Smoothing the passage

This week Gary Kleyn reports on ways to tackle the legal constraints when exporting.

EXPORTING can be a complicated business for the uninitiated. But that need not be the case, with a range of groups available to offer assistance on the legal issues involved with international trade.

Such advice is priceless for small businesses, many of which cannot afford to engage the services of a lawyer as a first port of call.

Austrade provides information on its website that may be of use to exporters, while the Chamber of Commerce and Industry produces an International Trade Handbook that includes a chapter on legal issues.

A paper on the issue, Legal Aspects of Exporting: risks and how to reduce them, published by the Graduate School of Management, at the University of Queens-land says that any business considering exporting should do the following.

p Firms thinking of exporting should thoroughly research the legal environment of their target market(s) along with other important environments (such as social and political) well before exporting takes place.

p This research information should be incorporated into a carefully crafted legal strategy, where the firm takes a planned legal position with respect to its export operation (eg appropriate legal structures, appropriate terms in contracts, appropriate modes of financing, and arrangements for taxation).

p Unless firms have their own legal resources they should seek the guidance of a legal practitioner expert in international trade issues.

p Such legal planning should be regularly updated to take account of the rapidly changing inter-national legal situation and also in response to the changing needs of the firm (i.e. as it grows from a small, part-time exporter to a full-scale exporting business).

Austrade lists a number of issues that may affect the ability to trade and operate offshore, including difference between legal systems, question of which laws will apply in disputes, rules of competition, patent registration, extra-territoriality of overseas legislation and product liability

Until 1989, all international sales subject to WA law were governed by the Sale of Good Act (1895). Since then the UN Convention of Contracts for the International Sale of Goods has been part of the WA law.

The UN Convention applies to all contracts for sale of goods between parties whose places of business are in different countries which are parties to the convention.

According to the CCIWA International Trade Handbook, domestic law has jurisdiction on issues not covered by the UN Convention, such as the validity of the contract, consumer sales, product liability and the passing of property.

In addition to the UN Convention, a number of treaties, agreements and regulations exist which have an impact on businesses that choose to trade overseas.

The most notable agreement in existence is the general agreement on tariffs and trade (the GATT) between World Trade Organisation members.

The Federal Government also imposes restrictions for reasons including quality control, international agreements, defence considerations, trade embargoes and industry protection.

The International Chamber of Commerce and Industry, based in Paris, has formulated a number of codes, rules and model contracts to make it easier for companies to trade.

 These include the ICC rules on arbitration, Incoterms (which are standard definitions of trade terms) and the Uniform Customs and Practice for Documentary Credits, which are used by banks all over the world to finance international trade.

ICC voluntary codes also cover marketing and advertising, the suppression of extortion and bribery and sound environmental management practices.

Whatever the legal framework used it is essential that the business incorporates it into the contract.

It is also essential that the different obligations and rights of each of the parties are spelt out clearly in the documents to avoid problems if things do go wrong.