Many small businesses take and ship international orders regularly for products. Products are priced in U.S. dollars, charged to the purchaser's credit card, shipped via Fed Ex, UPS or the USPS after sale, and delivered to the buyer in the foreign market. International sales may seem as routine as domestic sales, and the firm may not consider itself an exporter.
As identified in other articles in this series, the firm is indeed an exporter and must comply with all U.S. export restrictions, including clearing buyers on the Denied Persons list and getting ECCN codes, (ideally an EAR99 is all that is needed). And like other exporters, the firm faces payment risk, even when charging a foreign buyer's credit card upfront, prior to shipping. That's because it may takes days or weeks for fraud to be detected and also because the purchaser can cancel or dispute the transaction after the item has shipped. The seller has little recourse to reclaim the item, and in the case of fraud, the item is almost immediately moved on to destinations unknown.
Just got a great order via internet or phone from a previously unknown international buyer? Buyer is splitting charge to multiple credit card account numbers or providing several numbers until one goes through? Buyer requests immediate air freight? These should be immediate red flags that something is suspicious and more questions should be asked.
U.S. Commercial Services gets lots of reports of fraud after the fact and tries to warn companies about known scams. Among other fraudulent schemes reported to authorities, buyers in Singapore were having orders shipped to freight forwarders near the airport, where they were immediately re-labeled and reshipped throughout the region, making recovery nearly impossible and cost prohibitive. The U.S. seller loses from the charge back on the credit card and also the shipping costs.
However, never filling another new foreign order is probably not the best response to this risk. Many of the steps to protect your company are the same as those you would follow handling credit cards for domestic orders - routinely collect expiration dates and verification codes, watch out for multiple credit cards from the same IP address and for multiple cards card orders shipping to the same physical address. With new international orders, watch for purchasers of multiple items of the same product, purchasers that don't seem to have working knowledge of the product, and purchasers that are asking for expedited shipment on low value/low importance items. Do a quick internet search on the "Ship To" address and ask questions if orders are being shipped to freight forwarders or cargo terminals.
Credit card companies are also a resource to help fight fraud. Work with yours to set up authentication programs such as Verified by Visa or MasterCard's Secure Code. These programs confirm an online shopper's identity in real time by requiring extra steps to ensure no one but the cardholder can be making the transaction. Merchants that participate get expanded protection from fraud-related chargebacks. Putting one of these programs in place will reduce fraud across all credit card transactions, not just those by international customers.
A new customer placing a large order should be something to celebrate, whether the buyer is international or domestic. Putting good fraud prevention programs in place and asking extra questions when things don't seem right will reduce costs and build more sustainable business for all enterprises.