Risk tip: the buyer of overseas epidemic country claims force majeure and its response

With the development of the new crown epidemic, 151 countries and regions around the world have been confirmed cases (up to 5 p.m. on March 16, Beijing time), including Italy, Iran, South Korea, Spain, Germany and other countries. The impact of the new crown epidemic on the uncertainty of Global trade is increasing. According to the change of the epidemic situation, China Export Credit Insurance Corporation made the following tips on the risk of rejection and non payment of overseas buyers:

1、 New changes in contract performance

With the control of domestic epidemic situation, the delivery risk of Chinese enterprises in international trade is gradually decreasing. However, due to the spread of foreign epidemic situation, the risk of foreign buyers' rejection of goods and payment for goods due to epidemic situation is further increasing. Especially, the buyers in the epidemic country may quote the legal provisions or contract terms of "force majeure", which hinders Chinese enterprises' claim for contract rights.

2、 Requirements for foreign buyers to claim "force majeure"

The common situation in which the foreign buyer claims the "force majeure" clause of the contract is that the foreign government issues an injunction to prohibit the entry of Chinese materials. However, it should be noted that the injunction of the foreign government is not all the conditions of the "force majeure" clause. Chinese enterprises still need to carefully check other elements to safeguard their legitimate rights and interests, mainly including:

（1） Whether the trade terms selected in the commercial contract stipulate the risk transfer after the buyer receives the goods

For example, the trade terms such as FOB and CIF are selected in the business contract, and the risk of goods is transferred to the buyer along with the shipment of goods on board. At this time, the control measures taken by the buyer's country (region) cannot require Chinese enterprises to bear the risk of force majeure.

（2） Whether the government ban has been issued or implemented at the time of signing the contract.

The foreign government ban must occur after the contract is signed and before the contract is terminated. Otherwise, the foreign buyer refuses to perform the contract without the consent of the Chinese enterprise, which cannot constitute "force majeure".

（3） At the time of conclusion of the contract, the foreign buyer could not reasonably foresee that the government of the host country might take control measures.

At present, the foreign government's control measures are generally limited to prohibiting the entry of materials from China. For example, the foreign buyer's country is only the upgrading of the customs inspection and quarantine policy or the need to take measures of isolation for 14 days, so the buyer shall not refuse to accept the goods.

（4） Whether the foreign buyer is at fault for the contract performance affected by the control measures.

After the promulgation of the foreign government's ban, the foreign buyer shall take reasonable measures such as timely notifying the exporter to suspend the shipment, negotiating to choose the third country to receive the goods and so on in view of the risk of non receiving goods. For the part that the buyer's fault causes the loss expansion of our enterprise, we can't claim "force majeure".

3、 Countermeasures for Chinese export enterprises

（1） Actively communicate with the buyer to ask for and retain relevant supporting documents.

The export enterprise shall require the foreign buyer to provide the supporting documents for its "force majeure" claim, including the legal documents issued by the government prohibiting the receipt of Chinese materials, and the supporting materials for the buyer's failure to perform the contractual obligations such as receiving goods or paying for goods due to the epidemic situation and taking reasonable measures.

（2） Arrange credit insurance products of China export credit insurance company in advance.

China SINOSURE provides insurance products covering a variety of political and commercial risks, such as the import of goods or services purchased by the buyer, which are prohibited by laws and regulations or administrative measures issued by the buyer's country or region, to protect export enterprises from exploring overseas markets.

（3） Consider entering into a supplementary agreement with the buyer.

If the export goods of our enterprises are non-general goods and have been arranged for production, we can consider to reach a supplementary agreement with the buyer to postpone the performance, and continue to perform or choose other performance methods such as third country delivery after the government's ban is lifted.

（4） Contact forwarder or shipping company in time.

To know the current status of the goods, the implementation of the government's prohibition of the destination country and other relevant epidemic prevention situations.

（5） Find new buyers in time.

If the goods belong to general goods, the enterprise can consider to find a suitable third country new buyer.