6th April 2020
Chinese manufacturers, exporters and freight forwarders are slowly returning to their plants and offices after a long period of quarantine. Anybody who deals with Chinese entities will have noticed a recent increase in emails from logistics companies and manufacturers offering services and products. MSI's UK South Coast law member Lester Aldridge LLP explains more.
As many markets are still in lockdown to a greater or lesser, the ying and yang of trade means that Chinese manufacturers and shippers will be concerned by credit lines provided to businesses in those countries currently under lockdown. Demands for payment for goods which were provided late last year or earlier this year are likely to be presented and credit lines withdrawn. This issue will affect all parts of the global logistics chain as countries come out of the quarantine restrictions, as the virus dissipates.
Many companies will be facing challenges caused by not being able to move stock as a result of the current restrictions from the various governments, which have been imported on the basis of a credit line. At the same time, they will be eyeing the future where they may well need those credit lines to get business moving once again.
Agreements for the supply and importation of goods as well as the terms on which credit are provided in these situations, are often not properly documented. Credit lines can tend to evolve over a period of time, particularly when manufacturers begin to work closely with a distributor or agent in another country. That issue also affects the freight forwarding chains where business is done over a period of time. It is often a problem with shipments or a situation like the current coronavirus shutdown, which results in parties scrambling to put together the jigsaw puzzle of exchanges which evidence the contract terms and the credit line agreement. These cross border contract can raise their own particular set of issues.
A typical scenario:
A supplier in China has provided goods to us over many years on credit. The supplier is now demanding payments of all outstanding amounts and is wanting us to sell the goods in our possession but there is no market for them at the moment. What can my supplier do and what steps can they take against us if we are unable to pay?
There may be significant issues with Chinese companies trying to recover debt in the current circumstances for a number of reasons, This produces fertile ground for negotiation in order to try and reach a compromise, when a debt demand is made.
For further information and assistance please contact our member firm Lester Aldridge directly.
Lester Aldridge is a full service law firm, advising commercial organisations and private individuals on a regional, national and international scale, from offices in Southampton and Bournemouth.
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