Guide to Responding to International Trade Contract Fraud: Comprehensive Strategy for Overseas Buyers to Protect Their Rights
Created on 09.04
In international trade, overseas buyers often face the risk of contract fraud, from false deliveries to forged documents. Such behaviors are highly concealed, and cross-border accountability is even more challenging. Many buyers, due to their unfamiliarity with Chinese laws and rights protection processes, often find themselves in a passive position. This article will systematically outline the core steps to deal with contract fraud, while also combining the logistics services of Zhongnan Whale Navigation to provide you with practical advice from risk prevention to the implementation of rights protection.
1. Encountered fraud? Lock key evidence at the first moment.
Evidence is the cornerstone of rights protection. After discovering anomalies, the following materials need to be organized immediately to form a complete evidence chain:
1. Core Transaction Document
International trade contracts, letters of credit and amendments, bills of lading, commercial invoices, packing lists, customs declaration forms (these documents can be archived with the assistance of China-South Whale Shipping during the logistics process to ensure compliance);
2. Payment Voucher
Bank statements, wire transfer records, etc., to prove the flow of funds;
3. Communication Records
Emails, instant messaging, call records, etc., especially the content where the other party promises to perform or acknowledges a breach of contract;
4. Inspection Report
If there are issues with the goods, a professional inspection report can directly prove the breach of contract.
Evidence preservation techniques:
- Electronic evidence (such as emails and chat records) needs to be timestamped or stored on the blockchain to prevent tampering;
- Evidence formed abroad must be notarized and certified in accordance with regulations to avoid affecting its validity due to non-compliance with formalities.
Second, first determine: is it "fraud" or "breach of contract"?
Before defending rights, it is necessary to clarify the nature of the other party's behavior, which determines the subsequent path:
1. Distinguish between "contract fraud" and "general breach of contract"
1) Contract fraud (criminal offense)
If the other party fabricates the subject, forges documents (such as fake bills of lading), and deceives to obtain payment without actual performance capability, it may constitute a crime;
2) General Breach of Contract (Civil Dispute)
If it is only for delayed delivery, goods not matching the specifications, etc., and does not involve subjective fraud, it constitutes a civil breach of contract.
2. Determine jurisdiction and applicable law
- According to the contract, the "Dispute Resolution Clause" selects the jurisdiction court or arbitration institution (if agreed upon, the Chinese arbitration institution);
- According to the "Law on the Application of Laws for Foreign-related Civil Relations" and international conventions, clearly applicable laws (such as Chinese law, the "United Nations Convention on Contracts for the International Sale of Goods," etc.).
3. Assess the feasibility of rights protection
Analyze the time costs and probability of winning for criminal reports, civil lawsuits, and international arbitration based on the amount of fraud, the sufficiency of evidence, and the asset status of the other party, and develop the optimal plan.
3. Diverse Rights Protection Paths: From Reporting to Mediation, Choosing the Right Method is More Efficient
1. Criminal report: Suitable for cases with a large amount of fraud and solid evidence.
1) Reporting materials
Write a "Criminal Report," clarifying the facts of the fraud, evidence, and legal basis, and report to the Economic Investigation Department of the Chinese Public Security Bureau;
2) Cross-border collaboration
If the fraudster is overseas, they can request assistance from overseas judicial authorities for investigation, arrest of suspects, and freezing of assets through Interpol or bilateral judicial assistance.
2. Civil litigation or international arbitration: Responding to general breach of contract disputes
1) Start Program
Sue in a court of competent jurisdiction or apply for arbitration as agreed, requesting the termination of the contract, the return of the payment, compensation for losses, etc., and submit complete evidence;
2) Property Preservation
File a lawsuit / Apply for arbitration to freeze the other party's domestic assets (such as bank accounts, real estate) to prevent the transfer of property that would make enforcement impossible after winning the case;
3) Judgment Execution
Effective judgment documents can apply for court enforcement, and foreign arbitration awards can be recognized and enforced in other countries based on the "New York Convention."
3. Non-litigation negotiation and mediation: A quick way to resolve disputes
1) Professional Negotiation
Under the lawyer's guidance, based on clear evidence of the other party's responsibility, propose solutions such as refunds and reissues to strive for a settlement;
2) Third-party mediation
Agreements reached through mediation by institutions such as the China Council for the Promotion of International Trade (CCPIT) can apply for judicial confirmation by the court, granting them enforceability.
IV. Cross-border collaboration: Breaking down regional barriers and linking resources for rights protection
1. Domestic and foreign lawyer collaboration
Entrust Chinese lawyers to collaborate with foreign lawyers to achieve cross-border exchange of evidence and sharing of legal information, ensuring that actions comply with the legal provisions of both China and foreign countries.
2. Global Asset Tracking
Investigate the other party's domestic and foreign assets (such as offshore accounts, overseas properties) through professional institutions to provide clues for the enforcement process.
3. Leverage the power of international institutions
Coordinate cross-border evidence collection and document delivery issues through Chinese embassies and consulates abroad, the International Chamber of Commerce (ICC), etc., to improve the efficiency of rights protection.
5. Risk Prevention: The logistics process helps you "clear mines" in advance.
Reliable logistics services can reduce the risk of fraud from the source. The following services of Zhongnan Whale Shipping can provide support:
1. Document Compliance Review
Strict verification of bills of lading, customs declarations, etc. in maritime and air transport links to prevent forged documents;
2. Cargo Dynamic Monitoring
Through the real-time logistics tracking system, fully grasp the transportation status of goods, avoiding "false shipment";
3. Overseas Warehouse Inspection
Overseas warehouses in the United States, Germany, and other countries can provide arrival inspection services, and if problems are found, they can immediately refuse acceptance and retain evidence;
4. Full container transportation guarantee
Full container DDP/DDU service is fully controllable throughout the process, with records of every step from booking to customs clearance, providing evidence of transaction authenticity.
6. Preemptive Prevention: These 3 Points Help You Avoid "Pits"
1. Due diligence on trading counterparties
Verify the business information and credit records of Chinese sellers through professional institutions to avoid cooperating with shell companies;
2. Optimize contract terms
Clarify payment methods (such as letter of credit payment, reduce financial risks), delivery standards, breach of contract liabilities, and include anti-fraud clauses;
3. Dynamic Monitoring of Performance
Closely monitor the status of goods through logistics tracking (such as transportation node reminders from Zhongnan Whale Shipping) and provide timely warnings for anomalies such as delayed delivery and document discrepancies.
To combat international trade contract fraud, it is essential to understand the law and gather evidence, but it is even more important to rely on reliable logistics to control risks. Zhongnan Whale Shipping has 20 years of international logistics experience, from sea and air transportation to overseas warehouse services, providing you with compliant documents and monitoring cargo dynamics throughout the process, making cross-border transactions more transparent and safer.
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