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The principal difficulties in making collections after the goods have been shipped may in many cases be traced to faulty procedure on the exporter's part as regards compliance with the instructions of the buyer in respect either to the time or the method of shipment; the method of drawing drafts or other form of financing; or to some shortcoming in the quality of the goods themselves. Not infrequently, however, conditions beyond the control of the exporter lead to difficulties in collection-such as price or exchange fluctuations or changes in tariffs or other restrictions abroad which affect the salability of the goods. In any event, when a draft is refused either before or after title has passed to the buyer abroad, there are definite things that can be done either to avoid or mitigaté loss.



One of the most common reasons why foreign buyers refuse to pay drafts when presented is delayed shipment. Most goods are ordered so as to reach a foreign market at a specified time, to meet the buying season. A letter of credit, carrying a definite date of expiration, opened in an exporter's favor can guarantee to the buyer shipment within a certain period, but when an exporter is instructed to draw a bill of exchange against a foreign buyer, the latter has no assurance that shipment will be made within a specified period. When, therefore, shipment is to be delayed, the exporter should notify the foreign buyer and get his authorization to ship. Otherwise, he stands a chance of having his draft refused when presented for payment or acceptance.


Goods destined for foreign markets should be packed and marked in strict compliance with shipping instructions of the foreign buyer. If this is not done, drafts against buyer may be refused when presented. The exporter must assume that the buyer has good reason for specifying what may seem to be unnecessary and even fantastic stipulations. Failure to comply may put the buyer to additional expense, and he may refuse the draft unless he gets assurance that such expense will be absorbed by the shipper. Even so, buyers usually avoid placing orders with exporters who habitually ignore shipping instructions.

UNSATISFACTORY QUALITY OF MERCHANDISE Many foreign buyers manage to inspect the goods still in the custody of the bank before paying or accepting the draft. Many drafts are refused because quality is not up to sample or specification.

This is the buyer's privilege. Such matters can usually be arbitrated, provided the exporter has a representative on the ground.


One of the most frequent reasons for refusing drafts is a fall in the price of the goods in the foreign market between the time they were ordered and the time they arrive. Foreign buyers will often use one of the above complaints as a mere pretext under such circumstances, and there is little that the exporter can do about it, except to insist upon part cash with order when shipping such goods as are subject to foreign price fluctuations.


Goods sold in dollars necessitate the foreign buyer's paying the draft in dollars at the current rate of exchange for his own currency. If his own currency falls, therefore, in terms of dollars during the interim between order and delivery, the result is precisely the same as a fall in the local market price of the goods. More foreign currency than was originally calculated at the time of the order must be provided at the time of delivery to meet a draft drawn for a given number of dollars, and the cost of the goods in foreign currency to the foreign buyer is correspondingly enhanced. If the draft is drawn in foreign currency, this risk is assumed by the exporter. Either the exporter or the foreign buyer may protect himself against such contingency, by fixing exchange forward. That is, the exporter drawing in foreign currency may sell the foreign currency he expects to receive for future delivery. This is a hedging operation, and may also be done by the foreign buyer, expecting to meet dollar drafts at some future date, buying dollars for future delivery. The surest way for the exporter to avoid this risk, however, is not to depend upon the buyer's action, but to sell in foreign currency, and sell his expected proceeds forward. He thus eliminates all possibility of his draft being refused on this score.


Somewhat similar in their effects on the action of the foreign buyer are changes in tariffs, quotas, or other restrictions on the importation of the goods abroad. If the foreign buyer has calculated that the goods will pay a certain tariff and the rate is raised, the cost of the goods to him delivered is increased. He may refuse to take up the draft on some pretext as a result. Such contingencies are very difficult for the exporter to meet. Even a clause in his sales contract or quotation definitely fixing the responsibility on the importer will not avail if the loss is large. Many serious foreign restrictions are imposed or materially altered without warning, and this constitutes one of the greatest risks in exporting.

DRAFTS UNPAID AFTER ACCEPTANCE (D/A DRAFTS) Drafts which have been accepted by the foreign buyer but are unpaid at maturity constitute a clear credit risk, the possibility of which the exporter should have foreseen in his investigation of

the buyer. The reasons may be any of those advanced above, and, in addition, a number of others, such as inability to dispose of the goods because of unfavorable market conditions

or temporary or permanent financial embarrassment of the buyer. The only recourses are “dunning” through foreign collection agencies, suits in foreign courts, or arbitration.


In most foreign countries, regularly established collection agencies exist whose names can be supplied by the Commercial Laws Division of the Bureau of Foreign and Domestic Commerce. These undertake, for a fee, to collect overdue accounts—with varying degrees of success. The amount of pressure exerted upon the delinquent will depend upon the circumstances, including the energy and efficiency of the collecting agency and the reasons for the delinquency. There are also private facilities in the United States whereby exporters may register for co tion or adjustment of their delinquent oversea accounts on a contingent basis. These agencies operate through foreign attorneys and, in some cases, salaried representatives abroad.

SUING IN FOREIGN COURTS It is difficult to treat this subject adequately within the space allotted for it here. The Commercial Laws Division maintains lists of foreign attorneys who will undertake such action on behalf of United States clients, under conditions and stipulations which, of course, vary in each case.

Collection of a judgment, once obtained, is, of course, often more difficult and expensive than obtaining the judgment.

WHAT THE UNITED STATES GOVERNMENT CAN DO It is of little avail to write to American Government representatives in such cases. At best, they can only send lists of foreign attorneys, for they are not collection agencies, and while, under certain circumstances, field officers of the United States Government may investigate a case, particularly where fraud may be involved, their jurisdiction abroad is entirely restricted to United States nationals, and regulations prevent them from taking any action looking toward the collection of a debt or a judgment owing to citizens of the United States, by citizens of the country to which they are accredited. Where cases of outright fraud or flagrant abuse of credit are involved, field officers report to the Bureau of Foreign and Domestic Commerce (either directly or through the State Department) and appropriate notation is made on the report of the individual, maintained in the Commercial Intelligence Division.

COMMERCIAL ARBITRATION Many refusals to meet payments when due are based, as shown above, upon complaints, whether justified or otherwise, of the foreign buyer as to quality, method of shipment or time of shipment, or some


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