Everyoneforeign tradePractitioners, today we will discuss some cases about human nature should not be tested. These lessons come from over a decade of practical experience in foreign trade agency and hold deep real-world significance. If you think establishing a cooperative relationship means you can rest easy, these cases are worth your careful consideration. When cooperation goes smoothly, the relationship is close, even to the point of sharing meals and discussing business daily. However, once the relationship sours, the situation often deteriorates rapidly, leading to a series of complex legal and financial issues.

Case 1: Factory misappropriates payment to buy property, client loses major order

One client had collaborated with a factory for three to four years, with a high level of mutual trust. Suddenly, a Japanese buyer placed a large order worth $700,000. Logically, this was a significant business opportunity, but the factory withheld half the payment and refused to ship the goods because they had misappropriated over 2 million RMB to purchase property. This withholding lasted two years. The client eventually resolved the issue through legal means, recovering over 2 million RMB in payment. However, during those two years, the factorys property had appreciated by 2 million RMB. While the client suffered no direct financial loss, they lost the important buyer and endured two exhausting years of litigation.

Case 2: Taiwanese businessman flees, leaving suppliers collectively harmed

Heres another story about a Taiwanese businessman. This client had collaborated with suppliers for six years, and the relationship seemed very stable. He told suppliers that to maintain relationships with foreign buyers, he adopted a credit sales model, leading to cash flow issues, and asked suppliers to ship goods first. Initially, everyone agreed based on years of trust. However, over time, the credit debt kept growing, eventually accumulating to 4 million RMB, and the client fled back to Taiwan with the money. He had planned this, using the U.S.-China trade war as an excuse to delay payments until he disappeared entirely. The factory lease and equipment rental expired, and even the freight forwarding companyTrailerwas owed over 100,000 RMB and 20,000 RMB, respectively. Personally, I was relatively lucky, only being owed 700,000 RMB in VAT invoice payments.

Case 3: The high cost of compromising on quality

Finally, heres a case where a client deceived a foreign buyer. This client was in the textile business and received an order for bed linen sets. The buyer provided detailed technical requirements, including printing templates, Pantone color codes, and specifically requested twill fabric. However, to cut costs, the client secretly asked the factory to use plain weave fabric instead. Those familiar with the textile industry know that plain and twill fabrics differ significantly in texture and color. The intended sophisticated dark green ended up looking like a rustic green reminiscent of traditional northeastern Chinese quilts, completely failing the buyers expectations. The foreign buyer harshly criticized the client in our companys meeting room, then abandoned the order outright, even forfeiting the deposit. This left the client and factory arguing over compensation for the remaining payment and 300,000 RMB worth of custom bed linen sets (2.2m × 2.4m sizes are very difficult to sell in the domestic market).

Do not test human nature—ensure interests are aligned

In summary, foreign trade is like walking a tightrope. While pursuing reasonable profits, it is essential to ensure full payment to sleep soundly. If this isnt possible, at least keep control of the bill of lading, especially avoiding remote or obscure destination ports—if market conditions worsen and you offer credit terms, buyers may not hesitate to switch suppliers, weighing the cost of switching against the amount owed.

For payment terms, the deposit ratio can be flexible, but it must exist to increase the buyers cost of abandoning the goods and align interests. If the collaboration is new and trust hasnt been established, consider usingLetter of Credit(LC). Choose reputable large banks based on mutual recognition of each partys strength. The buyer should have financial management capabilities, fixed assets, or even opt for 100% cash deposits with the bank, while the seller has the capacity to ship goods first and submit documents to the bank later. Both parties should not be novices in foreign trade, as LC transactions can effectively mitigate risks.

In foreign trade, the most important thing is to have peace of mind, ensuring you wont suddenly find yourself in trouble one day. Good cooperative relationships are worth cherishing, but vigilance must always be maintained. After all, our goal is not only commercial success but also securing a stable life for ourselves and our families.