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Pay attention to contract terms and


In respect of the Hanjin case, in a sales contract

which adopted group E, F or C Incoterms, even if the

goods did not arrive at the port of destination as

scheduled, the risk was transferred to the buyer once

the goods were shipped. Accordingly, the buyer

would be liable to pay the seller under the sales

contract. In contrast, in an arrival contract which

adopted group D Incoterms, as the seller had not

fulfilled its delivery obligations under the sales

contract, the buyer would not be required to pay the


The bankruptcy of a carrier is not normally within the

coverage of export credit insurance. Whether a seller

can claim the increase in freight for the reshipment of

goods from a third port to the port of destination

under marine cargo insurance depends on which

version of the Institute Marine Cargo Clauses is used.

The 1982 version specifically excludes losses arising

from the insolvency or financial default of the carrier,

whereas there is a possibility the losses could be

recovered under the 2009 version, depending on

whether the bill of lading held by the seller was

issued by Hanjin.

Sellers are advised to be mindful of the version of the

insurance which has been purchased and the

corresponding insurance coverage.

Beware of online fraud

In addition to logistics risks, sellers should also be

aware of online fraud. In recent years, there has

been a notable increase in email hacking, where

fraudsters use hacked information to inform the

buyer that the seller's account details have changed

and then make off with the proceeds.

In the event that the buyer becomes a victim of such

fraud, the buyer is still required to pay the seller,

unless the buyer can prove that the seller is a party

to the fraud, or that any losses were caused by the

seller's negligence. To minimize the risk of such

fraud, certain precautionary measures should be


One such precaution would be for the seller to inform

all its customers that in light of the growing risk of

online fraud, customers should seek verification if

they receive any email stating that the seller's

account details have changed. Sellers should also

make it clear to customers that payments should

never be made to third parties and when in doubt,

the customer must contact the seller for verification.

Written communications such as these ensure that

the buyer has no excuse to refuse payment in the

event of fraud. Sellers may also stipulate their bank

details in the sale and purchase contract and state

that payments must not be made to third parties. The

contract should also state that the seller would inform

the buyer by a designated officer in the event of any

changes to their bank details, and that the buyer is

obliged to confirm the authenticity of such notice with

the seller by phone as well. This may substantially

reduce the fraud risk.

KT Fung

Partner, Hong Kong

T: +852 2533 2868