The Wrong Applications We Assume Right in Foreign Trade: My Reviews on the Terms of “Reclamation*, Debit/Credit Note**”

the obligation of bringing the export prices to the country, we began to spend an increasing  time on this subject.

However; I regret to say that our precious foreign trade experts who dedicated themselves to foreign trade and spend time, effort and capital to grow the export potential of our country ; carry on their commercial relationships using the terms that are wrong but somehow became traditional  without questioning instead of the terms and and the rules that have been accepted by the international trade applications and law.

About Reclamation

In the Turkish foreign trade practice, some words and word bundles like “Reclamation”, “Reclamation Applications” and “Reclamation Bill” are being used. Do not look them up in dictionaries for their meanings in other languages, do not ask about them using well-known internet search engines or do not thumb through books. These lexical bundles that have been used by our foreign trade experts  are terms that are hollow, vague and of no use besides being confusing. In our country, in various opinions, writings and the rulings of Turkish Tax Administration Office; there is an effort to make these words meaningful by relating them to the terms regarding the price reduction/discount, returning of the sold goods and penalty/compensation in the international trade of goods and services without an explanation of the origin, quality and the reason of usage of these bundles.

Down here I am sharing the pages containing the term “Reclamation” and what they mean from important resources about international trade and trade law written in English:

1)Vicente Gonzalet- Prida Diaz, Adolfo Crespo Marquez “After –Sales Service of Engineering Industial Assets- A Referance Framework For Warranty Management” Springer International Publishing 2014, various pages.

 Foreseeing and managing the risk of cost regarding the demand of return or payment according to the guarantee commitment provided to the customers have been evaluated.

2)Roger LeRoy Miller- Cengage Advantage Books- “Fundamentals of Business Law-Summarized Cases”– South Wstern College-West 2012, page 260.

In the legal text named “The Uniform Commercial Code”, the term was used meaning demanding the good sold regarding the unpaid cost of the good in case of the bankruptcy of the buyer.

3) Marcel Fontaine, Filip De Ly- “Drafting International Contracts- An Analysis of Contract Clauses”– Martinus Nijhoff Publishers Brill Academic 2006, pages 325 and 603.

The term was used in the French texts of the contract clauses regarding the demands in return  to the insurance obligations in the contracts and the breach of the purchasing obligations in the counter trade contracts.

4) Larry A. DiMatteo- “International Sales Law- A Global Challenge”– Cambridge University Press 2014, page 319.

During the arbitration started on the demand of the payment of the cost of the goods delivered in Austria in 1994, the term was used meaning the objection of the buyer to the seller’s bill.

5) John Felemega- An International Approach to the Interpretation of the United Nation Convention on Contracts for the International Sale of Goods ( 1980) as Uniform Sales Law– Cambridge University Press, page 511.

The term was used in a footnote bearing a resource regarding the United States Bankruptcy Law.

6) Fountoulakis Sc- “International Sales Law”, 2007, page 57.

The term was used to express the seller’s right to take the goods back regarding  the goods whose price was not paid.

7) Carole Murray, David Holloway, Daren Timson-Hunt, Schmitthoffs- “The Law and Practice of International Trade”– Sweet& Maxwell ltd. 2007, page 606.

The term was used as an expression of land improvement in printed FIDIC contracts which are contract examples used in construction projects.

As you can see above, in the international litterateur “Reclamation” does not mean price reduction/discount in the selling of goods and services or return and penalty/compensation. Because, it is not used as a generally accepted term in the international trade of goods and services (As understood from the examples,  in fact this term is similar to the “restitution/withdrawal” term in Turkish legal system and is used as a legal way of claiming rights).

Regarding the international law and the contact between parties, a set of right terms including “inspection of goods”, “notice of defect”, breach of contract”, “price reduction”, “damages” and “penalties” etc. should be used.  In all the international trade law books you can easily find these terms’ counterparts, reviews in litterateur and precedents formed by international case-law.

In this context, in the notifications handed in to the Turkish Foreign Trade experts or in the documents demanded by themselves , instead of the expression “Reclamation”;  the terms I cited above should be used in each situation and commercial records should be prepared  after the relevant documents containing the legal basis are provided.  Otherwise in a case of dispute, Turkish Foreign Trade experts will have to explain what “Reclamation Bill/Reclamation” entered in their commercial records is to both the authorized legal representative and the judicial organ. And this process will be very hard, maybe impossible and probably cause losses in rights.

About Debit/Credit Note

When it comes to “Debit Note” and “Credit Note”, these terms have counterparts because they are used in international accounting and financial transactions. They are especially used in the entering of accounts formed as a result of long-term procurement relations. In the research I carried out regarding these terms, I determined the following information in court verdicts.

1)In a verdict reached by German Tier Court in a lawsuit between the German seller and the Dutch buyer in 2000, it was accepted that a special way of payment method between parties could be built via this kind of credit note/debit note applications.

2)In a verdict reached by Belgian Court in 1997, it was decided that Credit Note could be organized between the Italian plaintiff and the Belgian defendant.

3)In a decision taken by International Chamber of Commerce Arbitrage in 1999, it was stated that the parties of dispute could carry out transactions by sending Debit Note reciprocally.

4)In the International Trade Manual 2011 published by the Association of British Chamber of Commerce, it was stated that the port cost payments resulting from the carriage contract could be done by monthly indebtments with these documents.

In our country, notifications named Debit/Credit Note are used by international traders widely. However, unfortunately  they are not recognized by Tax Administration Offices for the reason that they are not accepted as documents in many cases. If international traders want to be integrated in international trade increasingly day by day, this approach should be given up immediately. I believe that it is highly necessary to teach the international terms cited above instead of the term “Reclamation” and Debit/Credit Note applications to our international trade experts.

From the legal aspect, both the Debit Note and the Credit Note express a communication, a declaration of intention between the parties.  So, besides containing technical expressions like the crediting or the indebtment of the account, it should be concerted with the fundamental term set of the law that I cited above. In other words; it should cover the examination of the goods in the time determined, the notification of defect, the breach of the contract, price reduction, explanations of the loss and penalties and their basis.

Conclusion and Recommendations

1)First of all, let us give up using a fabricated term like “Reclamation” and stop being ridiculed in the international area. Let us build our foreign trade applications on terms that are appropriate to the solemnity  of foreign trade and foreign trade law, whose application have been reviewed by literature  and that are present in courts verdicts and that are predictable and defendable.

2)Regarding the Debit Note, in spite of the approach of the Turkish Tax Administration Office, if it is used by providing the provisions of the Currency Account Contract regulated in the article 89 and the succeeding articles of the Turkish Code of Commerce; I believe that it will make an incentive document  in the netting/agreement transactions and can not be denied by the Turkish Tax Administration.  In a field already gone through serious regulations by the Customs Office and Foreign Exchange Regime, it is clear that the practice formed by the Turkish Tax Administration regarding domestic problems will result in unfair competition in front of our international competitors.

3)The debit note you received has to cover the examination of the goods in the time determined, the notification of defect, the breach of the contract, price reduction, necessary explanations of the loss and penalties and their basis. When you receive a document not bearing these qualities and information, do not enter these kind of documents in your commercial records immediately without questioning. First of all, express your objection to the other party of the contract and notify them that the document is unjust and lacks basis. Thus, even if your commercial relationship with the other party ends in time,  you will have kept the right to demand the balance entered in the accounts unfairly in the period of limitation.

Footnotes

*The term “Reclamation” is used in Turkish foreign trade applications in the form of “Reklamasyon” and and the writer warns us that this term does not exist in Turkish and its wrong usage can result in problems in international trade.

**The writer also warns us that “ Credit/Debit Note” is not used in the right way by the Turkish foreign traders.