PROTECTING THE INTERESTS OF EXPORTERS

PROTECTING THE INTERESTS OF EXPORTERS IN INTERNATIONAL TRADE AGAINST THE RISKS OF IMPOSSIBILITY OR IMPRACTICABILITY OF

This case study addresses various aspects of the problems posed to exporters by extraordinary international conditions or circumstances which may prevent it or its buyer from performing or otherwise produce unacceptable levels of risk. In Tsakiroglou & Co., Ltd. v. Noblee Thorl GmbH (1962) A.C. 93 House of Lords, a buyer entered into a contract with a supplier for the delivery of Sudanese groundnuts at a fixed price. The 1956 Arab-Israeli war resulted in the closure of the Suez Canal presenting to the exporter the alternatives of performing the contract by shipping the groundnuts via the Cape of Good Hope at a transport cost 100 percent higher than that stated in the contract or failing to perform. The exporter chose not to perform and was ultimately held liable by a British court for its failure to do so. In Transatlantic Financing Corp. v. United States, 312 F. 2d 312 (1966) (D.C. Cir.), an American shipper contracted with

the USG to ship wheat to Iran, performed the contract even though the same Arab-Israeli war caused it to ship the wheat around the same Cape and sued the USG for the extra transport costs it incurred. The D.C. Court of Appeals held that the exporter could not recover those costs. These and other cases illustrate the high risk nature of international sales and transportation con

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tion in the buyer's country occurs. The exporter performs only to discover that before the system or plant, which operates perfectly, has been accepted by the customer, which lacks hard currency and is unable to pay because of the terms of the USG financing. Does the exporter have any legal recourse against the USG? Probably not. How can it protect itself in the future? What are its alternatives in this and other political risk situations? Alternative Courses of Action Apart from pursuing their legal remedies, the exporters in the two court cases and the hypothetical situation cited above were damned if they performed or if they did not perform. Unacceptable risks were involved in either case. 1. Insuring against the risks. Political or force majeure type insurance coverage is available, but its costs can be very high and in some types of situations, for example, the liabilities arising out of the export of a nuclear power plant, may be beyond the financial capability of the insurance carriers offering the coverage. The insurance alternative should be pursued and costed, but an international exporter needs to take the extra step of investigating the capacity of the insurers and the possibility of turning to broader reinsu

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