When you embark on exporting, your organisation inevitably becomes an international business entity, exposed to events occurring in markets beyond Singapore. This means that you have to identify external events that have potential effects on your business and take action accordingly:
Before any negotiation with your buyer, review your business information/assets to determine information which is sensitive, and information which is critical to sealing the deal. Sensitive information or assets include a new product or design in development, your financial information, your buyer and customer lists, your contacts, your price and costing lists, and your insider industry knowledge, which could prove detrimental to your business if leaked to your competitor. A common protection you and your potential buyer can adopt is to sign confidentiality or non-disclosure agreement between you before any party releases sensitive information.
Find out the laws and regulations and if there are any restrictions (i.e. bans, quotas or controls) imposed by Singapore upon exportation of your type of goods or services to your destination market. All exports laws, regulations and restrictions are administered by the Singapore Customs. Please refer to Step 4 of this Export Guide.
Find out the laws and regulations and if there are any restrictions imposed on importation of your type of goods or services into your destination market. A suggested line of basic inquiry into your destination market could be as follows:
Please refer to Step 4 of this Export Guide for the customs websites of various destination markets. For some markets, it would be prudent to make yourself aware of the foreign government’s policies on nationalisation, expropriation and confiscation of foreign imported goods to determine the risk level for your export transaction.
If your destination market belongs to a regional group, you need to find out if there are any regional law, regulation and restriction upon the export and import of your type of goods or services within that region. For instance, European Union rules bear consideration if you are exporting to an EU market and ASEAN rules if you are exporting within ASEAN. Your line of basic inquiry into this aspect can also take the same format as above.
The licensing and import requirements, customs and excise duties in your destination market could be different for sole proprietorships, partnerships or corporations. If you are currently a sole proprietorship or partnership, now is the time to review if your export goals could be achieved efficiently under this structure. If not, you may wish to consider if your export goals will be better served by converting your business structure into a corporation.
Find out the international laws, regulations and conventions applicable to you. Increasingly, international agreements, treaties and conventions are exerting practical effects on cross- border private commerce instead of being limited to relationships between governments. There are numerous types of international laws in force today. You will benefit from having some knowledge of these:
If you have spent intellectual effort to create a product for sale, you should protect your innovation. The law protects your innovation efforts by giving you rights of intellectual ownership over your creation. When diligently protected, maintained, accounted for, valued, monitored and managed, all your innovation assets can become formidable commercial assets that increase the total net asset value of your business. Here is a basic two-step approach:
International sales contracts contain many similar terms as domestic sales contracts. However, they also include certain clauses to deal with issues arising from having different laws and legal systems in a cross-border contractual relationships, for instance, the law of your counterparty has different implications on the transaction even if the same words are used. Arming yourself with a basic understanding of some legal clauses commonly used in cross-border contracts will better prepare you to negotiate your terms with your counterparty, avert conflict in interpretation to avoid causing misunderstanding, and communicate with your legal professional by enabling you to ask constructive questions and assess the quality of the advice you are paying for.
If you are contracting with a party whose official language is not English, it is best that your counterparty and you mutually designate one language as the official language for interpretation and dispute resolution to prevent misunderstanding through miscommunication.
It is also advisable to mutually agree on the dominant legal system. This is very important to any agreement which involves more than one legal system because choosing one law to apply to your overseas contract will help you avert misunderstanding rights and obligations that differ from country to country or conflicting laws that may be inconsistent with each other.
The jurisdiction clause should also be instated at the outset, for parties to mutually agree on the court to which they would bring their lawsuits to if any. The decision should be made in tandem with the choice of law as it only makes sense to choose a law and a court of the same legal system.
A force majeure clause usually excuses affected parties from performing their contractual obligations under specified circumstances beyond both parties’ anticipation and control (the Latin term force majeure means “superior power”). Some force majeure circumstances are natural disasters such as floods, storms, earthquakes, “acts of God”, political unrest including war, riots, police action or strikes, even runaway inflation, dramatic currency devaluations or stock market collapse. It is important to specify a limit on excusing performance such as the length of time, severity of the occurrence, and separating obligations that could not be performed from those which could be. It is also important to expressly provide for recourse in the case of partial performance.
Exporting your goods into a foreign market requires clearances from Singapore Customs as well as from the government authorities of your destination country. Practically speaking, your counterparty should be responsible for obtaining approvals and clearances from their customs authorities. Including a governmental clause will enable your counterparty and you to clearly list who should obtain which approvals from which authority, and avoid lapses in customs documentation, which may delay delivery and incur unnecessary cost.
An overseas sale involves more than one currency and this gives rise to many practical issues. There will be currency fluctuations when payment is remitted to you. Your buyer’s country may also have restrictions or prohibitions on remittances of its currency. There will also be costs of remittances incurred to consider such as fees, charges or transactional or service taxes, which banks typically impose on telegraphic transfers or letters of credit.
Your contract should clearly specify a pre-shipment inspection arrangement. Such an inspection protects both the importer and the exporter by avoiding disputes arising subsequently over disputes over quality or identification of the goods. The inspection costs should be borne by the party which requires this clause, or mutually by both parties and be factored into the contract price.
In a cross-border sale of goods, payment does not always occur at the same time as the physical delivery of the goods. Taking physical possession alone does not equal legal acceptance. Such issues can arise because most contract laws are slightly different in deciding when and how acceptance and refusal has taken place. You should consult your legal adviser on the exact contract law on this issue applicable to your case.
You should to specify how your intellectual property (IP) rights are to be handled in the sale to maximise the value of all your work done in acquiring IP protection. In your contract, you can specify how your seller is allowed to use the IP of your product, whether wholly or partially. You can also specify clearly defined scope of use for your product logo, images and other collaterals. If the sale includes a sale of your IP rights, you should review whether you have properly valued your IP to help you derive your sale price. You should consult a good IP lawyer to help you with this.
Incorporating a warranty clause has two benefits:
You should take into account convenience and cost when structuring your return or exchange policy, and then specify clearly in your contract how an exchange or return should be carried out.
Lastly, there are common problems that tend to arise in an export of goods, such as damage/destruction, complaints by buyer, payment issues and rights to legal actions. When you familiarise yourself with how the concepts and how they interact with one another, you can better determine the exact moment when your buyer takes legal ownership of your goods to help you resolve issues when they arise. The three most common legal concepts are title, property and transfer. Do understand what they are and how they work with the assistance of your lawyer.
This is the most common question asked when exporters face with problem of dealing with legal issues. While you are deciding whether to engage a lawyer, we want to highlight some key reasons you should:
You may have heard of the practice of modifying from previous agreements signed for future transactions. It is important to note that no two contracts are exactly alike, even if the transactions are of the same nature involving the same goods and parties. Rules, laws and customs may have changed without your knowledge. Your counterparties have no obligation to alert you of these changes and you should never assume that they will.
In the process of securing the deal, you will likely be occupied with looking after your business interests. Having a legal expert on your team to help you look after your legal interests while you take care of the business issues is an advantage that you should not overlook. This is especially useful if you are trying to secure a long-term arrangement in new market.
If you have decided that engaging a lawyer is right for you, be aware that the lawyer you engage will affect your future rights and interests. Whatever the size of your budget, your legal expenditure will form an important component of your total business expenses. We highly recommend that your prospective legal professional is one who specialises in overseas sales contracts for your destination market, and that you search for your legal expert prior to commencing negotiations.
You will be in a stronger position to stretch your legal budget if you are able to determine which issues you could resolve on your own without incurring professional cost. Such a skill can help you minimise the scope of legal services which you have to pay for. Here are some examples (non-exhaustive) of issues which you should be able to resolve on your own without expensive hired help:
The business considerations behind hiring a legal professional are no different from those for engaging other third party vendors. Having a broad understanding of international business law, common legal concepts in international trade and their practical implications on an export operation will help you more effectively assess your potential legal candidates as you discuss your requirements with them.