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Risk Analysis and Dispute Resolution. Martin Bitter Exportant Consultants Ltd. Expro 100 Engineering The Hague November 2013. What are possible export risks ?. Make difference in relationships – client and trade partner Offer: when is the offer no offer Contract Purchase conditions

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Risk analysis and dispute resolution
Risk Analysis and Dispute Resolution

Martin Bitter

Exportant Consultants Ltd

Expro 100 Engineering

The Hague November 2013


What are possible export risks
What are possible export risks?

Make difference in relationships – client and trade partner

Offer: when is the offer no offer

Contract

Purchase conditions

Product and product properties/characteristics, “what am I buying”

Timing, delivery times

Actual shipping, delivery conditions

Payment

Expro100 Engineering, The Hague, Martin Bitter


The agent
The Agent

Not only Commission (fix and variable cost)

No risk when Agency contract is detailed and has escape clauses

No direct handling, but needs a lot of people skills on your end and “Trade Partner Management”

Not involved in the contract between exporter & his client

Might represent different companies

Exporter keeps in control of prices, strategy, distribution …

Expro100 Engineering, The Hague, Martin Bitter


Obligatory subjects in a trade partner contract
Obligatorysubjects in a trade partner contract

Agent contract:

  • Description of activities for the agent

    (rendered services )

  • Description of the activities for the exporter

  • LAY DOWN OBJECTIVES/TARGETS FOR 1st. year and eventual years to follow

  • Duration of the contract

  • Commissioning

  • Evaluation moments

  • Escape clauses

  • Applicable legislation: EU protects agents by directives

Expro100 Engineering, The Hague, Martin Bitter


Eu agent contracts
EU & Agent Contracts

The European directivegoverning the agent contracts is: 86/653/EEC

Find the directive at:

  • http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31986L0653:EN:HTML

  • A true story 

Expro100 Engineering, The Hague, Martin Bitter


Other trade partners
Other Trade Partners

Importer / Large Direct Account

  • Exclusivity

  • Market data (not even intelligence)

  • Marketing / local contact

  • Tendencyto have supplier cover/finance complete part of the chain

Expro100 Engineering, The Hague, Martin Bitter


The offer that wasn t

The client

The offer that wasn’t

When is an offer no offer???

Any offer (oral or written) followedbyanacceptanceconstituesan agreement

Expro100 Engineering, The Hague, Martin Bitter


An offer is a legal instrument. Whether the exporter can revoke its offer will depend on its wording as well as the law applicable.

Two examples:

“This offer is open for acceptance until …”

The party making the offer will be bound by any acceptance made within the set time frame

“This offer will not become binding, even after it has been accepted until the order has been confirmed in writing by ……. ( the party making the offer)

The party making the offer will not be bound unless he himself confirms

Expro100 Engineering, The Hague, Martin Bitter


Three types of offers
Three types of Offers revoke its offer will depend on its wording as well as the law applicable.

Binding (firm) offer

  • Exporter will not offer these goods to another party and will not change its offer, until the other party has decided (hence the importance of an expiry date)

    Non-Binding Offer

  • The restrictions of the binding offer do not apply

    Offer by sample

  • Together with the offer, a representative

  • sample of the goods to be delivered is

  • provided for evaluation by the customer

Expro100 Engineering, The Hague, Martin Bitter


The content revoke its offer will depend on its wording as well as the law applicable.

Purchaseconditions

Productsandproperties

Deliveries/timing

Actualshippingandconditions

Payments

Expro100 Engineering, The Hague, Martin Bitter


Checklist what goes in the offer proforma invoice

The content revoke its offer will depend on its wording as well as the law applicable.

Checklist what goes in the Offer (proforma invoice)

A pro forma invoice should provide:

The fact that it is a proforma invoice

Your company details

Product specifications (number of units, sizes, country of origin, etc)

Prices (per unit price, total price, currency)

General conditions of sale

Delivery terms ((Incoterms 2000)

Payment terms (CAD, DLC, etc)

Binding (valid for acceptance date) or Non-Binding

… and should not specify:

Date shipment

Name carrier

Before sending out, make sure:

The offer has been signed by an authorized officer

The offer does not contain any (spelling) mistakes

Expro100 Engineering, The Hague, Martin Bitter


The proforma invoice
The revoke its offer will depend on its wording as well as the law applicable. proforma invoice


Seedimpex SA revoke its offer will depend on its wording as well as the law applicable.

Seeds for the world

  • The 7 functions of an invoice:

  • Shows the amount the Seller owes to the Buyer

  • Specification of goods delivered

  • Customs document (import duties)

  • Basis for insurance coverage

  • Application certificate of origin CoC

  • Accounts document

  • Bank document

Seedimpex SA

Seedimpex SA


General purchase sales conditions

Purchase conditions revoke its offer will depend on its wording as well as the law applicable.

General purchase/sales conditions

Make sure to read AND UNDERSTAND then to negotiate.

Battle of the forms(send along with Offer return with Order Confirmation)

“Last Shot” (send along with invoice)

The only “safe” way is to have them

agreed to by both sides in writing

Expro100 Engineering, The Hague, Martin Bitter


General purchase conditions

1 revoke its offer will depend on its wording as well as the law applicable. . Order and Confirmation

1.1 The Customer may cancel the order if the Supplier has

not confirmed acceptance of the order (confirmation) in

writing within two weeks of receipt.

1.2 If the confirmation varies from the order the Customer is

only bound thereby if it agrees to such variation in writing.

In particular the Customer is subject to the general

terms and conditions of the Supplier only insofar as

such conform with the conditions of the Customer or if

the Customer has agreed to such in writing. The acceptance

of deliveries or services as well as payments do

not constitute approval.

1.3 Any amendments or additions to the order shall only be

effective if the Customer confirms such in writing.

General purchase conditions


General purchase conditions1

17. revoke its offer will depend on its wording as well as the law applicable. Place of Jurisdiction, Applicable Law

17.1 The court of jurisdiction shall be, in the event that the Supplier is a merchant, at the place of ordering.

17.2 German substantive law shall apply excluding the Provisions of the United Nations Law on the Sale of Goods dated 11.4.1980.

General purchase conditions


Choice of law and jurisdiction
Choice of Law and jurisdiction revoke its offer will depend on its wording as well as the law applicable.

Remember, two choices to make:

Choice of Law

Parties are free to choose which law applies

Failing choice usually law of “characteristic performance” applies

Trade terms (Incoterms 2010)

Jurisdiction

Forum shopping – “choice of forum clause”

Subject to test of reasonableness

Tip: Better to choose than not to choose at all

Expro100 Engineering, The Hague, Martin Bitter


Products properties
Products revoke its offer will depend on its wording as well as the law applicable. & Properties

Performance conditions,

products of nature,

variances.

certification, whopaysforcertification,

Expro100 Engineering, The Hague, Martin Bitter


Timing and delivery
Timing revoke its offer will depend on its wording as well as the law applicable. and delivery

When does clientneed delivery andwhat is your planning?

What are regulated contact moments?

Client expectations?

Expro100 Engineering, The Hague, Martin Bitter


Actual shipping
Actual revoke its offer will depend on its wording as well as the law applicable. shipping

What is most used set of agreements?

Law?

Whatversiontoday?

What are differenceswithnewestversion?

Case 1

Case 2

Expro100 Engineering, The Hague, Martin Bitter


Incoterms principles
INCOTERMS revoke its offer will depend on its wording as well as the law applicable. principles

The delivery of goods is agreed upon between seller and buyer. Though it could be done individually, it is usual to refer to standardized terms. This speeds up the process and increases the transparency and mutual understanding.

The most commonly used trade terms are the INCOTERMS (= International Commercial Terms), which are a set of standard conditions for delivery which can be imported into the contract by the parties. The INCOTERMS have been prepared by the International Chamber of Commerce but do not apply unless they are expressly incorporated into the contract. They have no binding force of law.

  • Relationshipbetweensellerandbuyer

  • (notbuyer / sellerand carrier)

Expro100 Engineering, The Hague, Martin Bitter


Incoterms revoke its offer will depend on its wording as well as the law applicable.

Overview 2000

GROUP TERM COMPLETE NAME TRANSPORT

MODE

E EXW Ex Works Any

DEPARTURE

F FCA Free Carrier Any

MAIN CARRIAGE FAS Free AlongsideShip Sea

UNPAID FOB Free on Board Sea

C CFR CostandFreight Sea

MAIN CARRIAGE CIF Cost, Insurance andFreight Sea

PAID CPT Carriagepaidto… Any

CIP Carriageand Insurance paidto… Any

D DAF Delivered at frontier Any

ARRIVAL DES Delivered ex ship Sea

DEQ Delivered ex Quay Sea

DDU DeliveredDutyunpaidAny

DDP DeliveredDutypaidAny

Expro100 Engineering, The Hague, Martin Bitter


* revoke its offer will depend on its wording as well as the law applicable.

*

*

*

Any mode of

transport, inclu-

ding multimodal

Departure

contracts

Incoterms

Application

EXW Ex Works

FCA Free Carrier

FAS Free Alongside Ship

F O B F r e e o n B o a r d

CFR Cost and Freight

CIF Cost, Insurance and Freight

CPT Carriage Paid To

CIP Carriage & Insurance Paid to ...

DAF Delivered At Frontier

DES Delivered Ex Ship

DEQ Delivered Ex Quay

DDU Delivered Duty Unpaid

DDP Delivered Duty Paid

Departure

contracts

Arrival contracts

Expro100 Engineering, The Hague, Martin Bitter


Incoterms 2010 overview
INCOTERMS 2010 revoke its offer will depend on its wording as well as the law applicable. Overview

Modernisinginternational Trade Flow

Electronic documentation

Safety in the supply chain

Clearerdefinitionsin 2010

Easierexplanationand display

More logicalcategories

Reduced from13 to11 conditions

2 new “rules” (??)

Expro100 Engineering, The Hague, Martin Bitter


Incoterms revoke its offer will depend on its wording as well as the law applicable.

Overview 2010

GROUP TERM COMPLETE NAME TRANSPORT

MODE

E EXW Ex Works Any

DEPARTURE

F FCA Free Carrier Any

MAIN CARRIAGE FAS Free AlongsideShip Sea

UNPAID FOB Free on Board Sea

C CFR CostandFreight Sea

MAIN CARRIAGE CIF Cost, Insurance andFreight Sea

PAID CPT Carriagepaidto… Any

CIP Carriageand Insurance paidto… Any

D DATDelivered at terminalAny

ARRIVAL DAPDeliveredat placeAny

DDP DeliveredDutypaidAny

Expro100 Engineering, The Hague, Martin Bitter


. revoke its offer will depend on its wording as well as the law applicable.

CIF/CAD

A Dutch importer buys from an exporter in the Philippines a 20 ft container with machine parts on basis of CIF Rotterdam.

Trans shipment is allowed. Payment conditions CAD.

The goods are transhipped in Singapore and get lost in the harbour.

The Dutch importer delays payment until the goods arrive in Rotterdam.

He bought CIF Rotterdam and wants to know for certain that the goods will arrive as ordered.

Expro100 Engineering, The Hague, Martin Bitter

Digital-2-6-Riskman


DDP/Open revoke its offer will depend on its wording as well as the law applicable. Account

An exporter from India sells to Germany a container with machine parts. The contract basis is DDP Frankfurt.

Payment: Open account, within 7 working days after arrival of goods.

The contract does not mention anything about insurance.

The container arrives in Rotterdam where an accident happens. The total contents of the container is total loss.

The heavily damaged container is

transported to Frankfurt and delivered,

according to the contract DDP

Frankfurt.

The German importer

refuses to accept the consignment

and does not pay the invoice.

The exporter takes the matter

to court. You are the judge...

Digital-2-6-Riskman


Payment
Payment revoke its offer will depend on its wording as well as the law applicable.

The Risk Triangle

Utopia,

negotiations /

cultural /

relationships /

checking in network/

checkingthrough credit reports

Expro100 Engineering, The Hague, Martin Bitter


The conflict now what
The Conflict: revoke its offer will depend on its wording as well as the law applicable. nowwhat…….

The resolutionshouldalreadybe pre-engineered in the contract.

  • Go to court….

  • Or…..

Expro100 Engineering, The Hague, Martin Bitter


Pro s and cons courts
Pro’s revoke its offer will depend on its wording as well as the law applicable. andcons Courts

Pro:

independence

legal skills

relativelycheap

possibility of lodgingan appeal

Cons:

No expert view exceptforlegalknowhow

lengthyproceedings

Decision is public

Expro100 Engineering, The Hague, Martin Bitter


Arbitration
Arbitration revoke its offer will depend on its wording as well as the law applicable. :

Administration of justiceby expert laymen

Decision is as binding as in normal court proceedings

Ordinaryarbitrationandemergencyarbitration

Parties must agree on arbitrationexplicitly

Special proceduralrulesapply

Varyfrom country to country and contract to contract

Expro100 Engineering, The Hague, Martin Bitter


Advantages and disadvantages of arbitration

Disadvantages revoke its offer will depend on its wording as well as the law applicable.

Speed

Impossibility of Appeal

Non publication of the decision

Validity of decision

Cost and delay

Procedural safeguards

Advantages and disadvantages of arbitration

Advantages

Neutrality

Confidentiality

Expense, timing and finality

Language

Arbitors expertise

Enforcement (International Conventions

Expro100 Engineering, The Hague, Martin Bitter


Arbitration1
Arbitration revoke its offer will depend on its wording as well as the law applicable.

International Chamber of Commerce (ICC) Court of ArbitrationICC Court of Arbitration38 Cours Albert 1er75008 ParisFranceTel: (011-331) 4953-2878Fax: (011-331) 4953-2933www: http://www.iccwbo.org

Info on cost of Arbitration

http://www.iccwbo.org/Products-and-Services/Arbitration-and-ADR/Arbitration/Cost-and-payment/Cost-calculator-3/

Expro100 Engineering, The Hague, Martin Bitter


Conclusion
Conclusion revoke its offer will depend on its wording as well as the law applicable. ??

Expro100 Engineering, The Hague, Martin Bitter


Checklist key clauses in international sales contracts
Checklist key clauses in international sales contracts revoke its offer will depend on its wording as well as the law applicable.

Identification of the parties (buyer and seller)

Description of the goods

Price and payment conditions

Delivery periods and conditions

Inspection of the goods

Quantity and quality variations allowed

Reservation of title and passing of property rights

Transfer of risk – how accomplished

Warranties

Force majeure clause

Requirement amendments only in writing

General sales/purchase conditions applicable

Choice of law (language)

Choice of dispute resolution mechanism

Expro100 Engineering, The Hague, Martin Bitter


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