Dot The I’s And Cross Your Fingers
Small businesses that buy goods from overseas have been urged to pay close attention to a legal battle that has pitted listed Australian toy company Funtastic Limited against a former Chinese supplier.
The dispute concerns an infringement to intellectual property rights. Funstastic will probably be okay because it had warranties and indemnities built into the contract.
Intellectual property lawyer Trevor Choy,says a lesson has already emerged about the importance of warranties and indemnities within contracts, particularly if you are a small company buying from a large company.
This is a salutary tale for small to medium sized Australian importers. Funtastic is a listed Australian company and can afford a Pitt Street law firm.
A small importer can be the meat in the sandwich – buying goods from a large OS manufacturer and wholesaling to a large retailer or government department in Australia means you can get burnt at both ends.
If you’re starting-out or looking to grow, arranging loans may be financially out of the question and the legals daunting.
Unsecured import finance is an option. First, the manufacturer can be paid by a third party if you have a firm order from a reputable debtor in place. Second, you can attach a Letter of Credit (LC) with the order, which outlays the terms and conditions of the deal.
LCs can cover just about anything from indemnity for goods damaged in the shipping process through to product warranties, penalty clauses for late deliveries, and so on. In short, you can create an LC to fit the deal and significantly reduces your risks.
In addition, by sacrificing a small margin, you can significantly reduce your capital risk and obtain funding based purely on the transaction.
AR Cash Flow recently soft-launched an unsecured import finance product. You do not need strong assets or a solid credit history to apply for this service. Moreover, ARCF can provide direction on what should be included in contracts and LCs as one of its directors, Daniel Dunsford, is also a solicitor.