Table of Contents
- Cross-Border Contracts
- Interpreting Cross-Border Contracts
- Managing Disputes With an Importer
- Complying With Export, Customs and Quarantine Regulations
- Understanding Your Payment Obligations
- Complying With Product Liability and Safety Standards
- Complying With International Treaties and Sanctions
- Key Takeaways
Although selling your goods overseas can bring in plenty of new business revenue, dealing with business partners abroad and the process of exporting goods internationally is not without its complexities. These complexities can quickly turn into long-running nightmares if you are not careful. This article will unpack key legal issues when exporting overseas and how to avoid them.
Cross-Border Contracts
A critical way to manage risks with your overseas importer is to draft a comprehensive legal agreement. These agreements can take many forms and often go by various names, including:
- sales agreement;
- import agreement;
- export agreement; or
- terms and conditions.
Amongst other key terms, you should include a clause that clearly outlines when ownership of and risk for the goods will pass. In other words, will title pass from you to the importer once they make payment in full? Will risk pass once the goods leave the home country or only after arriving at the destination?
Drafting clear intellectual property (IP) clauses is also critical. Consider if you will continue to own any IP once you export the goods? If so, ensure your IP rights are safeguarded in the destination country. Also, be aware of any differences in IP laws and enforcement mechanisms.
Additionally, make sure that your agreement addresses data protection and privacy concerns, especially if personal data is being transferred across borders. Further, you must comply with data protection laws in both the home and destination countries.
The Australian Government is changing the law to protect consumer privacy after a series of high-profile data breaches and to bring the law into line with the safer and more protective laws in other regions. This fact sheet outlines what is expected in 2024.
Interpreting Cross-Border Contracts
When you are looking to export goods overseas, you most likely want to draft and sign a contract. If you meet the elements of a legally binding contract, you and the other side are bound by law to fulfil the terms of the agreement. When both parties are located in different countries, this naturally prompts the question: which country’s laws govern this contract?
You should include a specific clause in your agreement that explicitly states which laws will apply when interpreting the agreement. For instance, if you are based in Australia and your importer is from Hong Kong, which law will you want to govern your contract?
Continue reading this article below the formManaging Disputes With an Importer
It is important that your agreement outlines the dispute resolution procedures that will take place in the event a dispute arises. This can either take place in the same country of the governing law, or you can opt for a neutral dispute resolution body that is in neither yours nor the importer’s home country. Taking the above example, if you are located in Australia and the importer is in Hong Kong, you could choose the Singapore Mediation Centre.
You should seek legal advice immediately if you get into a dispute with your importer, as small issues can become larger problems that can be very expensive and time-consuming. Likewise, you might find yourself in front of an international commission. Several international arbitration commissions will hear disputes related to importing and exporting overseas. However, deciding which commission best applies can be a complicated and often very technical process.
Complying With Export, Customs and Quarantine Regulations
There are export control laws and regulations which restrict the export of certain goods, technologies, or services. Some countries also have strict quarantine laws, and if you do not comply with these, it can result in fines, restrictions or the destruction of your goods.
Ensure that you and the importer understand and adhere to any export, customs and quarantine regulations and any relevant licensing requirements or restrictions. In addition, check that you have obtained the necessary permits or approvals for the export of specific goods and that the goods are properly classified and documented for a smooth customs clearance.
Understanding Your Payment Obligations
Be aware of the relevant tax laws, currency exchange rates and fluctuations that may impact pricing and payments. Likewise, ensure you clearly outline payment terms in your export agreement and mitigate any risk of non-payment. A simple solution to this is requiring upfront payment in full or using an irrevocable letter of credit, where a guarantee for payment is issued by a bank. This means you will always have recourse to recover the cost of goods from your importer.
Complying With Product Liability and Safety Standards
Ensure you comply with the destination country’s product safety and quality standards. You should clearly define who will be responsible in the event of any product-related issues and how these will be addressed or resolved.
Additionally, you should limit your liability for your goods to manage risk and exclude things you do not wish to be liable for. For example, you might state that your business is not liable for product defects if your importer damages the cargo after you deliver it.
Complying With International Treaties and Sanctions
Finally, be aware of any international trade agreements or treaties which could impact your exports. You may also want to avoid exporting to countries subject to international sanctions or embargoes.
Key Takeaways
Entering overseas markets is an excellent way for Australian businesses to grow their ventures. However, new markets come with new legal, financial and logical hurdles. Gaining information about who to export to, how, and whether it is legal is critical to ensuring a smooth trade.
If you are exporting overseas, a tailored agreement or set of agreements can ensure your international transactions go smoothly. A well-drafted agreement will mitigate the many risks of exporting items overseas, including non-payment, compliance with overseas laws, and dispute resolution.
For legal assistance drafting your export agreement, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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