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What to do when supplier breaks the contract and blackmails your deposit

 by Mike Bellamy 

Chinese supplier ignored the contract and holding my order hostage.

Tom writes:

Hi Mike,

We met at your Global Sources conference in Hong Kong.

One of the criteria for safe trading, as you mentioned, was to have the red stamp/chop, to make it legally binding. This is something I have.

My problem is that the Chines supplier has not sent the goods and now request I increase my order from a sample quantity order to 100 units. I am loathe to throw good money after bad, and no longer wish to deal with this company.

They offered to refund my money, and when I reluctantly accepted this option, at the time of truth, they refused to send me my money.

Can you help in any way Mike? I look forward to your comments


  What's your leverage?  Is the seller real?

 What’s your leverage? Is the seller real?

In short, it’s hard to know for sure without doing some research, but I am worried the seller is a scam and isn’t a formal company. As we talked about at the conference, the following red flags jump out at me when looking at the proforma invoice you have with this supplier:

  1. the bank account is a personal account, not a company
  2. address appears to be in a residential building
  3. an official chop has Chinese characters and sometimes English translation, but rarely English only as on your document.

I would suggest the following:

Don’t let them know you suspect anything, find some excuse to delay your formal feedback until you have a chance to better understand the situation. Don’t pay any more funds until you figure out the truth!

Get some basic due diligence (cost a few 100 USD via to determine if the factory is real or not.

If real company-  you are in luck, you have leverage, legal recourse and a demand letter could be issued IF needed.

If fake company-  it is possible to engage the local police to get your money back, and if their address, name and contact # is legit, there is a chance the police could grab them before they disappear.

BUT, coordinating the police requires a lot of paperwork and face to face coordination on the ground in China. That means you would need to come here or engage a representative (like the lawyers I work w that  While they are very affordable and the process would be a fraction of the costs back home, as your total order value with this suppliers is not large, it may not make economic sense to put good money after bad.

BTW, if it turns out that the seller is bad, please list them to and warn other buyers.

For your reference, here are some resources relating to your situation:

Video 8: Avoiding Scams

Safe Payments = Safe Sourcing

Let me know if this email helps.

Question answered by Mike Bellamy, an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. Mike is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.


Want to know how to work with factories to produce your unique products?  Join the Smart China Sourcing Summit to learn sourcing best practices, April 17-19, 2016.  Co-located with Global Sources 3,000-booth trade show in Hong Kong.  Learn more at

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