Want to Export? Here is what to know - Part I

One way to grow a business is through export, be that of goods or services. Yes, there are risks doing business internationally, however, any risk whether real or perceived can be avoid with proper planning, and accounting for the risk. International business is no different with a little preparation you too can export.

Before you embark on the journey there are a few steps and a roadmap to follow so you can avoid making costly mistakes. Sometime the consequences of these mistakes can cause criminal or civil liability. For instance, if one you were to export to sanctioned countries, or dubious parties, or import here into the United States resources or goods from those countries or parties. This is not to scare you from doing business overseas: it is meant only to draw your attention to proceed with caution and know what is allowed and what is not.

Therefore, the first order of the day before you export is to ask these questions: where are you exporting, what are you exporting, and to whom, and for what purpose? Answers to these questions will help you discover if you need to be concerned with complying with certain United States trade regulations before executing a contract or making any other commitments to export. We will delve in later series on the specific regulations involved that an exporter should remember as it is outside of the scope of this article.

Once you have exported you may want and should document the transaction in a contract. An attorney specializing in international transactions could assist you with this step. It is always a good practice to engage the advice of counsel from the beginning of the export process as counsel can guide you navigate the complexities of a transaction and help you understand the risk.

To illustrate, a contract is signed and executed in country X and performance will be in country Y. The two versions of the contract, the one in the country’s X language and the one in country’s Y language, contained a different forum selection clause. This is the clause that outlines where (the forum) the parties should go to resolve the dispute. It also contains language that tells the parties what law will apply, and what court will resolve the dispute. In the instance illustrated one version of the contract called for a dispute resolution in one place the other for dispute resolution in the next. The parties had to go to court to figure out where they needed to be to resolve the dispute. This is costly.

This example highlights not only the importance of engaging counsel from the beginning, it brings us to another important aspect of transaction: the language of the contract. Making sure that each version of the contract before execution doesn’t conflict with one another, and the meaning is intact. Language is important also for another reason. It must be determined in the article what the controlling language of the contract will be if a conflict occurs and what language will control. And no, the answer is not always “English”. This aspect is often overlooked.

Similarly, overlooked is also currency. The most popular currencies for trading internationally, at the time of this writing, the dollar, the euro, and the yen. Currency fluctuates and creates uncertainty about the expected profits or amounts to be received in a transaction. One way to get around the fluctuation in rates is to enter into a forward contract or a future contract. A forward contract parties agree to exchange payments at a specific time. Whereas, a future contract is similar to a bond. It involves a sort of speculation in futures markets for currencies. Companies wanting the comfort of knowing what their profit will be choose a forward market.

The above are some of the main points to start exporting. Some other important considerations involve an understanding of the culture, history, customs, and business engagement in a particular country. Indifference to these could lead to an unsuccessful transaction. Last, if you don’t want to export directly you can always do so indirectly through export trading companies, customs brokers, export agents and the likes. Regardless of who assists you in exporting you remain under the laws of this nation responsible for your export activities, hence, due diligence should be and remain your number one priority.

*We are happy to answer your questions about this article or any other export related questions. Call us or contact us at aida@albexlaw.com