Common fraud tactics in the valve market (original)

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This post was last edited by Weixiaobao on 2011-3-30 21:00. I am fortunate to be a member of Haichuan Forum, where I have learned a great deal. The atmosphere at the forum was great; everyone was striving for true knowledge. Well, I will also share with you some of the fraud tactics I have learned about from working in the valve industry. First, let me introduce myself briefly: I have been working in the valve industry in the sales field, and I have served as general manager at large sales companies; with nearly 10 years of work experience, I have seen countless instances of fraud in engineering projects and bidding processes. I originally intended to write a detailed article discussing some characteristics of the domestic valve market, but since I can’t mention specific brands and examples in the forum, I’ve put this idea on hold for now. When the time is right and the forum permits it, I’ll still be happy to share this information with everyone. My goal is to help everyone understand the valve market better, so as to avoid losses during procurement and use. Okay, let’s begin. The following are the general steps and methods used for fraud: 1. First, find a valve manufacturing company that is somewhat well-known in China. It was fine to be famous in the past, but it’s even better to be famous now; it doesn’t matter whether there is actual production or not. It’s best to be located far away from one’s own company, as many customers give up the idea of making on-site visits due to the long distances between the agents and the manufacturers. This creates spatial opportunities for fraud. For example, if the manufacturer is in the northeast, then the agent is in the southwest. In short, the greater the spatial distance between the two, the better. 2. Register a company with a name similar to that of the manufacturer. For example, if the manufacturer is Tianjin XX Valve Co., Ltd., then the name of the agent will be Shanghai XX Valve Co., Ltd. (where XX are the same two characters). In fact, there is no inherent connection between the two; they are completely independent legal entities that operate independently and assume responsibilities independently. It leads users and purchasers to mistakenly think it is a difference between the head office and branch offices, when in fact the two are closely connected. Even earlier, around before the year 2000, manufacturers and agents had good relationships, which allowed agents to obtain approval for establishing sales offices of XX Valve Co., Ltd. in their respective regions. Hearing that, its origins seem even more impressive. It makes it easier for users to believe in their hierarchical relationship. 3. Pay the management fee and pick up the goods. Many manufacturers are short-sighted and ignorant as well. Some openly support agents in falsifying products. Manufacturers attempt to achieve profitability by having agents pay certain management fees, but it is precisely this short-sightedness and ignorance that provide agents with unlimited room for fraud. The factory produces the products; agents take a small amount as a symbolic quantity. If it’s not available, then goods are obtained from various valve-making workshops and enterprises without proper qualifications. Attach the manufacturer’s label and certificate of conformity. Now, fake labels and certificates are made to look just like the original ones. There are round things that should be round, and square things that should be square. It costs a few cents for the cheaper ones, and up to 50 cents for the more expensive ones; this is a drop in the bucket compared to the huge profits generated by fraud. Agents with some resources, finding it troublesome, bought computerized marking machines and color printers to produce certificates and labels in their own offices. At the same time, product samples need to be made; those with more money can make them thicker, while those with less money can make them thinner. It’s funny – I’ve seen that product samples from agents of the same manufacturer in different regions can be completely different. As for the pictures of the factories and products in the sample, most of them are plagiarized or edited using Photoshop. It’s completely meaningless as a reference. This is basic fraud. 4. Intermediate methods of fraud. If agents purchase large quantities from unofficial manufacturers, they need to prevent customers from discovering fraud. Let unregulated manufacturers handle the mold design for the valve body (they can control things like the thickness of the valve body and the composition of the materials), and include the logo of a regulated manufacturer when casting the valve body. Because typical, low-quality fake manufacturing methods involve using manual welding to apply logos to the valve body, the appearance is definitely rough. 5. Advanced techniques for fraud. Agents collude with manufacturers to carry out fraud, forging various certifications and honor certificates (mostly using Photoshop). The manufacturer does not produce valves (this practice is common among some established valve manufacturers in China; they were once very famous, but due to institutional issues their development came to a halt – they no longer have manufacturing facilities, and only retain their business registration and trademarks). In order to make huge profits, the company’s management supports fraud, on the condition that they will not get involved in case of any quality problems. The agent bears all risks entirely. This type of fraud is generally not detectable by people outside the industry. It can almost deceive all purchasers and users. 6. Alternative ways of fraud. Some manufacturers and agents neither have premises nor production equipment. So, one has to borrow facilities from others (which can be valve manufacturers or those that are not). The factory name plates are prepared in advance before the customers arrive, to be placed or hung temporarily. Or pull a bunch of valves and place them next to the lathe. Make the customer think they have arrived at the production site. 7. Commercial bribery. This is easy for everyone to understand. The management, technical staff, and decision-makers of the users are fully aware of the fraud, but due to vested interests, they continue to purchase and use fake products. This situation is also very common. Note: Currently, the sale of valves in China is mostly handled by agents. That is, the manufacturer is responsible for sales, while the agent is responsible for market development, sales, and after-sales service. Of course, there are also manufacturers with strong capabilities that establish their own actual offices and branches (which are outside the scope of this article). The above is merely the tip of the iceberg regarding fraud in China’s valve market. Due to time constraints, that’s all I can write today. If conditions permit, with forum and reader support, and there is interest. I will share more questions and information regarding the valve market with everyone, in a more systematic manner. This article is original and does not mention any specific company names, personal names, or specific events. Those who are involved in the fake production, sale of valves, and other illegal activities for profit are the ones the author has in mind. If your heart is moved, identify yourself and reflect, as well as repent.