For foreign buyers, common fraud and breach-of-contract practices when conducting international trade with Chinese suppliers can be summarized into the following categories. Understanding these patterns is the first step in building effective risk defenses.
I. Typical Types of Fraud and Breach of Contract
| Type | Common tactics | High-incidence industries |
|---|---|---|
| 1. Price gouging & contract fraud | Attract orders with prices significantly below market rate, then demand higher prices after receiving deposits — citing "rising raw material costs" — otherwise refuse to ship or disappear. | Steel, commodities, industrial raw materials |
| 2. Quality not meeting specifications | Products delivered using inferior materials, refurbished or used machinery, and counterfeit quality certifications (CE/ISO, etc.). | Machinery & equipment, electronics, building materials |
| 3. Shipping & logistics traps | Delayed delivery; quantity shortage; freight forwarder withholding goods and demanding additional fees after arrival at port. | Freight forwarding & ocean shipping services |
| 4. Document fraud | Forged bills of lading, quality inspection reports, certificates of origin and other documents. | Letter-of-credit transactions, bulk commodity trading |
| 5. Payment structure risks | Demand 100% prepayment and then disappear, or exploit letter-of-credit loopholes (documents match but goods do not). | Emerging trading companies, first cooperation |
II. High-Risk Signal Warnings
Be highly vigilant if the following signs appear before a transaction:
- Questionable supplier background: recently established company, unverifiable registered address, bank account name not matching the contracting party.
- Vague contract terms: quality standards, delivery time and breach liability vaguely described.
- Communication pressure: frequent demands for payment, refusal to use escrow or installment payments.
- Refusal of on-site inspection: refusing to allow buyers or third parties to inspect the factory or goods.
III. Prevention and Response Recommendations
| Stage | Recommended measures |
|---|---|
| Before the transaction | 1. Verify company qualifications through official Chinese channels (e.g., National Enterprise Credit Information Publicity System). 2. Request past export records and recommendations from overseas clients. 3. Clearly define quality specifications, inspection standards and breach liability clauses in the contract. |
| During the transaction | 1. Avoid 100% prepayment; use "deposit + final payment" phasing. 2. Appoint a reliable freight forwarder (FOB terms recommended). 3. Engage a third party (SGS, BV) for pre-shipment inspection. |
| After a dispute arises | 1. Immediately secure evidence — contracts, payment receipts, communication records, photos/videos of defective goods. 2. Consider asset preservation — apply to a Chinese court to freeze the other party's accounts or assets. 3. Initiate legal proceedings — arbitration or litigation; report suspected fraud to authorities. |
IV. When Is Professional Legal Intervention Needed?
Seek professional legal assistance immediately in the following situations:
- Suppliers disappear after receiving large deposits or explicitly refuse to fulfill their obligations.
- Goods are detained without reason by freight forwarders, facing demurrage fees and sales losses.
- Large-scale quality defects or non-compliance are discovered and the other party refuses to negotiate.
- You suspect the other company is transferring assets or deregistering its entity.
Our team has extensive experience representing international clients in such disputes and is familiar with Chinese litigation, asset preservation and cross-border enforcement procedures. If you are involved in a dispute, contact us as soon as possible to assess evidence and develop a strategy.
V. Why Choose Us?
We not only handle litigation, but we also excel at intervening in the early stages of a crisis:
- Evidence preservation: guidance on remotely preserving evidence under the rules recognized by Chinese courts and arbitration commissions.
- Property preservation: quickly apply to freeze the other party's bank accounts or seize assets to exert pressure.
- Combining negotiation and litigation: use Chinese legal tools to force the other party back to the negotiating table, or maximize protection through criminal charges (such as suspected contract fraud).
We have long served clients worldwide, including in the United States, Canada, Germany, the United Kingdom, France, the United Arab Emirates, Singapore, Japan and South Korea. Whether it is international trade arbitration, maritime court litigation or complex transnational enforcement, we can provide legal strategies that align with international business practices.
We offer multilingual (Chinese/English) legal advice and a contingency fee model — payment upon successful outcome — for eligible cases, truly sharing the risks with our clients.
VI. Get Professional Advice Immediately
If you are facing a dispute with a Chinese supplier or logistics company, time is of the essence. Evidence can be easily lost, and assets can be transferred.
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