Articles Posted in US Court of Appeals for the Third Circuit

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The creditors shipped goods via common carrier from China to World Imports in the U.S. “free on board” at the port of origin. One shipment left Shanghai on May 26, 2013; World took physical possession of the goods in the U.S. on June 21. Other goods were shipped from Xiamen on May 17, May 31, and June 7, 2013, and were accepted in the U.S. within 20 days of the day on which World filed its Chapter 11 petition. The creditors filed Allowance and Payment of Administrative Expense Claims, 11 U.S.C. 503(b)(9), allowable if: the vendor sold ‘goods’ to the debtor; the goods were "received" by the debtor within 20 days before the bankruptcy filing; and the goods were sold in the ordinary course of business. Section 503(b)(9) does not define "received." The Bankruptcy Court rejected an argument that the UCC should govern and looked to the Convention on Contracts for the International Sale of Goods (CISG). The CISG does not define “received,” so the court looked to international commercial terms (Incoterms) incorporated into the CISG. Although no Incoterm defines “received,” the incoterm governing FOB contracts indicates that the risk transfers to the buyer when the seller delivers the goods to the common carrier. The Bankruptcy Court and the district court found that the goods were “constructively received” when shipped and denied the creditors’ motions. The Third Circuit reversed; the word “received” in 11 U.S.C. 503(b)(9) requires physical possession. View "In re: World Imports Ltd" on Justia Law