What is a payment loophole?

Recently, a shipment of pepper, cinnamon, cashew and anise worth more than half a million USD exported to Dubai, the United Arab Emirates (UAE) was suspected of fraud. Up to now, 4 consignments of pepper, cinnamon and cashew have been taken out of the port by the buyer, while the seller, who is a Vietnamese enterprise, has not yet received payment. Another shipment of star anise is kept at the port in Dubai.

Agricultural product shipments are said to be at risk of being scammed because they are easy to split and difficult to trace (Artwork)

In recent days, the Vietnamese Embassy and the Vietnam Trade Office in the UAE together with the Dubai authorities have actively stepped in to soon ensure the interests of Vietnamese exporters.

Sharing about this incident, Mr. Tran Thanh Hai - Deputy Director of the Import-Export Department - Ministry of Industry and Trade said that in international transactions, banks play a very important role. It is not only an agency that makes payments and transfers between buyers and sellers, but also acts as a guarantee for more reliable payments and transactions. One of the methods that businesses often use through banks is D/P (exchange documents for payment).

This is also the method that businesses in the case of the last 5 agricultural products have applied. In theory, this is a fairly reliable form of payment. Through banks in Vietnam and partner banks with enough trust, we can recover money when exporting.

However, in the case of 5 shipments exported to Dubai, when the Vietnamese bank transferred the documents to a foreign country, it was lost and fell into the hands of the buyer, while the buyer had not paid the bank in Dubai. . This is the key point that leads to the buyer having received 4 consignments, and 1 consignment being held at the port, they have not yet received. Currently, the buyer's bank is also in the process of reviewing to find out why there is an unpaid situation but the documents are in the hands of the buyer.

Regarding the ability to claim money from partners, Mr. Tran Thanh Hai shared, businesses will only be able to claim money from the bank, and the bank is responsible for asking for money from the buyer. However, businesses can only claim money from the bank when there is proof that we have delivered the documents to the bank.

“One point here, like the case of 76 containers of cashews being scammed in Italy last year, is that for some reason, the document delivery unit did not deliver the correct set of documents to the responsible person on the buyer's bank. In this case, the file is handed over to the bank's security staff. So, is that employee the person authorized to receive that dossier? This is a loophole in the process that the parties, including the bank and the delivery unit, have to review?” – Mr. Tran Thanh Hai explained.

What solutions support Vietnamese businesses?

In fact, as international trade grows, disputes often arise. These are civil transactions and disputes. But it is worth noting that in the past time, there has been the participation of state agencies such as diplomatic agencies, Vietnamese trade agencies abroad... in working with the port authority and the Ministry of Foreign Affairs in on your side to try to keep the 5th shipment. Then work with the shipping line to recover or sell it to another buyer.

This incident continues to pose a requirement to verify the credibility and reputation of the partner. This is not easy because the distance between countries is very long. But now, there are a number of solutions businesses are using. Mr. Tran Thanh Hai shared, the first is through credit rating organizations or business consulting organizations. They have a large database of data available, updated regularly to be able to assess the status of businesses. There are many such organizations, but businesses must accept to pay fees.

Secondly , through organizations, industry associations, VCCI... is a place for the business community to share experiences.

The third is the Vietnamese diplomatic missions abroad.

In addition, one way businesses can limit risks is through logistics service businesses. For example, when an exporter uses the services of a logistics company in Vietnam and has a partner in Dubai, they will be responsible for delivering the documents to the logistics partner in Dubai, not to the buyer. That partner will do the task of handing it back to the buyer. In that case, even if the buyer has a set of documents, because the documents do not bear their name, they cannot get the goods. This is an effective process that businesses can implement within their reach.

“In addition, businesses themselves must always actively raise awareness through working with law firms or lawyers throughout the business process, not just when a dispute occurs. They can review the contracts, making sure the terms in them are the most reliable, not giving them a disadvantage. Or when a dispute occurs, a lawyer on behalf of the enterprise can settle the dispute, the case can be resolved better " - Mr. Tran Thanh Hai noted.

Previously, talking to a reporter from the Industry and Trade Newspaper, Mr. Truong Xuan Trung - First Secretary, in charge of the Vietnam Trade Office in the UAE, concurrently Catalyst said, in order to ensure the safety of Vietnamese export businesses, Entering the UAE market, the Vietnam Trade Office in the UAE recommends that Vietnamese exporters should note a few things such as the need to be cautious and carefully negotiate payment terms to ensure the safest. Besides, it is necessary to research and verify the business before signing the contract.

“Especially, businesses need to limit the use of postpaid T/T (Telegraphic Transfer) payment methods or pledge checks (the check has no value because there is no money in the account). These are very risky forms of payment because the buyer receives the goods and then does not pay, or the buyer does not receive the goods, there will be a cost to bring the goods back. If it is a fresh product, the business will have to bear more costs," noted Mr. Truong Xuan Trung.