Growing your business internationally – part 3

This is the 3rd article in the series on “How YOU Can Grow Your Business Internationally”.  In this segment you will learn of some things to beware of before opening a market outside the U.S. and will get some tips on key issues that should be addressed in a sales contract.

A Few Notes of Caution

Expanding your markets outside the United States can be a great strategy for growing your business but, as with any strategic move, it requires prudence and caution.   Become familiar with the current state of affairs in any country in which you would like to do business.  The U.S. Department of Commerce can give you excellent advice in this area.  The following is a list of ‘sovereign’ risks you should be most concerned about:

  • Political instability in the country
  • Wars the country is involved in
  • Military and civil unrest and insurrections
  • Economic instability
  • Boycotts by the country that could affect you or your products
  • Tariffs levied by the country on imported products
  • A history of expropriations of property by the government
  • The failure of the country’s central bank to provide foreign exchange for the country’s currency
  • Governmental subsidies to your buyer(s) that could end

Andy Germer, Managing Director of the China Direct Group, normally advises his clients to initially insist on Letters of Credit if selling directly to an end user until a trusted relationship has developed.  Another approach he suggests is to minimize risk by finding a qualified and vetted foreign partner in the buyer’s country such as a distributor, sales agent, etc. who will absorb the credit risk in a buy / resell transaction with the seller.

Lastly, as with any transaction, it is absolutely critical that there is a clear and unambiguous understanding by both parties of what is being sold and bought.  Here is a list of some of the more critical items that should be included in a sales contract:

  • Merchandise description – Be specific
  • Packing and marking requirements
  • Delivery instructions – time and place
  • Price – itemize goods and seller-supplied non-product services
  • Shipping terms –check  Incoterms for guidance and terminology
  • Transfer of ownership
  • Insurance
  • Inspection – by whom and at what cost
  • Warranties – type and duration
  • Applicable law
  • Dispute resolution procedures
  • Method of payment

In the next, and last, segment of this series I will list some great sources you can turn to for addtional information.


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