A freight forwarding company went bankrupt and was sued four times

Since its establishment, Dabang has been involved in lawsuits and has been sued four times. In the past two years, cross-border logistics costs have been high, which is a period of profitability for logistics companies. Why did Dabang file for bankruptcy at this time? The company's major shareholder said that the main reason for the company's current situation is that the infighting of shareholders and the payment period dragged down the capital chain.

After the news came out, many people in the market believed that the company's capital chain was broken due to low-price cargo collection, and some people bluntly said that filing for bankruptcy was a disguised way of running away. Dabang shareholders responded one by one.

In the cross-border logistics industry, the problem of payment period is very common. The excessively long payment period puts a lot of pressure on many logistics companies. If the company's funds are interrupted, it will trigger a series of chain reactions. At the same time, due to the low threshold of the logistics industry, the quality of the players is uneven, and the low-price delivery and other industry chaos have also affected users' confidence in logistics companies. Identifying reliable freight forwarders is still a compulsory course for sellers.

Unable to repay debts, Dabang Freight Forwarding filed for bankruptcy

On April 18, the Yiwu People's Court issued an announcement stating that based on the application of Yiwu Dabang International Freight Forwarding Co., Ltd. (hereinafter referred to as "Dabang"), it ruled on April 11 to accept the company's bankruptcy liquidation case and appointed an accounting firm as its administrator.

According to public information, Dabang was established on April 23, 2020, just two years ago. The company's registered capital is RMB 5 million, and its business scope includes general projects such as import and export agency, cargo import and export, customs declaration business, international cargo transportation agency, domestic cargo transportation agency, and licensed projects such as international road cargo transportation and waterway general cargo transportation. At present, Dabang's official website cannot be opened.

Since its establishment, Dabang has been involved in various disputes. In less than two years, the company was sued four times, mainly due to freight forwarding contract disputes and sales contract disputes.

Dabang has also been a plaintiff. In October last year , Dabang sued a supply chain company and a freight forwarding company in Yiwu due to a freight forwarding contract dispute. The court ruled that the plaintiff Dabang was allowed to withdraw the lawsuit, and the case handling fee of 2,489 yuan was also borne by Dabang. In February this year, Dabang sued three Yiwu freight forwarding companies due to a tort liability dispute.

Information from Tianyancha shows that Dabang’s risk level is “high” and it has been included in the list of dishonest persons. This is due to a debt conflict between it and a freight forwarding company in Shenzhen .

In 2021, a freight forwarding company in Shenzhen sued Dabang due to a freight forwarding contract dispute, and the two parties went to court. In September last year , the case of the commission contract dispute was executed, and Dabang and its legal person were fined 973,000 yuan, but Dabang did not fulfill its obligations.

In January this year , the Yiwu People's Court issued an execution ruling, stating that Dabang had no property available for execution, and the applicant for execution (the above-mentioned Shenzhen freight forwarding company ) could not provide any clues about Dabang's property available for execution, so the case could not be continued for the time being. Dabang and its legal person became dishonest debtors and were restricted from high consumption. This execution ended, but Dabang still had an outstanding amount of 785,000 yuan.

On March 31, Dabang applied to the Yiwu People's Court for bankruptcy liquidation on the grounds that it had "ceased operations, could not repay debts due and was clearly insolvent". According to the property investigation by the court's enforcement department, Dabang had no property available for execution and was clearly insolvent. The bankruptcy liquidation application was legal and well-founded and was accepted.

Why did DaBang go bankrupt? Shareholders respond

Cross-border logistics costs have remained high in the past two years, which can be regarded as a bonus period for logistics companies. Why did Dabang go bankrupt at this time?

Yien.com contacted Dabang’s major shareholder Yuan Wenjie, who attributed Dabang’s current situation to two points: 1. Mutual distrust among shareholders led to the dissolution of the partnership; 2. Excessively long payment terms led to a break in the company’s capital chain.

Yuan Wenjie said that because the company's legal representative also served as the financial officer, the accounts were unclear for a long time, and no financial statements were provided to the shareholders' meeting, the shareholders began to distrust each other, which eventually led to the three partners dissolving the partnership on February 7, 2021, and he took over the subsequent business. However, before that, the three did not hand over the business or audit the property, resulting in the shareholders' failure to repay part of the agency's fees.

"After the partnership was terminated on February 7, 2021, I never let any customer's goods be affected, and I also borrowed money to pay off the overseas warehouses and some domestic agents, but the remaining money is not something I can afford alone."

On March 17, 2021, without informing other shareholders, Dabang’s legal representative sent a notice to all customers and agents, announcing the company’s complete suspension of operations and informing Yuan that he had resigned on the same day.

This notice informs customers that Dabang will suspend all business from 11:59 pm on March 17, 2021, and no one has the right to act as Dabang's agent in any business activities. If Mr. Yuan Wenjie or anyone else uses Dabang's name to conduct business with your company without the company's authorization, it is his personal behavior and has nothing to do with Dabang. From now on, if there is no business with the company's official seal and the signature of the legal person, it does not represent Dabang's behavior; if your company does not conduct business with Dabang in accordance with this notice, all responsibilities arising have nothing to do with Dabang.

Dabang’s business was suspended as a result.

In July last year , Dabang's legal representative Chen* sued Yuan Wenjie and two other shareholders, demanding the termination of the equity holding contract between him and the two, and requesting a court to order Dabang to handle the industrial and commercial registration change, changing the company's industrial and commercial registered equity from Chen*'s 100% shareholding ratio to Yuan Wenjie's 40%, Chen*'s 30%, and Chen**'s 30%, with Yuan Wenjie and Chen** assisting. In the end, the court ruled as Chen* requested, and Dabang completed the shareholder change registration procedures.

In addition to the ongoing shareholder conflicts, another important reason for Dabang's poor performance is the interruption of its capital chain, which is consistent with market speculation.

After the news of Dabang's bankruptcy was announced, many people in the industry believed that this was a financial problem caused by the freight forwarding company's low-price cargo procurement, but Yuan Wenjie denied this.

"As for our customers' goods, we are not engaging in vicious price competition as rumored on the Internet. It is mainly because our competitors have been delaying payment for a long time, which has caused our capital chain to fail to keep up and led to a debt crisis. We still have more than 2 million yuan in uncollected debts. In view of the recent internal competition in the industry, I also call for reasonable payment terms to maintain reasonable profits for the company's development." said Yuan Wenjie.

in the country, it is very rare for freight forwarding companies to voluntarily file for bankruptcy, and some people in the industry believe that this is a disguised form of running away.

Yuan Wenjie said: "We did not run away with the money as rumored online, and no customer's goods were affected. Bankruptcy liquidation is not our shareholders' attempt to evade responsibility, but because the partnership business is not doing well and we want to end it early. We will also cooperate with the administrator to declare and recover the debts and claims, and I will also assume some of my responsibilities after the bankruptcy liquidation."

As of now, Dabang still has more than 3 million yuan in air freight fees owed to two agents.

Daxin Legal’s Lao Yang believes that in judicial practice, 99% of bankruptcy liquidation applications will be rejected by the court. Based on the nature of Dabang Co., Ltd., its application for bankruptcy is legal. After the company applies for bankruptcy, the main issue it faces is the repayment of performance debts.

Li Hui from a logistics company in Shenzhen analyzed that if a logistics company goes bankrupt and liquidates, its partners will be the most affected, because many logistics companies and other partners have certain credit periods. If a logistics company files for bankruptcy and is unable to pay its partners’ freight, it may affect the customers’ goods in transit, but the logistics company will also give customers credit periods, so it is difficult to say how to protect their rights. “If it is a responsible company, it will consider the interests of customers as much as possible. If not, customers can only take legal action.”

After the Yiwu People's Court accepted Dabang's bankruptcy application, the legal person, shareholders, senior executives and financial director of Dabang Company need to submit a performance report and a statement of property status, a list of debts, a list of claims, relevant financial accounting reports, payment of employees' wages and social security payments and other materials to the administrator or the court within 15 days from the date of receipt of the ruling accepting the bankruptcy application.

Dabang's creditors need to declare their claims to its administrator before May 20, 2022, and state in writing the amount of the claims, whether there is any property guarantee, whether it is a joint claim, and provide relevant evidence. The court will hold the first creditors' meeting at 10:30 am on May 25, 2022 through the "Yiwu Court Zhipo Platform".

With frequent financial incidents, is it really that difficult to be a freight forwarder?

Freight forwarding companies often experience sudden incidents such as running away and filing for bankruptcy liquidation. Behind every bankrupt company there is a group of cross-border sellers under pressure.

Previously, a freight forwarder in Shenzhen ran away with the money, and many sellers were victimized. One victim said frankly that this freight forwarder was a rogue, who repeatedly went back on his word and treated his promises as a joke. The freight forwarder owed the airlines fees, causing my goods to be stranded at the airport and unable to take off. Later, I and several victims went to the door to urge the goods and collect the debts, but all ended in vain. The scary thing is that after the freight forwarder owed money, it changed its vest and continued to deceive other airlines or customs clearance agents.

In the relevant seller groups, there are often cases where freight forwarders are ready to run away with the money and owe employees wages; freight forwarders charge air freight prices but ship the goods by sea, causing sellers' goods to be delayed and miss the peak season sales; freight forwarders go bankrupt and owe storage fees abroad, and the goods shipped by sellers are detained.

Daniel, the person in charge of a logistics company in Xiamen , said that there are two types of freight forwarder bankruptcy: one is being forced to file for bankruptcy, and the second is doing it intentionally.

Freight forwarders are forced to file for bankruptcy usually because they cannot repay their debts and their capital chain is broken. In this process, the freight forwarder's capital chain is directly related to the customers it serves.

The cross-border seller customer groups served by freight forwarders will require an account period of 1-3 months at the shortest and more than 6 months at the longest. It is common for freight forwarders to advance funds. While waiting for customer funds, if there is a problem with the funds, the freight forwarder cannot be paid normally. If the freight forwarder cannot make up the large amount of funds, the capital chain will be broken.

Many cross-border e-commerce sellers are asset-light. They may have strong operational capabilities abroad, but they are dependent on foreign third-party platforms, so the risks of this group are relatively high. Especially last year, when major e-commerce platforms carried out rectification of violations, many domestic sellers’ accounts were blocked and their funds were frozen. Sellers cannot withdraw funds, so they may default on the payment to freight forwarders indefinitely. In this case, freight forwarders have no way to seek legal action and may be implicated in bankruptcy.

Freight forwarders who do this intentionally are more despicable. These companies are basically small, irregular companies, and many people set up companies with the original intention of "making money".

Daniel admitted that the threshold for the freight forwarding industry is very low. If you want to register a new company, it is relatively easy to operate it. A boss, a financial officer, and a salesperson can set up a company with almost no major costs.

Because the entry threshold is low, some businesses will take unconventional measures. When they first register a company, they don’t think about serving their customers well, but only do business with the idea of ​​making quick money. These companies will disrupt market conditions, purchase goods at prices much lower than the market price, and not ship the goods after receiving the payment, or they will take lower-cost channels and simply run away after making money.

Soon, these companies may change their "vests" and continue to cheat. Especially when international logistics freight rates rise, some people see that this industry is profitable and enter the market with bad intentions, exacerbating the internal competition in the logistics industry with price wars, and even harming a group of sellers who ship goods.

Li Hui from a logistics company in Shenzhen has a similar view. He said that the logistics industry has developed wildly in recent years. Everyone thinks that it is easy to make money in the logistics industry. The motives of some outsiders entering the industry are not pure. They are not doing it to run a good career, but to make quick money. They rush in without opening up many links. Once the market changes, they have no ability to resist any risks.

The entry of these people has led to a serious internal conflict in the logistics industry. Li Hui believes that logistics has never been a high-profit industry. Now, let alone high profits, it is simply a small profit or even a loss, which has indirectly led to the closure of many logistics companies.

One bad apple spoils the whole barrel! After these freight forwarders who cheat sellers are exposed, the outside world’s trust in freight forwarders will be greatly reduced.

However, sellers who need to ship goods do not need to worry too much. Daniel said that in terms of the entire logistics industry, these unscrupulous companies are still a minority, and most logistics companies still sincerely want to serve their customers well.

Alex, a logistics worker in Shenzhen , said that with high overseas demand and limited cross-border logistics capacity, some freight forwarders can easily take advantage of loopholes. Some small freight forwarders "switch the pillars" by purchasing air freight at high prices and shipping them through low-priced sea freight channels. Customers think that logistics timeliness is slow, and freight forwarders blame logistics delays. The general consensus is that under the epidemic, the waiting period at ports and terminals is long, and there is a shortage of truck drivers at destination ports in Europe and the United States. Even more irresponsible freight forwarders will also charge sellers demurrage fees and charge sellers multiple times.

Because such cases occur frequently, in the eyes of laymen, the cross-border logistics industry is a hot commodity. With the increase in freight rates across all channels, including sea, land and air, freight forwarding has undoubtedly become a highly profitable industry that sellers envy.

The development of the logistics industry needs to be standardized

Freight forwarders often make a lot of money by doing nothing, buying a house in Shenzhen in a month, or buying a luxury car after a peak shipping season. But in reality, do they really make that much money? Or do all cross-border logistics practitioners have huge profits to gain?

As a logistics practitioner, Daniel said, to be honest, our industry was called a sunset industry before, because the profit was too thin and the service was full of problems. As the entry threshold is low, more and more people come out to start companies and become bosses. They recruit fewer people, the cost is lower, and they are happy to make a little profit.

However, the entire industry is often market-oriented. As these small-scale enterprises continue to lower prices, logistics practitioners will earn less and less. Ultimately, the bosses do not make any money, and the employees' salaries cannot be raised. Employees have meager incomes and may go out and start small companies on their own, which will put the entire industry into a vicious circle.

However, in the past two years when logistics prices have been pushed up, the profits of freight forwarders have indeed improved compared to before. This is Daniel's view, but Li Hui disagrees. He thinks that the profits have not changed, but the investment of freight forwarders has increased, which has increased the risks of freight forwarders to a certain extent.

"The profit of freight forwarders has nothing to do with freight. Freight forwarders usually make a few cents per kilogram. In fact, we prefer the price to be as low as possible. We make the same amount of money, but the investment will be less, and the gross profit ratio will be higher. For example, if the cost is 5 yuan, we can make 6 yuan. If the cost is 50 yuan, we can only make 51, but not 60."

Under high freight rates, freight forwarders have to pay sellers for longer periods of time, and their own advance payment costs also rise, increasing the risk.

The bankruptcy or absconding of the freight forwarder will undoubtedly cause losses to the sellers. For sellers, it is very important to select a reliable freight forwarder to reduce unnecessary losses. Combining the opinions of many logistics professionals, sellers can pay attention to the following aspects when looking for a freight forwarder:

1. Find a freight forwarding company with good qualifications and understand the company's rules and regulations and internal capital flow in advance;

2. Pay attention to the establishment years of the freight forwarding company. The longer it has been established, the longer it has been in the industry. It is not the kind of company that blindly enters the market to make quick money.

3. Try to cooperate with large-scale freight forwarders. The larger the scale, the more standardized the process, and the less likely they are to run away;

4. Don’t be greedy for cheapness. Small freight forwarders may give low prices, but the market tells us that price determines the service you enjoy. Be wary of freight forwarders with low delivery prices.

5. Remember to find a freight forwarding company that has its own channels, and don’t find a middleman.

Freight forwarding companies have repeatedly gone bankrupt, which has sounded the alarm for sellers and should also give the logistics industry more room for reflection. Why is this industry always pushed to the forefront?

As more and more irregular operations are exposed and more and more rights protection is raised, logistics practitioners should pay attention to the standardization of processes. Those who find customers online and make verbal promises and boast in order to meet customer needs should stop! Those who circulate documents online and reach cooperation agreements should also be standardized. Please do not sign written agreements that have no legal effect at will.

Having seen cases where their peers were cheated, cross-border sellers should be more mindful and pay attention to documents that have no legal effect. Many disputes have arisen between cross-border sellers and freight forwarders, and when they go to court, they are unable to argue because of the signed documents that have no legal effect. Sellers must be careful.

Freight Forwarding

Bankruptcy

Run away