7 Steps Sourcing Guide

Small Biz Starter Kit

Alibaba.com is the world’s largest business e-commerce marketplace connecting buyers and suppliers.

TABLE OF CONTENTS
SOURCING INTERNATIONALLY

Seven Steps to Better Sourcing from Alibaba.com 5
Step 1: Marketing and Business Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Step 2: Product Sourcing and Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Step 3: How to Check Your Supplier Before Ordering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Step 4: Do I Need a Factory Audit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Step 5: Price Negotiation and MOQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Step 6: Best Payment Method and Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Step 7: Pre-Shipment Inspection is 70% of the Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

How to Verify Suppliers at the Early Stages of Trade from Alibaba.com 19
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Do Some Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Factory Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Inspection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Find Trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Contacting Your Supplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

GETTING THE GOODS

Things You Never Knew About Logistics from Alibaba.com 23
Moving Goods: The Basics of Shipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Freight Forwarders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Shipping Documentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Quality Control and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Covering Against Lost: The Trader’s Guide to Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Resolving Payment Problems with Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

TRADING SAFELY

Safe Trading Tips from Alibaba.com 31
Tips for Safe Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Fraud Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Fraudulent Emails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Buying and Selling with Confidence and Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Websites for Fraud and Internet Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Get Your Guide to Safe Trading on Alibaba.com 40
Search Buyer Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Check Membership Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Alibaba.com is the world’s largest business e-commerce marketplace connecting buyers and suppliers. Alibaba .com Small Biz Starter Kit 2

Verify Companies Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Pay Securely Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Question? Ask It! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

IP Protection in China from Alibaba.com 43
Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Patent Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Trade Secrets and Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46


SOURCING INTERNATIONALLY
Making Global Trade a Possibility for You

SEVEN STEPS TO BETTER SOURCING
from Alibaba.com

■ Step 1: Marketing and Business
Planing

■ Step 2: Product Sourcing and
Certification

■ Step 3: How to Check Your Supplier
Before Ordering

■ Step 4: Do I need a Factory Audit?

■ Step 5: Price Negotiation and MOQ

■ Step 6: Best Payment Method and
Incoterms

■ Step 7: Pre-shipment Inspection is
70% of the Game

Seven Steps to
Better Sourcing:
A Step-By-Step Guide to Sourcing from China

HOW TO VERIFY SUPPLIERS
AT THE EARLY STAGES OF TRADE
from Alibaba.com

■ Reference

■ Do Some Research

■ Factory Visit

■ Website

■ Inspection Agency

■ Find Trader

■ Contacting Your Supplier

EXPERT INSIGHTS

How to Verify Suppliers at the
Early Stages of Trade?

Editor’s Words your travel expense will be much lesser at first . It is important to
visit the factory of your suppliers to know first hand their abilities
Did you ever have a hard time finding a trustworthy supplier? Do
and their long term relations with you .
you know how to verify suppliers at the early stages of trade?
(From Forum Member: GMPImportExport)
By participating in our forum activities, our members and experts
have shared their great insights and experiences with the
Website
community .
Let’s see what they have to say on this topic: Tips
Look at their website, they have to have one if they are serious .
Reference Search for meaningful content about themselves and what they
do . If they have a telephone, contact email, an “about us” page .
Tips
Scammers rarely go to all this trouble and usually have one web
To check if the supplier is trustworthy or not you can ask for any page that is 3 million characters long .
references of his existing clients . (From Forum Member: secondreview)
(From Forum Member: khashar)
Inspection Agency
Do some research
Tips
Tips
Inspection Agencies is the best way to go . Locate one . Pay your
To find a reliable supplier from a host of choices, it is important to desired 2 - 3 percent and sleep easy .
know your requirements and communicate this to the suppliers in
advance . Find Trader
Do some research first about the company profiles, investments,
Tips
locations and product lines .
Go to Hong Kong . Find a good trader there . Pay your 2 - 5
If you can see their product lines suggest a very chaotic
percent and let them take up the headaches .
succession from products to products without a core strong
objective, this should be a red flag . There should be a Hong Kong laws will prevent anyone to deceive or dupe
professionalism and innovation on the side of the suppliers to importers . They can get their hides peeled off for that .
give you more than you want . (From Forum Member: multibizhk)

Factory Visit 1. Contact your supplier through correspondences or
emails, or call them directly if you can speak Chinese.
Tips
If not, it doesn’t matter; most of the suppliers have their
The best option for you when you want to visit the factories is to staffs to deal with the language problem.
have the company located within 50 km of each other, this way


EXPERT INSIGHTS

A reliable supplier would ask you more detail about product etc, then be aware of it, chose and select the most save,
before offering the price including description, clear and authenticated one .
specification, packing condition, payment method, delivery ▪ If you unable to do this verification, consult with some
time, etc . Because all these factors would affect the price, IT expert or Web master to checking the e-mail, domain,
the price offering is the most serious process and also the website and the company statistic&historical .
final transaction process . Go through this procedure you can ▪ You may try use Alexa and few SE . too .
feel and touch the suppliers and know how good they are . After the above Preliminary or sorting the nomination of few
If the seller promise whatever you want, or the price they contacts/suppliers, next step is to email them each, and asking
offered is too low than average, this is most likely fraudsters . them by several correspondences of :
Just ignore and go to next .
▪ Their company profile, organization, experiences,
2. Face to face meet with your suppliers and establish comparative advantages .
personal relationships with them.
After you find some of satisfied suppliers, invest a few ▪ Their achieving, best products, high demand items etc .
thousands to make a trip to China, visit China Suppliers ▪ How long been in export business in the items or similar
factories, face to face to discuss further detail about your with? etc .
products including price, payment term, quality inspection,
Those are the very early stage points that you need to do to
delivery time etc .
verify the supplier .
(From Forum Member: kellyli)
(From Forum Member: Oneuni)

Contacting Your Supplier

The trustworthy supplier on Alibaba is Gold member with trust
pass verified member;
For Non-member, you may have to get some information to verify
it by asking the supplier:
1 . To whom or which companies that they ever supplied, ask
the reference letter from the supplier’s customer, ask its
contact person and address to get some info .
2 . Cross checking, ask the permission from supplier that you
will contact the companies that been given, to get their
opinion and impression about the performance of this
Supplier .
3 . Re-Checking their address, phone number, website, license
(if any) etc via Search Engine (Google, Yahoo, AOL, Who is,
Ask, Answer, etc) then the Yellow page&white page for their
phone number (fix station) not the cell or mobile phone . The
Zip or code post for the address . etc .
▪ It also must do the same to the references source that
been given for .
▪ It may happen that those several contacts are from the
same group/team .
4 . If you or any from your resource are good enough in IT (web
mail) .
▪ You will and can check the web, domain, email, from the
IP, hosting, server, etc; if it is unknown zone,
unidentified, not trustworthy source or not authenticated


GETTING THE GOODS
Knowing the Ins & Outs of Logistics

THINGS YOU NEVER KNEW
ABOUT LOGISTICS
from Alibaba.com

■ Moving Goods: The Basics of
Shipment

■ Freight Forwards

■ Shipping Documentations

■ Quality Control and Inspections

■ Covering Against Lost: The Trader’s
Guide to Insurance

■ Resolving Payment Problems with
Buyers

Things You Never
Knew About Logistics
A Detailed Guide on How to Ship by Air and Sea from China

1. Moving Goods: The Basics of Shipment • CIF - COST, INSURANCE AND FREIGHT This
means the seller’s responsibility ends when the
Types of international transportation goods pass the ship’s rail in the port of ship-
ment. The seller must pay the costs and freight
There are a number of shipping options open to you. necessary to bring the goods to the named port
Obviously, they are determined by the quantity and size of destination; although, any additional costs
of your shipment, where it is going to or where it has due to events occurring after the time of deliv-
come from. ery are transferred from the seller to the buyer.
However, in CIF the seller must also procure
Exporters may find it useful to consult a freight forwarder marine insurance against the buyer’s risk of
in determining the method of international shipping. Since loss of or damage to the goods during carriage.
carriers are often used for large and bulky shipments, the
exporter should reserve space on the carrier well before
the actual shipment date. This reservation is called the 2. Freight Forwarders
booking contract.
Freight Forwarders are professionals who take care of
International shipments are increasingly made through
the more important steps regarding the shipment of your
bills of lading under a multimodal contract. The multi-
goods. You can get all of the transport information you
modal transit operator (frequently one of the transporters)
require from a freight forwarder. For example, they can
takes charge of and responsibility for the entire move-
inform you of shipping rates and routes, and they can
ment from factory to final destination.
also book cargo space for you. They can also prepare the
First steps documents you need and serve as an import agent. Their
roles may vary according to the shipping responsibilities
Order confirmation: Once an order has been confirmed, a outlined in the Incoterms agreed upon between the seller
document called a commercial invoice, or sales confirma- and the buyer/importer.
tion, will be completed by the seller. Upon confirmation of Finding a Freight Forwarder
the order, you should be aware of:
The following resources can help you locate suitable
• The quantity of the products being shipped freight forwarders:
• The entire cost of the shipment
• How and when they will be shipped • For the US, go to the USDA’s Freight For-
• Who is responsible for the shipment warders Online Directory at http://www.ams.
usda.gov/tmd/freight/ffdb/index.asp or visit the
Responsibility: Who is responsible for the shipment is National Customs Brokers and Forwarders
dependent on the Incoterms parties agree to during nego- Association of America website at http://www.
tiations. These terms are fundamental to international ncbfaa.org/
trade as they clarify when responsibility for the shipment • Check your Local Yellow Pages under “Freight
passes from seller to buyer. Caution must be exercised Forwarders.”
when selecting Incoterms because they usually relate to • Ask an experienced importer/exporter who
particular modes of transportation. For example, some In- deals in similar products as yours to refer you
coterms deal solely with transport by sea. Terms such as to a good forwarder.
FOB and CIF can be used only for ocean-bound freight: Choosing a Freight Forwarder

Using the right freight forwarder can save time, money
• FOB - FREE ON BOARD: This means the
and establish a more competitive base for your product.
shipper (seller) has upheld his/her part of the
Using the wrong one can send you in the opposite direc-
agreement when the goods pass the ship’s
tion. If you have decided you need the assistance of a
rails at the port of exit. The receiving party
freight forwarder, you must find one that suits your needs.
(buyer) assumes risk and costs associated with
This section covers the criteria for determining if the
the goods once they pass the ship’s rail in the
freight forwarders you select are appropriate to your type
seller’s home port.
of product and the shipping destination.

Some forwarders are more familiar with certain aspects of
trade than others. Therefore, it is a wise business deci-
sion to interview each forwarder. In considering a for-
warder, ask these questions.

Alibaba.com is the world’s largest business e-commerce marketplace connecting buyers and suppliers. page 2 of 6
Alibaba .com Small Biz Starter Kit 25

Contents of this white paper are contributions from members of Alibaba.com

Does the freight forwarder: • Proof of receipt of the goods for shipment
• An invoice for the freight
• Have an office near your shipping port? • A certificate of insurance
• Have experience handling your type of product • A guide to airline staff for the handling, dispatch
and shipment to your market? and delivery of the consignment.
• Have experience with the type of carriers you
require? Usually, the document consists of three originals and
• Have a good credit rating? nine copies. The first original is intended for the carrier
• Have favorable shipping rates and delivery and is signed by an export agent; the second original,
schedules? the consignee's copy, is signed by an export agent and
• Receive good recommendations from carriers? accompanies the goods; the third original is signed by the
• Belong to any professional associations or carrier and is handed to the export agent as a receipt for
organizations? the goods after they have been accepted for carriage.
• Have a reputation for friendliness, competence,
efficiency, reliability, cost-effectiveness, trust- B. Bill of Lading (B/L)
worthiness and using fair business practices?
A bill of lading (B/L) is used for sea shipment and is a
Many customs brokers and freight forwarders use these certificate of ownership of goods. It must be produced
web-based applications to ensure accurate submission at the port of final destination by the importer in order to
of import documentation to customs agencies for security claim goods.
tracking of various shipments. Third party logistics provid-
ers can also provide clients with up-to-date cost analysis, As a document of title, the bill of lading is also a nego-
logistics and import compliance information. The following tiable document and you may sell the goods by endorsing
fee-based online websites can prove useful if you want to or handing it over to another authorized party, even while
import yourself: the goods are still at sea.

Smart Border - www.smartborder.com Although negotiable bills of lading are in common use,
Open Harbor - www.openharbor.com some countries do not allow them or make it difficult for
Nextlinx - www.nextlinx.com them to be used. You have to be sure that a negotiable
B/L is accepted in your country; otherwise, a non-negotia-
3. Shipping Documentation ble B/L is issued.

The B/L is a formal, signed receipt for a specified num-
Numerous documents are required for shipping. The
ber of packs, which is given to the export agent by the
primary documents are listed below with links to samples.
shipping line when the shipping line receives the consign-
Exporters should seriously consider having a freight for-
ment. If the cargo appears to be in good order and is
warder handle the formidable amount of documentation
properly packed when received by the shipping line, the
that exporting requires, as forwarders are specialists in
bill of lading is deemed as "clean". The ship owner thus
this process.
accepts full liability for the cargo described in the bill.
Documentation must be precise because slight discrep-
ancies or omissions may prevent merchandise from being
exported, result in nonpayment, or even result in the sei-
zure of the shipment by customs. Collection documents
are subject to precise time limits and may not be honored
by a bank if time has expired.

Most documentation is routine for freight forwarders and
customs brokers, but the exporter is ultimately respon-
sible for the accuracy of its contents.

The following documents are commonly used in the ship-
ping process:

A. Airway Bills

An air waybill is used for air transport and is documentary
evidence of the conclusion of a contract for carriage. It
serves as:

Alibaba.com is the world’s largest business e-commerce marketplace connecting buyers and suppliers. Alibaba .com Small Biz Starter of 6 26
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C. Commercial Invoices

A commercial invoice is a bill for the goods from the seller
to the buyer. These invoices are often used by govern-
ments to determine the true value of goods when assess-
ing customs duties. Governments that use the commer-
cial invoices to control imports will often specify its form,
content, number of copies, and language to be used, as
well as other important details.

4. Quality Control and Inspections

Quality Control and Compliance

When purchasing volume goods internationally, there are
many areas in the process where you should conduct
checks on your prospective suppliers.

• The first one is during the discovery and nego-
tiation process when you are deciding which
supplier to go with. More often than not, the
prospective supplier will indicate whether he
or she has achieved ISO accreditation for their
products (see below for details).
• The other very important stage in quality
checking is prior to shipment. You need to en-
gage the services of an inspection officer to go
through the shipment to check and see if what
you are about to receive is what you paid for.

D. Insurance Certificates International Organization for Standardization (ISO)

An insurance certificate is a representation of the insur- ISO (International Organization for Standardization) is the
ance policy taken out by the buyer or the seller (depend- world's largest developer of standards. ISO has built a
ing on the Incoterms) for a shipment. strategic partnership with the WTO (World Trade Organi-
zation) having the common goal of promoting a free and
• Blank insurance certificates are supplied by the fair global trading system. Between 1947 and the present
insurer pre-signed and bearing the open policy day, ISO has published more than 15,000 International
number of the exporter. For an air shipment, an Standards.
air waybill serves as an insurance certificate.
• For a sea shipment, an insurance certificate Although ISO's principal activity is the development of
is issued as evidence of the existence of the technical standards, ISO standards also have important
marine insurance policy. economic and social repercussions. ISO standards make
• The marine insurance policy is a contract a positive difference, not just to engineers and manufac-
between the insured and the insurer which de- turers for whom they solve basic problems in production
fines the terms of the agreement between the and distribution, but to society as a whole.
insured and the insurer.
• ISO: 9000 is concerned with ‘quality manage-
E. Packing Lists ment.’ This means what an organization does
to enhance customer satisfaction by meeting
The packing list indicates the number of items in the customer and applicable regulatory require-
contents of each pack, along with individual weights and ments and continually to improve its perfor-
dimensions. This list enables you to check that the cor- mance in this regard.
rect number of units has been received. Customs authori-
ties can also easily identify a specific pack if they wish to
inspect it.

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• ISO: 14000 is primarily concerned with ‘envi- • Safety: Are the products compliant with appli-
ronmental management.’ This means what an cable safety regulations?
organization does to minimize harmful effects • Performance: Does the product function prop-
on the environment caused by its activities erly and as intended?
and to continually improve its environmental • Appearance: What is the condition of the finish,
performance. printing and marking?
• Packaging: Is the condition of packing, marking
Shipment inspections and accessories appropriate?
Governments or buyers demand inspection reports for a
number of reasons: 5. Covering Against Loss: The Trader's
Guide to Insurance
• To ensure shipments do not contain illegal or
low-quality merchandise Generally speaking, all international shipments should be
• To make sure importers are properly declaring insured against loss or damage.
their goods
• To ensure they have received what they have Obtaining insurance:
paid for or are about to pay for (usually by inde-
pendent inspection) • Many SME importers and exporters can ap-
proach their freight forwarders for coverage or
buy insurance directly.
The process typically starts with the buyer. Once a con-
• Most SME shippers organize an ‘all-risk’ cover-
tract between a buyer and seller has been established,
age that covers all reasonable risks to a given
the importer or buyer will arrange a pre-shipment inspec-
shipment.
tion with their favorite inspection company. Although
• Proof-of-insurance coverage is outlined and
some countries require a specific company to perform
verified in a document known as a policy or
the inspection, others have opened it up to a variety of
insurance certificate. Insurance policy formats
competitors.
vary from insurer to insurer.
Upon requesting an inspection, the following information
needs to be given to the inspecting company: company Remember, it is the Incoterms which decide who is re-
name, contact name of the exporter, and the type and sponsible for organizing insurance coverage. It is advis-
location of the goods to be inspected. able when shipping to use a Group F Incoterm and import
with a Group C Incoterm, and then move beyond use of
Note: Regarding the time of the inspection, inspec- these as your experience builds.
tors have busy schedules and need a five to seven day
window to schedule a visit. Once you have a tentative Some common Incoterms and their insurance obligations
date for inspection you need to have the goods ready for are:
inspection. This may mean opening the shipping unit or
• CIF
having the container staged and ready to load.
The exporter is responsible to insure on behalf
of the buyer until goods arrive and are unload-
Some other advice:
ed at the port of destination.
• Many Less than Container Load (LCL) ship-
• FOB or CFR (Cost & Freight)
ments can be inspected at the port of export.
The importer is responsible to insure goods
• It is recommended that the inspection take
from the time the goods are loaded on the
place where you can supervise and answer
seagoing vessel.
questions the inspector might have.
• You may also need to close up a crate or box
If the other party is responsible for the insur-
following the inspection so it is best that you or
ance and you have doubts about the cover-
your forwarder is available to assist during the
age, you may want to consider buying back-up
examination.
insurance, called contingent insurance. This
• Following the inspection, a “Clean Report of
provides supplementary coverage that is
• Findings” (or something similar) will be issued.
activated if the primary insurer does not pay a
This is usually required at the time of import.
legitimate claim.
Most reports are issued following proof of ex-
port and usually can be completed by fax.

The importer usually pays the costs for such examina-
tions; however, delays can be invoiced directly to the
exporter. The inspector will look at the following aspects
of the products in the shipment:
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6. Resolving Payment Problems with Buyers

If a payment problem occurs, you will want to resolve the
issue as quickly as possible with the buyer. You first need
to get a good understanding of the entire situation before
seeking dispute resolution assistance. Ask:

• Were the goods supplied per the contract /
invoice?
• Are all your shipping and customs documents
in order?
• Was there damage or theft?
• Have you attempted to negotiate a solution
to the problem, along with a payment plan or
future concessions to the buyer?
• Have you discussed your problem with your
bank and your lawyer?
• Do you have copies of all correspondence and
records related to the dispute?

Help with payment disputes

If you have come to the point where negotiations with the
buyer are not leading to a resolution and you are deter-
mined to collect, you will have to turn to the advice of
your bank, legal adviser and perhaps other advisory bod-
ies involved in mediation, arbitration or even litigation.

The International Chamber of Commerce handles the
majority of international arbitration and is usually accept-
able to foreign companies because it is not affiliated with
any single country. For additional information, go to

• Councils of the International Chamber of Com-
merce at http://www.iccwbo.org/ or
• ICC Dispute Resolution Services at http://
www.iccwbo.org/home/bdrs/bdrs.asp

page 6 Kit


TRADING SAFELY
Becoming a Global Trade Expert

SAFE TRADING TIPS
from Alibaba.com

■ Tips for Safe Trading

■ Fraud Case Studies

■ Fraudulent Emails

■ Buying and Selling with Confidence
and Trust

■ Websites for Fraud and Internet
Security

Safe Trading Tips:
Case Studies on Detecting and Avoiding
Fraudulent Suppliers and Marketers

1. Tips for Safe Trading Use pre-shipment inspection services

If you are a buyer, you can protect yourself against poor
There are a number of actions you can take to research quality by ordering a pre-shipment inspection of the prod-
potential business partners met on the Internet. These ucts. You can demand the inspection as a condition of
actions can reduce the risk of you being subjected to payment. For additional information, go to
fraudulent transactions or business misunderstandings. Bureau Veritas Group at www.bureauveritas.com,
Intertek at www.intertek.com and SGS at www.sgs.com
Confirm contact details
Protecting yourself against payment risks as the
Always confirm if the address, phone number and email seller
address given to you by your trading partner belongs
to the same company. If a trader provides inconsistent If you are a seller and have not been doing business with
contact details, for example an address in the USA and your partner for very long, avoid selling your products on
phone number from another country, we recommend you open-account (in which case you are extending credit to
look up the address in the local phone directory, obtain your buyer). Instead ask your buyer to open a letter of
the local phone number, and call this number to confirm credit (L/C).
that the person you are in touch with actually works for
the company. Similarly, if a partner's email heading states Protecting yourself against payment risks as the
that they work for a certain company, you should verify buyer
this. Be aware that some scam artists alter their return
email address heading to make it look like they work for a If you are a buyer, sometimes a supplier may ask you for
company when, in fact, they don't. a deposit (usually 30%) before they accept your order.
While this is not unusual between longstanding trading
partners, if you are doing business with the supplier for
Check the partner's background
the first time, make sure you have done sufficient back-
ground checks on the supplier before you agree to the
Background checks from independent third-party sources
deposit, or ask for a different form of payment, such as a
include a search for legal registration and credit reports.
letter of credit. If the seller seems more focused on pay-
In many countries, the existence of a company and
ment than any other issue or indicates that cash payment
its legal status is a matter of public record. Check the
must be made urgently, more caution should be given to
company’s registry in the partner's country to ensure that
the transaction. Be extra cautious when the seller asks
the company exists with a valid registration. If you cannot
you to send money to an account whose real owner
gain independent access to your partner's registration
cannot be traced: for example, you cannot trace the real
information, ask your partner to provide you with a Certifi-
name of the person behind an account with a wiring ser-
cate of Good Standing issued by the company’s registry
vice such as Western Union.
office in his/her country or state/province. You can also
gain further knowledge about your partner by ordering a
credit history report from a local credit agency. Credit his- Suspect shipping or contact addresses
tory reports contain information about the partner's busi-
ness history in their relationships with banks and other Pay close attention to shipping or contact addresses
trading partners. Contact credit agencies that can provide located in regions with high reported incidences of online
credit history reports. See Credit Agencies List in page 7. fraud, such as Eastern Europe, Western Africa and Cen-
tral America.

Meet your partner in person 2. Fraud Case Studies
Whenever possible, meet your business partner in person
1. Gold Supplier Identity Theft
and visit their company's facilities. While the Internet of-
fers you a wealth of information on your potential partner,
Case description
that enables you to make an initial assessment, there is
no substitute for face-to-face contact.
One buyer sent an email saying: "I have received a
quotation in my email; the sender said his company was
Protect yourself when ordering or providing samples
a Gold Supplier. I knew Gold Supplier members are
verified, so it gave me confidence in this transaction and
Buyers should order a sample before committing to a
I paid 30% deposit to buy the Ipods he provided. But
purchase order to be sure that the product meets their ex-
after the payment, I didn't receive my ipods, nor get any
pectations. Sellers should request payment for a sample
response from them. Their contact person, Tony Yang just
and/or payment for shipping costs before you send out
seemed to ignore my emails. Please help me contact this
the sample, especially if your product has a high resale
company to either get a refund of my payment or send
value.
the items I paid for."
page 2 of 8

After checking with the Gold Supplier member mentioned 3. False Information
by this buyer, the Tony Yang in this case wasn't an em-
ployee of this company at all. The so-called "Tony Yang" Case description
was a scammer posing as a verified company’s represen-
tative in order to defraud innocent people on our website. "I didn't receive the products. The supplier said the goods
were detained in the Customs Office because Customs
Analysis of this case didn't find the original invoice attached to the goods. The
supplier explained that it's his company's policy to issue
• Make your own investigation before dealing original invoices only when quantities are above 5 units.
with your potential partner. Use the company He told me to pay for another 2 units with another $150
name they provided to search your B2B web- USD, but I have refused. I paid by Western Union. He
site and the company's website. registered on your website as a US company, but actually
• Compare the products listed on the company it is a Chinese company. All his information is fraudulent.
website. If they are in entirely different catego- This is a fraudulent company!"
ries; for example, the company usually sells
shoes but the offer you received is an Ipod, it Analysis of this case
might be a signal of fraud.
• • It is a sign of potential fraud if the seller re-
Contact the company on your B2B website
quests that you send payment to another coun-
directly and confirm with them whether the per-
try instead of their registered country shown on
son contacting you is really from their company
the website: e.g., the company claims to be a
or not.
• UK company and requests that you send pay-
Or you can send email to the service team of
ment to Nigeria, or other African countries.
your B2B website, and they can help you verify
• If you think their price is very attractive and
the contact person.
want to deal with them, it is absolutely neces-
sary for you to verify that they are a legitimate
2. The "Low Price" Trap company and their contact information is
correct. In this case, the fraudster is pretend-
Case description ing to be a US company, but all his registered
information is false. This can be judged easily
One buyer complained: "I have contacted a seller to buy by calling his company telephone number or by
100 Nokia 8800 mobile phones, and the price offered by searching the company name on related state
the supplier is 20USD/set. After paying 1000USD upfront, government websites.
the supplier refused to send the goods unless I agreed to • The fraudulent company will always find some
buy more products from him. He also threatened to raise excuses, such as their products are detained
his unit price." by a Customs Office for some reasons, and
then ask buyers to add more payment to re-
Analysis of this case lease the products. Be cautious and make your
own decision if your seller behaves in this way.
• The normal price for Nokia 8800 mobile • Western Union is a dangerous payment
phones on the market is around $250 USD. method, it can be picked up anywhere in the
Compared to the market price, the offer price is recipient's country, with no way of tracing the
unbelievably low. It is unreasonable and unre- person who picked it up. The criminal remains
alistic to expect to receive these types of goods anonymous. So it is a commonly used payment
at this price. method by fraudsters. Try to avoid adopting
• Be cautious. Some dishonest suppliers will of- this payment method and consider other more
fer extremely low prices to attract buyers look- secure payment methods like escrow.
ing for their first deal. After receiving payment,
they will raise their price or demand buyers
place a larger order. Whether it is a market-
ing ploy or a deliberate kind of fraud, it is not a
good business experience for buyers.
• Paying full payment upfront isn't a wise choice
when doing business. Always try to find a
secure payment method, such as an escrow
service, which protects your payment until your
items are received without any problem.
• Be aware of the market price of the products
you are looking for. You should reconsider the
deal if the price offered is 30% lower than the
current market price.
page 3 of 8
Copyright © 2007 by Alibaba.com Hong Kong Ltd. All rights reserved

4. Meeting Your Supplier for the First Time Analysis of this case

Case description • Any unsolicited business proposal, especially
large high-profit government projects from Af-
“I was almost robbed by one of the suppliers I contacted! rican countries should be carefully scrutinized.
I was contacting a supplier to buy iPods, and he invited Most of them are too good to be true. Check
me to visit his city and to meet him in person to pick up with your embassy in that country if there is
the iPods. It was a good suggestion since my city is not really such a government agency. Or consult
so far away from his city and I can drive to his factory di- with your bank, an attorney, or the police about
rectly to pick up the iPods. I drove to the appointed place the contract.
together with my friend, but the supplier didn't show up • Scammers will always tell lies to you, like “you
at all. After I came back, the supplier contacted me and need to register with some business agency to
requested to meet him in person. He must have been a export your products to their country” or some-
robber who hid and observed me in the appointed place thing else. In this case, they asked for a bid-
secretly and wanted to rob me if I was by myself.” ding fee, a lawyer’s fee and legal fees for this
contract. It is necessary to understand whether
Analysis of this case or not this is normal process for a business
contract in that country.
• Picking up products directly is a good way to • In fraud cases like these you are not dealing
avoid being defrauded by others. But if you with one scammer; you are dealing with an or-
don’t make a background check against your ganized group of scammers. Someone will pre-
business partner and then meet them in per- tend to be an attorney and guide you into their
son, you could potentially be in danger. trap step by step. Someone will pretend to be a
• Always investigate the company on search government official and give you confidence in
engines to find useful information. You can also this contract. They are a professional group of
get help and advice from other experienced scammers rather than individual scammers.
members in our forum. • Search the company name or government
• If you would like to meet your partner in per- agency via a search engine to find some useful
son, please arrange the meeting in a public information for your business
place and go there with a friend and do not
carry precious belongings with you.

6. False Shipping Website
5. The Contract Trap
Case description
Case description
“This company cheated me out of 2000 USD. Our terms
“This company offered us a government project for the
were USD 200 for shipping, USD 1,000 once the tracking
supply of wooden furniture to a Togo government agency.
info was verified and the balance of $1,460 paid once the
I even went to Togo to meet the principal and the people
package was received. This guy said that he was going
from this government department.
to use a local courier. He gave the website and track-
We had been tricked into paying the sum of USD 30,000
ing number for checking. When it showed "package now
plus other expenses to the value of almost USD 40,000.
on hold in London", I sent USD 1,000 as per the agree-
The money our company paid was supposed to pay for
ment. After that the company demanded the balance right
the bidding/lawyer fee and legal fee for the contract.
away. He said his superiors wanted payment in full due to
They said they would pay us the money for the furniture
something about an audit and not being allowed to give
immediately after the legal process, but to date, they
credit to people from the USA. He said I needed to send
have not dispatched the money for the said contract.”
at least $800 more and he'd take care of the rest. So I
scraped up $800 more and sent it. Then he came with a
new excuse. Something about a death in the family and
if I wanted my package I needed to go ahead and pay
the last $660! So basically, he's made up some fake
business and website and is using it to con people into
believing that their package is on the way. Then he puts
the package "on hold" and says "if you want your pack-
age, I'm going to need more money."



Analysis of this case 3. Fraudulent Emails
• Avoid using unknown shipping websites. It is 1. What is Fraudulent Email?
risky to allow unknown shipping websites to Email fraud comes in many different forms, many of
deliver your products. Before you accept this which we’ll layout below. However, simply put, email fraud
delivery method, do your own due diligence, is any activity that originates from an email that aims to
including searching the shipping website on separate you from your money through the use of lying
search engines to see what others have to and cheating. Scammers have many ways to get hold of
say. Or you can go to http://www.whois.com/ to your money. Most of these people are professional scam
search for registered information of this web- artists and they make thousands of dollars a year preying
site. Be wary if the domain of this website was on the good trust of naïve people. But by understanding
created less than three months ago. some of the telltale signs you can learn to easily identify
• When your supplier is making excuses about and prevent falling victim to email fraud.
the delivery (or lack thereof) of products and
asking for additional payment, it is generally a
2. One way scammers use email to gain your trust
trick.
• Search the company name on the forum or
search engine to find something useful to you. The scammer sends an email posing as a potential buyer.
Or you can contact your B2B website’s service The person requests a price list along with full details/
team. specifications and is eager to see samples. Everything
seems like a normal buyer inquiry. You send them the
7. Remain Vigilant information they request and await their reply. They then
request samples, at which time you inform them of the
Case description
price, etc. This is where the scam begins. They request
a Proforma Invoice, which is normal for business, but
We were scammed by one of our clients. We are export-
then again it's potentially dangerous in the hands of a
ing silk ties from China. This client is a Korean, but he
scammer. The scammer now has two choices to get your
is doing business in Spain. We exported to his Korean
money or products for free:
agency as per our contract. Then his Korean company
sent the products to Spain. It worked well for several • They inform you that they can only send you pay-
small order; we received quick payment after we sent out ment by Cheque or Credit Card. If you accept these
our products. Then this client wanted to place a larger or- terms, you are in big trouble as you have just been
der and requested to prolong the payment time. Consid- scammed. You might feel that you have no problems
ering our good cooperation from last order, we accepted because the cheque went through and the credit card
his suggestion. Then we never received our USD 7,000. was accepted, but you will have trouble in the future.
This client always gave me the excuse that he cannot Ninety nine percent of the time those cheques are
arrange payment because of a problem with his Korean forged from someone else's account and the credit
partner. It has been half a year now and still I haven't card numbers are stolen. When the owner finds out,
received the payment. they will recall the money and you lose your merchan-
dise costs, etc.
Analysis of this case
• When they receive your Proforma Invoice, it will
contain all the information the scammer needs to take
• This is an advanced fraud trick: the fraud- your identity, try to withdraw your funds, and purchase
ster will build confidence with the supplier to samples using your name and business reputation to
conduct fraudulent activities. He will place scam their next victim.
small orders first and transfer payment quickly
to convince the supplier he is a good partner. You will never hear from any of these people once they
Then he will place a large order and set a trap have scammed you. However, they might contact you in
for the supplier. Based on the good cooperation the future using a new identity and a new story or com-
of previous business, the supplier will fall into pany and try to defraud you again.
the trap easily.

• Always follow normal foreign trade processes
when doing business with your partner.



How to Spot Fraudulent Email Fake signatures

Fake email address As many fraudsters have received or have access to a
website’s emails, it is easy for them to copy signatures to
Most fraudulent email senders send emails with forged their fraudulent emails in order to seem more legitimate.
email addresses, which appear to be real email address-
es of an established B2B website (e.g. From Alibaba@ Other ways to determine a scam letter/inquiry
alibaba-inc.com or Alibaba Inc, or Alibaba Department).
The “From” field of an email can easily be altered – it is • The majority of these letters are from Nigeria
not a reliable indicator of the true origin of the email. and other African countries. Sometimes you will
receive these from other areas like the UK, but
Impersonal and general greetings the person will tell you they have fled from their
home country awaiting release from a Political
Most fraudulent emails start with a general greeting such Asylum camp.
as “Dear Member” or “Dear User” while emails from a • The person always gives you a Mobile Phone/
legitimate B2B website generally include your First name Satellite Phone number. They do this because
and Last name. it is easily thrown away or changed with a new
SIM card.
Stress urgency and threaten your user account • The person who sent you the inquiry says he
status wants to place a large volume order, but has
not asked to see a sample. Instead, he asks
Most fraudulent emails: that you send a Proforma invoice to him by
e-mail so that he can get approval by his gov-
• Claim your account was suspended or that
ernment. Do not fall for this! The scammer will
you need to verify your account by inputting
most likely copy or edit your Proforma invoice,
information about your member ID and pass-
and maybe even send it to other people. To be
word or credit card without any explanation of
safe, you should make it a policy to only send
the reasons.
Proforma invoices by fax.
• Try and scare you into “urgent action” by
threatening that your account will be suspend-
ed or closed if you do not follow their instruc- 4. Protecting your B2B account against fraudulent
tions and submit sensitive personal information emails
as soon as possible.
Fraud safety guidelines
• Include incorrect English and unprofessional
expressions. • Most sites never ask for your password or per-
• Make reference to a User Agreement in order sonal information in an email unless you con-
to seem more legitimate. tact them first about your account problems.
• Most company emails contain your personal
Use fake links or URL address
member ID at the bottom.
Most fraudulent emails have links included for you to
In The Future
update or submit information. Remember that these links
can be forged too! These emails usually contain HTML
• Avoid filling out forms in any email that asks for
links that look genuine but hide their actual URL address.
sensitive information.
Generally, if a B2B website requests information from
• Don’t click on suspicious links. Instead, type
you, they will always direct you back to their website. Do
URLs into your browser address bar.
not click links in any email that seems suspicious.
• Always ensure that you’re using a secure
website when submitting credit card or other
Use fake feedback forms
sensitive information via your Web browser.
• Regularly sign in and make sure that your ac-
Many fraudulent emails ask you to submit sensitive in-
count information is current. Try and check at
formation such as member ID and password, credit card
least once a month.
details, etc. by clicking a link or completing a form which
• Regularly check your bank, credit and debit
is very similar with those of your B2B website. Through
card statements to ensure that all transactions
this scam the perpetrators attempt to steal private and
are legitimate. If anything is suspicious, contact
confidential information from members.
your bank and all card issuers.



Remember, the best tools for fighting fraud are aware- 5. Websites for Fraud and Internet Security
ness, education and vigilance. Remain cautious when-
ever providing sensitive information, whether it is in
The following resources provide information to help en-
an email or any other form of communication sent to a
sure safe trading and protect your company.
potential trade partner.
Knowing Fraudulent Internet Transactions
4. Buying and Selling with Confidence and
Trust • Computer Crime and Intellectual Property Sec-
tion (CCIPS): Responsible for implementing
These safe trading tips are designed to help you identify the Computer Crime Initiative, a comprehen-
trustworthy trading partners as well as online and offline sive program designed to address the growing
resources that can help to make your Internet experience global computer crime problems at http://www.
safer and more secure. cybercrime.gov/
• Hoaxbusters: Get information about fraudulent
Knowing Your Trading Partner email chain letters, warnings, offers, pleas for
help, computer viruses and more at http://hoax-
Learning more about your trading partner has always busters.ciac.org/
been important when making trading decisions. In import • Interpol Technology Crime Information: In-
and export, there is little room for error in choosing a cludes a FAQ on information security, a check-
trustworthy supplier or relying on a credible buyer. When list of IT security, crime prevention methods,
using a B2B website, it’s best to find one that offers a and more at http://www.interpol.int/Public/Tech-
number of services to help you learn more about your nologyCrime/default.asp
trading partners: a B2B site that has already done the • Cybercrime on the Internet: Includes defini-
basic verification background checks on these suppliers tions of the most common types of cyber crime.
for you, including: From Jones Telecommunications & Multimedia
Encyclopedia at http://www.cybercrime.gov/
• Third-party Authentication and Verification by • Computer Crime Research Resources: In-
reputable credit agencies cludes a definition of computer crime. By Bruce
• Proof of valid business registration T. Fraser of Florida State University at http://
• On-site visits by their staff (if possible) www.crime-research.org/links/

Detecting, Avoiding and Reporting Fraud Reporting Fraud Cases

The vast majority of Internet introductions result in a • Web Police: Fighting all forms of Internet crime.
successful partnership that generates profit for both the A branch of InterGov.
buyer and seller. However, it is important that you protect • Internet Fraud Complaint Center (IFCC): Pro-
yourself from the rare cases of fraud that may occur due vides an avenue for fraud victims to file com-
to concealment of true identity on the Internet. Please plaints. A partnership between the FBI and the
keep up-to-date on fraud alerts helping you learn about National White Collar Crime Center.
new forms of online fraud that have been most recently
reported on the Internet. If you suspect fraud, you can Learning How to Protect Yourself Online
take action:
• Site Seeing On the Internet: A guide to help
• Contact your trading partner and arrange a you prepare for your voyage on the Internet
telephone call or face-to-face meeting. This and avoid fraud and deception en route. From
usually resolves the situation. Most buyers the U.S. Government at http://www.ftc.gov/bcp/
and sellers are honest and dependable and conline/pubs/online/sitesee.shtm
problems are often simply a matter of mis- • Internet Fraud Watch: News, updates and
understanding due to language and cultural advice from the National Fraud Information
differences. Center at http://www.fraud.org/internet/intinfo.
• If you suspect your potential partner of fraudu- • htm
lent activities, we recommend that you inform Internet ScamBusters: Information to help you
the relevant law enforcement authorities. You avoid getting ripped off by Internet scams,
should also report any suspected abuse by its fraud, misinformation and hype at http://www.
members to your B2B website, so that they can scambusters.org/
review the status of the member's account.



Credit Agencies List

You can contact the following credit companies to get
credit reports on the traders for which you need more
detailed information:

• Dun & Bradstreet (D&B): The world's lead-
ing provider of business information, enabling
business-to-business commerce for nearly 160
years.
• Asian Company Profiles Ltd (ACP): A subsid-
iary of the FBR Group of companies, market
leaders in providing Asian corporate informa-
tion and support to international businesses
operating in Asia.
• Huaxia Credit Ltd. (Now known as Huaxia
D&B) A leading provider of Chinese business
credit information and ratings.
• Xin Hua Xin (China)
• Coface Group: A complete seamless service
offering protection to enterprises.

Simple Procedure to Verify:

• Ask for the phone number and fax number, and
call the numbers they provide to confirm that they
are available on those numbers.
• Check with the business registrar in the country
of the supplier to ensure that the business is
legitimate and licensed.
• Pay for a sample before purchasing in bulk to be
sure that the product meets your expectations.
Or, ask for the freight collection terms of sending
the requested samples, especially if your product
is more expensive among other general goods.
• Ask for an inspection service to ensure the
products meet the required general standards
and that they match the quality of the samples
provided.
• Make sure you do not pay for products in cash.
Use L/C or D/P for payment instead.
• If the trader keeps on talking about payment or
other sensitive issues rather than pursuing the
regular business process, caution is advised in
the transaction.
• In addition, you are suggested to take the neces-
sary legal measures in the event of any trade
dispute or perpetration.



GET YOUR GUIDE TO SAFE TRADING
on Alibaba.com

■ Search Buyer Reviews

■ Check Membership Type

■ Verify Companies Online

■ Pay Securely Onlin

■ Question? Ask It!

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