parliament has just ratified the Vietnam-EU Investment Protection Agreement (EVIPA) during the State visit of President Vo Van Thuong at the end of July, opening up new business opportunities, but also comes with challenges in preventing commercial fraud and scams./.

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