BUSINESS ETHICS

Evening Post, Volume CXXIII, Issue 51, 2 March 1937, Page 12

BUSINESS ETHICS

"A TIMELY"WARNIN£

MEETING SIGHT DRAFTS

"Evening Post," March 2. Disapproval of the practice of delay in meeting sight drafts is expressed by the official organ of the Auckland Chamber of Commerce. It is observed that during the past few years when business was depressed sellers were in the mood to grant concessions to buyers, and some of them were willing to grant almost anything a buyer required in order to retain the business. "This led to many instances of abuse. And one of these abuses on which the authority quoted lays some emphasis is "the practice among certain business ■firms of not paying Sight drafts on presentation, but returning them -to the presenting bank with some answer such as 'present again on arrival of vessel carrying ' the goods.'' This system, it is moticed, appears to be growing, and fa the interests of business firms it sfaould be checked. The banks generally!, advise the drawers that their drafts are* unpaid. In many cases no reason is .-stated, so that the drawers, becoming apprehensive, write to find out why drafts were not honoured on presentation in accordance with contract. Of course, by the time such letters of inc^uiry are received, the drafts concerned' have usually been paid long since. - Nevertheless, such happenings cause uneasiness in the minds of oversea htouses who are not very familiar with > the casual treatment accorded to drafts by many New Zealand business hotsses. RECENT INSTANCES. Several cases of- this undesirable practice have been .{reported to the Auckland Chamber' of Commerce recently. Two of such instances arc given. In one case,:at is reported that a New Zealand firm bought goods in December for March-April shipment, with payment by sifiht draft. The contract note was duly (prepared and submitted for signature, i The clause setting out terms of payment was, however, struck out and the contract note surcharged with a rubber stamp as follows: —"This>order isjjplaced subject to payment on \ arrival.' of vessels in the port of Auckland." (The fact .of this being a rubber stamp indicates that the firm concerned isv'evidently. making a practice of this sort) of thing,:it is remarked. "When largfe business houses descend to this sort Vof thing it must tend to create an unfavourable impression, and have a serious effect on overseas firms doing business with New Zealand." I i THE KICK-BACK. . Apart from any '.consideration of hardship, the Auckland Chamber sees the matter in a morei serious aspect. -"In1 the selling of New Zealand's produce, the customary th^ng is to require ; buyess to establish letters of credit which provide payments at time of ship'rnent. In the case of wool, for instance, payment is deirianded fourteen after the fall of hammer, irrespective of whether the godds are actually shipped or not. This* means that ,buy_ers are standing outa.of their money for a long time before-they get their goods. ■ "Because of these 'Very stringent terms New Zealand insists on, New Zealand business people;, when the position is reversed and [they are the buyers, should be partScularly careful to at least honour all »sight drafts on .presentation." , ; ; The system :of payment ;by "sight" draft is accepted as vary' convenient;' but, if it is abused, the time may come when the banks will exer,t pressure and Insist on New Zealand business houses establishing letters of cqsdit for New .Zealand purchases in. the! same way as;overseas buyers of New jZealand produce are required to do. j "This would be an unhappy day, but, it would be .solely due to the growth of the undesirable practices just cited."