Essential terms of a foreign trade agreement: how not to have problems with the supply of imported goods?
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When concluding a Foreign Economic Agreement, a Ukrainian entrepreneur shall be guided by the Ukrainian legislation in the field of foreign economic activity, the general principles of concluding agreements in Ukraine, taking into account all essential conditions that have arisen and will arise in the future on the performance of the agreement.
First of all, the subjects being the parties of the Foreign Economic Agreement (Contract) shall be capable of concluding the agreement (contract) in compliance with the laws of Ukraine and/or the law of the place of the agreement (contract) conclusion. This point should be paid attention to when entering into an agreement, because in some countries not every company is able to export goods. More details about the check of the counterparty here.
It’s also important to understand that the agreement must be not only beneficial for you in terms of cost or any special terms of delivery, etc., it must also reliably protect your interests in case of disputes. And for this purpose, it must be executed in accordance with the Ukrainian legislation. The main thing is to have all essential conditions of the agreement, adjusted to your needs. Today, we will talk about them.
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Essential conditions of the Foreign Economic Agreement
Subject of the Agreement. It may either be clearly described immediately in the agreement, with all the details, if the delivery is planned alone, or with the indication that a clear description of the goods will be contained in the specifications or additional agreements to the contract.
Terms of Delivery. Which party is responsible for the organization and logistics of the delivery? Does the price of the goods include the cost of delivery or not? The price and terms of delivery may include insurance, packaging or other surcharges.
If the customer has a price for the goods with delivery, then adding the cost of customs clearance can immediately determine the potential cost of the goods. If the contract is multiple, then the terms of delivery should be specified with a note “unless otherwise specified in the invoice”. This will allow you to change the terms of delivery depending on future delivery arrangements, and will simplify the customs clearance of goods.
The documents that the buyer receives for customs clearance. It should be determined at once whether the counterparty will give a certificate of origin, or possibly Euro 1. If there is an opportunity to obtain such a document, it should be noted and this document specified among other mandatory documents to be received by the client along with the goods.
Such documents should include an invoice, certificate of origin, certificate of quality, packing list, export declaration. If the price of the goods includes delivery, it should be additionally noted that the counterparty provides a bill of lading or CMR. If the terms of delivery provide for compulsory insurance, the insurance policy should also be among the mandatory documents.
Additional conditions for the goods. Pay attention to quality assurance, warranty period of goods and the possibility of complaints. This will save time and money in the future. For example, the manufacturer of the equipment can provide a warranty on the main units of the sold equipment, and if they fail, the seller can provide the necessary spare parts for free upon complaint.
Then it will not be necessary to pay for the spare part, but it will be necessary to customs clear it at its customs value. It is also possible to send the broken parts for repair, and at the same time make a temporary exit through the customs office. And when a repaired part is returned, you can process the return, and pay for customs clearance not for the cost of the whole product, but only for the cost of the repair work.
All these issues should be stipulated in the agreement in advance.
The court to which the parties apply. Based on our experience, one should insist on Ukrainian arbitration. It’s worth explaining to the counterparty that with advance payment the buyer bears big risks and should be protected. In case of future potential courts, if the parties agreed on Ukrainian arbitration, the lawsuit will be considered in Ukraine. With a foreign defendant it is very long, because every next hearing is postponed for 6 months, but it is feasible.
The details of the parties. They must always be correct. If the contract is long-term, then when you change the details, it’s worth concluding an additional agreement, which will simplify bank control and customs clearance.
Development and signing of the contract is only the first step in organizing the import of goods to Ukraine. However, it determines the level of your protection and allows you to correctly coordinate all subsequent stages of importing products into Ukraine.
Our company provides a full range of services for the organization of import or export of goods to Ukraine, including the development of FEA. Don’t hesitate to contact us if you would like to organize import or export of goods to Ukraine without any problems.
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