- Published on Wednesday, 28 November 2012 12:13
We are a UK based online retailer who frequently work with Chinese suppliers
I have managed to get myself into a sticky situation with what seems to be a fraudulent Chinese supplier based in Shenzhen and was wondering if you could advise me on what direction to go. I will summarize the chain of events
1. – Met supplier on Alibaba , “Zhou” from XXXsenbuy.com on Monday 8th October
2. – Agreed to purchase goods (Micro sd cards), received pro forma from Zhou and paid a substantial amount (over $10,000) via a direct bank transfer to the companies bank account with HSBC Hong Kong (8.10.12)
3. – Zhou contacted us on Thurs 11th to say the funds had been received.
4. – Zhou contact us on Friday 12th saying that there was an issue as the market price had risen and that he would confirm this on Monday.
5. – On Monday we requested a full refund citing that at the new market price, the deal is no longer financially viable. He became very shady, stopped responding to messages and generally started ignoring us.
6. – After several days of intermittent conversation, with him refusing to return the funds, we contacted a supplier (Annie) we have worked quite closely with for some time, who has since helped us contact Zhou.
7. – On Tuesday night she went to Zhou’s office (based in Shenzhen) with a Police friend of hers, stating that she was a colleague of ours based in Hong Kong, requesting that the funds be returned immediately. The Police have taken down his personal information.
8. – On Wednesday 17.10.12 (the following day), Zhou agreed that he would ship the goods as per the pro forma and would supply us with DHL tracking information within 24 hours.
9. – I have received no contact from him today and have had Annie repeatedly calling him. Several hours ago we received a text from Zhou saying, No Money, No shipment.
10.- It is quite apparent that he is trying to scam us and is looking to buy time through a means of different ways of delaying us.
11. – Whilst Annie has been very helpful; contacting him, going to his office, getting the police involved and being our point of contact, I feel if we really want to get our money back something else needs to be done.
She is recommending me to fly out to HK / Shenzhen and she will then aide me in dealing with the Police. I expect things will get done a lot quicker with me on the ground there.
We have kept all the correspondence between ourselves and Zhou.
I realize I have made some poor / naive mistakes here and would massively appreciate any advice as to how to resolve this (Contacting a Chinese lawyer, Shenzhen police, flying out there myself?) Many thanks in advance.
Sorry to learn of your nightmare SD card supplier.
I have potential good news for you.
Assuming you have a clear record of payment, AND assuming the bank account name matches contract/PO matches supplier name, AND assuming the seller has assets…. then, if I were in your shoes, I would explore two options:
1. Turn over to a China based collection agency.
2. Engage a local lawyer to issue demand letters in Chinese.
I have used both options in the past and there are pros and cons. The advantage of the lawyer I used is that they would work on a set fee to issue demand letters (100’s of USD) and can litigate in China if the demand letters don’t work. Litigation is 1000’s of USD rather than tens of 1000’s in China for typical cases like the one you describe. So the expenses are capped and you don’t have to share the recovered funds with the lawyer. But you still have the pay the lawyer even if you are unable to recover funds.
The advantage of the collection agency I used is that they are performance based. If their methods don’t recover funds, then you need not pay them. The potential disadvantage is that upon success they retain about 30% of the recovered funds as their service fee.
As you are dealing with a supplier that owes to the tune of 10,000 USD, I think you are better off with the collection agency. But I would be happy to introduce you to the collection agent or the lawyer I have used in the past. Please advise.
A few other points:
1. Consider engaging a sourcing agent to help you find more reliable suppliers.
2. Don’t forget that you can have a 3rd party inspection agent visit the supplier before they ship goods and before you make that final payment to confirm the product is legit.
Here are some short videos that explain more, ones in bold are highly relevant to your situation:
Video 1: Finding Suppliers
Video 2: Evaluating Suppliers
Video 3: Negotiations
Video 4: Project Management and Quality Control
Video 5: Protecting Your Intellectual Property
Video 6: Leveraging Global Sources
Video 7: How to Find and Manage Partners for Logistics
Video 8: Avoiding Scams
Video 9: Returning Defective Products
Video 10: Resolving a Dispute
One final note. Some western buyers are setting up www.SupplierBlacklist.com to help warn other buyers of bad suppliers. Please contact them about getting your scam listed.
Hope the ideas above help you. Let me know if you need some introductions to lawyers or collection agents.
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.