Intepretative Theory On The Application Of PMSI

Purchase-money security interest(hereafter referred to as ‘PMSI’)is a new chattel mortgage rule introduced by The Civil Code of People’s Republic of China.As a responding measure to reliefing small and medium-sized enterprises from difficulties in financing,PMSI is of vital importance in conviniencing financing,free debtor from economical control of floating mortgagee and insuring the interest of purchase money creditor.Systematically,the introduction of PMSI allows title retention and finance leash to be partially under the rule of mortgage law system and endow them with publicity.Since PMSI doesn’t reduce the expectation of the creditor when floating mortgage is set,PMSI won’t damage the interest of the floating mortgagee.Yet due to the possibility of abusing,and the reduction of property of debtor,it could still,in fact,cause risk of reduction floating mortgage property eventually.The existing regulations on PMSI presents a doubt in its ligitimacy when comes to its priority over the new mortgage on the subject because of the possibility that PMSI could be abused to damage the right of the new mortgagee.The range of ‘purchase money’ should involve interest,liquidated damage,transportation cost and other necessary expense in pursuet of realizing PMSI.‘Delivery’should be restricted to actual delivery,for the fact that the moment of delivery could be confirmed voluntarily.It’s only possible to apply PMSI when the former mortgage is floating mortgage.The burden of proof on PMSI goes to those who claim PMSI.Based on the different role in the transaction,the factum probandum and the standard of proof should differ between vendor and other creditors.Compared to other mortgage set by other debtors on the same property,PMSI loses its priority.Merging several PMSIs between the very debtor and creditor is forbidden.PMSI is superior to the priority of contractor,but inferior to maririme lien.Normal purchaser is able to reject PMSI.Certain defaults still exist in the registor system of PMSI,such as the unjust high cost for the third party to raise objection,the eventual value of floating mortgage property be utterly reduced due to the over-use of PMSI,PMSI on vehicle is not able to registor through the Credit Reference Center(CRC)of People’s Bank of China,and the factors required for registoring PMSI being too simple.It’s possible to resolve such defaults by endowing the effect of afterward property clause with restriction,adding a period of objection after the registing period,promoting the connection between CRC and vehicle administration or such,and setting standard for registoring cautiously.