Not sure why but the number of frauds from China seems to be increasing. A lot.
I thought about that last week after our China lawyers received no fewer than three, but this morning was the kicker. I woke up to two of them. Five in one week has to be a record and this record did not come out of nowhere. The number has been on the rise for months. Anyone know why because I sure don’t.
Anyway, as a sort of public service, I am going to run two recent emails below and explain why I believe they are scams. I have changed them where necessary to protect the parties involved.
I’m with a small Nebraska company that sells organic towels and I’ve been reading your posts. We have agreed to basic terms with an import/export company in Xiamen named Xiamen ________ Development Co., Ltd. to sell them 30,000 towels. They have agreed to EXW shipping and to pay 40% upon signing and 60% before shipping. Still, I am concerned. They have asked us to come to Xiamen for signing and the contract does mention a notary, i.e., some of the “red flags” I’ve seen discussed on your blog, but not all. We’ve already spent $1500 on passports and visas, and we are about to book our flights/hotels (they didn’t recommend a hotel). How can we protect ourselves?
My response was as follows:
I am nearly certain this is a fraud so you have essentially two ways to protect yourself. One, just walk away and not go. Two, pay us to do some basic due diligence on this company. I am virtually certain the most basic of due diligence will prove this is a fraud, but if it doesn’t, we can take next steps.
How do I know this is a fraud? For all of the following reasons, none of which I mentioned in the email because there is always the possibility that I am wrong.
1. Why does a company in China need to go all the way to Nebraska to buy organic towels? They don’t and this alone is highly suspicious.
2. The name of the company is “__________ Development ______” and they are in the business of buying and selling towels? I don’t think so. Chinese companies are to a large extent required to list their business in their name and Development and towels just don’t seem to me to go together.
3. The name of the company ends in Ltd., which makes me think it is not a Chinese company at all, but a Hong Kong company. Believe it or not, I am not aware of a legitimate Mainland China company ever committing this fraud. Legitimate Chinese companies are expensive to form and they would have a lot to lose if reported for this sort of fraud. HK companies, far less so.
3. The Chinese company has agreed to pay 40% upon signing and 60% before shipping. Not sure what world you all live in but in my world and that of the Chinese attorneys I know, this sort of payment upfront from a Chinese company doesn’t happen. Like never, and certainly not with towels.
4. The Chinese company wants the American company to go to Xiamen to sign. This makes no sense. If anything, the Xiamen people should be going to Nebraska to sign, and while there they can check out the products on which they will be spending so much money. Wanting to meet in person happens on complicated deals all the time but not one involving the purchasing of towels.
5. The contract mentions a notary. Honestly, I’m not sure I’ve ever seen a legitimate contract come from China that asks for a notary.
6. The email said there were some of the “red flags” we have discussed on here, “but not all.” Other than the fact that the Americans are not being put up in a particular hotel chosen by the putative scammers, I truly do not know what more by way of red-flags would be required.
The other one was somewhat different but at its core, it gave me the same feeling. Here is that one, again with a few changes:
I have been contacted by a company in Yantai, China called _________ Investment Group / Yantai _______University). The person’s name is Wang Xi.
They have asked my company to design a University Campus in Yantai. As I am an Architectural company I assumed the contract was legitimate. I sent the contract to a lawyer who confirmed the contract seems real. I have not been asked to pay any money.
Today I received this email:
We are going through notarization formalities and he will need 2 weeks. After completing the notarization formalities, we will make the first advance payment as soon as possible.
The notary office has accepted the contract documents signed by us. Please find attachment for notarization document, please sign and mail to me.
Yes. Hire a lawyer who knows something about China as this reeks so much of fraud that I can smell it all the way here and I am in Spain right now [for this].
This one is a bit more difficult to prove just on the emails but, again, none of it makes much sense. Why does a University in China pick someone overseas to design its buildings when there are so many foreign architecture firms with offices in China? And again, what is it with the notarization? And this “university” just happened to get the name wrong on the contract? You don’t think that might be because it sends out hundreds of these contracts in the hopes just one company bites?
None of this smells right and asking some random lawyer who doesn’t breathe China contracts every day to determine the validity of the contract is a complete waste of time. Anyone can pull what looks like a contract off the internet, but that does not mean it is a real contract for China.
Anyway, just you be careful out there. Especially now.This article was written by Dan Harris and published on China Law Blog. Original Post: http://www.chinalawblog.com/2017/10/china-scams-rising.html