The place of performance in international trade contracts
China’s law has no clear provisions on the place of performance of foreign-related contracts, which is basically determined by the prior agreement of the parties or according to international practice.
The place of performance of an international trade contract refers to the place where the debtor performs its contractual obligations and the creditor accepts the performance. The requirement of the law on the place of performance is to perform in strict accordance with the provisions of the contract, because it is related to the cost burden, performance time and even risk liability of both parties.
The place of performance commonly used in international trade is delivery at the port of shipment. The loading port is also called the start-up port. Under the condition of FOB (FOB), the buyer shall bear the responsibility of signing the transportation contract, pay the freight and send the ship to the agreed loading port on time. The seller completes the obligation of delivery by handing over the goods to the carrier at the port of shipment and obtaining the transport documents. Another commonly used place of performance is delivery at the port of destination. Under the CIF (cost, insurance and freight) and CFR (cost and freight) delivery conditions, the seller is responsible for loading the goods on the ship to a specific port of destination, and the seller signs a transportation contract to pay the freight to the carrier. Different ports of destination have a significant impact on the seller’s export costs.
Because the price terms determine the different delivery conditions and the different characteristics of different delivery conditions, it is decided that under the FOB condition, it is more for the buyer to make an article on the choice of the port of shipment in order to cheat the seller;
[case] missing words, freight costs more
A Chinese company signed a contract with an American customer to import certain goods. The contract stipulates delivery at the western port of the United States. However, when our company opened the letter of credit, it wrote “delivery at the port of the United States”, omitting the word “West”. After receiving the letter of credit, the United States informed us to receive the goods at a port in the eastern United States, so we had to notify the ship to receive the goods at that port, resulting in an extra freight expense.
In this case, due to China’s careless L / C issuance, the United States had the opportunity to cheat and change the loading port, which caused inconvenience and losses to China, but the United States paid less.
The modes of transportation in international trade include air transportation, land transportation and sea transportation, but the most common mode of transportation is sea transportation. In this mode of transportation, the main attention to the problem of loading port is as follows:
- The inland city cannot be the loading port, otherwise the contract cannot be performed. If your company is located in Kunming and adopts the mode of maritime transportation, the loading port cannot be written as Kunming, because Kunming is not a coastal port. If it is written as Kunming, when the ship is chartered by a foreign party (FOB condition), its ship cannot enter Kunming; If you are responsible for chartering transportation (CIF or CFR conditions), you cannot obtain the transportation documents with Kunming as the loading port, so you cannot negotiate the payment for goods.
- Attention must be paid to the choice of loading port. When FOB conditions are adopted in the contract, the buyer shall be responsible for chartering the ship for transportation. The port of shipment is of great significance to both parties, and the port of shipment must be specified in the contract. The seller is not responsible for the port of shipment under the charter party or CFR. According to the customary practice of international trade, in order to facilitate the seller’s shipment, the port of shipment is mostly proposed by the seller and confirmed by the buyer. When we are the seller, we shall comprehensively consider various factors, such as the handling capacity of the port, shipping conditions and inland transportation, and choose a port convenient for our delivery, so as to ensure the timely and smooth performance of the shipping obligations. In order to have some flexibility in performance, two or more loading ports can be selected in the contract, such as “China Tianjin Xingang / Dalian Port”, which shall be selected by the other party. Some can write “Chinese port”. When we are the buyer and the other party is the seller, and the other party proposes the port of shipment, we should consider various factors such as route, voyage and transportation expenses to decide whether to accept it. After comprehensive consideration, if it is unfavorable to our own side, we should negotiate with the seller and choose the loading port acceptable to both parties. In addition, as the buyer, we must be meticulous when opening the letter of credit, and the filling of the port of shipment must be completely consistent with that determined in the contract, so as to avoid the seller taking the opportunity to cheat.
When the contract stipulates that the place of performance is the port of destination, in actual business, the port of destination is mostly the place where the buyer accepts the goods. In order to facilitate the buyer’s receiving and transshipment, it is customary for the buyer to propose the port of destination and the seller to confirm it. In this case, the place of performance fraud is carried out by the buyer against the seller. In order to prevent the buyer from cheating the seller, when the buyer proposes the port of destination to be confirmed by the seller, the seller should also pay attention to whether the port of destination mentioned by the buyer is a coastal port. Especially when trading with landlocked countries, we must choose the port where we can arrange transportation, and should not take inland cities or inland river ports as the port of destination. Otherwise, we will bear the inconvenience and high cost of inland or inland river transportation and suffer heavy losses. Secondly, we should pay attention to the uniqueness of the port of destination. In the international trade contract, when we are the seller and responsible for chartering shipping, we must pay attention to the problem of the port with the same name. If there are ports with the same name in different countries, the name of the country to which the port belongs shall be added. If there are ports with the same name in the same country, the specific port shall also be specified. For example, the words “East” and “West” shall be added to the contract to limit the specific port, so as to avoid unnecessary misunderstanding, fraud, disputes and losses. In addition, the wording of the port of destination on the relevant documents should be consistent. The international trade rules are strict, especially the documents related to the letter of credit must be strictly consistent with the letter of credit, that is, the bank will pay only if the documents are consistent. If our documents make a slight mistake, it will lead to the other party’s fraud or transaction failure, resulting in heavy losses.