Date of Physical Delivery Under the UCC Determines Priority

Vendors who sell goods to a debtor pre-petition typically hold pre-petition unsecured claims unless they qualify for administrative expense status under § 503(b)(9) of the Bankruptcy Code, because the goods were delivered to the debtor in the 20 days preceding bankruptcy. Likewise, vendors who sell goods to a debtor after the bankruptcy has been filed would have those claims treated as administratives under § 503(b)(1)(A).

However, for international sellers, this analysis is not so simple. With shipment times up to 30 days or longer, these sellers could gain or lose administrative priority depending on whether the goods are treated as delivered when placed aboard a common carrier or when physically received by the debtor. After providing some basic background on methods of shipment, this article discusses two fairly recent cases analyzing issues unique to international sellers.

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