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Internet Sales Scam for CE from China   Leave a comment

New broke today of a major fraud case perpetrated by a leading online sales company in China called Alibaba.com.

Chinese vendors could open pages on Alibaba.com where they could advertise their wares to customers from around the world. In order to create trust amongst users, Alibaba had a verification system where a vendor would pay a fee and Alibaba would then do a verification of the customers company, products etc to assert that the vendor was a trusted company.

It appears that many Alibaba salesman were handing out these verifications without actually doing any verifications of the vendors in question. This lead to vendors defrauding clients who believed the were dealing with a trusted company.

In the CE world, many of the used equipment traders in China (particularly in Shanghai) use the internet to attract customers. Alibaba is one among many sites these guys use to attract customers. It is well known on this side that a large majority of these sites were fraudster sites. The game was to list your company and machines on a website. A overseas customer would say they were interested to buy a one of the machines listed. The Chinese vendor would then require a deposit (perhaps 10%) of the purchase price to be paid in advance. After the vendor shipped the machine, the buyer would have to pay the remaining balance.

Well the trick here was to get the down payment and then shut down the site and break off all communications and never ship the machine requested. For an used construction equipment that might cost USD100 or more, the deposit could be in the range of USD5000 to USD20000.

Not bad money for doing nothing but listing a fictitious website and waiting for a sucker to send you money.

How many of theseĀ  UE brokers used Alibaba and were trusted members I have no way of knowing. But what I do know is that this scam was (is) rampant with CE brokers in China trying to export used equipment to buyers outside of China.

I also know that about a year ago, machinerytrader.com, the largest construction equipment website in North America stopped listing any and all listings from China. My guess is that they received many complaints from thier clients about the fraud going on in China and decided as a firm to block all listing from Chinese clients.

In my recent trip to Shanghai, I have started to hear complaint from these brokers that “times are tough” and “its hard to find customers”. Well the truth is that these scams have become all to well known and customers are just avoiding China altogether.

I am sure there are many of you out there saying “these guys had it coming, never send a deposit without inspecting the machine or visiting the broker first”. I can tell you that guys who did exactly this were also scammed.

So my suggestion is to never buy construction equipment on-line from China. Never send a deposit (only use LC’s) and only work with international trading firms you can trust. You must visit China to meet the vendor and inspect the machine. You should also be there to witness loading if you can. Some of these guys have even made fraudulent documents and submitted them to the bank the negotiate the LC without every shipping anything.

The best piece of advise I learned when I first came to China is to always judge your decisions as follows “If I would not do this deal in New York (or London, or Sydney, or wherever your home country is) don’t do it in China.” The Chinese have a way of convincing you that “China is different” and that you need to do things differently here. That is a red flag for danger. If it does not make sense and is something you wouldn’t do back home, don’t do it in China.

Anyone here experience this kind of problem in China (or anywhere else)?

Posted February 22, 2011 by chinacetrader in Shanghai

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