How to Avoid Being a Victim of Shipping and Freight Fraud

How to Avoid Being a Victim of Shipping and Freight Fraud

Fraught in transportation is on the rise again, and the culprits are much craftier year over year. As a result, many freight forwarders are falling victim to fraudulent, duped, intermediaries, taken for a ride by shippers and made them pay double. As one of the top companies in logistics, we are always on the cutting edge of trends, keeping a watchful eye on fraud and ways to prevent it when our customers ship freight. We’ve investigated with our partners and made a list of how we can help you prevent being a victim against shipping and freight fraud. Take time to read these following tips we’ve covered just for you.

 Know your trading terms

This is the basic. You have to read and understand Incoterms. You may be new or not in the industry reading Incoterms is a must because it helps you identify the responsibilities of the seller and the buyer in the transaction at different points in the shipping journey; it works better and efficient in modes of transportation.

A large volume of fraud, duping and mistakes mostly happen to those buyers and sellers who doesn’t understand the Incoterms that has to be used for their particular transaction. Take time to read these 11 incoterms below that the Back Office Offshoring Solutions and  Back Office Offshoring Services have covered and summarized based on the mode of transport.

Incoterms for any mode of transport

 

Ex Works (EXW)

The seller fulfills their obligations by having the goods available for the buyers to pick up at their premises. Buyer will bear all the risks and costs starting when picking up the products at the seller’s location until the products are delivered to their location. Seller is not obligated to load the goods or clear them for export.

Free Carrier (FCA)

The seller delivers the goods export cleared to the carrier stipulated by the buyer or another party authorized to pick up the goods at the seller’s premises. Free Carrier Incoterms means the buyer assumes that all risks and costs associated with the delivery of goods to the final destination including transportation after delivery to carrier and any customs fees import the product into a foreign country.

Carriage Paid to (CPT)

Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller in the agreed place of shipment. Seller will be responsible for the transportation costs associated with delivering goods to the agreed place of destination but is not responsible for procuring insurance.

Carriage and Insurance Paid to (CIP)

Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller in the agreed place of shipment which is similar to the Carriage Paid To. The difference here is we are talking about insurance, but still, the seller is responsible for the transportation costs with delivering goods but has an addition of procuring minimum insurance coverage to the place of destination.

Delivered at Terminal (DAT)

Seller clears the goods for export and bears all the risks and costs associated with the delivering goods and unload them at the terminal at the agreed port or place of destination. While buyer will be responsible for all costs and risks from this point forward including clearing the goods for import at the agreed country of destination.

Delivered at Place (DAP)

Seller clears the goods for export and will bear all risks and costs associated with delivering the goods to the agreed place of destination unloaded. Delivered at Place Incoterms means the buyer is the one responsible for all costs and risks associated with unloading the goods and clearing customs to import the goods into the agreed country of destination.

Delivered Duty Paid (DDP)

Delivered Duty Paid Incoterms means the seller bears all risks and costs associated with delivering the goods to the agreed place of destination and is ready for unloading and cleared for import.

Incoterms for Sea and Inland Waterway Transport

 

Free Alongside Ship (FAS)

Seller is the one that clears the goods for export and delivers them when they are placed alongside the vessel at the agreed port of shipment. Buyer will be the one to assume all risks and costs for goods from this point forward.

Free on Board (FOB)

Seller will clear the goods for export and delivers them when they are on board the vessel at the agreed port of shipment. Buyer still assumes all risks and costs for goods from this moment forward.

Cost and Freight (CFR)

Seller will clear the goods for export and delivers them when they are on board the vessel at the port of shipment. Seller is the one that bears the cost of freight to the agreed port of destination. Buyer assumes all risks from the time goods that have been delivered on board the vessel at the port of shipment.

Cost, Insurance, and Freight (CIF)

Seller clears the goods for export and delivers them when it’s ready. Seller bears the cost of freight and insurance to the agreed port of destination. Whereas the buyer is responsible for all costs associated with unloading the goods at the named port of destination and clearing goods for import. Risk passes from seller to buyer once the goods are on board the vessel at the port of shipment.

Trust

We all know trust is earned. For entrepreneurs, a lack of trust is your big expense. It takes years to develop the trust of your business partner, but only moments to lose. Without trust, transactions are impossible to occur, influence is destroyed, leaders can lose teams and salespeople can lose sales. Therefore, whenever you are doing business with a certain company for the first time, you should take several safeguards. For example, if you are selling to a first time buyer oversees and you both agreed on Cash On Delivery don’t be too nice and issue a Seaway Bill or do a Telex Release before you get your money.

In such cases, it is best to issue Original Bills of Lading and hold on to them until you receive the money in your account. Don’t send them the Original Bills of Lading based on a proof of payment. Many times the proof of payment turns out to be a fraud. Just be patient and be wise and wait until your money is in your account.

Ensure your money and seek the assistance of banks, there are instruments like Letter of Credit that can assist you with this case.

Trust is the natural results of thousands of tiny, actions, words, thoughts, and intentions. But once the trust has been developed and has been earned through these natural results, you can use your discretion.

Verify and Distinguish

Before making a transaction, make sure to verify whether the company and person that you are selling to or buying from is genuine and actually a legal entity. It’s much better to look carefully and thoroughly to the person and company as a precaution. These days there are many pretentious middlemen who pretend to be the supplier, manufacturer, or even seller and you will find out later longer that their company doesn’t really exist. In order to avoid putting your business at stake especially if the business is new, we, the Offshore Back Office Solutions and Back Office Offshoring Services, strongly suggest that you should pay a visit first to the company at the origin and convince yourself that the seller or the buyer and their product is genuine.

Choose the right partner

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If you are an exporter or importer, work with a freight forwarder or a customs broker that is easy to establish credibility. Be careful in finding the right partner in forwarding. There are a lot of times that clients took a save few monies but end up choosing run-of-the-mill agents and end up actually being blackmailed by them which makes them pay more and still don’t get their cargo in time.

In order to avoid such cases, it is much better for you as a forwarder, to look for similar forwarding associations in the destination country and choose the right partners. You can ask for a recommendation from Customs or Port authorities in your area. They are always glad to be of help.

 Learn

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If you are in the business of exporting or trading don’t stop learning. There are a lot of things that you need to know, you have to know, and you want to know how the whole process works. Don’t be satisfied in knowing only what happens in your area, instead, know the whole process.

This way, if there’s something untoward happens, you know how to handle it without panic, and you will know whom to approach and speak to. And those are your agent, the shipping line, Port, Chamber of Commerce, if possible Customs to understand the various roles and how each entity fits within the whole chain.

Do not settle from what you already know. Keep on learning everything about the process in forwarding by reading books, blogs, and website to understand more.

Know the costs

Whether you are selling and buying on FOB, CIF, CPT, DAP mode of transport it is important for you to know the costs at origin and destination first. There are a large number of queries that were received pertain to such issues whereas the seller expects the buyer to pay for this activity with a certain amount and the buyer is rejecting or vice versa.