Do’s
1.Indian companies should run a preliminary internet check on the credibility (profile and credentials) of the Chinese company for complaints registered online against such fraud companies by other affected parties.
2.Contact Embassy or the Consulates in China for basic information and credential check.
3.Before engaging in any business proposal with a Chinese company, sign a proper contract.
4.Contracts entered with Chinese companies need to have arbitration clause.
5.Indian companies should insist on the copies of both the Resident Identity Card (Chinese ID Number) and Passport of the proprietor and other responsible interlocutor(s) of the Chinese entity with whom the Indian company is interacting.
6.Ensure that all documents required for customs clearance like original BL, PSIC etc. should also be clearly mentioned in the contract / agreement with the Chinese company.
7.Consult with a Business Service Company to gather a report on the business transparency, financial health, reputation, reliability and credentials of the Chinese entity (in case of large transactions)
8.Before signing a contract, gather a copy of the business license and enquire about the Company from local Industrial and Commercial Bureau (ICB)
9.For larger transactions, site visits may be considered. Take photos of the company and the factory during such visits.
10.For high value transactions, recommended method is Payment with Letter of Credit (L/C). Alternatively, both the parties should operate through an ‘Escrow account’ or ‘Bank guarantee’ route. Letter of Credit should be opened with the provision of honouring it on inspection of in-bound cargo at the Indian port and not on placement of Bill of Lading only. If B/L placement is the norm, presence of a Company representative from Chinese Company may be insisted upon at the time of inspection of the cargo at the Indian port, especially, if the bulk or value of the consignment is large.
11. Quality / Quantity of any product to be imported from China to be physically certified by the Indian company either by visiting China or by appointing a professional third-party inspection agency.
12.Physical inspection of the goods to be carried out by the importing company at the point of loading in China.
13.Insist on having the registered documents and other agreements as signed with the Chinese company attested by the the Embassy of India or the relevant Consulate in China.
14.Check the e-mail id of the dealing foreign company, whether China-based or third country-based, every time a correspondence is made. For fund transfer, Indian company must ensure that its bank account is properly communicated to the Chinese/foreign company through different modes of communications (fax, courier) and not through e-mail only.
15.The Indian company in consultation with the Chinese company could 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.
16.Procure proof of existence of Chinese company (company registration document) duly certified by Chinese Ministry of Foreign Affairs and Embassy of India / Indian Consulate in China.
17.Request Chinese company to produce Quality Certificate (QC) for any product imported duly authenticated by the Chinese Ministry of Foreign Affairs and the Embassy of India / Consulate in China.
18.Insist on having the registered documents and other agreements signed with the Chinese company attested by the Embassy of India / Consulate in China. This process of attestation of documents by the Embassy/Consulate involves both the local sub-council of China Council for Promotion of International Trade (CCPIT) as well as the Chinese Ministry of Foreign Affairs and thus, weeds out fake companies in most of the cases
19.Verify that the bank account is the company’s account, and not an individual’s account before making any payment.
20.Check whether products are produced by the Chinese company and whether the packages belong to the target company.
21.Treat each transaction as on its own merit. There should be no compromise on documentation or scrutiny even if there are previous successful business dealings.
Don’ts
1.Don’t pay any advance to any Chinese company whose credentials are unknown. If at all there is a need for advance payment, both the parties should operate through an ‘Escrow account’ or ‘Bank guarantee’ route. The Indian company must insist on guarantee before making advance payment to its Chinese partner.
2.Balance amount should not be released without checking the quality and quantity of the consignment received in India.
3.Advance payment through bank transfer is discouraged; unless the credibility of the Chinese company is proved beyond doubt.
4.Avoid payment via Telegraphic Transfer (TT).
5.No payment to any Third Party Company/Agent.
6.Never trust email communications while confirming bank details. Always supplement it with communication through faxes/courier.
7.Avoid signing of contract, transacting with any company from a B2B platform, social media platforms such as WeChat, WhatsApp etc. Some B2B sites offer products at much lower rates than the market value. Those websites should be shunned.
8.Don’t release L/C if not sure of the quality and quantity of product. A provision must be incorporated in the agreement that provides releasing LC only after the Indian company is satisfied with the quality of the product in the consignment.
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