Foreign Trade Pactions Cautious Penalty Clause Trap

[case]

A Chinese import and export company has signed 100 million sand bag export contracts with a company of a certain country. The delivery date is 3 months after the establishment of the contract, and the price terms are 1 dollars CIF Hongkong.

[analysis]

This is a typical case of concealed illegal purposes by legal means and fraudulent use of contractual liquidated damages.

The main measure to guard against fraud in liquidated gold bars is to have a clear idea of its actual performance capability.

Generally speaking, when China acts as an exporter, its ability to perform is mainly composed of:

1. supply.

The source of goods is the most fundamental basis for the exporter to perform the contract.

Although it is not necessary to prepare the goods, the seller can conclude an export contract with the buyer, but the subject matter of the contract can at least be basically guaranteed or purchased in the domestic market.

When signing agricultural and sideline products, mineral products, and local commodity export contracts that need production organizations in the field, we should take into account the supply of goods.

2. production and processing capacity.

Participating in international trade and international economic exchanges, participants must act in accordance with their own level of technological development and production and processing capacity of commodities.

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In fact, as the exporter signs the contract with the other party, he must consider his actual production capacity comprehensively.

For example, when negotiating garment export contracts, we should consider whether the quality of domestic fabrics can meet the requirements of the other side, and consider whether the manufacturers can meet the requirements of their workmanship.

Where the level of technology and production capacity limit, and even domestic manufacturers can not produce processing, or can produce and process, but the quality is difficult to meet the requirements, we must not blindly clinch a deal. Otherwise, once the performance is difficult, the contract will also have a penalty clause, the buyer will apply for a penalty clause to ask the seller to compensate for the loss, and the seller will fall into a very negative passive situation.

3. raw material supply.

When signing an export contract and considering its export performance capability, it is sometimes necessary to consider whether the supply of raw materials is implemented.

Because some of the export commodities, although the seller has production and processing capacity, supply channels are also smooth, but because the production and processing of the raw materials are relatively tight, it is difficult to supply adequately.

In this case, whether the seller can fulfill the contract on time or not depends on the supply of raw materials.

In addition, the export of deep-processing products should also take into account the production of raw materials for intermediate products.

4. acquisition funds.

The acquisition of the source of export commodities by foreign trade agents mainly adopts the way of buyout, that is, the acquisition from foreign trade enterprises to production and processing enterprises.

In general, foreign trade enterprises do not have sufficient funds, mainly rely on bank credit to solve the problem of liquidity.

Therefore, when a foreign trade enterprise signs an export contract, it should consider the direction of the domestic financial market, whether the money is tight or not, and whether the funds for purchasing the goods will be implemented.

The lack of acquisition funds or the acquisition of funds in a timely manner can not be stocked or shipped on time, resulting in external default.

5. export licensing.

Many countries, including our country, have implemented the import and export licensing system.

For certain commodities, the State implements export license management, and implements quota and license management for commodities that implement active quotas or passive quotas.

Therefore, if we, as the seller, sign the export contract, if the subject matter of the contract is a commodity licensed by the state, the producer must be confident of obtaining the required export quotas and permits in time.

As for the licensing system, there is another issue worth noting: the state may sometimes impose a licence on the goods and the owners.

The scope of export commodities under dynamic quota management should be adjusted in time, so export contracts should be included in the scope of the force majeure as the government's actions in the export contract, so that the exporters can invoke the force majeure clause and safeguard their legitimate rights and interests effectively when the contract fails to fulfill or fail to fulfill the contract due to the state's adjustment of the quota and the scope of the license management.

6. the time limit for performance.

Performance is the process of the two parties' concrete implementation of their contractual obligations and their respective contractual objectives.

The implementation of international trade contracts involves many aspects and covers a wide range.

Some jobs can be completed by both parties, while others need to cooperate with each other in the inspection departments, pportation departments, banks, customs, insurance companies and other relevant parties.

Therefore, in the contract stipulates the time limit for delivery date and letter of credit settlement date, we must carefully measure the actual situation and leave some leeway to ensure that we have enough time to complete all the work that should be done by our side. Otherwise, any delay in any link may form a breach of contract and cause losses.

In this case, if the Chinese import and export company can rationally analyze its performance capability at the beginning of the contract, and fully consider the other party's liquidated damages clause, and strengthen its awareness of prevention, it will not suffer such a great economic loss.