Be sure to specify the conditions for terminating the contract and refunding the advance payment in the contract.
The seller’s refusal to shipment is a major risk in cross-border e-commerce, as well as the biggest concern of the buyer.
Although the existence of fraudulent sellers is inevitable, honest businessmen and fair trade are still the mainstream. Then why do they refuse to ship the goods sometimes?
Given the outbreak of the COVID-19 has exerted a great impact on the supply chain, many sellers are more or less affected and therefore reluctant to make shipments.
The biggest reason for non-shipment is the gigantic increase in freight and raw material costs:
1. Freight
If the seller and the buyer agree to be bound by CIF, then the freight is borne by the seller. In the past year, international logistics prices have soared. For the seller, once it ships the goods and pays the freight, it is very likely to lose money.
2. Raw material costs
Due to the economic stimulus package of various countries after the epidemic, raw material costs have generally increased several times. This leads to the estimated cost of the seller when receiving the order much lower than the actual cost, so for the seller, once it starts production, it is likely to lose money.
If the seller raises the product price due to the increase of freight and raw material costs, the trust between the buyer and the seller will collapse. The buyer will worry that if it yields this time, would the seller push its “luck” harder next time?
In this case, terminating the contract and refunding the deposit may be the best choice for both parties.
To sum up, we advise that:
First of all, when signing a contract or order, the buyer and the seller must add termination clauses for circumstances where the increase of costs renders the contract performance non-profitable.
Secondly, the buyer and the seller had better speed up the contract performance. The faster the shipment is made after signing the contract, the less likely will the buyer and the seller be affected by cost fluctuation.
The Cross-border Trade Dispute 101 Series (‘CTD 101 Series’) provides an introduction to China-related cross-border trade dispute, and covers the knowledge essential to cross-border trade dispute resolution and debt collection.
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Photo by Lau keith on Unsplash
Contributors: Meng Yu 余萌
