In news and other social media, we hear that supplier has cheated buyer by delivering poor quality goods or goods not supplied after making payment and any more reasons. This type of fraud is common mostly when you are dealing with overseas supplier and without doing due diligence of your supplier. Below is the guide that will help you to protect yourself from such scam.

 (1) Selection of Supplier

• Request a copy of the company’s certificate of import/export, business license, check validity of address and phone number, license validity date, name of registered representative, etc.
• Check online details of company like promoters, management, subscribed capital etc on Company registry portal of particular country.
• Take opinion about your supplier from Indian Embassy located in country of your supplier.
• Verify the company’s international trade experience and avoid firms that have less than two years of experience.
• Seek multiple references and check them. Request referrals to both suppliers and customers.
• Sign sale contract only after taking legal opinion from qualified professional about the validity and enforceability.
• If you are going to trade for high value transactions or for long term trade then insist on having the registration document and other agreements signed with the supplier company attested by the Embassy of India or the relevant Consulate in country of supplier.
• Include arbitration clause in contract and clearly mention that cost of arbitration shall be reimbursed to winning party by the losing party. The contract should be in English.

(2) Inspection & Payment

• In consultation with the supplier include a clause in the contract which provides for release of LC only after verification of quality and quantity of goods by an internationally accredited inspection agency at destination port.
• Conduct Physical verification of the goods at the point of loading (by your known agent or reliable third party agency).
• Never pay any advance money if you are dealing with your supplier first time. If payment term is advance payment always take bank guarantee from supplier to the extent of advance money.
• Pay only using secured forms of payment methods such as letter of credit or direct telegraphic transfer (T/T or wire transfer).
• Don’t release LC payment if you are not sure of the quality and quantity of the product based on shipping documents.