01 Preface
In import and export transactions, payment arrears by overseas buyers are the most common cross-border commercial disputes. Most small and medium-sized foreign trade enterprises have cognitive misunderstandings when safeguarding their rights. They only claim the principal of arrears and ignore the legally recoverable overdue losses, failing to make up for capital occupation costs and performance losses. Few enterprises are aware that under judicial practice, overdue payment interest and contractual liquidated damages can be claimed simultaneously without constituting repeated compensation, which is a core profit point for foreign trade payment recovery rights protection.
02 Core Legal Basis
In accordance with the Contract Part of the Civil Code of the People's Republic of China, if a party fails to perform the payment obligation within the time limit stipulated in the contract, the observant party has the right to claim overdue payment interest to compensate for the statutory loss of capital occupation. If the cross-border sales contract clearly stipulates clauses on liquidated damages for overdue payment, the observant party may claim both interest and liquidated damages. The people's court will only appropriately reduce the total amount if the sum of the two fees is far higher than the actual loss, rather than directly rejecting the dual claim.
03 Core Differences Between Interest and Liquidated Damages
Overdue payment interest is a statutory compensation that does not require special contract stipulations. As long as overdue payment occurs, it can be calculated based on the LPR released by the National Interbank Funding Center, serving as mandatory statutory compensation for capital occupation losses.
Overdue payment liquidated damages are contractual liabilities for breach of contract based entirely on contract clauses. They are mainly used to punish the dishonest acts of the breaching party, compensate for enterprises' lost expected profits and cross-border performance costs, and adapt to the industry characteristics of foreign trade transactions including long cycles, high logistics costs and difficult cross-border rights protection.
04 Exceptions Where Dual Claims Are Not Supported
First, if the total amount of interest and liquidated damages is significantly higher than the enterprise's actual loss, the court will appropriately reduce the total compensation upon the breaching party's application for adjustment. Second, if the contract clearly stipulates that "liquidated damages cover all losses and no additional interest will be calculated", the contract stipulation shall prevail and dual claims are not allowed. Third, if the enterprise cannot prove actual losses such as capital occupation and performance consumption, the claim for high liquidated damages will hardly be supported by the court.
05 Practical Legal Suggestions
When signing cross-border sales contracts, enterprises shall improve breach clauses, clarify the calculation standards of overdue payment interest and the proportion and calculation method of liquidated damages, and secure the legal basis for dual claims. After payment is overdue, send reminder letters and emails in a timely manner, retain complete reminder records, and fix the facts of breach and the starting time of overdue payment. In litigation, accurately calculate losses and submit a complete evidence chain to maximize compensation.