Payment

The coffee remains the property of the sellers until it has been paid for in full.   No third party can lay claim to any coffee that has not been paid for. This is important when documents are sent in trust. (See Conditions of payment earlier in topic 04.02.08.) If a buyer is declared insolvent after the documents are received but before they have been paid, then the judicial authorities (or liquidators) have no claim to the goods, although in some countries national insolvency law takes precedence over individual contract stipulations. How far sellers can enforce this clause in European Union and other importing countries therefore depends on local law.

In the United States there are no doubts in this respect. When invoked, bankruptcy law (11 USC365 (e)1) overrides all GCA terms and conditions. Most coffee is sold on payment terms in the United States and Canada and the risks are great. Selling net 30 days from delivery means the seller is granting the buyer possession 30 days before payment. If the buyer goes bankrupt, the seller may lose the value of the coffee.

There can even be problems with payments that are made within the 90 days prior to a bankruptcy. This is called the preference period and if the liquidator or trustee can show that the payments were not normal (i.e. extraordinarily late or extraordinarily early), then a supplier might even be forced to return the payments to the bankruptcy pool.

ECF and GCA contracts both state that letters of credit must conform exactly to the contract, must be available for use from day one of the agreed shipping period, and must remain valid for negotiation for 21 calendar days after the last date shipment can be made. This allows time for the seller to obtain all the required documents and possible consular visas.