UCC-Filings

For the commercial distribution of goods, the American system puts the seller at a disadvantage: if the buyer doesn’t pay, no order for payment procedure will help, because there is none. An extended reservation of title cannot be asserted, because it is not part of the legal system. Going to court often does not make financial sense because of the ‘American rule’ (where each party must bear its own court and attorneys’ fees, regardless of the outcome). Due to the complex civil procedure system, with its expensive discovery process, claims below USD 100,000 can rarely be enforced in a cost-effective manner, because they are largely used up by the cost of the proceedings. The only course of action is for the European supplier to register a security interest, according to the rules of the Uniform Commercial Code (UCC). The UCC is one of the few written laws that Americans enacted at the national level. One section stipulates that the seller of goods can register a lien to secure its purchase price claim, which gives it the right to satisfy its claim vis-à-vis third parties as a matter of priority. The UCC lien is commonly used and very helpful. It should definitely be used if parts of the purchase price are not paid on delivery.

We can draw up the necessary contractual security agreement in the purchase agreement or the general terms and conditions, and subsequently register the lien with the authorities. The attorneys’ fees for this work are reasonable, considering the protection it affords. In the U.S., this option is used thousands of times a day, whereas in Europe it is still relatively unknown.