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similar reason. Where a satisfactory settlement cannot be reached, there has been established, in most of the principal foreign markets, machinery whereby disputes of this character may be arbitrated. In many instances, American chambers of commerce abroad specialize in this work. Some countries have compulsory arbitration laws, while others merely provide by law means of arbitrating commercial disputes voluntarily. The Commercial Laws Division maintains full and up-to-date information on this method of settling disputes, which is now being used more widely than ever before. Private associations concerning themselves exclusively with furthering the idea of commercial arbitration have been organized in this country and abroad for a number of years. Their work has resulted in the passage of many of the laws that have been found so helpful in eliminating expensive, and often unnecessary, legal action.

DRAFTS UNPAID UPON PRESENTATION (D/P DRAFTS)

When drafts are drawn so that the documents carrying title to the goods are surrendered only against payment, the risk of loss is considerably mitigated, although there is no assurance that even these drafts will be paid. If they are not paid, the goods remain in customs or in warehouse subject to the orders of the shipper.11

The shipper may either resell the goods or ship them to another destination, or back to the point of origin. In the one event, he may be faced with some loss, and in the other two he is sure to have to advance the freight charges.

THE COMMODITY AND LOCALITY CONSIDERATIONS

Of course, in the case of goods specially ordered for a given market or special purpose, such as machinery built to specifications, the exporter should always require part cash with order, and balance by letter of credit-for such material is often a dead loss to the shipper if the draft is refused. Goods in general demand, for which there is a ready market, can often be sold and documents drawn against payment with practically no risk that in case the drafts are refused they cannot be resold at prices that will take up the draft. As pointed out above, however, this is not always true with respect to products whose market prices fluctuate to any extent or in markets where exchange is unstable. It is also quite difficult to dispose of such goods in small markets abroad where the demand may be very limited. In such cases, part cash with order is the only safe method to pursue.

INSTRUCTIONS TO THE BANK

All foreign-exchange banks furnish their customers with instruction sheets to be attached to each draft drawn, upon which they are requested to note instructions as to how the draft is to be presented and what is to be done by the correspondent bank (which becomes

11 In Venezuela, goods are deliverable to the consignee on a "To order" bill of lading without presentation of the bill of lading. American shippers, therefore, ship goods to their own agents who deliver the goods only after the draft has been paid by the buyer. In Columbia, while the same system is in effect, consignees unable to produce the bill of lading must file bond with the Government for double the value of the merchandise as a protection not only to the Government but to any person having a legal right to the goods. Such persons, however, must recover from the Government in case of loss.

the custodian of the goods) in case the draft is refused. Too much care cannot be exercised by the exporter in filling out these instruction sheets. In addition to all necessary information about the draft, such as the amount, the date, the drawer, and the drawee, they contain blank spaces where the exporter may indicate the bank through which the buyer has requested that the draft be presented to him; whether the documents are to be surrendered against payment (D/P) or acceptance (D/A); whether, in case of refusal to pay or accept, the draft should be formally protested; whether, at maturity, an accepted draft should be extended; and the name of the exporter's foreign agent on the ground, who may be notified in case of refusal to pay or accept. Usually, there is also a space where the exporter may indicate whether he wishes the bank to act as his agent in any disposition of the goods indicated. The importance of all these instructions is readily understood. Many buyers have special reasons for wishing the draft presented through the banks they designate, because of special credit arrangements with those banks. The importance of designating whether documents are to be surrendered against payment or acceptance is obvious. The importance of protest is frequently overlooked by exporters. In many countries, however, a repudiated draft has no standing in court unless a formally notarized statement of the facts, technically known as "protest," is attached. Unless the bank is authorized to do this, charging the fee to the exporter, or adding it to the face of the draft, subsequent suit may be vitiated. Instructions as to extension will be readily understood, as will the need for designating specifically who should handle the disposition of the rejected merchandise.

CREDIT INSURANCE

There are few facilities, either private or official, open to United States exporters for insuring against the losses likely to be incurred under the above contingencies. Formerly, a private organization in this country undertook to insure United States exporters against the insolvency of their foreign customers, but this has now been discontinued. In its place a reciprocal interinsurance exchange has been established which covers its own subscribers against losses due to the insolvency or uncollectibility at law of their foreign accounts up to 75 percent of any credit approved in advance, based upon a credit checking and rating service. Aside from this, the only guaranty that the exporter has is that provided by careful investigation of the credit risk, and the ordinary precautions in complying with shipping instructions and drawing his drafts, watching the general credit situation so that risk of loss may be reduced to a minimum.

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