We know that dealing with business partners abroad and exporting overseas can often result in complex problems, but if you are not careful, these problems can quickly turn into long-running nightmares.

There are number of legal matters you need to become aware of if you are planning on exporting overseas.  If you do not familiarise yourself with the key legal issues, you will become exposed to significant financial risks.

One of the best ways to deal with these risks is to get a legal agreement drafted with the importer before you go into business with them. These agreements can take many forms and often different names – sales agreement, import agreement, export agreement, terms and conditions, and so on.

This article provides an introduction to what you should put into your legally binding agreement to ensure your interests are best protected when exporting overseas.

Contract Interpretation

If you have an agreement between you and the other party, it is most likely a legal contract; i.e. once both parties sign it, they are both bound by the law to fulfil the agreement’s terms.  This leads to the logical question: Which country’s laws apply?

Usually, once the goods or products reach the borders of the nation you are importing into, the legislation of that country applies.  However, there are often ambiguities and uncertainties in importing transactions, so you should include a clause in the agreement which says which nation’s laws apply to the interpretation of the agreement itself.

Nonetheless, you should probably consider speaking with a business lawyer or getting online legal advice to find out the key differences between the Australian legal system and laws of the country which you are exporting to.

Payment Terms

Make sure your export agreement mitigates the ongoing risk of non-payment.  Another simple solution is pre-payment or you can use an Irrevocable Letter of Credit.  One of the best ways to mitigate non-payment risks is to do a thorough credit check on the party which is importing your items.

Quarantine

If you are exporting overseas, you should familiarise yourself with the quarantine requirements of that country, as many nations have very strict quarantine laws.  If you do not comply with these laws, it may result in fines, restrictions or destruction of your goods.  Your agreement needs to cover these compliance laws.

What if I get into a Dispute with the Importer?

Disputes can be very difficult to deal with in cross-border transactions.  You should seek legal advice immediately if you get into a dispute with your importer.  There are a number of international arbitration commissions that will hear disputes related to importing and exporting overseas.  Deciding which commission best applies can be a complicated and often very technical process.

Most parties seek legal advice before deciding which commission to hear their dispute.  Your export/import agreement should cover dispute resolution procedures, so you can rely on these clauses to solve problems before they become expensive and time-consuming legal disputes that end up being decided by an international commission.

Other Terms

There are a number of key terms you should examine closely when exporting overseas and engaging in a contract with an importer, including:

  • Property retainment clauses;
  • Passing of title;
  • Liability;
  • Obligations and rights; and
  • Fees.

Conclusion

If you are exporting overseas, you should get a contract lawyer to draft a tailored agreement or set of agreements to ensure your 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.

 

Lachlan McKnight

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