Fraud by unscrupulous merchants is more complicated, and the truth is confusing. The most typical one is the deliberate setting of soft terms in the letter of credit.
For example, a letter of credit from a German food importer stipulates:
47A + THE MERCHANDISE IS SUBJECT TO A SUBSEQUENT INSPECTION BEFORE SHIPMENT .
At the same time
46A + INSEPCTION CERTIFICATE ISSUED BY APPLICANT IN DATED BEFORE SHIPMENT .
Before shipment, the market for the product changed and the price fell. As a result, the applicant delayed arranging the inspection. After repeated urging from the exporter, the applicant still did not issue the relevant original confirmation documents and asked for a price reduction. Because the letter of credit was about to expire, in order to obtain the customer’s inspection permit certificate, the exporter had to accept it, resulting in losses. This type of clause, such as “before shipment, the applicant must inspect and allow shipment”, is extremely risky because the right to issue inspection documents is completely controlled by the applicant.
The other type is to make a fuss about “releasing goods without documents”. It is common under FOB transaction conditions, colluding with freight forwarders, or simply using FCR, a non-property certificate, to replace bills of lading, or working with banks under letters of credit to pick up goods in advance in the form of a guarantee letter. For example:
An American handicraft importer imported a batch of picture frames by letter of credit. After the goods arrived in the United States, they refused to pay the documents on the grounds that a copy of a certain document was missing, and requested a deduction (the actual reason was that some products in the previous batch of goods were not glued cleanly, and the claim was unsuccessful). After verification by the freight forwarder, the batch of goods had been picked up. The export manufacturer was shocked when he heard the news, and questioned the issuing bank through the bank, but the issuing bank claimed that the documents were still kept intact. After repeated hesitation, the export manufacturer accepted the foreign businessman’s request for deduction.
In fact, in this case, because the foreign business and the issuing bank are large in scale and have always had a good reputation in the past, the factory does not need to panic but can feel at ease after checking and finding that the goods have been taken away. Because at this time, it is basically certain that the customer has adopted the “guaranteed collection” method. Although the full set of documents is still in the hands of the issuing bank in form, the bank can no longer return them. If the factory insists on payment or return the order, the customer and the issuing bank will inevitably compromise. Unfortunately, the factory did not understand the relevant provisions of the letter of credit, and when it learned that the goods had been taken away, it lost its mind and took the initiative to retreat.
To deal with unscrupulous business scammers, you need to have a solid knowledge of foreign trade and be familiar with trade practices. On the premise of understanding the inside story, you should not be intimidated and stick to principles. You can accumulate more industry experience and collect various fraud cases for reference.