Export Contract: How to Draft an Export Contract?

Properly drafting an export contract for the delivery of goods not only minimizes the risks of exporters in case of disputes with counterparties but also reduces the risk of negative consequences associated with potential violations of currency and customs legislation.

Export Delivery Contract

An export delivery contract is one of the types of foreign trade contracts that regulates the commercial relations between the seller (exporter) and the buyer of goods (importer).

Drafting an Export Contract

Drafting an export contract for the delivery of goods includes the following stages:

• Checking the reliability and creditworthiness of the buyer;

• It is necessary to establish a clear agreement on the name, quality, and quantity of the product. If it is a permanent cooperation, complete information about the product is recorded in the invoice or contract specification. If it is a one-time sale, everything is indicated directly in the contract itself.

• Coordinating the delivery terms in accordance with the Incoterms 2020 rules and distributing responsibilities and risks;

• Agreeing on the terms and method of payment for goods, currency: direct bank transfer, letter of credit, advance payment amount, etc.

Key Terms of the Contract

When developing an export contract for the delivery of goods, the following is also necessary:

• Determine the quality requirements for the product, the procedure for submitting complaints, warranty periods and servicing, the procedure and deadlines for returning it in case of defects in the product or if the buyer refuses to pay for it;

• Specify in detail the conditions for shipping, labeling, packaging, and transportation of goods;

• Agree on the list of additional documents for the goods;

• Determine the liability of the parties for breach of contract obligations.

It is not enough to simply write "there is a penalty" for the party that breaches the contract.

• Instead, if someone fails to fulfill their obligations:

• what penalty will be applied (fine, penalty, compensation for damages, etc.);

• in what amount;

• when and in what order it will be collected;

• what will happen if payment is not made (for example, going to court or withholding from settlements)

all of this must be written clearly and understandably. That is, it is important not only to indicate the existence of a penalty but also to specify how it will be applied in practice.

Applicable Law and Jurisdiction

The choice of applicable law and jurisdiction for the contract should be based on the individual terms of the transaction, established judicial practice, economic feasibility, and other factors.

Undoubtedly, agreeing to automatically refer the dispute, for example, to the Stockholm International Arbitration Court, is not a good idea. Such courts require a lot of time and can be costly.

Mistakes in choosing jurisdiction can also create additional grounds for holding the exporter administratively liable for violating currency laws if the buyer does not make payment for the goods. Agreeing on jurisdiction for the contract is not a formal matter; the choice of a specific court should be determined by the circumstances of the specific export transaction.

Rules of the Export Contract

The main rules of the export contract also include:

• Force majeure circumstances and the procedure that the parties will consider in case they arise;

• Determining the term of the contract;

• Agreeing on the preferred language of the contract;

• Coordinating sanctions and currency rules if necessary;

• Checking the completeness and accuracy of the parties' information (exact name, registration numbers, organization’s registration address and mailing address, email addresses for prompt exchange of documents, bank details, etc.).

Any rules of the foreign trade contract for the export of goods must comply with the requirements of current legislation and maintain a balance of interests between the parties.

The export contract is not just a formality, but primarily a means of protecting the rights and interests of the exporter in conducting foreign economic activity.

Our company's lawyers have prepared several important recommendations for successfully drafting an export foreign trade contract.

Recommendations for the Export Contract

1. The main advice is not to use templates and contract samples downloaded online. Most of these templates are outdated and do not take into account the constantly changing legal requirements and established practices. Moreover, no export contract template considers the specific terms and nuances of a particular transaction, as well as the unique characteristics of the goods. Participants in foreign economic activity who have used regularly downloaded contract templates and later failed to receive partial payment for goods contact our Center's lawyers. In addition to being unable to resolve disputes using a contract template, the exporter may also face problems related to currency control.

2. Check for the existence of and take into account intergovernmental documents and agreements concluded between the exporting and importing countries. In some cases, they may contain rules that contradict the terms of the transaction specified in the export contract.

3. Avoid unsubstantiated inclusion of references to specific rules regulating international trade, such as conventions, agreements, etc. The choice should be justified based on the agreements of the parties regarding the specific transaction.

4. Do not overlook the technical details of drafting the export contract:

• The parties should show that they intend to perform this contract not just on paper but in reality. That is, they clearly express their agreement to fully and timely fulfill their obligations in the contract.

• Ensure that those signing the contract have all the necessary powers to draft it;

• Check that each page of the contract is signed by both parties;

• Carefully check the parties' information, including the email addresses of the parties specified in the contract: all correspondence should be sent to these addresses;

• Pay sufficient attention to checking the reliability of the counterparty.

Entering the Contract into the Electronic System

After the export contract is signed in paper form, it must be entered into the electronic system. For this:

1. Access is made through the portal contract.customs.uz or through the EDS (Electronic Digital Signature) of the business entity.
2. The contract data (number, date, amount, term) is entered into the system.
3. After saving the data, the system automatically assigns a unique identification number to the contract.

After the contract is entered into the system: the servicing bank monitors the receipt of foreign currency under this contract.

Currency Control of Export Contracts

If funds under the export contract do not arrive on time, penalty sanctions may be applied to the business entity. Therefore, it is recommended to strictly adhere to the deadlines for "accounts receivable".

Drafting an Export Contract

The lawyers of our Center have specialized in drafting and formalizing foreign trade contracts since 2017. Over the years, our lawyers have successfully worked on drafting contracts for export cargo and providing comprehensive support for export projects.

One of the areas of activity is comprehensive legal support for the export business:

• developing ready-made export contracts;

• legal analysis of completed contracts;

• concluding and approving foreign trade contracts and transactions;

• supporting foreign economic activity through consulting;

• providing comprehensive legal assistance for export deliveries.

The cost of preparing or reviewing an export contract depends on the actual volume of the foreign trade transaction and the agreed terms.

The cost of preparing an individual export contract usually ranges from 200,000 to 500,000 sums, including the Russian-English text of the contract.

The preparation time for the contract depends on the workload and can range from 1 to 3 days.

Source: правовэд.рф