Expert View
GETTING PAID IN THE GLOBAL MARKETPLACE
by Stephen Greenwood, Commercial law partner, Farleys
There are various methods importers and exporters can use address the tensions between a buyer and seller concerning payment for goods in international sales.
For the seller, ideally the buyer would make payment before goods are shipped which avoids the risk of chasing payment.
However, buyers are often understandably reluctant however to pay for goods they have not taken delivery of. Here are some of the solutions:
• Bankers’ letters of credit (documentary credits) allow a seller to receive payment for goods as soon as they’re shipped and the buyer knows when payment is made that the goods have been shipped.
The buyer will deposit funds with a bank which will make payment to the seller on receipt of agreed documents, usually the seller’s invoice with details of the goods and breakdown of price, a certificate of origin of the goods, and transport and insurance documentation.
Australia and New Zealand. Since leaving the EU, the UK government is in a better position to negotiate new trade agreements faster.”
Stephen Greenwood, partner at Lancashire law firm Farleys, says: “Brexit freed the UK to negotiate its own trade agreements with the world but at the expense of a loss of trade freedoms within the EU.
“The UK’s trade agreement with the EU only allows goods of UK origin to move tariff and quota free into the EU.
“They ensure that a UK business can’t buy cheap products from a country with poor labour standards, change the labels on them and then sell them into the EU tariff free.”
He adds: “There are various traps for the unwary. For example, importing a product from the EU and then exporting it back to the EU might attract a tariff because the goods are not of UK origin.
“On the other hand, if goods are imported from the EU, sufficiently processed in the UK and then exported back to the EU then they might be classed as UK origin and benefit from tariff free trade.”
According to the Institute of Export and International Trade, British traders paid an additional £600m in customs duties over the first half of 2021 as a result of “complications” arising from Rules of Origin.
Stephen points to an early, often cited
• Collection Arrangements are in direct reversal of the above. The seller’s bank acts as agent of the seller and takes instructions from the seller.
Exchange of ownership and payment, however, take place at the buyer’s premises on receipt of delivery.
• Export Credit Agency Finance is where the UK government provides partial guarantees to UK banks in support of UK exports. The ECGD, which also operates under the name UK Export Finance, provides insurance to exporters and banks against the risk of non-payment by overseas buyers.
Whichever method is adopted it is important to make sure the agreement is properly documented in the Contract for Sale between the seller and buyer, that appropriate documentation is entered into, with the banks supporting the arrangement, and that all parties involved, including the banks, take advice from their respective solicitors.
example concerning ‘Percy Pigs’. The sweets are manufactured in Germany and shipped to the UK. No tariffs are payable because of the UK-EU trade deal.
He says: “The issue arose, however, when M&S exported them to its stores in the Republic of Ireland because they left the EU and had not been processed sufficiently to give them UK origin, meaning they were subject to tariffs to get them back into the EU.”
However, he adds: “Savvy businesses can use Rules of Origin to save money and gain a competitive edge in the international market.
“Analysing supply chains to identify products origins and their tariff classification can enable a business to claim preferential tariffs on import/export where available.
“There are various sources of information to help businesses determine Rules of Origins for products.
“Once that is established, it must not be overlooked that a UK certificate of origin is required to certify the nationality of goods and their components in order to export them, along with a UK EUR1 preference certificate to enable tariff free trade.
“Getting it wrong can lead to impounding of goods and unexpected duties so when in doubt it is essential for businesses to take expert advice.”
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LEGAL VIEW
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