Fraud warning to entrepreneurs: Beware of business inquiries from Limited Company from China!

Caution when doing business with China - danger of fraud

Beware of business enquiries from Limited Company (LTD) from China

Some time ago it all started very comfortably with a cheese request from China – an import company wanted to import our Alps cheese. Since we know from the media how important milk products imports are for China, we gave the company YK IMPORT&EXPORT CO., LTD from Shaanxi Province China a quick answer – that we are interested.

A subsequent call to the Chinese company showed us that there was someone there who could be reached. The pleasant lady on the phone told us that her boss doesn’t speak English very well and that we should please send everything via email.

1. Overview of the main business development with China LTD

The business inquiry from China

Dear Sir,
We are YK IMPORT&EXPORT CO., LTD. which located in Xi’an of China.
Our company has great strength with the stable clients distributed in the Chinese market,of course,we are still trying our best to develop the new clients.
China has a huge market,we are very willing to cooperate with you.
We would like to order dairy products, like milk, cheese, cream and so on from you.
Hoping your early quotation.
Best Regards,

Honglin Fan
Vice General Manager

YK China Import LTD China
NO.25, Dianzi ZhengJie Dong Sanxiang, Xi’an, Shaanxi Province,   China
Mobile: 0086 182 9267 7278
Tel: 0086 29 636 254 16 / 636 254 18
Tax:0086 29 636 254 19

Blumenkäse ist ein Traum von Schnittkäse
Blumenkäse ist ein Traum von Schnittkäse

Our answer to the business request – Cheese

Dear Mr. Honglin

We only have hard and semi hard alps cheese and butter (all our products are high quality premium products – no mass industrial manufacturing) – and special sausage from local game (deer, chamois, roe deer)

Which quantities do you need from which product.

Best regards

First order from China for import

After we agreed on the price and transport air freight (several emails) the order was sent to us with a request for confirmation of feasibility. We agreed on delivery variant according to Incoterms and payment on confirmed bank letter of credi

The order document

YK Import Order Käse
YK Import Order cheese at Alpen Sepp
YK Contract China
Alpen Sepp YK Contract China

The final contract with China – with some effort and back and forth Connected

After some back and forth email conversations we could fix the final content and everything looked good and serious. The delivery dates were fixed and the payment for the delivery to China was precisely defined. All this meant a lot of effort for us and also for YK Import – which is why everything looked very professional.

Download of the purchase contract (.pdf)

2. It gets funny – invitation to sign a contract in China?

Dear Stephan,

Thanks for your letter. In China, we need sign a contract to complete our business. After we signed the contract, we will apply for the exchange currency in SAFE to change the RMB to Euro. China is the country which execute foreign exchange management system, each payment to abroad have to be approved by the Foreign Exchange in SAFE. Only after approved by them, could our bank pay for you.  The procedures is very strict and complicated. The SAFE need our contract to apply for the exchange currency, besides, our bank also need the contract to transfer the payment to you.
Attachment is the contract our lawyer drafted, please check it. If you have any other different opinions about it, you can modify directly on it. Then write it back to us.
Hoping we can reach an agreement and start to sign the contract as early as possible. Your fast reply will be appreciated.

Logo of the Scammer Organization
Logo of the Scammer Organization

Best wishes,

Honglin Fan
Vice General Manager

NO.25, Dianzi ZhengJie Dong Sanxiang, Xi’an,
Shaanxi Province,   China
Mobile: 0086 182 9267 7278
Tel: 0086 29 636 254 16 / 636 254 18
Tax:0086 29 636 254 19

3. Normally the buyer visits the supplier – questions in the business network

YK Import Invitation China
YK Import Export LTD Invitation China

After consultation with other entrepreneurs, we learned that there seems to be a scam from the very low priced China Ltd. companies, which are professionally acting, attracting suppliers to China to collect horrendous contract set-up fees and nothing but high costs happens.

Good question: What do you want to reject under pressure in an almost lawless area for us?

We decided to set a trap:

We first accepted and received the invitation and by email details on where to go – Xi’an XianYang Airport in China.

4. Confrontation with the information of the entrepreneurs

We wrote an email with 3 options how we could proceed – with the request for comments:

Dear Honglin

I am writing you because we received important news from our lawyer after his discussion with the Austrian foreign trade agency.

Their feedback was: “In China in the last years Austrian companies had several cases of faked contracts with China Ltd. companies. Chinese Ltd. companies are cheap to create in China. For the entrepreneurs everything looked good and trustful and the Austrian companies received invitations for final contract signing. In China then they had to go to a notary and had to pay (were charged which a percentage of the contract value) for obviously official china contract costs (which were not necessary according to the law). And after this nothing happened – no contract was implemented. This happened many times and the damages to these companies were high.”

For reputable cooperation the foreign trade agency recommend us:

  1. Because of the simplicity of the delivery for the first order (only goods is packed) – complete the first order and travel afterwards to China for long term agreements. Signing in China is not required by law and confirmed irrevocable L/C makes everything safe for both parties. Additional legalization in Austria for China is possible in Vienna.
  2. If you go to China before the first contact and delivery ask for a deposit which cover the full travel cost (approx. 6.000€) and deduct it afterwards from the contract value. Normally this is a often used option and no problem.
  3. Invite your client to Austria to sign the contract – if necessary – in Austria.

Because of the fact that we are in a traditional farmers business (we try to prevent any losses for our farmers), we are not so big and not specialists in international business – how shall we proceed?

We prefer to proceed according to the first point of the  recommendation list.
Now I need your help – hope to hear soon from you.
Best regards from Austria

5. The answer from China and last “sign of life” from Mr. Honglin

We received a final reply to our email – further attempts to contact them were unsuccessful.

Logo of the Scammer Organization
Logo of the Scammer Organization

Dear Stephan,

Thanks for your letter.
I forwarded your letter to our CEO.
We discussed our cooperation today and decide to find a suitable time to visit you instead.
Please wait our visit information.

Best Regards,

Honglin Fan
Vice General Manager

Searches for scammers (= fraud, scam) on the Internet

Beware of fraudsters on the Internet
Beware of fraudsters on the Internet

Obviously, numerous companies have already fallen for this China fraud scam. Online research has yielded the following results:

And the fraud machine also works in the private sector, of course – Tourism in China!

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