In the first part, we went through how to avoid scams in China. Now we are going to illustrate how complicated it can be to import from China by sharing with us a case that affected one of our members.
At the end of 2013, we were contacted by a Swedish company. They had placed an order from a company on Alibaba.com with a value of approximately SEK 3 million. Due to missing products and unclear answers via email, they realized that something was wrong, so they decided to contact us.
We accepted the challenge to take on the case and immediately began to review the company in question. It turned out that the owner had recently died and the company, in Shanghai, was therefore being closed down. However, the sellers had continued to sell and keep in touch with customers. The payment seemed to go to the company, but in fact it went to a bank account in Hong Kong belonging to a trading company of the same name but with an extra “.”.
We identify and contact about ten people involved, including the sales manager, Seller A, at the original company and the sales manager, Seller B, at the factory used by the trading company.
Initially, Seller A did not intend to deceive. She saw an opportunity to take over her old company’s customers and let another factory take over production. Unfortunately, the factory went to reconstruction due to the owner doing bad business and therefore being indebted to the ears. All production was stopped by the Chinese state.
We travel to the factory, which is blocked, and look for Seller B. She of course knew about the factory’s situation when she entered into a partnership with Seller A via the trading company. Her argument that she did as she did was simply because she had not been paid for 3 months, just like the other 400 factory workers. After threatening to sue, she finally gave back the share she received from the trading company.
The trading company still had a large amount of capital left and was not interested in doing the right thing. However, they wanted to make new sales to the Swedish company. Seller A had fled Shanghai and was now in his hometown of Chongqing.
We travel there and look for her. We find her as the new sales manager for a factory in the same industry. By threatening to sue and promising her not to tell her boss the story, we got the rest of the money back.
The whole story was a very complicated process that took 6 months to solve in the form of reviewing, hunting, meeting, discussing and threatening the atmosphere. In total, we managed to get back 95% of the deposit on the original order.
How did it go for the Swedish company?
The company was of course happy to get back almost everything they had invested, especially considering that at first it looked like everything was lost. They have since become one of our VIP members, ie. imports for over SEK 7 million. Over the years, we have resolved several new conflicts for them and visited several factories where we developed their agreements and at the same time improved relations. We have also replaced bad factories with factories that maintain better quality and higher standards.
According to Zhengsourcing, importing from China can be very complicated, especially when something unexpected happens such as death or bankruptcy. Our Swedish member was extremely unlucky that first the owner died and then the factory, which illegally took over production, went bankrupt.
The lesson to be learned from this case study is to be careful. Even if you have a supplier that it has worked with before, it can change overnight. In this case, an owner died and their sales manager took the opportunity to falsify the company’s payment information so that she could take part of the money. It could just as easily have been someone else who hijacked the company’s communications and thus changed the payment information. Therefore, you should ALWAYS review the company and check that the bank account matches what is registered with the company.
Another important thing to keep in mind is that when you have paid for products in China, it is important to remind the factory of your agreement and production, which can easily be de-prioritized if the factory e.g. receive more lucrative orders from others.