ibt chapter 01

7/26/2019 IBT Chapter 01

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he purpose of this chapter is to review briefly some of the major topics and issuesinvolved in international business transactions. The remaining chapters of the book

will expand on the topics outlined in this chapter. The first part of Chapter One highlightsthe tremendous growth in international business transactions and some of the causesbehind this expansion. One factor that has aided the expansion of international trade isthe development of a supranational trade law. Chapter One therefore introduces the

reader to the concept of international customary law.

T

We will examine the ways international business is transacted. The concepts of directand indirect exporting, licensing, and direct foreign investment will be introduced. Thisdiscussion will provide a basic understanding of the perceived advantages anddisadvantages of each method of transacting international business. These methods willbe explored further in Chapter Three, along with hybrid ways of transacting business,

such as franchising and jointventuring.

The secondhalf of ChapterOne will focus on

the risks involvedin international

business transactions. The great opportunities presented by international businesstransactions do not come without risk. ome risks are the same as those in purelydomestic transactions! others are uni"ue to the international business environment. #irst,we will analy$e how companies evaluate such risks. econd, we will review the genericrisks associated with international business transactions, including risks associated withcultural and language differences, currency risks, legal risks, and political risks. #inally,we will look at the tools that have been developed to minimi$e and manage such risks.We conclude by discussing strategies for managing international business risks, including

the development of an export plan, use of intermediaries, and a form of internationalbusiness known as countertrade.

%ltimately, the goal of teaching international business law is to sensiti$e futureentrepreneurs to the risks of international business and the ways to manage such risks. &savvy entrepreneur is adept at analy$ing risk and is knowledgeable about the techni"uesto minimi$e risk. &fter Chapter One introduces the reader to the risks of internationalbusiness transactions, the rest of the textbook will explore more fully how such risks areminimi$ed in the areas of exporting, direct foreign investment, and intellectual propertytransfer.

The Global and Regional Marketplace

The relaxation of international trade barriers after the econd World War has produced adramatic increase in world trade in goods, services, and technology

1

Chapter I

Introduction to InternationalBusiness Transactions


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2 'art ( )egal and *thical *nvironment of +nternational usiness

http-,%.. ureau of *conomic&ffairs-http-www.state.gOveebtpp. +nformation on % .liade programs with links to

/T& and WTO Web sites.

http-,%.. 0epartment ofCommerce uieau of*conomic &nalysis-http-www.bea.doc.gov .'rovides statistics pertainingto economic activm.

licensing. & number of factors have facilitated this expansion in international trade including-

1 even 2ounds of 3eneral &greement on Tariffs and Trade 43&TT5 /egotiations1 The expansion of 3&TT with the adoption of the (667 World Trade Organi$ation 4WTO5

&greements into other areas, such as trade in services, technology8 transfer, and foreigninvestment

1 The deepening of regional trading blocks, such as the *uropean %nion 4*%5 and the /orth&merican #ree Trade &rea 4/T&51 The disintegration of the oviet %nion and Warsaw 'act and the advent of 9emerging

economies,9 many of which have become members of the *%1 0ramatic advances in telecommunications and information technologies1 The development of vibrant international capital markets in *urope and /orth &merica1 *conomic reform based upon capitalist models currently under way in the 'eople8s 2epublic of

China

This list is far from exhaustive, but it illustrates the fact that we live in an age of dynamicglobal economic development and interdependence. +t should be noted that the threat of terrorismworldwide, emphasi$ed by the attack on eptember ((, :;;(, has placed a degree of uncertainty oninternational trade and travel that is difficult to measure.

The forces listed here have resulted in significant increases in cross


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(6=>, total world #0+averaged ?6= billionper year. y (66@,#0+ had reached ?77;

billion. &ccording to the %nited /ations Conference on Trade and 0evelopment, foreign directinvestment inflows increased to ?@A> billion in :;;(. The increase in world #0+ has, much liketrade, occurred mostly in the three major regional trade aieas of *urope, the &mericas, and *ast.&sia. 3lobali$ation is likely to expand both at the regional level and at the

( ec, gcru rallv Ward ouer 9 the tutiire lrucuue of the 3lobal )egal Baiketplace.9 The Betropolitan Corporate Counsel4(6665.


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Chapter ( +ntroduction to +nternational usiness Transactions

EXHIBIT 1.1 Trends in World Trade Integration (trillions of dollars)

ource The World ank, (Anbnl Piosptrts (> 4Washington, 0 (66>5 2eprmted with permission. Copyright D (66> bvthe +nternational ank loi 2econstruction and 0evelopment and the World ank

worldwide level. The causes of this expected growth include the advance of globaltelecommunications and the increased transferability of services and intellectual property. erviceand knowledge industries, such as entertainment, education, and health care, will benefit from theexpansion of the General greement on Tariffs and Trade (GTT) into areas other than the saleof goods. The upward trend in services and intellectual property trade will continue in the nextdecade and beyond. The average annual growth rate for trade in commercial services between (6=;and (66A was @.@ percent, compared with 7.6 percent for trade in goods. The dollar value of tradein commercial services grew to ?(.E trillion, with an annual growth rate of E percent by :;;:, whilethe annual growth rate of trade in goods was 7 percent.

hup-,!orld Ban"#

$tt%#&&'''.

'orldan".org.'rovidesstatistics and information oninternational trade andfinance.

Laws of International Business Transactions

+nternational law generalh refers to the historicalF5 developed transnational rules and norms thatnational courts use to regulate three primarv relationships- 4(5 the relationship between two nations,4:5 the relationship between a nation and an individual, and 4A5 the relationship between persons orentities from different countries. This book is primarily concerned with the last tvpe of relationshipG the person


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4 +8art ( )egal and #thical *rmmrnnent ot +nternational usiness

hup-+nternational Court ofHustice- $tt%#&&'''.ie*ci.org.

http-l inks to le !"##developments-$tt%#&&le+mercatoria.net.

Tins Web sue describes itselfas a monitor tordevelopments in internationalcustoman law and +ntei netinfrastruc lure

regulations promulgated bI the World Trade Oigani$anon 4WTO5 will be studied because of theirdirect impact on the export and import of goods, scnices, and intellectual property rights.

There are numerous sources of international business law. rticle ,- of the tatute of theInternational o/rt of 0/stice* lists the sources of international lav. +n order of superiority theIare 4(5 international conventions8 and treaties,74:5 intei


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Chaptci ( +nlmduction to +nternational usiness Transactions

The acceptance of generally recogni$ed contract principles, the trend toward economic tradeunions, the adoption of international conventions, and the growth of international customarv lawhave all led to common approaches among national legal systems in the area of international

contract law. +n the long term, international unification and harmoni$ation arc likely to reducetransaction costs relating to international contract formation.

International /stomar2 3a'

#ollowing standard practices, custom, and trade usage can minimi$e the risk of legal disputesstemming from contractual misunderstandings. These secondary sources of international businesslaw can be divided into two general groups, the first of which includes international conventions orregional initiatives aimed at harmoni$ing rules about cross


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'ait ( )egal and *thical )mironment of +ntel national usiness

Preventive Contracting and the CISG

Bost international business disputes stem from poorly written contracts or the parties8

failure to recogni$e kev substantive issues. 3iven the universal nature of businesstransactions and the globali$ation of the marketplace, contractual failures attributable toinherent linguistic and cultural differences have significantly diminished, but when theydo occur, they can lead to high transaction costs. &nother cause of legal disputes is theexistence of fundamental differences in national rules interpreting contractual terms.Thus, a primary way to understand the risk of international business transactions is toreIiew cases and arbitral decisions dealing with contract disputes.

%nder the 7nited 8ations onvention on ontracts for t$e International 9ale ofGoods (I9G):11a written contract is not re"uired and a contract maI be proved by 9Zmeans including witness testimony.9(: +n practice, manv business transactions arecharacteri$ed by a high degree of informality. &n *nglish court noted in this regard- 9Onehas to bear in mind that commercial men do not look at things from the lawyer8s point of

view.9(A

0espite the informal nature of business contracting and the common use ofstandard forms, howeIer, it is likely that sophisticated business


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Chaptei ( +ntroduction to +nternational usiness Transactions 7

Scope of International Business Transactions

&ll business transactions imohe considerable risk. The essence of being a busi


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8

http9::; . government links-$tt%#&&firstgov.gov.'rovides links to allrelevant governmentWeb bites.

agents seek to obtain the desired items at the lowest possible price and are paid acommission by their foreign clients. +n some cases, the agents may be foreigngovernment agencies or "uasi


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&n indirectexporting methodsimilar to using an*TC is sellinggoods to an e+%ort

agent or remar"eter. *xport agents or remarkeiers purchase products directly from themanufacturer and then pack and mark the products according to their own specifications.They sell overseas through their contacts in their own names and assume all accountrisks. The %.. manufacturer relin"uishes control over the marketing and promotion ofits product, which could have an adverse effect on future sales efforts abroad.

iDirect Exporting

& compam new to direct exporting generally treats export sales no differently fromdomestic sales, using existing personnel and organi$ational structures. owever, there areadvantages to separating international from domestic business, including centrali$ation ofspeciali$ed international market skills and focusing of marketing efforts. 2egardless ofhow a company organi$es.for exporting, it should ensure that the structure facilitates themarketer8s job. *xperience shows that a company8s success in foreign markets depends

less on the attributes of its products than on its marketing methods.Once a company has been organi$ed to handle exporting, it must select the proper

channel of distribution in each market. These channels include sales


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Chapter ( +ntroduction to +rutrnational usiness Transactions

representatives, agents, distributors, retailers, and end users. & foreign salesrepresentative is the e"uivalent of a manufacturer8s representative in the %nited tates.The representative uses the company8s product literature and samples to present the

product to potential buyers! a representative often handles many complementary linesfrom different manufacturers. The sales representative usuallv works on a commissionbasis, assumes no risk or responsibility, and is under contract for a definite period oftime. The contract defines territory, terms of sale, method of compensation, reasons andprocedures for terminating the agreement, and other details. +n contrast, a foreign agentnormally has authority to make commitments on behalf of the firm he or she represents.&ny contract should state whether the representative or agent does or does not have legalauthority to obligate the firm.

The foreign distri/tor is a merchant who purchases merchandise from a %..exporter, resells it at a profit, and generally provides after


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(; 'art ( )egal and *thical *nvironment of +nternational usiness

General Sources for Market Research

1 *xport &merica.

This monthlv publication of the )!..0epartment of Commerce contains recentnews stories, market analyses, technicaladvice on exporting, uade leads, andsuccess stories of export marketing.FedBi


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Chapter ( +ntroduction to +nternational usiness Transactions ((

0emographic and general economic statistics such as population si$e and makeup, per capitaincome, and production levels by industry can be important indicators of the market potential for acompany8s products. The third method of secondary market research is obtaining the adIice of

experts, including those at the %.. 0epartment of Commerce and other government agencies!attending seminars, workshops, and international trade shows! hiring an international trade andmarketing consultant! talking with successful exporters of similar products! and contacting tradeand industry association staff.

Working with secondan sources is less expenshe and helps the company focus its marketingefforts. owever, the most recent statistics for some countries may be more than two years old.&lso, statistics on sale of services are often unavailable. et, even with these limitations, secondaryresearch is a valuable and relatively easy first step for a company to take 4see 0oing usiness+nternationally- & tep. +dentify any %.. or foreign govA #.:d (:@A 46lli Cir.(6=(5, a female plaintiff sued her employer foidrscnminatorily not promoting hei because she was female.

The job to which she would have been promoted re"uired herto deal with outh &merican businessmen who preferred notto do business with females. Theie, the Court stated that themere fact that it was an international case did not distinguishit from other cases wherein it was held that mere customerprefeience would not justify the use ot the .#.O..exception. The re"uirement that an individual be a Boslemto perfoim the duties of a helicopter pilot in certain portionsof audi &rabia is a bona fide occupational "ualificationwithin the meaning of 7: %. C. } :;;;eth . (6=75.

Case ;ighlights

1 The use of a written employment conti act to limitthe emplovei8s liabilities

1 *xtraterritorial application of %.. employmentdiscrimination laws

1 The ona #ide Occupational ualification defense4.#.O..5 to an employment discrimination claim

1 2eligion as a .#.O . irr some international businesssituations

Currency Risks

Currency risks ate a concern in almost all business ttansactions that cross national bordets. Thereare three sepaiate risks that relate to currency and international business transactions convertiilit2:re%atriation: and c/rrenc2 rate fl/ct/ation. & buver and a seller in different countries rarely usethe same currency. 'ayment is usualh made in either the buyer8s or the seller8s cunency or in amutually agreed


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a devaluation ot the loieign cui lencv could cause the exporter to lose money in the transaction.One of the simplestIvaIsfor a %.. exporter to avoid this type of risk is to "uote prices and re"uitepavment in %.. dollars. Then the burden and risk are placed on the buyer to make the currency

exchange. +f the buyer asks to make payment in a foieign currency the exporter should consult aninternational banker befoie negotiating the sales contract. +nternational banks can help one hedgeagainst such a risk, if necessary bv agreeing to purchase the foreign currency at a fixed price indollars regardless ol the value of the currency when the customer pays. +f this mechanism is used,the fees charged by the bank should be included in the price "uotation.

TheIiernia Ristribtor G ,ernina 1n$ng V4! ?o$pany case illustrates how a party didnot anticipate the risk of a currency rate fluctuation. +n this case, a poorly written open price term98resulted in significant monetary losses due to an unanticipated curiencv fluctuation.

& loreign importer or exporter can minimi$e the risk of a negative currency rate changethiough techni"ues of hedging. This is accomplished by entering into forward, future, or optioncontracts. ome investors speciali$e in aritrage: which is the simultaneous buying and selling ofthe same foreign exchange in two or more markets to take advantage of price differentials. &

for'ard contract re"uires two parties to eIc hange specified amounts of mo currencies at somefuture time. The

Bernina Distributors, Inc. v. Bernina Sewing Machine Company0


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contract is not one made impracticable by the contingency ofthe deIalued dollar. Comment = to } : states that thisexcuse does 9not apph when the contingency in "uestion is

sufficiently foreshadowed at the time of contracting.9 &lso,cost increases alone do not render a contract impracticable.The loss would have to be especially severe andunreasonable. +mporter was aware of the possibility of areduction in profits due to exchange rate fluctuations andcould have guarded against this contingency. #or example, acost


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Chapter ( +ntroduction to +nternational usiness Transactions 2

fluctuations. The seller is paid a fee for tendering the option. The right to seil a currencyin the future is a put option, while the right to buy is a call option. The option is obtainedbI paying a substantial premium whether the option is exercised or not.

Legal Risk

One of the primary risks in all international business transactions is the application andenforcement of foreign laws. ost country laws may include restrictions on currencyconversion and repatriation of profits. +f a company is deemed to be doing business in aforeign country, then it may become subject to the legal jurisdiction of a foreign coutt.Companies that establish a presence in a foreign country must also be concerned withlocal employment laws. Bany countries impose severe restrictions on the termination ofemployees ;( agents, such as re"uiring lengthy notice re"uirements and substantialseverance payments. Other host country laws that should be examined include labeling,marketing, and advertising laws! income and sales tax laws! environmental laws! product

and consumer liability laws! health and safety laws! and antitrust or competition laws. +norder to decrease the uncertainty due to the risks of foreign laws, the %nited tates hasentered into ilateral investment treaties (BIT) with many foreign countries. Thesetreaties provide the basic legal framework for a company investing in a foreign country.They generally address issues of convertibility of currency, repatriation of profits,compensation for expropriation, protection of intellectual property, andnondiscriminatory treatment of foreign investors.

ecause of differences in language, culture, and legal systems, the intentions ofparties in an international transaction may not be easily discernible from their contract.Therefore, it is imperative, more so than in a purely domestic undertaking, for the partiesto express carefully intended rights and obligations in a written contract. &t the lime ofexecution, the parties must, with the assistance of their lawyers, review each contractclause to make sure all parties understand them.

Of course, such a model approach to contract review is not often practical. #orexample, in the typical export transaction, there is no single form that both parties readand sign. The parties simph exchange their own forms in order to effect an offer andacceptance. /onetheless, each parry should take the time to carefully review the termsand conditions in the other party8s form before entering into the contract. This isespecially important if it is the first transaction between the contracting parties. +t is alsoimportant, particularly in large transactions with a corporation or partnership, to Ierifvtheother party8s authority to bind the company to a contract.

Often the "uality of a contract is erident not in what it says but in what it fails to say,and an international contract is often the product of 9studied ambiguity.9 (= agueness orambiguity in contractual language is employed to achieve the illusion of agreement.'arties make use of 9a kind of *speranto9 in which 9parties often draft a contract in

ambiguous form in order to achieIe agreement.9(6The roots of contract ambiguity comefrom two sources, the parties negotiating the contract and those charged with its drafting.& common scenario is that the principals negotiate

http-+nternational )aw0ictionary-$tt%#&&a/g/stl.com&%/s&diet&proIidesdefinitions or wordsand phrases used inprivate and publicinternational law.

(=. Hohan teI0.9 I Nind ol #.spu.mio< [ hr tiol$\ of 8iability% Io =% ;% . nks. )et /ew Moik. Oxturd %mveisuv'i ess (7

(7. +bid. p. (A
http://erifv/http://augustl.com/http://erifv/http://augustl.com/


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24 'art ( )egal and *thical )nvironment of +nternational usiness

http-,&merican ociety of+nternational )au-$tt%#&&'''.asil.org .

'rovides infoimation oncurrent developments ininternational law, alongwith links to internationaldocuments and anahsis.

the general framework for an agreement and then nun over to their attorneIs the task of writing thelanguage of the agreement. uch brief negotiations increase the risk of ambiguity inherent ininterpersonal communication, especially within a cross


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finding ade"uatelegal counsel andrestricted discovery

options.:(The %.. #ederal 2ules of Civil 'rocedure provide a liberal set of rules that allow for fulldiscovery of the odier party. uch sweeping discover5 techni"ues may not be available in othercountries. &lso, the remedies available to the plaintiff may be of

8:;.

:(.

%7(t5h]@ist nouce is the le"uiNinent tli.n a pain tMiam fm ixlension of lime to peifoini ihe connact upon ihe re"uestol the other pain 7athH7lnotu e mil be examined in Chaptei tight0istoIen is llu pietnal piocess wheiebI the liliganls imcoIei evidence bI "uestioning the opposing pain eitliei Pwilting 4mtei logatones5 ;( in pel son depositionsF examining documents piourted bI ibe opposing pain, andobtaining the lestnnom of independent null p.itlI witnesses.
http://athju/lhttp://athju/lhttp://athju/l


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a different order. The %.. notions of treble 4triple5 and punitive damages are not found in mostforeign legal systems, and the %.. and common law views that prefer to give monetarv damagesare not found in civil law countries. +n civil law, the plaintiff is allowed the choice of suing foi

monetarv damages or receiving an order of specific performance that forces the other party tohonor the contract.

#inally, similarities in the substantive laws of a countrv may mask differences in theenforcement of those laws. This can be seen in the areas of intellectual property protection andcorruption. & number of countries have ratified the primary international property rightsconventions, such as the 'aris and erne Conventions, but have been lax in their enforcement. )axenforcement has resulted in high levels of counterfeiting and piracy of trademarks, patents, andcopyrights. &nother example is the enforcement of anti


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2! 'art ( )egal and *thical *nvironment of +nternational usiness

http-World TradeOrgani@ation-$tt%#&&'''.'to.org.

'roudes links to allWTO &greements.

http-.'olitical 2isk+nformation-$tt%#&&'''.%olitical*ris".net.'rovides dataand information onpolitical risk.

1 3overnment procurement restrictions1 *xport subsidies1 )ack of intellectual property protection1 ervice barriers1 +nvestment barriers

& number of international agreements address trade barriers. The 7r/g/a2 >o/nd ofthe 3&TT addressed all of these trade barriers in some fashion. 3&TT negotiationstraditionally targeted tariff barriers and "uantitative restrictions. The original (67@ 3&TTcontained provisions aimed at 9reducing fees and formalities connected with importation

and exportation9 4&iticle III): 9general elimination of "uantitative restrictions9 4&rticle+5, and the 9publication of trade regulations9 4&rticle 5. The WTO &greements thatfollowed the %ruguay 2ound of 3&TT committed the newly formed WTO to a reductionand elimination of all categories of trade barriers. 8on*tariff arriers include import"uotas and other "uantitative restrictions, non


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the rates, a denial of a tax credit, or a change in accounting rules can be used tomanipulate corporate income taxes. Other forms of taxes, such as revenue taxes, can alsobe manipulated. These taxes are associated with the importation and exportation of goods

and include the valueis" ssessment and ;anagement

efore entering a foreign market, a business should measure die degree and likelihood ofpolitical risk by performing a formal risk assessment. This may be done internallythrough research with materials obtained through the %.. tate 0epartment and theO'+C. ome businesses enlist private companies that speciali$e in risk

:A. alue


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'art ( )ethal and *thical *nviionmcnl of +nternational usiness

assessment. +f a project is verv large, however, then management should meet with governmentofficials of the foreign country to discuss the company8s goals. +f possible, a formal concessionagreement should outline the duties of the foieign government and the rights of the company +t

should specify the level of tariffs to be charged, the light of the companv to repatriate profits, thehost counhs commitment to intellectual property protection, the applicable leIel of taxation, andthe government8s transfer %ricing policy


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procurement may be subject to loreign government regulation. +n China, for example,insurance in conjunction with a joint venture must be obtained through a Chineseinsurance rompam.

The decision to obtain commercial insurance ma! be dictated by the commerciallender. 'roIisions in the undcihing contract should also be reviewed for their potentialimpact on subse"uent insurance claims. #or example, choice of law clauses should bereIiewed to determine if there are laws that preclude the insured from making Z ] laimunder its insurance policI.

The application for insurance, like the application for a letter of credit, is contractualin nature. The applicant should read the form carefully and answer it as honestly andcomprehensively as possible. The general rule is that the applicant must disclose anyinformation that would 9materially9 influence the insurance company8s decision to grantthe re"uested insurance.(8E+n the related area of marine insurance, a court stated that 9anapplicant foi a marine insurance policy is bound to reveal every fact within hisknowledge that is material to the risk.9:@+n that case, an owner of a compam failed to

disclose that he had previously filed claims for more than two do$en losses at sea. Thecourt found that there wa.s sufficient evidence for fraud in intentionally concealingmaterial facts and allowed rescission of the insurance policy

Typical precisions found in most insurance contracts include a description of theinsured properu, a definition of an expropriatory act, a waiting period, notice, warranties,recoveries, duty to minimi$e loss,:= and definition and computation of loss.:(8 Thedefinition of what expropriatory acts are covered by the expropriation insurance policIshould be closeh scrutini$ed. 0oes the policy cover both partial and total loss orexpropriationq & 9waiting period9 is often re"uired between the expropriatory loss andcollecting on the insurance policy. +n large projects, the waiting period can be as long as ayear. The duties of the insured regarding the preservation of the investment and anvclaims pertaining to the loss should be clearly defined. & warrant5 provision oftenre"uires the insured to take steps in order to preserIe its anerage. #or example, the insuredmay have to certify that it will comply with relexant host country laws and that theuninsured portion of the investment will remain uninsured. &lso, rights to recoveriesmade after payment on the claim should be defined.

Managing Risk Through Intermediaries

*xporting, licensing, and direct foreign invesuncnt risks can be reduced by using pro3). +t publishes the8egal ide on International ?ontertrade TrnnsfLlions' which provides information on how best to

O ee. MQZQS. Hohn C. 3tabow V]XXU and 0i.ilrmM Contiact!, $ +ntel national 2artrt and ountei hadeTlan 4k675 . @ ee t C+T2


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Chapter ( +ntroduction to +nternational usiness Transactions A(

Tho"as B# Mc$e%& '(ountertrade)

and *olic% +ile""as'

30 Low Policy intl Bus2 I '356


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2 '.ut ( )egal and *thical *nviionmcnl of +nternational usiness

A Step$%&$Step Approach to "ar!et Research 'continued(

learing greements

&lthough countertrade is conducted mostfre"ueitlh between a soveieign nation and aprivate fum, countertrade arrangements alsooccui between and among soIereign nations/ations have histoiicallv enteiedintobilateial orniultilateial 9dealing agieements9 undei whichtHieI agree to pin chase e"ual values of eachother8s pioducts oIei a specified period oF time.This is a form of lecipiocal ading not unlikethe pmate fhm


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Chaplei ( +ntroduction to +nternational usiness Transactions

structuie a countertrade tiansaction. +t also discusses the types of clauses generally found incountertrade contracts. The clauses discussed in the ide include type, "uality, and "uantity ofgoods! pricing of goods! participation of third parties! payment! restrictions on resale! li"uidated

damages! security for performance! failure to perform! choice of law- and settlement of disputes.ecause of the difficulty in finding marketable goods in a foreign country to fulfill a

countertrade 4counterpurchasc5 commitment, certain clauses take on added importance. #irst, anextended period of time should be allotted to the exporter to obtain host country goods to satisfy itscounter tr acle obligations. econd, a broad list of countertrade goods should be negotiated toenhance the exporter8s chances of finding marketable goods. Third, because of the poor "uality ofsome foreign goods, the exportei should negotiate broad inspection rights. &lso, the costs anduncertainty of the ] countertrade arrangemen t may w ai rant the granting of a disagio 4discount5 ofthe amount of goods needed to be purchased to fulfill the countertrade commitment.

&nother provision included in countertrade contracts is a penalty clause for non


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Sa"ple utline for an ./port *lan4

#ocus on Transactions

art I. E+%ort olic2 ommitment 9tatement

art II. 9it/ation&Bac"gro/nd nal2sis

1 'roduct or ervice1 Operations1 'ersonnel and *xport Organi$ation1 2esources of the #irm1 +ndustry tructure. Competition, and

0emand

art III. ;ar"eting om%onent

1 +dentifying. *valuating, and electingTarget Barkets

1 'roduct election and 'ricirm

1 0istribution Bethods1 Terms and Conditions1 ales 3oals- 'rofit and )oss #orecasts

art T. Tactics# ction 9te%s

1 'rimary Target Countries1 econdary Target Countries

1 +ndirect Barketing *fforts

art . E+%ort B/dget

1 'ro #orma #inancial tatements art

I. Im%lementation 9c$ed/le

1 #ollow


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*xamples of international law societies include the 3erman

ibt chapter 01

Documents