Legal Definitions - cash-and-carry clause

A cash-and-carry clause is a specific condition within a trade agreement or regulation that allows for the sale of certain goods, often those that might otherwise be restricted or subject to special controls, under two strict requirements: the buyer must pay for the goods in full immediately (cash), and the buyer must also be responsible for transporting the goods themselves (carry). This type of clause is typically designed to limit the seller's direct involvement, financial risk, or logistical burden associated with the transaction, especially when dealing with sensitive items or particular buyers.

• Example 1: International Sanctions Relief

  Imagine a country facing international sanctions that severely restrict its ability to import certain medical supplies. To ensure humanitarian aid can still reach its population without directly benefiting the sanctioned government, an international body might allow a specific non-governmental organization (NGO) within that country to purchase these supplies under a cash-and-carry clause. The NGO would have to pay for the medicines upfront and arrange for their own secure transportation from the seller's port, thereby ensuring the selling nation isn't involved in the logistics or potential diversion risks within the sanctioned territory.

  Explanation: This illustrates the clause by allowing access to otherwise restricted goods (medical supplies under sanctions). The "cash" requirement means the NGO pays immediately, and the "carry" requirement means the NGO is responsible for all transportation, minimizing the seller's risk and involvement in a sensitive transaction.

• Example 2: Strategic National Reserves

  During a severe national shortage of a critical raw material, a government might decide to release a portion of its strategic reserves to private industries. To manage the distribution efficiently and avoid becoming a logistics provider, the government could implement a cash-and-carry clause. Companies needing the material would be required to pay the full price immediately and send their own trucks and personnel to designated government warehouses for pickup, rather than relying on government-arranged delivery.

  Explanation: Here, the critical raw material is a restricted good from a strategic reserve. The "cash" aspect requires immediate payment from the companies, and the "carry" aspect mandates that companies arrange their own transport, offloading the logistical burden from the government during a crisis.

• Example 3: High-Value, High-Risk Commercial Goods

  A specialized manufacturer produces advanced electronic components that are highly valuable and could potentially be used in sensitive technologies. When selling these components to certain international clients, the manufacturer might insist on a cash-and-carry clause. The client would need to make a full payment before the components are released, and then arrange for a specialized, insured logistics company to pick up the goods directly from the manufacturer's secure facility and transport them to their destination. This reduces the manufacturer's liability for loss or damage during transit and ensures payment before the goods leave their control.

  Explanation: This scenario involves high-value, potentially sensitive goods. The "cash" requirement ensures the manufacturer receives payment upfront, mitigating financial risk. The "carry" requirement places the responsibility for secure transportation entirely on the buyer, reducing the manufacturer's exposure to shipping risks and potential misuse during transit.