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Loss of Goods

Loss of goods occurs either during the course of shipping from damage or theft or as part of scam.

Managing the loss of goods during the course of shipping can best be addressed with the advice of a freight forwarder or cargo insurance company. Loss of goods due to theft or damage can be managed to some degree through the choice of the port of entry or choice of shipping method. Some ports are more secure than others and are better equipped. If the goods in question require special handling then it is important that the chosen port is equipped to handle goods. For example perishable goods require a port where they can be handled quickly and where sufficient cold storage is available. If goods are fragile or of high value, then air freight may be preferable.

It is important to be aware of when ownership passes from the buyer to the seller and thus risk of loss passes. This is typically defined within the INCOTERMS. Not all losses can be prevented so it is important that sufficient cargo insurance be purchased.

Goods can also be lost as a result of a scam. It is important to be able to recognizing a scam. Many scams contain similar features. A scam may contain some or all of these features or other elements as well.

  • A company is contacted by an unknown foreign buyer. The contact may be unexpected or there may be no obvious reason for the contact.
  • The buyer seems to be unfamiliar with the goods. Scammers often have no particular need for the goods but see an opportunity for to easily obtain the goods or they can easily dispose of the goods.
  • The buyer orders an extraordinary quantity of goods.
  • The buyer is willing to pay full retail price especially when less expensive alternative sources are available.
  • The buyer wants the goods shipped immediately, often by expressed freight, and is not concerned about the cost.
  • The buyer offers to pay in advanced by credit card or cashier’s or certified check. None of these are secure methods of payment. The burden is on the seller to verify the validity of these methods of payment. It can take two weeks or longer for stolen or fraudulent credit card numbers to be registered in the banking system. U.S. banks will give you immediate credit for checks that are deposited. This is called a provisional credit and does not mean the check is valid. The provisional credit is subject to being revoked if the check does not clear. It can take two weeks or more for a check to be determined as fraudulent.

Many scams originate from West Africa or some part of the Pacific Rim.

Remedy: There is no adequate method to recover goods lost in the course of an international scam.

Prevention: The key to avoiding scams is to conduct due diligence on the buyer and use a secure method of payment with unfamiliar buyers.

Due Diligence: There are various approaches to conducting due diligence.

  • Conducting a credit check through a bank,
  • Conducting a full background check, or
  • Having the buyer provide references to other U.S. firms and verifying their references

Secure Method of Payment: When dealing with unfamiliar buyers even if due diligence has been conducted a secure method of payment should also be used. Irrevocable confirmed letter of credit is one option or electronic funds transfer is another. For a more complete discussion of these and other methods of payment view the Finance Section of this webpage.