Negotiating a strong international sales agreement from the importer’s perspective
From the importer’s perspective, negotiating an international sales agreement is about securing goods in the right condition, at the right time, and at a competitive price, while minimizing risks related to transportation, quality, and payment. Here’s what importers should focus on when negotiating.
Quality and conformity of goods: Securing specifications
Primary Objective: Ensure the goods meet agreed-upon specifications.
Importers should clearly define product quality, specifications, packaging, and labeling in the sales agreement. Including the right to inspect the goods upon receipt and, if necessary, pre-shipment inspections ensures that the goods conform to contractual obligations.
Tip: Negotiate a right to withhold payment or demand replacements if the goods do not meet the agreed specifications, protecting against substandard deliveries.
Incoterms: Reducing shipping risks and costs
Primary Objective: Minimize risks and costs associated with shipping and customs clearance.
Importers typically prefer Incoterms such as CIF (Cost, Insurance, and Freight) or DDP (Delivered Duty Paid), where the exporter bears most shipping risks and costs, including customs duties. These terms provide greater certainty over the final cost of goods and help avoid complications related to transportation and import procedures.
- CIF: The exporter arranges and pays for shipping and insurance up to the destination port.
- DDP: The exporter assumes all responsibilities for transportation, import duties, and delivery to the importer’s specified location.
Tip: Importers should negotiate Incoterms that limit their exposure to logistical risks while ensuring transparency in shipping costs, helping to manage overall transaction expenses.
Payment Terms: Balancing cash flow and security
Primary Objective: Secure flexible payment terms while ensuring delivery.
Importers should aim for payment methods that allow for the inspection of goods before payment, such as open account terms or documentary collections. These methods ensure that the importer retains liquidity while receiving the goods. Deferred payment options help to maintain cash flow, especially for large-scale transactions.
Tip: If the exporter insists on using Letter of Credit, importers should negotiate to ensure that the documentary requirements are clearly defined to avoid delays or payment rejections due to discrepancies in documents.
Dispute resolution: Favorable or neutral venues
Primary Objective: Secure a neutral or advantageous forum for resolving disputes.
Importers should avoid agreeing to dispute resolution clauses that require litigation in the exporter’s home country. Arbitration offers flexibility and predictability compared to navigating a foreign court system.
Tip: Negotiate for arbitration in a neutral country or agree to a jurisdiction that offers enforceability and predictability for both parties.
Logistics and compliance: Ensuring smooth importation
Primary Objective: Ensure compliance with import regulations and customs procedures.
Importers need to ensure that the exporter provides all necessary documentation, such as bills of lading, commercial invoices, certificates of origin, and product safety certificates, to prevent delays at customs. Non-compliance can lead to fines, penalties, or even the seizure of goods by customs authorities.
In conclusion, while exporters focus on ensuring payment security and minimizing logistical risks, importers are concerned with receiving goods in the correct condition and managing costs. Both sides must negotiate terms that balance their respective interests. A well-drafted international sales agreement, tailored to the specific needs of both parties, helps to mitigate risks and ensure a successful transaction. Contact us we will ensure that all necessary documents and regulatory requirements are met for the smooth importation of goods and during negotiations we will draft a fair and legally sound contract.
