Getting paid by U.S. buyers: a guide for Turkish exporters and sellers

Pick the payment method for the risk

Note 1

Letters of credit: where sellers lose money

Under the Texas UCC (Business & Commerce Code §5.108), the issuing bank must honor a presentation that appears on its face strictly to comply with the credit. It has until the end of its seventh business day after receiving the documents to pay or give notice of discrepancies.

Strict compliance means a misspelled name, a late shipment date or a missing certificate can let the bank refuse. Have trained staff or your bank prepare and check the documents.

Talk to your bank before the buyer applies for the credit: which transactions suit an LC, what it costs, and who pays the fees. You and your bank must be satisfied with the buyer's bank.

The credit can choose the law that governs the issuer's liability, and that law need not relate to the deal (§5.116). Read that clause before you accept.

Escrow and platform payments

Escrow is a form of cash in advance: a third party holds the buyer's money, you ship, the buyer inspects within an agreed period (trade.gov's example is five days), and the funds are released. If the buyer returns the goods during inspection, you are not paid.

Check that the escrow provider is licensed or accredited, and agree in writing who pays its fee. This guide does not recommend any provider.

Online marketplaces pay sellers under their own seller agreements, and those agreements control payment holds and disputes.

Write the contract so it works in the U.S.

• Get it in writing. In Texas, a contract for the sale of goods for $500 or more is generally not enforceable without a writing signed by the party you want to enforce it against (§2.201). Between merchants, a written confirmation counts against the receiver unless they object in writing within 10 days.
• Watch the forms. When a purchase order and your acceptance contain different terms, §2.207 decides which terms join the contract. Between merchants, additional terms generally join unless they materially alter the deal or draw an objection, so put payment date, late-payment interest, retention of title and forum in a document both sides sign.
• Know which law applies. Turkey (in force 1 August 2011) and the United States (in force 1 January 1988) are parties to the UN Convention on Contracts for the International Sale of Goods. It applies automatically to sales of goods between businesses in the two countries unless the contract excludes it (CISG Articles 1(1)(a) and 6). Writing only “Texas law” may not exclude it.
• Choose law and forum on purpose. Under the Texas UCC, parties may choose the law of a state or nation that bears a reasonable relation to the transaction (§1.301).
• Consider arbitration. Both countries are parties to the 1958 New York Convention (the U.S. since 29 December 1970, Turkey since 30 September 1992), which provides for the enforcement of foreign arbitral awards.
• Court judgments. A Texas court recognises a final foreign-country money judgment unless an exception applies, such as no impartial tribunal or no jurisdiction (Civil Practice and Remedies Code Chapter 36A). A U.S. judgment is enforced in Turkey through a tenfiz case, which requires reciprocity among other conditions (Law No. 5718, Articles 50–54).
• Mind limitation clauses. The parties may shorten the 4-year limitation period for sale contracts to no less than 1 year, but may not extend it (§2.725).

Screen the buyer, including for sanctions

Before you ship on credit, confirm the buyer exists and who owns it: the state business registry where it is formed, its bank details and trade references.

Search the buyer, its owners and its bank on OFAC's Sanctions List Search, which covers the SDN List and OFAC's non-SDN consolidated lists.

Under OFAC's 50 Percent Rule, an entity owned 50% or more, directly or indirectly and in the aggregate, by blocked persons is itself blocked even if it is not listed. U.S. persons may not sign contracts signed for the other side by a blocked individual.

U.S. persons, including U.S. companies and banks, must comply with OFAC sanctions. Non-U.S. persons are also prohibited from causing U.S. persons to violate sanctions, so a Turkish seller paid in dollars through U.S. banks is affected.

If screening shows a possible match, compare full names, dates of birth, addresses and registration numbers before acting (OFAC FAQ 5). Persons subject to OFAC rules must keep records of such transactions for at least 10 years (31 CFR 501.601). For blocked or rejected payments, see our OFAC page.

When a U.S. buyer does not pay

1. Stop further shipments on credit and collect the contract, purchase orders, invoices, bills of lading, proof of delivery and all messages.
2. Send a written demand for the exact amount with a deadline. In Texas, a claimant represented by an attorney can recover attorney's fees on a claim for an oral or written contract or a sworn account, if it presented the claim and payment was not made within 30 days (Civil Practice and Remedies Code §§38.001–38.002).
3. Notify your insurer if you have export credit insurance. Türk Eximbank's short-term policy, for example, requires overdue invoices to be reported within 60 days of the due date and a claim within 90 days.
4. Use the forum in the contract: arbitration, a Texas court or another court. Texas justice courts hear civil claims up to $20,000, excluding interest (Government Code §27.031).
5. Mind the deadline: sue on a sale of goods within 4 years of the breach (§2.725); a suit on a debt also has a 4-year limit (§16.004).
6. Enforce where the assets are. A judgment or award is collected where the buyer holds assets, so plan the forum with that in mind.

Points on the Turkish side

Türk Eximbank, Turkey's export credit agency, offers short-term receivables insurance for credit sales of up to 360 days. The U.S. EXIM Bank's insurance supports U.S. exports only.

Turkish rules on bringing export proceeds into Turkey also apply to you; your Turkish bank can confirm the current requirements before you agree long payment terms.

How Merit can help

Merit's U.S.-licensed attorneys (Nora Busra Turan: Texas, New York, Maryland; Beyza Candelen: New York, New Jersey, Pennsylvania) draft and review sales and distribution contracts under U.S. law, send demands, handle U.S. collection steps and answer OFAC questions. See contracts.

The firm's lawyers licensed in Turkey (Istanbul Bar) handle the Turkish-law side, such as contracts governed by Turkish law and tenfiz of U.S. judgments in Turkey. This guide is general information, not legal advice, and it does not endorse any bank, platform or escrow provider.