Some experienced 'fraud' may not be actual fraud but problems occurring due to misunderstanding and miscommunication and the lack of understanding each others culture. Much of these issues can be avoided by seeking trade information from China related government institutions beforehand.

Examples of Fraud

Trade with Fake Companies

Doing business with strange companies is a big risk in trade. Perhaps, your partner is a fake or cheating company, they would disappear after you made your payment. In order to avoid being cheated by these companies, you can order a background check from independent third-party sources including a search for legal registration and credit record.

Payment Risk

Many buyers have failing experience on payment. They would not receive products after cash or T/T payment has been made. Using a Letter of Credit (LC or L/C) or Escrow service are the recommended payment methods. If the seller seems more focused on payment than any other issue, or indicates that cash payment must be made urgently, more caution should be given to the transaction. Be extra cautious when the seller asks you to send money to an account whose real owner cannot be traced.

Fake Check Scams

There are many variations of the fake check scam, but the common thread is a stranger proposing to send the victim a check and have the victim wire money in return. It may start with someone offering to buy something you advertised for sale, pay you to work at home, or give you an advance on a sweepstakes you won. Whatever the bottom line is if someone you don't know wants to pay you by check but wants you to wire money back, it's a scam.

Be aware sending free samples (Buyer)

This concerns a supplier requesting a sample from the buyer to produce the product according to the client's requirements. Sometimes the supplier uses these samples without delivering the actual product to the buyer. In this case, when samples are required for production, the supplier should pay for the samples and the shipment cost. Once the product has been delivered and the sample returned to the buyer, the money for the sample and shipment may be returned to the supplier.

Be aware sending free samples (Supplier)

The buyers request a nominal payment for samples. When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal pre-payment. Otherwise, the supplier requests samples to check the quality of the product. Order a sample before committing to a significant purchase order, to make sure that the product meets your requirements. Always ask buyers to pay for samples - including shipping costs.

Poor Quality of Product

Sometimes a buyer receives poor quality products after payment has been made, but the supplier refuses to compensate the importer or does not even respond to complains. In order to avoid poor quality, you can use Pre-Shipment Inspection Services and demand the inspection as a condition of payment. Sometimes a supplier sents high quality samples to the buyer but the quality of the real end product is very poor. In order to avoid poor quality, you can use Pre-Shipment Inspection Services and demand the inspection as a condition to payment.

Long Time Firm Fraud (Supplier)

This kind of fraud aims to obtain large amounts of merchandise without paying for it. The swindler orders merchandise from a few suppliers and pays promptly. These suppliers are then used as credit references for larger and larger orders. The bogus company soon becomes a slow-payer and then a non-payer. At some point in the future, creditors are stuck for "the last payment".
This type of fraud is often well planned, highly organized and involves substantial financial backing. The fraudsters can provide references from concerns controlled by themselves or simply prepare false references using modern desktop publishing methods. They may operate from rented premises or accommodation addresses. Many of these frauds investigated by the police, illustrated a basic failure by the suppliers to carry out checks on the creditor for creditworthiness and details of an established trading history.

Be Wary of Over Generous Offers

Be wary of potential partners who offer an especially high or low price. It is easy to be tempted by such offers, but they are often attempts of fraud. In business, the expression "you get what you pay for" is often painfully true. Be especially diligent to check the contact information, identification and any claims a suspicious trade partner makes. If it sounds unbelievable, it probably is.