Lack of partner inspection, businesses face risks in international trade

Businesses subjectively verify partners

At the trade promotion conference with the system of trade agencies abroad, on November 30, Deputy Director of the Trade Promotion Department (Ministry of Industry and Trade) Hoang Minh Chien said that the process of economic integration Deep economic growth along with participation in more and more free trade agreements brings many great opportunities to the Vietnamese economy, but also poses many potential risks in international trade. In fact, many export businesses have faced fraud and suffered damage to property and goods due to being subjective and lacking understanding of their partners in international trade transactions.

In particular, in a volatile market context, trade disputes and fraud are a problem that exists in international trade transactions that export businesses always have to take into account. “As Vietnam integrates more deeply, Vietnamese businesses do business with many partners, wider playing fields, and different rules of the game, the risk of disputes and fraud is also greater and more complicated. Frauds and disputes that businesses often face are due to not having the conditions to thoroughly check the partner, choosing an inappropriate payment method, and possibly from calculated manipulations from the partner in the contracts that

Vietnamese businesses do not have much experience with," Mr. Hoang Minh Chien emphasized.
According to the Ministry of Industry and Trade, although many of Vietnam's export industries are currently leading in the world, most Vietnamese businesses are small and medium-sized enterprises, very inexperienced in international trade disputes.

Furthermore, Vietnamese businesses have too much trust in brokers. Currently, many contracts drafted by brokers are very simple, lacking many important terms, but businesses still accept them. More worryingly, the business also skipped the partner checking stage while this is a mandatory requirement when dealing with new partners. Therefore, businesses do not recognize signs of risk.

In particular, taking advantage of the long period of being affected by the epidemic, while businesses need to promote import and export, they tend to accept higher risks in transactions. “Online fraud not only takes place in the Middle East and Africa but is increasingly common and takes place even in large, reputable markets such as the US, Netherlands, Italy, Norway..., leader of the Information Import-Export Department.

There are cases where the broker impersonates the importer

Ms. Tran Thu Quynh, Counselor of the Vietnam Trade Office in Canada, informed that recently the number of fraud cases involving Vietnamese businesses related to Canada is increasing rapidly. “Despite warnings to businesses, the number of cases has not decreased. On average, each month we record about 10 fraud cases, related to bogus certificates," Ms. Tran Thu Quynh informed.

According to the representative of the Vietnam Trade Office abroad, the increase in the number of cases is due to two factors. Firstly from the local side, although Canada's legal system is quite transparent and clear to check information; Canada's sanctions for violations are also relatively strong. However, recently Canada has allowed massive immigration from many different countries and all are of working age, so the social structure has undergone changes.

The second factor causing the increase in commercial fraud related to Canada, according to Ms. Quynh, is due to the difficult global market and a decline in orders. Therefore, businesses look for orders. When receiving orders from foreign countries, businesses tend to be subjective. Especially when receiving orders from the Canadian market, businesses also have quite high confidence. Therefore, businesses have loopholes in accessing and drafting contracts.

Similarly, in the Egyptian market, Mr. Nguyen Duy Hung, Vietnam Trade Office in Egypt, said that through commercial disputes between Vietnamese enterprises and Egyptian enterprises in recent times, it shows that there are two main form of dispute.

Specifically, trade disputes have an objective element in the market. This is a fairly common dispute in recent times, mainly related to the problem of delayed payments by banks due to lack of foreign currency. Most export businesses do not have many options when the goods arrive at the port but the buyer cannot pay for the goods according to the contract nor get any commitment from the bank on the payment deadline. Goods then have to wait at the port for a long time, incurring storage costs, degraded quality of goods, not to mention changing prices in the market, leading to disputes over loss sharing. In many cases, exporting enterprises must accept delivery in advance (if they do not want to have the goods brought back or be released by Customs due to exceeding the allowed time limit) and switch to deferred payment to minimize losses in the hope of minimizing losses will receive payment on time.

Besides, there are cases where commercial disputes show signs of fraud or deception. According to Mr. Nguyen Duy Hung, this dispute is often related to contracts signed through brokers when the exporting enterprise does not directly contact the importer and all information exchanged must go through the broker. There have been cases where a broker impersonated a letter sent by the importer to a Vietnamese enterprise requesting early delivery of shipments, leading to the importer not agreeing to receive the goods due to deviations from the delivery schedule according to the contract, forcing Vietnamese businesses had to reduce prices, causing significant damage.

“While the contract signed with the broker is not strict, there is no binding responsibility in terms of fully recovering the goods, so disputes arise and the exporter always has to bear the damage. In addition, the importer can also use the reason of difficulties and business losses to request to receive the goods first and pay for the goods later in many installments, however, after that, they continuously missed appointments and eventually put pressure on them to reduce prices or not pay the final installment," the Vietnam Trade Office in Egypt informed.

Faced with the above situation, the Trade Office warns and recommends that businesses exporting to the Egyptian market in the current period need to pay attention to carefully reviewing contract terms on delivery conditions, forms of payment and supplementation. Add provisions to handle arising situations such as cases where goods have to be stored at the port for a long time due to delayed payment from the partner to minimize risks when implementing the contract. Limit signing contracts through brokers. In case of signing a contract with a broker, it is necessary to clarify the broker's responsibility for fully recovering the goods or the conditions for paying commissions. Contracts need to have terms for prepayment of at least 30% of value according to local practice. In particular, when there is any request for change from the importer, businesses need to check and verify the sender's information and request the partner to send an official document to have a basis for resolving any dispute.

Source:Custom News