EXPORT CONTRACT

What is Export Contract?

The export contract is used for the international
sale of certain products (industrial supplies, raw
materials, manufactured goods), which are
projected for resale, where the buyer is a trader,
importer, distributor or wholesaler that will sell
the products to another company or merchant.
Though it is common practice to export products
based a proforma invoice or quotation received
from exporters, it is a safe practice to use written
and legal export contracts.
 Elements of Export Contract
There is no standard format of export contract
as the elements of export contract may vary
from individual to individual, transaction to
transaction and country to country. The
elements of an export contract also depend
upon the nature of product being exported.
However, some of the elements of the export
contract are common. These elements are:
 Contd.
(a) Name and addresses of the parties, i.e.
importer and exporter must be stated clearly and
fully.
(b) Product standards and specifications such as
name of the product, its technical name, if any,
applicable national or international standards,
etc.
(c) Nature, manner and focus of the envisaged
inspection, as well as the name of the inspection
agency.
 Contd
e) Quantity in terms of number of units both
in figures as well as words and specifications
relating to packaging, labelling and marking.
(f) Total contract value in words and figures
and the currency, responsibility for the
payment of taxes, duties and levies.
(g) Terms and place of dispatch and delivery
and the date from which the period of
delivery begins.
 Contd
(h) Part-shipment, trans-shipment and
consolidation of cargo. If goods are to be shipped
under a consolidation of export cargos , it
should be specified.
(i) Terms of payment, amount, mode and
currency, discounts and commissions and their
basis.
(j) Details of insurance goods against loss,
damage, or destruction during transportation,
type of risk covered and the extent of coverage.
 Contd.
(k) Product guarantee and warrantee and extent
of such warrantees and guarantee, after sales
service, etc.
(l) Inclusion of an arbitration clause to facilitate
amicable and quick settlement of disputes or
differences that may arise between the parties.
(m) Signature of the parties signifying the consent
of parties to the terms and conditions of the
contract.
 INCO Terms
Incoterms are trade terms published by the
International Chamber of Commerce (ICC)
that are commonly used in both international
and domestic trade contracts.
 Contd
Incoterms were first developed in 1936 and
are updated from time to time to conform to
current trade practices. Because of these
updates, contracts should specify which
version of Incoterms they are using (e.g.,
Incoterms 2010).
 Contd
Trade terms used in different countries may
appear identical on the surface, but they
actually have different meanings as they are
used domestically. Incoterms are
internationally recognized and prevent
confusion in terms of foreign trade contracts
by helping sellers and buyers understand their
obligations in any transaction.
 Incoterms Rules for Any Mode
Some common examples of Incoterms rules for
any mode, or multiple modes, of transportation
include delivered at terminal (DAT), delivered
duty paid (DDP) and ex works (EXW).
Delivered at terminal indicates that the seller
delivers the goods to a terminal, and the seller
assumes all the risk and transportation costs until
the goods have arrived to the terminal.
Thereafter, the buyer assumes the risks and
transportation costs of the goods from the
terminal to the buyer's final destination.
 Contd
Delivered duty paid indicates that the seller
assumes all the risk and transportation costs,
and the seller is obligated to clear the goods
for import and export. Moreover, the seller
must pay duties for both export and import if
the goods are shipped under DDP.
 Incoterms Rules for Sea and Inland
Waterway
The ICC has set aside Incoterms rules for inland
waterway and sea transport, such as free on
board (FOB) and cost, insurance and freight (CIF).
Free on board indicates that the buyer or seller
delivers the goods on a designated vessel. The
buyer or seller may assume all the risks and
transportation costs, depending on whether the
goods are sold under FOB shipping point or FOB
destination point.
 Contd.
Cost, insurance and freight indicates that the
seller must deliver the goods onto a specified
vessel or port. Under the CIF rule, the seller is
responsible for paying for insurance and
transportation costs for loading the goods
onto the ship. Thereafter, the buyer assumes
risks associated with transportation once the
goods are loaded onto the vessel.
DISCUSSIONS