International Trade Contracts

Different countries have different business cultures and languages. It’s a good idea to make sure you have a clear written contract to minimize the risk of misunderstanding.

The contract should set out where the goods are being delivered. It should cover who is responsible for every stage of the journey, including customs clearance, and what insurance is required. It should also make it clear who pays for each different cost.

To avoid confusion, internationally agreed Incoterms should be used to spell out exactly what delivery terms are being agreed, such as:

where the goods will be delivered. There should be a clear written contract between buyer and seller, including details of exactly where goods will be delivered.

who arranges transport and who is responsible for insuring the goods, and who pays for insurance. Documentation is needed to cover the transport of the goods and insurance during the journey.

who handles customs procedures, and who pays any duties and taxes. Specific documents may be needed to get the goods through customs and to work out the right duty and tax charges. There may be requirements both for the country the goods are being exported from and the country they are being imported into. The right paperwork can be an important part of the payment mechanism.

For example, an exporter might agree to deliver goods, at the exporter’s expense, to a port in the customer’s country. The customer might then take over responsibility, arranging and paying for customs clearance and delivery to their premises. The exporter might also be responsible for arranging insurance for the goods until they reach the port, but pass this cost on to the customer.

As well as including delivery details, the contract should cover payment. This should include what currency payment will be made in, how much will be paid, when payment is due and what payment method will be used. Documentary collections and documentary credits are payment methods often used in international trade.

With a documentary collection, the exporter prepares a bill of exchange stating how much is to be paid and when. Once the customer accepts this bill of exchange, they are legally liable for payment. Only then does the exporter, usually through the bank in the overseas country, allow the customer to have the transport documents needed to take possession of the goods.

With a documentary credit, the customer arranges a letter of credit from their bank. The bank agrees to pay the exporter once all the right documentation – such as transport documents showing the right goods have been dispatched – is received. The exporter must provide the required paperwork within the agreed time limit and with no discrepancies.

If you are using one of these payment methods, it’s important to understand what documentation is required and ensure it is accurate. Payments under letter of credit can be particularly problematic as the exporter must provide exactly the right documentation in order to get paid.

Regardless of what payment method you agree, you should have a clear written contract stating what amount is due, in what currency, and when. The contract should also make it clear who is responsible for any bank charges.

It’s important to co-operate with your counterpart on getting the paperwork right. For example, if you’re shipping goods to a customer overseas, they should tell you what paperwork they require at their end. If you are dealing with a non-English speaking country, it can be a good idea to provide one set of commercial documents in the local language.

Exercise 9. Choose the right answer.

1. Why is it necessary to have a clear written contract?

a) to minimize importance for making agreement;

b) to minimize benefit;

c) to minimize the risk of misunderstanding;

d) to minimize enforcement of foreign award.

2. What should be used to spell out exactly what delivery terms are being agreed?

a) Insurance; b) Incoterms; c) Intercom; d) Payment.

3. What should contract not set out?

a) duties and taxes; b) customs clearance;

c) delivery terms; d) successful realization.

4. Who is responsible for arranging insurance for the goods until they reach the port?

a) the exporter; b) the Arbitral court; c) the Central Bank; d) the importer.

5. What payment methods are often used in international trade?

a) documentary collection/documentary payment;

b) documentary credits/documentary currency;

c) documentary credits/documentary collections;

d) documentary collection/documentary paperwork.

6. What does the exporter prepare with a documentary collection?

a) a letter of exchange; b) a bill of exchange;

c) a letter of currency; d) a bill of currency.

7. Who agrees to pay the exporter with a documentary credit?

a) sponsor; b) attorney; c) customer; d) bank.

8. What payments can be particularly problematic?

a) under letter of credit; b) under bank charges;

c) under currency payment; d) under payment method.

9. What makes it clear who is responsible for any bank charges?

a) specific documents; b) contract; c) right paperwork; d) Incoterms.

10. What language in one set of commercial documents is good to provide if you’re dealing with a non-English speaking country?

a) foreign language; b) English; c) local language; d) any language.

Exercise 10. Translate the following terms into Russian. Give your own definition to them (in English) and learn these terms by heart.

1. an insurance; 2. a delivery; 3. expense; 4. premise; 5. a payment; 6. a discrepancy; 7. a bill of exchange; 8. a letter of credit; 9. currency; 10. charge.

Exercise 11. Write an outline of the text.

COMPREHENSION

Exercise 12. Fill in the table. Add two more categories for comparison.

	Russian Federation	United Kingdom
Documentation
Language
Payment

Exercise 13. Fill in the gaps using the words given below, and translate the sentences into Russian.

payment bilateral foreign trade co-operation barriers

contract credit duty signed enable bilingual

1. … is an agreement between two or more competent parties to perform or not to perform a specific act or acts for a consideration. 2. In … transactions a contract is drawn up to give legal expression to the intentions of the partners. 3. The contract for international sale of goods was … . 4. The rate of … payable depends on the type of goods. 5. Terms of … are necessary from the business point of view. 6. Foreign trade contracts in Russia are usually made as a(n) … English-Russian table. 7. The agreements … trading at a reduced rate of duty, or duty-free. 8. The purpose of trade agreements is to reduce the … to trade between countries. 9. Trade agreements are usually … or multilateral. 10. Trade agreements/trading blocs also come in different forms, involving increasing levels of … .

Exercise 14. Replace the underlined words with the synonymous terms from the texts.

1. The legal entity shall have its own name, which shall include an indication of its legal-organizational form. 2. The amount of deal in monetary terms is $ 3000. 3. The decrees and orders of the President of the Russian Federation may not contradict the Constitution of the Russian Federation or federal laws. 4. The non-observance of the written form shall entail the nullity of the agreement on the forfeit. 5. If the request is signed by proxy, a respective power of attorney shall be attached. 6. Special transport will transfer the workers to the job. 7. There is no way to appoint fair conditions unless businesspeople take part in setting them. 8. At the same time, the demand that a majority of the members needed to be present for any decision to be taken would remain in force. 9. The lender remains responsible for performance of any continuing obligations. 10. The Inspectors had identified three such inconsistencies.

Exercise 15. a) Match the verbs on the left with the nouns on the right.

1. to conclude	a) the risk;
2. to contravene	b) with one’s counterpart;
3. to settle	c) to the public policy;
4. to deliver	d) to invalidity of the contract;
5. to minimize	e) goods;
6. to check	f) confusion;
7. to lead	g) a foreign trade contract;
8. to avoid	h) the company under the law;
9. to co-operate	i) legal capacity of a partner;
10. to represent	j) disputes.

b) In the sentences below replace the Russian expressions with the phrases you have got. Use these expressions in the necessary form.

1. The Parties (заключили внешнеэкономический контракт) on purchase of goods. 2. To (минимизировать риск) all bank charges in the Seller’s country are to be carried out by the Seller. 3. To (избежать недоразумений) payment for the goods delivered under the present Contract shall be made by the Buyer in US dollars. 4. In case of disputes or disagreements arising out of the present Contract the Parties shall do their utmost to (урегулировать такой спор). 5. This company is safe and always (проверяет юридическую способность партнера). 6. All amendments and additions to the present Contract are valid only if they (не противоречат государственной политике). 7. (Товары) as per Appendix 1 (должны быть доставлены) within 50 days after the date of signing the Contract. 8. If the Party for whom it becomes impossible to meet its obligations under the Contract doesn’t advise the other Party it (приведет к недействительности контракта). 9. The legal representatives of the company are the persons who (представляя.ет компанию на основании закона). 10. The partner program is as a constitution, the set of rules on which we (взаимодействуем с партнером).

WRITING AND COMMUNICATION

Exercise 16. Write an essay on one of the given topics and discuss it with your partner.

1. Incoterms.

2. Contractual Terms.

Exercise 17. Translate the following sentences from Russian into English.

1. Оплата полной стоимости товара должна производится в долларах США. 2. В банк должны быть предоставлены следующие документы: счет и полис страхования. 3. Аккредитив должен открываться в течение 10 дней после получения уведомления продавца о готовности товара к отгрузке. 4. Продавец осуществляет страхование товара на полную стоимость и на все случаи. 5. В случае задержки поставки товара по сравнению со сроком, указанном в контракте, Продавец выплачивает Покупателю штраф. 6. Решение Арбитража окончательно и обязательно для обеих сторон. 7. Настоящий Контракт подписан в двух экземплярах, по одному для каждой из сторон на русском и английском языках. 8. Если согласие не будет достигнуто, спор или разногласие подлежат рассмотрению и окончательному решению Арбитражным судом. 9. Языком настоящего Контракта является английский язык. 10. Условия страхования могут быть расширены по требованию Покупателя и за его счет.

PROJECT WORK

Imagine that you are an importer. You need to deliver goods to your foreign partner. Make a business contract to supply goods. Don’t forget to include terms and conditions to make this contract effectual in law.