Critical Risks in Payment Against Documents (PAD) for Fresh Fruits Shipped by Air Cargo
Critical Risks in Payment Against Documents (PAD) for Fresh Fruits Shipped by Air Cargo

In recent years, fraudulent schemes targeting fresh fruit exporters have intensified, particularly those using Payment Against Documents (PAD) with air cargo shipments. Understanding these schemes and implementing preventative strategies can help protect your business from significant losses.

 

Understanding the PAD Fraud Risk

 

In PAD transactions, goods are shipped, and payment is due upon the buyer's presentation of shipping documents—typically handled through the banking system. However, with air cargo’s rapid turnaround, goods often reach the buyer before payment can be fully verified, creating a window for fraudulent activity.

 

Fraudsters exploit this delay through tactics such as:

 

·         Fake Payment Slips: Scammers may send realistic-looking payment slips to “confirm” the transaction. These slips often include bank logos, transaction IDs, and signatures, making them appear legitimate and giving sellers a false sense of security.

 

·         Manipulated Bank Transfers: Some fraudsters initiate actual bank transfers but withdraw or cancel them shortly after. This creates a temporary appearance of payment in the banking system, prompting the seller to ship goods without realizing the payment will not be finalized.

 

Real-World Case of Fresh Fruit PAD Fraud

 

Consider a recent case where an African fruit exporter agreed to a PAD transaction with a new client in the Middle East for a large shipment of mangoes. The buyer provided a convincing payment confirmation that included official bank logos and details typical of a genuine transfer notice. Reassured, the exporter shipped the mangoes via air, which arrived within two days. Only after attempting to withdraw funds did the exporter discover that no payment had been made. The buyer could not be contacted, and the exporter not only lost the shipment’s value but also incurred unexpected freight and handling costs.

 

Key Risks in PAD Transactions for Air Cargo Shipments of Fresh Fruits

 

1. Fake or Cancelled Bank Transfers: Scammers exploit the rapid shipping time, creating fake or temporarily initiated transfers that deceive sellers into releasing goods before confirming payment.

 

2. Customs Clearance Speed: Air cargo for perishable goods often clears customs quickly, making it challenging for sellers to retrieve goods once they’re released to the buyer.

 

3. Difficulty in Retrieving Goods: Once the goods are in the buyer’s hands, recovery is nearly impossible and usually requires costly legal proceedings.

 

Recommendations to Prevent PAD Scams in Air Cargo Transactions

 

1. Require an Irrevocable, Confirmed Letter of Credit (LC): This payment method is far more secure than PAD, especially with new or unverified clients. An irrevocable, confirmed LC ensures payment upon verification of shipping documents and offers protection if the buyer defaults.

 

2. Request Full or Partial Payment in Advance: Requiring at least 50% upfront establishes the buyer’s commitment and credibility. While full prepayment may be unusual with established clients, it’s prudent for new clients or regions with elevated PAD fraud risks.

 

3. Utilize Trusted Escrow Services: Escrow services act as neutral third parties, holding funds until both parties meet their obligations. This ensures payment verification before goods are released.

 

4. Partner with Trade Insurers: Trade insurance can help cover potential losses from non-payment or fraud. Specialized policies for agrifood exporters can protect against unpaid transactions and support dispute resolution if issues arise.

 

5. Conduct Comprehensive Due Diligence on New Clients: Always verify new clients by requesting trade references, validating their business registration, and confirming bank details with the bank directly. Red flags include reluctance to provide references, delays in payment discussions, or urgent shipment requests without prior transactions.

 

6. Independently Verify Payment Before Shipping: Confirm directly with your bank that payment has cleared before shipping, especially for high-value, time-sensitive shipments like fresh fruits. Avoid relying solely on buyer-provided documents, insist on verification from your bank or an independent source.

 

 

By staying vigilant and choosing secure payment methods over PAD, exporters can reduce the risk of fraud, safeguard their assets, and avoid costly disputes. Protecting your business begins with thorough due diligence and a strong stance on verified payments.

Adalidda Southeast Asia

 

Mrs. Susa Taing
General Manager

 

65 C Street 101

Phnom-Penh

Cambodia

WhatsApp/Telegram: +85569247974

Email: info@adalidda.com

 

 

Adalidda India

 

Mr. Rajaram Gulothungan

General Manager

 

WhatsApp/Telegram: +91 94451 04542

Email: gulothungan@adalidda.com

 

Websites

 

English https://adalidda.com/en

Français https://adalidda.com/fr

Español https://adalidda.com/es

Deutsch https://adalidda.com/de

Italiano https://adalidda.com/it

Português brasileiro https://adalidda.com/pt

简体中文 https://adalidda.com/zh

عربي https://adalidda.com/ar

हिन्दी  https://adalidda.com/hi

தமிழ் https://adalidda.com/ta

Polski https://adalidda.com/pl

Bahasa Indonesia https://adalidda.com/id

 

 

Social media

 

Facebook https://www.facebook.com/adaliddaen

 

LinkedIn https://www.linkedin.com/company/adalidda

 

X @adalidda https://twitter.com/adalidda

 

YouTube https://www.youtube.com/@AdaliddaBusinessTV

 

Instagram https://www.instagram.com/adalidda

 

Threads https://www.threads.net/@adalidda

 

BlueSky @adalidda.bsky.social https://bsky.app/profile/adalidda.bsky.social

 

Adalidda is a premier global branding, marketing, and sales agency specializing in agricultural products. Our mission is to connect high-quality Asian and African products with international markets, fostering sustainable growth and economic development across Asia and Africa.

Kosona Chriv
Kosona Chriv - 5 November 2024
ChatGPT-translated text
ChatGPT-translated text
Fresh mangoes ready for shipping by air cargo (credit: Adalidda / Public Domain)
Fresh mangoes ready for shipping by air cargo (credit: Adalidda / Public Domain)
Fresh bananas ready for shipping by air cargo (credit: Adalidda / Public Domain)
Fresh bananas ready for shipping by air cargo (credit: Adalidda / Public Domain)
A fake payment receipt sent to seller as proof of payment (credit: Adalidda / Public Domain)
A fake payment receipt sent to seller as proof of payment (credit: Adalidda / Public Domain)

Contact Form

    Useful Information
    Useful Information
    Technologies Used

    Frontend Technologies

    NextJS 15

    Backend Technologies

    MongoDB, Redis

    Loading animation is provided by

    EnglishFrançaisEspañolDeutschItalianoPolskiBahasa IndonesiaPortuguês brasileiro简体中文عربيहिन्दीதமிழ்

    LinkedIn

    Facebook

    BlueSky

    YouTube

    WhatsApp

    Instagram

    Threads

    © 2024 Adalidda
    Version 1.6.1-10 - December 2024
    Powered byAdalidda All rights reserved.