THE MUST DOS IN DOING BUSINESS INTERNATIONALLY: REALITIES OF CHINA-CHILE TRADE TRANSACTIONS

One of the major setbacks in doing business is the risk of being defrauded. Most often than not, fraud cases are caused by unguided dealings and lack of extensive research of potential business partners, especially in doing transactions internationally.

Being the only Chinese law firm in Santiago, Chile, fraud cases comprised most of the cases that our law firm handled. Sadly, Chinese businessmen – both big and small – are being made victims of their so-called partners from Chile.

One of our cases involves a big Chinese company ABC, importing Durvillaea Antarctica from a Chilean company XYZ. The need for the products is urgent that ABC entered into a Sale Contract involving a huge quantity of products and made payments right away to XYZ. However, not a single piece of product arrived in China and XYZ disappeared and in no way can be contacted.

 In doing business, the first thing to do is to research. And this does not include solely researching the market, but as well as researching the background of the potential business partner. It is important to investigate the background of the company and its owner firstly. Verification of the identity of a person introducing himself as the owner/representative/manager of a Company is a must. He needs to prove that he has the authority to enter into Contract. It would also be better if parties involved in the signing of the Contract are juridical persons (companies) for the reason that even though a person authorized to represent the company is already gone, the company can still be held responsible to comply with the obligations of the Contract.

In the case given above, as we were in the process of filing a case against Chilean Company XYZ, records show more than ten (10) fraud cases filed against it and its owner for the last five years. Another fraud case could have been avoided if this information has been known prior to the signing of the contract. In the end, Chinese Company ABC has no other option but to get through the arduous judicial process of Chile.

The similar thing happened to Chinese AAA who entered into a Purchase Contract with Chilean BBB involving a purchase of a large quantity of chicken feet. Chilean BBB is represented by Person XXX, who identified himself as the Company’s Manager. A Contract had been executed and initial payments had been made, only to realize later that the entire transaction is a fraud. Person XXX can nowhere be found. Worse, Chilean BBB denied their relationship with Person XXX making the signed Purchase Contract null and void – Person XXX having no authority to sign the said Contract on behalf of Chilean BBB.

In this case, it is also important to pay attention to the comments and warnings posted by other people or information that appeared on official websites. They are posted there for a reason. A quick look into the website of Chilean BBB, you will be welcomed by a dialog box “Warning! Take care of persons introducing as members of our company…” If this could have been considered before signing the contract, another fraud case could have been avoided.

And lastly, the mode of payment gives hint as to what kind of person or company you are doing the transaction with. If a personal bank account is given for you to deposit the payment, it is a big no-no. More so, the demand for a bigger initial payment.

In both cases illustrated above, initial payments asked tantamount to 80% of the total contract value. Fraud case could have been evaded if the conditions of payments are made in a way that is fair and could compel both parties to comply with the obligations of the contract.

In LAWSHI, the protection of our clients is our main priority. Their success in their business transactions here in Chile is also our success. As such, we spend time and effort in doing background research and study just to make sure that there will be a win-win situation between our clients and their potential business partners. We aimed nothing but the best for both parties.

Need to make business deals here in Chile? Contact us for a safe and honest business transaction.

I am the Marketing Manager of LAWSHI, the first law firm in Chile headed by a Chinese lawyer and is also the pioneer of Litigation Funding in Latin America.