Scam in cashew nut export to Italy: MARD proposes solutions to the Government

Cashew nut containers are on the way to Italy

On March 17, the Ministry of Agriculture and Rural Development forwarded a report on the Italy cashew nut scam to the Governmental Office.

Five cashew kernel processing and exporting firms signed contracts with some Italian clients to ship 74 containers of cashew kernels to the foreign nation via a broker – Ho Chi Minh City-based Kim Hanh Viet One Member Co. Vietnamese firms do business using the D/P – Documents against Payment method. 

Vietnamese enterprises receive a series of documents from the shipping company after completing export procedures. After that, the documents are sent to the seller's bank in Vietnam. This set of documentation will be delivered by the Vietnamese bank to the importer's bank in Europe. Payment will be sent to the importing bank and the importer will get the set of documents. The buyer can receive the products at the port with this set of documents, and the importing bank will send money to the Vietnamese bank.

However, problems happen when the original documents from Vietnam transported to Europe are "lost." Vietnamese firms quickly withdrew the original documents after identifying signs of fraud. According to the report, by March 15, 2022, documents of 36 out of 74 containers worth VND 162 billion are lost. Eight containers have already arrived at Italy's Genoa port; the other containers will arrive in Italian ports between late March and early April 2022.

For these 36 consignments (about 30 out-of-control shipments according to the most recent information from the Vietnam Trade Office in Italy), the containers were no longer under the authority of the Vietnamese enterprise. International law requires shipping lines to deliver products to recipients when they produce the necessary documents (original documents that Vietnamese enterprises are missing) and pay the delivery price.

Businesses are searching for partners in Europe to resale containers that have had their original documents revoked in order to mitigate the damage.

Container rescue

At the moment, the David Gallasso law firm (the unit engaged by Vietnamese businesses) is cooperating with the Vietnam Trade Office in Italy to resolve the situation. According to the lawyer's office, they worked with the police, customs, and shipping lines, as well as obtaining a court judgment that prevented the products from being cleared even though the clients had the original documents in hand. Additionally, the lawyer is continuing to work with banks to determine who is accountable for this case, while also assisting Vietnamese firms in reclaiming ownership of items.

Vietnam Cashew Association (VINACAS) collaborated with Vietnamese banks and industries on March 9. One day later, VINACAS sent a document to relevant shipping lines requiring them to take "emergency" measures, including temporarily holding consignments at the port or on their way to the port; and refusing to release the goods to the consignee even if the consignee presents the original bill of lading. Release of goods is permitted only after confirmation from shippers (sellers). Thus far, the HMM shipping firm has reacted positively, promising to assist Vietnamese cashew exporters in accordance with the aforementioned recommendations.

MARD will continue to collaborate closely with the Ministry of Industry and Trade and VINACAS to monitor the case and report to the Prime Minister on a timely basis for help in mitigating company damages. The ministry directs VINACAS and businesses to continue collaborating with Law Office Davide Gallasso, the Vietnamese Embassy, and the Vietnam Trade Office in Italy to work with Italian authorities to deny customs clearance to 36 containers of goods that lacked original documents or to allow customs clearance only when the Vietnamese exporter (the seller) determined. 

MARD proposed that the Prime Minister appoint the Ministry of Transport to work with shipping lines of 36 containers which lost original documents to retain goods and create favorable conditions for lawyers to handle the case, allowing the business to re-export the goods to another market; The State Bank of Vietnam works with commercial banks (which are banks that receive money from export companies) to review the process of transactions with the buyer's bank.

MARD further requested to the Prime Minister that the Ministry of Public Security investigate the case and collaborate with Interpol to ensure that the fraud is handled in accordance with international law in the case that foreign organizations or persons are involved.

MARD concluded that Free Trade Agreements (FTAs) had increased Vietnam's export potential. The larger the playground, though, the greater the obstacles and risks. As a result, MARD will collaborate with relevant ministries, agencies, and VINACAS to promote economic and international trade expertise and will exercise caution when dealing with new clients in order to avoid unexpected effects.

Developing a thorough understanding of the clients

The Vietnam Trade Office in Italy reports that the partner firms that engaged in contracts with Vietnamese counterparts are registered in Italy. Because they are all new businesses with offices located mostly in the field, it is risky to sign a contract with a high quantity and value.

MARD advises businesses to work with commodities associations and the Vietnam Trade Office in the importing nation to get knowledge about brokers, consumers, and payment banks in order to mitigate trade risks.

While the MoIT suggests that firms verify and authenticate clients through a variety of channels, including the Vietnam Trade Office in other countries, prior to initiating export activity.

Enterprises should consult with the consulting unit to fully comprehend and master the contract's terms, each party's duties, disclaimer provisions, dispute resolution procedures, and compensation...

Additionally, businesses are cited for risk prevention and management actions such as acquiring complete insurance and actively chartering ships, therefore managing stages in the logistical chain.

Due to the nature of the D/P payment method, the importer must settle the money with the bank before obtaining the documents. When original papers are lost, however, the D/P payment method is deemed to be more detrimental to sellers. D/P is a hazardous payment method since the firm does not get a deposit or an advance but instead actively ships the products. However, after the items are carried on board, clients have the right to purchase or not to purchase, to pay or not to pay.