Chinese "Suppliers" Shipped Water While You Bought Sunflower Oil

Filed Under:Fraud & Scam   |   Viewed by: 11713 Persons

Recently we witnessed A LOT OF scam stories, sadly. This is another one.

A buyer from Poland(Oil Refinery Plant) approached me to source crude rapeseed and sunflower oil for them, which they will use to produce biodiesel. The order is mega size, as the buyer is saying that they plan to buy 6000 tons per month from China.

So we start the sourcing:
First of all, due to the project size, we tried to identify top rapeseed oil suppliers in China. We contacted China Customs to purchase top 50 exporter list for this product, was told there was no data on the customs system for rapeseed exporters. That was weird. As every time, when we come across big projects, we always turn to the customs to buy the top export list(to identify top manufacturers or exporters). This was the first time they told us there was no data on their system.
    
Did it mean that there was no export for the products of rapeseed oil in the last year?

With that question mark in mind, we go on with the search. We found a list of top rapeseed companies in China from the media report, there are hundreds of them, we contacted these companies one by one, we were told that they imported rapeseed or rapeseed oil instead of export.

All the reliable sources told us it was wrong direction to source rapeseed oil from China.

While searching across websites, you did can find a dozens of “companies”(from free B2B websites) claiming that they could supply the products at unbelievable price(like 650USD to 900USD per Ton). However, if you check the market price for this product, it seems they are wholesaled at China market at something like 1500USD.

Unanimously, these companies are either offshore shell companies in Hongkong, or a small trading company in city Tianjin, while operating in another province. We think this kind of supplier is not reliable.

Based on the finding, we strongly suggested to stop the sourcing, while the buyer strongly prefered to taking risk by buying a trial order of 200 tons.

In the end, there are only 2 “suppliers” claimed to be able to supply the product, meanwhile willing to accept our onsite verification. One supplier is in Tianjin, another one, in Pingyuan county of Shandong province.

With proper due diligence and investigation
, we found the Tianjin company didn’t have office in Tianjin at all, they operated in Shijiangzhuang city of Hebei Province. They allowed us to visit their associate factory as well, this factory, through our later on secret investigation, confessed to us they have never produced rapeseed oil before. Through credit investigation, we found the business license of this company has been provoked.

For the other company in Pingyuan County, their contact number is from Wuhan city of Hubei province. There office is in Tianjin province. They are a new company, so we didn’t find anything through credit investigation.

Even though the sourcing and investigation results are really bad, the client still planned to go on to import from these “suppliers”, and even decided to increase the quantity of trial order from 200 tons to 1000 tons.

So we wrote a long email to client strongly suggesting them not to buy the products from China, here is the email:

Dear xxxx,
 
Please copy all the email to the buyer. As you didn't send his email address.
 
Based on the long research we did when sourcing the rapeseed oil from China:
1) we have tried to purchase top 100 export list, found there no data
2) we get a top rapeseed oil factory list we got, no one can export, many of them are importing actually.
3) we searched and contacted more than 200 so called rapeseed oil suppliers, low quality one, we end up found only 3 to 4 "suppliers" that can give us a quote and allow us to do verification
 
So the fact is that, after contacting hundreds of rapeseed oil suppliers, we only found 3 to 4 shabby little fishy trading companies that can supply this products.
 
I think we can conclude that China is not exporting this products, but importing instead.
 
The Tianjin Supplier is founded by Chinawhy, but we actually don't recommend to do business with them, based on the following:
a. their business license has been provoked before, only when you do illgeal things, that your business license will be provoked by government
b. they now set up an offshore shell company in Hongkong to do business with client, for offshroe shell company, there is no assets, no investment, no hire, no room, no anything, Hongkong adopt different law system than mainland China. So if they cheat you and run away, when you sue them in Hongkong, sorry, they are a shell company, no office, no staff, nothing. If you sue them in mainland China, sorry, they are not a chinese company at all.
 
So we don't recommend to do business with them.
 
However you decided to go on to trade with them despite of our strong objection, we have suggested to go on on the following condition:
a. if trade with their hongkong offshore company, have to be 100% L/C
b. we can trade directly with the factory of Tianjin company(which is in another province)
 
The Tianjin supplier firstly told me they will accept this, but then refused.
 
So, our point is, if the buyer decide to go ahead despite of our warning and objection, what we can and should do is trying our best to minimize the risk.
 
Based on that, I think we have to go through a procedure like this:
a. buy 200T trial order
b. if that goes on well, increase to 2000 to 5000T per month, if you are cheated, then it is only a risk of 10% deposit of 200T, not 10% of 2000T
 
So Again, we strongly suggest not to increase the quantity of test order from 200T to 1000T
 
Please consider and confirm.


The buyer didn’t contact us further for the sourcing of rapeseed oil, but I knew that they used another sourcing company in China to proceed with the purchasing from these 2 “suppliers”.

But this is only one part of the story. The buyer has already bought 200 tons from a Gansu “supplier” before they asked us to do the sourcing.

The payment term for that order was 30% deposit and balance to be paid against the SGS test of rapeseed composition. The “supplier” ignored the client’s request of container loading supervision at factory, they pretended they didn’t know, just informed the buyer to pick up sample at port.

A the port, all the flexitank were covered by thick cloth. Samples were taken from the flexitank of each container, they were then sent to the SGS lab to test, the test result met the specification of the contract, so the buyer released the balance payment.

When the containers arrived in Poland, the buyer found that underneath the thick cover of flexitank, there was a bag of oil within the valve of flexitank, so when the buyer representative opened the valve and take sample, they took sample from this bag, however, under this bag, the whole flexitank was full of water.

This is a fraud!!

Here is some pictures:



Shortly after this fraud, we got a phone call from a US client, they bought cooked oil from China, also got water in the flexitank.

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Comments

3 Responses to " Chinese "Suppliers" Shipped Water While You Bought Sunflower Oil "

  1. Imran on  AUG   4th , 2013 23:42 PM

    Hello,

    I would like to make chinawhy readers aware of a scam from company http://www.qdyxie.com/. They have fake certificates on their website.
    They wont answer video calls via Skype, making excuses that they have no camera but can only chat. They also wont allow sgs checks at the loading port, which is a bit strange for a supposed legitimate company. they will also offer you way below market prices, in this case sunflower oil. I believe they also deal with other products. below a sample of their excuses, PLEASE BEWARE and do not fall for their trap, they will make all sorts of promises even supplying CIF via LC

    "From: sales05 [mailto:sales05@qdyxie.com]
    Sent: 05 August 2013 06:55 AM
    Subject: Re: Re: Re: RE: Re: FW: verify

    Dear:

    It's impossible,as the L/C need a long time.then if you make SGS to waste too time too .so sorry,we can't accept .
    Our boss let me tell you that We are sorry about our cooperation.

    Thanks.
    Regards.
    "

    Admin on  AUG   13th , 2013 23:10 PM

    Thanks for sharing your experience, Imran.

  2. Peter on  AUG   2th , 2013 12:40 AM

    Hello: You say the scam happened BEFORE the client came to you for help in sourcing the product. How could they have avoided this scam if you were not involved?

    Admin on  AUG   13th , 2013 23:8 PM

    Hi Peter,

    If the buyer has done due diligence properly, I think they should be able to detect the risk and quit before it happening.

    The red flag during the sourcing or supplier verification process:
    1) The price offered by supplier is dramatically lower than price offered in main wholesale market here in China
    2) If the buyer do credit investigation, they will find those supplier has something like 100,000RMB turnover in past year, while they are trying to sell you 10 million RMB worth products
    3) Their business license has been provoked
    4) They are operating like an shell company, ready to run any time.

    The lists could go on and on.

    So there are many opportunities to detect and avoid the risk before it happen

    Regards,
    Steven Chow

  3. Alexander on  JUL   22th , 2013 20:20 PM

    What a sad story. This is a good example of when greed takes over reasonable thinking. This polish oil refinery was probaly also not a very big and professional company but rather a startup that got a lot of cash on their balance sheet. They probably thought they could make millions in short period of time. Chinese can smell this easy accessible cash from miles away and will take the chance to get hold of it.

    Admin on  JUL   23th , 2013 6:2 AM

    Hi Alexander, this is a truly sad story.

    The client should have avoided the scam if they took our warning seriously.This type of scam happens everywhere, not only in China. As far as I know, it happens in Malaysia, Russia and many South American countries as well.

    Regards,
    Steven

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