Don'ts of Exporting part 2

                                                 Don'ts of Exporting part 2

by Margaret M.Gatti, Esquire
(Article appeared in the 1996 Official Export Guide)
(Article was revised in October 1996 and in May 2002) ( Updated April 2007)
All Rights Reserved

Don't #5:

Don't ignore your responsibilities with regard to the U.S. Export Laws that mandate against certain types of behavior, i.e., the Foreign Corrupt Practices Act and the Anti-boycott Act.

The Foreign Corrupt Practices Act prohibits U.S. exporters from paying, offering to pay or promising to pay monetary commissions to a foreign government official or to relatives or friends of a foreign government official for the purpose of closing a deal, i.e., getting the business. U.S. exporters who violate the foreign corrupt practices act are subject to fines and possibly imprisonment.

The Anti-boycott act prohibits U.S. exporters from knowingly or inadvertently participating in another country's boycott of a country friendly to the United States. U.S. exporters who violate the Anti-boycott act are subject to penalties ranging from denial of export privileges through monetary fines to imprisonment.

Don't #6

Don't neglect to evaluate country risk in addition to buyer risk in selecting the proper payment method for your export transaction. countries frequently experience political and economic problems so severe that buyers in such countries are precluded from obtaining the necessary foreign currency to pay for their imports.

Exporters that ship to such countries without having investigated the country's political and economic situation and without having selected a payment method appropriate in light of such political and economic situations run the risk of not receiving for their export sale, regardless of the good intentions evidenced and fiscal responsibility exercised by their foreign buyers.

Don't #7

Don't confuse INCOTERMS with other sales terms formulations, i.e., the revised american foreign trade definitions, the uniform commercial code, or the warsaw terms. Although all formulations of sales terms are somewhat similar, they are significantly different in that each has its own definition of each individual term.

Consequently, it is important to specify which sales terms formulation applies to your transaction. Additionally, it is important to ensure that you don't misuse the specific INCORTERMS selected and that you fully understand the costs, responsibilities, rights and obligations that accompany the use of a specific INCOTERM. 

The misuse of a selected INCOTERMS can lead to over or underpayment of costs and to over or under assumption of responsibilities, rights and obligations.

Don't #8

Don't forget to analyze the adequacy of insurance coverage on your export transactions, given the transfer points for title and risk of loss and given the payment method selected. Determine the type, extent, and tenure of insurance coverage required and deliberately assign responsibility for insurance procurement and premium payment.

Exporters who ignore insurance issues never comprehend the extent of risk to which they are exposed until the risk becomes actual and they abruptly discover that they are either uninsured or underinsured.

Don't #9

Don't think that your use of a letter of credit is a substitute for a valid, enforceable export sales contract. A letter of credit deals only with payment and the documents that must be presented to obtain payment.

It does not deal with many other equally important issues, such as product acceptance, product warranties, or dispute resolution procedures. These issues are typically dealt with in an export sales contract.

An export sales contract should prescribe and incorporate the selected payment method and deal with any issue deemed significant by the exporter and the importer. Exporters who undertake an export transaction without having entered into an export sales contract are exposed to significant transaction risk over which they are unable to exercise much control.

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