Be sure to check the credentials of all potential partners before engaging in any business over the internet.

You can check the backgrounds of established manufacturers or wholesalers with trade institutes, local or online credit agencies, or online services such as D&B. Unfortunately, few resources are available to verify the legitimacy of newly established businesses. Be especially vigilant when dealing with new businesses.

Letter of Credit and Escrow are the recommended payment methods

You should make a trade contract and keep it for a specific period to prevent argument. The contract should include sales conditions, payment method, an arbitration clause, quality inspection, etc.
Always confirm if the address, phone number and email address given to you by your trading partner belongs to the same company. If a trader provides inconsistent contact details, for example an address in the USA and phone number from another country, we recommend you look up the address in the local phone directory and obtain the local phone number, and call this number to confirm that the person you are in touch with actually works for the company. Similarly, if a partner's email heading states that they work for a certain company, you should verify this. Be aware that some scam artists could alter their return email address heading to make it look like they work for a company that they don't. Don't just believe the e-mail, contact everything you can before you make a deal.
Call the company's phone number and check that the person you are in touch with actually works for the company. Be suspicious of any trader who uses only an e-mail address and cell phone and is reluctant to reveal a telephone number.
Maintain frequent contact and ask in detail about price, quality, payment method, contracts, etc. Genuine traders will respond positively and promptly. Most successful internet traders maintain close contact with business partners and reply promptly to inquiries.

E-mail Address: Do not rely on e-mail to contact a business partner. Even if the company has its own domain name, you may not be able to trace its owner.
Fax Number: Look out for companies that use the same number for telephone and fax. They are likely to be small businesses. Also, it is best to avoid companies that list only a fax number in their contact information.
Website address: An impressive website does not guarantee the honesty or existence of a company. Don't be lulled into a false sense of security.

For Sellers: Request a nominal payment for samples.
When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal pre-payment.

For Buyers: Request samples to check the quality of product.
Order a sample before committing to a purchase order to be sure that the product meets your expectations. Don't forget to pay for samples.

Be wary of potential partners who offer a particularly high or low price in the first instance. It is easy to be tempted by such offers, but they are most often attempts to defraud. This method is most commonly employed in the mobile phone and computer-related business.

As international trade over the Internet increases, Internet-related fraud is also becoming more common. At CNMMN, we are doing our utmost to minimize the financial losses sustained in such cases.
At present, when a user reports a case of fraud to us, we delete the suspect's offers and web site and cancel their membership to guard against possible repeat offences even though it is premium memeber. We also maintain a blacklist of offenders to ensure that they do not gain admittance to CNMMN at a later date. It is important to note that these steps may be taken on the suspicion of fraud, before obtaining evidence.
CNMMN cannot act as a mediator in disputes between companies regarding cases of fraud. By its very nature, international fraud is extremely difficult to prosecute, and while small cases are frequent, few are resolved satisfactorily. All CNMMN members are advised to be vigilant at all times.

The following are some examples of international trade fraud and advice on how to avoid it.
Example 1 - obtaining samples fraudulently
When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal payment for the samples. If the buyer refuses to pay the mailing costs, let alone the sample charge, you are advised to beware.

Example 2 - false promises leave the exporter with unsaleable stock
Swindlers often try to convince a supplier that they are about to place a large order on an L/C basis. They encourage a manufacturer to go into early production on their specifications, claiming that is a test and promising early payment. However, once production is complete the buyer goes back on his word, and the manufacturer is left with unsaleable stock. To avoid this type of situation, when commencing business with unknown buyers, it is safer not to agree to early production, no matter how enticing the offer may be.

Example 3 - demanding discounts by invoking spurious conditions in documentation
In order to create artificial conditions for refusing to accept goods or for reducing prices, some buyers deliberately include vague terms in the L/C and later claim an intentionally "UNPAID" clause. A variation is to place orders on L/C & D/A, but to withhold payment for the D/A part of the contract.

Example 4 - sending illegal job hunters disguised as buyers
Some company may send job seekers disguised as buyers. If you have any doubts, consider the age and position of the person. Very young or low ranking buyers should arouse suspicion. When groups of buyers are encountered, the credibility of the company should be thoroughly checked.

Example 5 - refusing payment for the second part of a shipment
After gaining the trust of an exporter in the first part of a deal by making immediate payment by T/T, the fraudster then refuses to pay for the second part of the shipment. When working on a T/T basis, once the shipment has been made, if the importer refuses to make the payment, there is no way for exporter to obtain the money. Therefore, if you think you're dealing with an unreliable partner, the T/T method should be used on a pro forma basis only.

Example 6 - uncollectable payment due to a financially unstable opening bank
When accepting an L/C from an unknown bank in an underdeveloped country, be sure to check the credibility of the bank. If there are any doubts about its financial condition, it is advisable to request confirmation of the L/C from a reliable bank.

Example 7 - refusing payment for goods received on credit by establishing a new company
Some importers deliberately shut down their existing companies and set up new ones in order to avoid payment, leaving exporters unable to collect money. If your partner suddenly changes his or her company's name and places a big order on credit, it is wise to check the company's legal status on the export contract and shipping documents.
Example 8 - commission fraud in exchange for a bigger order
Luring an exporter with the promise of a big order, dragging out the negotiations to keep him hooked, and then demanding a fee for brokering the deal at the last minute is another common type of fraud.
Example 9 - Be care of paying through Western Union
Some seller let the buyer pay through the Western Union which a fake name, when the buyer comfirm the goods, change to the true seller name. Meanwhile the seller let the buyer send the tranaction to him for comfirmation purpose. The result the money is picked up, no goods are sent.

Example 10 - securing goods at discounted prices by delaying the payment
All transactions on credit should be avoided, no matter how small the amount. Even though an importer may not initially intend fraud, if the payment is delayed, the exporter may end up having to negotiate a discount in order to get paid, even though there is nothing wrong with the product.

Example 11 - 419 Scam Mail (Nigerian Scam Mail)
419 scam mail originated in Nigeria but now emanates from other countries, especially in Africa. The mail begs for help and offers a handsome return-typically over a million dollars-for the simple favor of using your bank account to transfer some money. Don't even think about responding-this is a scam of the worst sort.
Learn about other types of Internet fraud at http://www.scambusters.com