Before purchasing equipment from abroad, a Ukrainian company should check the seller, their financial position, address, owners and ability to fulfil the contract.
Purchasing industrial equipment abroad often involves a substantial advance payment. Depending on the terms of the contract, a Ukrainian buyer may transfer 30–70 per cent of the cost to the supplier even before the equipment has been manufactured or shipped.
The larger the advance payment, the more important it is to ensure that the foreign company actually exists, possesses the stated specialisation, production capacity and experience in fulfilling similar contracts.
A professional website, a presentation, photographs of the equipment and active correspondence are not sufficient proof. Fraudsters may use other people’s images, set up companies with similar names or send invoices with a third party’s bank details.
Before signing a contract, it is worth checking the seller’s exact legal name, registration number, address, date of incorporation, status, directors, owners, corporate affiliations, financial indicators and payment history.
The Business ID Report and the D&B Business Information Report may contain registration details, operational data, corporate structure, financial indicators, credit ratings, payment behaviour and legally significant events.
“The more attractive the offer and the larger the advance payment, the more thorough the vendor due diligence must be. Photographs of equipment, a website and a corporate presentation do not confirm that the company has the necessary assets, experience and capacity to fulfil the contract,” said Maksym Urakin, Director of Development and Marketing at Interfax-Ukraine, Head of the D&B business unit at Interfax-Ukraine, and Candidate of Economic Sciences.
Separately, you need to verify that the bank details match the legal entity specified in the contract. A change of account immediately prior to payment, a request to transfer funds to another company, or the use of a bank in a third country all require further explanation.
The risk can be mitigated through payment in instalments, a documentary letter of credit, a bank guarantee, insurance, an independent production inspection or a pre-shipment inspection of the equipment.
If the seller is an intermediary, the buyer must understand who actually manufactures the equipment, who is responsible for the warranty, and who will be liable in the event of a delay or technical defect.
Due diligence is also necessary after the contract has been signed, particularly if production takes several months. A deterioration in financial health, a change of ownership or the cessation of business operations may affect the fulfilment of the order.
Dun & Bradstreet has been operating in the field of business information and risk assessment since 1841. The company provides international business reports, data on payment behaviour, corporate links, creditworthiness and the ownership structure of businesses.
‘Interfax-Ukraine’ is the official representative of D&B in Ukraine. A specialised division of the agency assists Ukrainian companies in commissioning checks on foreign manufacturers, sellers and suppliers. ‘Interfax-Ukraine’ has been operating since 1992 and is an independent Ukrainian news agency.
Enquiries can be made via D&B’s dedicated website – dnb.ua, by email at [email protected] or by telephone on +38 (044) 270–65–74.