For businesses that seek to increase available working capital by borrowing against the merchandise and raw materials the company buys — before the goods arrive in the US — the laws that apply to the so-called “goods in transit” are often overlooked. Whether unknown or unheeded by companies, overlooking these laws presents a number of challenges to the company and its asset-based lender. These intricate issues arise in any international contract for the sale of goods, not just where a lender is financing the buyer.
The landscape is, indeed, complex. Which laws govern what part of the purchase contract? What laws govern the transportation contract? The perfection of the lender’s interest in the goods? A dispute among the seller, the American company, its lender, and the logistics providers?
These are not merely academic questions. The answers affect the essential rights and liabilities of all parties concerned and often require sophisticated analysis of the underlying transactions and conflicts of law rules in different countries.
BRCSM’s Tom Hemmendinger co-led the roundtable gathering on these issues at the recent American Bar Association Business Law Section in April of 2016, highlighting the surprising extent to which US federal law and foreign law apply to a transaction commonly thought to be governed by the Uniform Commercial Code.