Vietnamese enterprises have reported huge lost revenues due to global trade uncertainty, heard a conference of the Vietnam Association of Seafood Exporters and Producers (VASEP) in HCMC over the weekend.

Around three weeks ago, VASEP wrote to its member companies warning them against seafood trade fraud.  A number of businesses had been cheated with losses amounting to hundreds of thousands of U.S. dollars due to their transactions with Echopack INC headquartered in Quebec, Canada.

Echopack reportedly colluded with New Zealand’s General Equity to take delivery of goods but did not make payments. Echopack intends to fool Vietnamese firms as it used a signature, which is different from the one in the contract, to open a letter of credit (L/C) at General Equity.

This L/C requires the signatures in the L/C and the payment request documents to be the same. General Equity did know that Echopark’s documents are inappropriate but allowed the latter to get the bill of lading so as to take delivery. 

Nguyen Hoai Nam, deputy general secretary of VASEP, said this is not the first time the association has alerted its member enterprises. Local seafood exporters have suffered from late payments and in certain cases, foreign importers have infringed international law.

Given Vietnam’s deeper international integration, trade fraud would rise. Therefore, local companies should practice prudence in international trade transactions.

Experts at the conference on global trade risks and collection of overseas receivables said the biggest risk to Vietnamese firms is credit. Many domestic businesses have had difficulty collecting debts from foreign partners or have even been swindled.  

Notably, many of them have racked up huge losses and are on the verge of bankruptcy. 

Keith Stillings, chief executive officer (CEO) of the U.S.’s Assurance Global, told the conference that given pressure from expansion and sales boost, exporters try to look for new customers even though they know little about them. This is a source of risk for local firms.

In 2015 alone, Vietnamese companies lost about US$8 billion due to trade fraud or irrecoverable debts.

Lawyer Ngo Khac Le, an arbitrator at the Vietnam International Arbitration Centre, said major risks for local firms are unclear contract terms, a lack of information about partners and poor awareness.  

Le said to avoid trade fraud local companies should discuss directly with their partners or hold talks with business associations, consulting firms, commercial sections or embassies to select honest partners. They should be cautious when striking the first deal with a foreign business. Abnormal pricing is also a sign of trade fraud as dishonest foreign companies use this method to cheat local firms after Vietnam has signed a series of free trade agreements (FTA).

To make the most of FTAs, local businesses should master international practices and know their positions in the integration process. They should draw up plans to protect themselves from trade fraud and debt, gather information about their foreign partners and read contract terms carefully, invoices and export documentation.

SGT