Export Sales Contract

and
INCOTERMS® 2010

Prof (Dr) R K Wadhwa

Director
Global Business Consultants
And Ex-Prof IIFT, New Delhi
Former Director, IBM, GLA University Mathura
2714 Sector 23, Gurgaon-122 017
Website:www.globalbizconsultants.com
E-MAIL Id: training@globalbizconsultants.com
E-mail Id: consultancy@globalbizconsultants.com
E-mail: rkwadhwa@gmail.com
M: 91-9891413701/91-8800497110

24 AUGUST-EIDP-APIM 2018-19
Types of Contracts in Export Sales
- Contract of Sale
- Contract of Carriage
- Payment-related Contracts
- Insurance Contracts

Major Global Legal Systems

- Civil Law (Romano-Germanic Civil Law)-Modern Civil Law
influenced by Napoleon Code 1804 and German Civil Code of 1896
– reliance on comprehensive code. Followed in France, Germany,
Continental Europe, Japan and much of South Africa
- Common Law (Anglo-American Common Law) – reliance on past
precedents/rulings. Followed in countries with historical link to
England e.g. US, Canada, Australia, New Zealand, Nigeria.
- Islamic Law (Shari’a Law) – reliance on principals of Koran and
teachings of Mohd Prophet. Followed in Saudi Arabia, Jordan,
Syria, Iran, Iraq, Afghanistan, Egypt, Indonesia, Pakistan, Algeria,
Tunisia, Morocco and several others.
BASIC ISSUES IN EXPORT CONTRACT
1. Applicable law
– validation of contract
- Performance of contract – liability
- Any eventuality like change of law in the
country
2. Settlement of disputes
- Jurisdiction
3. Recognition & enforcement of decrees/award
4. Principle of conflict of laws : choice of law;
malafide intention; contrary to any specific
law
ELEMENTS OF AN EXPORT
ORDER
•Subject of the contract –
specifications of goods
•Base conditions
•Terms of delivery
•Date of delivery (date of b/l)
•Date of enforcement of contract
ELEMENTS OF AN EXPORT
ORDER
•Quantity of goods
•Delivery by separate lots
•Range and quantity of goods in lots
with specifications
•Deviation in shipment of 10% from
quantity of goods determined in
specification is admissible
ELEMENTS OF AN EXPORT
ORDER
•Price and value of contract
•Unit price and total value of goods
•Price includes tare, packing, marking
and transport charges for delivery of
goods to the port
•Total value of contract in us dollars
ELEMENTS OF AN EXPORT
ORDER
•Quality and guarantees
•Quality shall normally conform to
standards of sellers’ country or
otherwise
•Quality of goods shall be certified by
the seller – certificate to be attached
•Seller guarantees high quality
ELEMENTS OF AN EXPORT
ORDER
•Quality and guarantees
•In case goods found defective for the
fault of seller/do not meet technical
specifications and or certificate - seller
on receipt of written claim from buyer
shall replace defective goods by new
ones at his expense within 30 days of
the claim
ELEMENTS OF AN EXPORT
ORDER
•Terms and date of delivery
•Goods shall be delivered
within_______days as agreed to from
date of receipt of ____% advance (if
necessary) along with purchase order
ELEMENTS OF AN EXPORT
ORDER
•Terms and date of delivery
•Documents to be attached to the
shipped goods:
•Original copy of invoice
•Photocopy of coo of goods
•Photocopy of certificate of quality
•Packing list
ELEMENTS OF AN EXPORT
ORDER
•Terms and date of delivery
•Despatch of shipping documents to the
buyer by courier within 7 days from
date of shipment:
•Original copy of invoice
•Original copy of coo
•Original copy of certificate of quality
ELEMENTS OF AN EXPORT ORDER
•TERMS AND DATE OF DELIVERY
•Despatch of shipping documents to the
buyer by courier within 7 days from date of
shipment:
•Original certificate of analysis
•Original copy of packing list (separate
one for each container)
•Original copy of packing list (split at
rolls) (separate one for each container)
ELEMENTS OF AN EXPORT ORDER
•Terms and date of delivery
•Despatch of shipping documents to the
buyer by courier within 7 days from date
of shipment:
•Clean on-board b/l (1st & 2nd originals
marked “freight prepaid”)
•Photocopy of export declaration duty
stamped by customs
ELEMENTS OF AN EXPORT ORDER
•Terms and date of delivery
•Despatch of shipping documents to the
buyer by courier within 7 days from date of
shipment:
•Photocopy of fumigation certificate

•Seller to provide above documents

to buyer not later than 15 calendar
days from date of B/L
ELEMENTS OF AN EXPORT ORDER
•Terms and date of delivery
•Seller to be liable for delay in
delivery of goods or for demurrage
caused for late receipt of
documents by the buyer
•Seller to send scanned copies by
fax/e-mail for approval and
confirmation before shipment of
goods
ELEMENTS OF AN EXPORT ORDER
•Terms and date of delivery
•Buyer may ask for additional
requirements to shipping
documents for customs clearance
ELEMENTS OF AN EXPORT ORDER
•Terms of payment
•Payment for goods supplied to be
effected in us dollars as per
contract
•All bank charges in the buyers
market to be borne by buyer and
outside by seller
ELEMENTS OF AN EXPORT ORDER
•Packing and marking
•Packing of goods to be shipped should
correspond with nature of goods
•Packing to protect goods from all kinds of
damage during transportation allowing for
possible transhipments en route and long-term
storage
•Wooden pallets – free of bark
•Wooden tare to comply international
standards for phytosanitary measures
ELEMENTS OF AN EXPORT ORDER
•Marking of goods to contain
following information:
•Sellers’ address
•Description
•Quantity
•Coo of goods

•Seller responsible to buyer for all kinds

of damage due to inappropriate/low-
quality packing
ELEMENTS OF AN EXPORT ORDER
•Force majeure
•No party responsible for full or partial non-
execution of contract due to unforeseen
circumstances (fire, flood, earthquake, ban
on export/import or any other
circumstances beyond control) for the
fulfillment of obligations under the contract
•Certificates issued by respective chambers
of commerce – sufficient proof of
circumstances and duration
ELEMENTS OF AN EXPORT ORDER
•Force majeure
•In case delivery of goods made later than
stipulated date - seller to pay buyer a fine
of 0.1% of the value of goods for each day
of delay in delivery

•Arbitration
•All disputes/disagreements on fulfillment
of contract to be settled through
negotiations failing which by arbitration
tribunal
ELEMENTS OF AN EXPORT ORDER
•Other conditions
•Previous negotiations & correspondence to
become null and void after signing of the contract
•All appendices, amendments, addenda to form
integral part of contract and be legally valid only in
writing and signed by both parties
•None of the parties can transfer their rights and
obligations to third party without written consent
of either party
ELEMENTS OF AN EXPORT ORDER
•Legal addresses
•Buyer and his bank
•Seller and his bank
SUMMARY OF TERMS AND CONDITIONS
OF AN EXPORT CONTRACT
•Product and description
•Product specifications as regards quality
•Price: fob/cif as per incoterms 2000
•Quantity
•Payment terms
•Delivery schedule: time period; partial or complete
•Mode of shipment: air/sea/road/post/inland water
•Type of shipment: direct/transhipment
SUMMARY OF TERMS AND CONDITIONS
OF AN EXPORT CONTRACT
•Inspection
•Labelling/packaging/packing and marking
•Insurance: exporter/importer
•Documents
•Escalation clause
•Force majeure
•Arbitration
•Fines/penalties
•Applicabilities of law
INCOTERMS® 2010
 INCOTERMS® 2010
NEED
•Trade practices vary from country to country
•To avoid misunderstanding resulting in disputes
and litigation international chambers of commerce,
Paris evolved uniform rules for interpreting the
commercial terms in 1936
•Since then these have been revised in 1953, 1967,
1976, 1980, 1990, 2000 and 2010 (in force from 1-
1-2011)
•No. of INCOTERMS reduced from 13 in 2000 to 11
in 2010. Two new Incoterms rules – DAT and DAP – have
replaced the Incoterms 2000 rules DAF, DES, DEQ and DDU
FUNCTIONS:
•A group of standardised trade terms 3 letters
commonly used in international contracts of sale of
Goods.
•To divide the costs of International Business
Transactions.
•Defining responsibilities between buyer and seller,
and
•Reflect current practice in the international
freight.
Contract of Carriage

The INCOTERMS utilized in a transaction will dictate which party is

responsible for each transportation segment and it’s corresponding
contract of carriage. The INCOTERM that is utilized can affect the title
passage in foreign trade.

As a general rule, Pre-Carriage, Main-Carriage and On-Carriage should be

utilized in connection with the INCOTERMS

INCOTERMS- Contract of Carriage

Pre-Carriage: the transportation segment from the seller’s location to the

point where the cargo would leave from the seller’s side. Example, to
arrange for pre-carriage, you would contact with an inland carrier to make
delivery to a port of airport.

Main-Carriage: the transportation segment from the seller’s side to the

buyer’s side. Example, to arrange for main-carriage, you would contract
for ocean or air carriage.

On-Carriage: the transportation segment from the point of arrival (on the
buyer’s side), to the designated ultimate receiver. Example, to arrange for
on-carriage, you would contract with an inland carrier to make delivery
from the port/airport of arrival to the ultimate receiver.
 GROUPING OF INCOTERMS® 2010
A set of 11 terms, each identified by a three capital letter acronym that
form the “key words” in international commercial transactions.
Classified into two categories: viz. Rules for any Mode or Modes of
Transport and Rules for Sea and Inland Waterway Transport

Any Mode or Modes of Transport Only Sea and Inland Waterway

Transport
EXW (Ex-Works) FAS (Free Alongside Ship

FCA (Free Carrier) FOB (Free on Board)

CIP (Carriage, Insurance Paid To) CIF (Cost, Insurance & Freight)

CPT (Carriage Paid To) CFR (Cost and Freight)

DAT (Delivered at Terminal)

DAP (Delivered at Place)

DDP (Delivered Duty Paid)

 DO’S AND DON’TS OF INCOTERMS

INCOTERMS DO INCOTERMS DON’T

•Provide an internationally accepted •Dictate the contract of carriage
definition of incoterm

•Responsibility of consignor and consignee •Include all of the duties of the

consignor/consignee in a transaction

•Allocation of costs •Deal with a breach in contracts

•Assumption of risks •Exemptions from liability in case of

impediments

Have been created to adapt to the most •Do not speak about payments between
contemporary commercial practices buyer/seller
THANKS FOR PATIENT LISTENING
Please contact for any Help on Export Import related Issues:

One Stop Solution

Prof (Dr) R K Wadhwa

Director
Global Business Consultants
And Ex-Prof IIFT, New Delhi
Former Director, IBM, GLA University Mathura
2714 Sector 23, Gurgaon-122 017
Website:www.globalbizconsultants.com
E-MAIL Id: training@globalbizconsultants.com
E-mail Id: consultancy@globalbizconsultants.com
E-mail: rkwadhwa@gmail.com
M: 91-9891413701/91-8800497110