How To Avoid Getting Scammed In An International Trade Transaction

The international trade business is one of the most profitable industries in the world you could venture into depending on what products you’re selling, the monthly volume your client wants, the payment terms you’re working with, and much more.

But while this industry is highly lucrative, a lot of people take advantage of it to dupe people of their money. They come up with different tactics, procedures, and do everything in their power to ensure the unsuspecting buyer doesn’t catch a hint that he or she is just another pawn in their game.

With the average amount spent on any global trade transaction ranging from $100,000 to well over $100,000,000, knowing how to protect yourself every single step of the way is key to growing a successful business.

That said, here are 8 ways to avoid getting scammed in an international trade transaction:

See Also: How To Find International Buyers For Your Import/Export Business

1). Making Upfront Payments:

This is the first scam signal you should watch out for. Most inexperienced con-men always push for the buyer to make a form of upfront payment for one thing or the other. They could call it Cost of Transaction (COT) or something else, but will ensure they make the buyer believe that without making that payment, they will never be able to buy that type of product from their country.

Once you see anyone telling to make an upfront payment before you’ve seen the product or had time to verify that the title deed is in the seller’s name, walk away immediately.

2). High Profits, Low-Risks Investments:

When a merchant is trying to sell you a product at almost the cost of nothing, then it is probably a scam. In the global trade business, ridiculously low prices are always too good to be true, and you need to watch for them.

For example, if the price of a certain product per metric ton is $390 and everyone has told you that you can’t get it any lesser, you need to be wary of the only person who tells you he can deliver at $320 per metric ton.

What it means is there’s either no product and the seller wants to scam you of your money or he has a product but it is substandard.

When the price is too good to be true, it usually is. Walk away and don’t look back, except you’re dealing with an OFF-OPEC crude oil transaction, then you know you can do more research.

See Also: 15 Things That Kill Crude Oil Marketing Transactions In Nigeria

3). Zero Public Profile:

While there are thousands of legitimate international trade merchants who don’t have any public profile or website, there are hundreds of thousands more who are scammers waiting to part you with your money.

They’d put up the argument that they haven’t had the time to set up a public profile, chat you up from an email address that looks illegitimate, and use the leverage of the fact that many other legitimate traders don’t have public profiles.

If you come across a global trade merchant like this, thread with caution and try to get as much more information from him. Also, ensure the transaction procedure is secure and doesn’t put your company at any financial risk.

4). Refusal To Provide Export Licence And Other Related Documents:

Every exporter in any country around the world is always registered with their export promotion councils and/or other related bodies. As a result, requesting they send you a copy of their licence documents proving they have the right to either export or package the products for export is important.

If any seller refuses to share their export licence, company registration document, and/or more critical documents that show they’re genuine, find out what stage of the transaction they would be willing to share it. If it is only going to be shared after a financial instrument has been placed, then you should walk away.

Some sellers would force it that the document is only shared after a contract is signed, but that is a complete no-brainer. If they can’t send it, then they should be able to show it at a table-top meeting.

Any seller who refuses to show you his export licence at all in the entire transaction is a scam. Walk away!

See Also: 10+ Legal Requirements For An Import And Export Business in Nigeria

5). Refusal To Have A Table Top Meeting:

Most scammers always only prefer to operate from the internet. Whenever a prospect indicates they want to come down to their country to have a table top meeting, they either start to say the buyer is a time waster or give random excuses as to why they don’t want to have a meeting.

If you expect to make at least a $100,000 from a transaction, why refuse a meeting?

One reason could be that the sellers don’t have an office, and so, will not want to appear like they don’t. While most people run their businesses from their homes, that is still not an excuse to not want to have a meeting.

If any prospect you’re speaking to vehemently and aggressively resists any form of meeting before you pay for the product, abandon them and move on immediately.

6). Fake Letter of Credits:

Just as sellers are mostly the scammers in any transaction, buyers can also be. Most buyers will issue a Letter of Credit from a bank whose capitalisation isn’t even worth up to the value of the Letter of Credit.

Some will also issue a leased financial instrument, which most sellers never know is almost useless.

Before you accept any form of payment guarantee from a buyer, do your due diligence on the bank issuing the financial instrument, talk to your banker to verify the financial instrument, and most preferably, ensure the financial instrument is coming from a top 50 world bank.

See Also: How Exporters Can Always Secure Payment For Goods Sold In International Trade

7). Pressure To Sign A Contract:

Most international sellers or their sales representatives would always want to pressure you into signing a contract immediately. They’d be emphasising that you should sign the contract and let everyone move on to the next phase of the transaction.

In this scenario, you have to be extremely careful, as some terms of the contract could be highly deceptive. Some sellers would put damning clauses in the contract that ensures the buyer will pay a fine for an innocent mistake made.

If anyone keeps forcing you into signing a contract before you get to even do your due diligence on the seller or have a meeting with them, then you’re better off elsewhere.

8). Claims Of Being A Company’s Representative:

When you receive a proposal from a presumed sales rep of any company or organisation to sell or export a certain product to you, one of the things you should do is to verify if the company exists, then reach out to them to find out if the sales rep is actually one of their employees or official representatives.

If the rep turns out to be non-existent, then you may have dodged a bullet.

Always do your due diligence on anyone who reaches out to you at all, before committing to move forward with a transaction or not.

See Also: How To Start An Import/Export Business In Nigeria: A Short Guide

To Sum It Up

The higher the profitability, the higher the risk. The international trade business holds golden opportunities for people who dare to venture into it, and so, is also an attractive haven for scammers.

Whatever you do in this industry, first ensure you carry out an ideal due diligence on either the buyer or the seller before you proceed with either party.

Working with a good plan, honest trade processes, and a global network of reputable buyers and sellers, the sky would be your stepping stone.

See Also: 14 Common Import And Export Mistakes To Avoid At All Costs

About The Author

This is an article written by Stan Edom, the Editor In Chief of Startuptipsdaily.com and the founder of Globexia Limited, a global commodity trading firm that exports solid minerals & agricultural products from Nigeria, and facilitates the global trade of oil & gas commodities.

These article along with others are written to help exporters and importers around the world to have a better understanding of the commodity trading business and to improve their chances of becoming successful in the industry.

If you’ll like to contact Stan Edom for questions or inquiries, you can reach him on +2348080888162 or via email at [email protected].

Professional Due Diligence Checks In Nigeria By Globexia

International buyers are always wary of doing business with Nigerian based businesses because of the high risk of disappointments either in the form of time wasted or money lost, and as such, are highly sensitive of any organisation that presents them a trade offer.

To curb this problem and help international buyers make comfortable and confident trade decisions, Startup Tips Daily, through her sister company, Globexia, has set up an in-depth due diligence check consulting service that will help international buyers get in-depth information on any organisation looking to do business with them. Some of the information the international buyers stand to gain from the in-depth due diligence exercise that will be carried out by Globexia’s team of experienced lawyers in Nigeria are:

• Verification of Company Registration
• Verification of Export Licence
• Verification of Export Activity
• Verification of Past Certificates of Origin
• Verification of Past & Present Bill of Ladings
• Verification of International Passport / Driver’s Licence of The Exporter
• Verification of Bank Verification Number (BVN)
• Verification of Tax Documents
• Verification of Financial Health of The Company
• Verification of Mining Licence
• Physical Verification of Office Address With Pictures & Videos
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• Full List of Registered Company Directors

And much more based on the client’s requirements.

You can read more about the service here.

If you simply want general commodity trade consulting in Nigeria spanning through Due diligence & proper verifications of both parties, understanding the entire Nigerian commodity trading industry, identifying and completing all due trade registrations, clearing & forwarding of the commodities, market research/feasibility study reports, and much more, Globexia Limited is the right partner to talk to.

What are your thoughts on these 8 ways to avoid getting scammed in an international trade transaction? Let me know by leaving a comment below.