DIY importers need to be aware of one increasingly common freight forwarding scam that has the potential to cost them thousands of dollars. In this post we'll reveal the details of this fraud to help you avoid falling victim.
Here's how it works
A scammer will pose as a freight forwarder on Alibaba or other business-to-business directories. Their advertised rates will typically be significantly lower than other, legitimate forwarders in order to lure unsuspecting buyers into their trap.
After the goods are packed and shipped from the port of loading, what should normally happen is that the freight forwarder issues a bill of lading. This is a mandatory legal document that the freight forwarder issues after shipment, specifying the buyer, seller, port of destination, and type and volume of the products being shipped. Without a bill of lading, the port of destination will not allow you to take possession of the shipment.
And you guessed it. Importers who fall victim to this scam never receive their bill of lading from the freight forwarder. Instead, they get an email ransom letter telling them to pay up or never receive their products. If the supplier doesn't pay, a number of things can happen, and none of them involves the buyer receiving their products:
- After a few days of the shipment sitting unclaimed at the port, the buyer can be held responsible for storage costs. So every day of inaction ends up resulting in even more losses to the buyer.
- Customs can take possession of the goods and auction them off.
- Or, in the case of hazardous items, customs officials will simply have them destroyed.
Also, keep in mind that overseas suppliers can't usually be held accountable for anything that happens to the product after they ship it from the factory. So even though a buyer's shipment is being held hostage by a thieving freight forwarder, the buyer is still responsible for paying the supplier for holding up their end of the bargain - i.e. producing it and shipping it off.
How to protect yourself
Because it's difficult for governments or private enterprises to prevent scams before they take place in such a huge market, it's not enough to rely on Chinese law or Alibaba's terms of service alone to protect you. Buyers should avoid smaller freight forwarders, and unusually low price quotes should also raise a red flag. Verify the Chinese business license of any freight forwarder you use, and if possible, get references.
Be safe out there, importers!