GUIDELINES FOR BUSINESS OPERATIONS DURING COVID - 19 FOR FOREIGN TRADERS IN VIETNAM
Currently, the Covid-19 epidemic is still complicated in all countries around the world. As a result, demand for goods related to medical protective equipment such as masks, gloves, protective gear, etc. is increasing and such equipment is becoming scarce as well. Foreign traders have been looking for factories around the world that can supply quality medical protective equipment for export. One of the potential sources that they have paid attention to is manufacturing factories in Vietnam.
However, due to policies of the Vietnamese Government with reference to long-term quarantine and restricting travel activities among other countries, commercial activities have been facing several risks such as breach of delivery obligations and non-refundable deposit, or commercial fraud.
The appropriate authorities in the country and foreign traders constantly warn about the fraudulent phenomenon in international trade transactions that many Vietnamese enterprises have experienced. In particular, in the severe impact of the Covid 19 pandemic, fraud in international trade transactions tends to increase with sophisticated techniques that are difficult to detect with a variety of methods such as delivery without payment; forgery, even bank documents, arrange people with the purpose of obtaining export documents; using hackers to infiltrate the email addresses of two parties in a transaction, monitor the negotiation process and when the buyer is about to transfer money to purchase goods, "hack" the email account or falsify an email account to send account information, when the buyer transfers money to the fraudulent account, the subject will immediately withdraw the money and disappear.
Recently, we have found that several enterprises have profited from various types of manufacturing and trading intransparency in some medical protective equipment. As a result, the quality is not guaranteed, it not only poses a significant danger of disease transmission but also has a direct impact on the health of the customers.
For example, Group A Joint Stock Company (Company A) has not met the conditions to produce and circulate medical gloves and medical masks to the market. Company A located at City H. has two processing factories in provinces B and H. Ms. H – Vice General Director of Company A – answered the interview of reporters at the headquarter that currently, Company A cannot afford to build a factory; therefore, such factories are rent from other units. However, the company is still active in selling medical gloves and medical masks on the market.
From the above case, it is noticeable that contracting with unlicensed companies for production and business poses very high risks for foreign traders. In order to minimize risks for foreign traders, DHT Law Firm would like to give advice as follows:
1. Due Diligence – DD
Traders need to carry out appraisal activities carefully, including the appraisal of partners' commercial activities, production capacity, and legal due diligence:
- Appraisal of activities;
- Evaluation of production capacity;
- Legal due diligence (legal due diligence is mainly focused on factory operation license, eligibility for export quality, eligibility for manufacturing products).
In addition, to ensure that Vietnamese traders shall properly perform their contractual obligations as well as compensate for damage, foreign traders may further appraise the following respects: an appraisal of capital, financial assets, loans, annual transaction contracts,...
2. Contact local banks to consult the company's transaction history
The local banks can be contacted to certify the transaction history to see if the contractors have transacted with any foreign merchants and properly performed their contractual obligations. In addition, the enterprises can be requested to directly provide this document for uncomplicated consultation before contracting.
3. Hire a local law firm or an audit to seek assistant on appraising and giving advice
This is one of the convenient ways for traders to authorize law firms or services to check and evaluate whether that contracting business is capable and eligible to enter into this type of contract or not. And in the host country, these businesses and services on behalf of foreign traders shall monitor and supervise the completion of the work of the businesses they have contracted with.
4. Buy insurance for the transaction
Commercial risks are present in every transaction. Therefore, the purchase of insurance for the transaction is considered as a measure to prevent financial loss, in case one party fails to perform the obligations, the insurance buyer will receive compensation from insurance.
Above is the advice of DHT Law Firm for foreign traders to minimize risks in business and commercial activities during the Covid-19 pandemic. If you need detailed advice, please contact us for professional and effective services.
