Dos and Don'ts in Export Transactions: A Practitioner's Guide for SMEs?
| Author | Claudia Oberle,Lars Ponterlitschek |
| DOI | http://doi.org/10.1111/1758-5899.12731 |
| Date | 01 September 2019 |
| Published date | 01 September 2019 |
Dos and Don’ts in Export Transactions: A
Practitioner’s Guide for SMEs?
Claudia Oberle and Lars Ponterlitschek
Swiss Export Risk Insurance SERV
Abstract
Being successful in export business transactions constitutes a great challenge for export newcomers. Entering a new foreign
market, export newcomers must take into consideration many additional risks and pitfalls even if they are world-class in their
technology field in their domestic market. Besides the knowledge of common risks and pitfalls, experience in international
project management is a must!Good contracts are to be carefully drafted, especially key project execution issues like
timeschedules, starting point of deadlines, scope of supplies and services and its limits. If this is properly done, contracts may
be used like a checklist for project execution and help the exporter to provide evidence on their contractual performance at
any stage.Besides project execution topics, financial risk management has to be taken into account. Although –very hopefully
- not needed, legal / legal enforcement issues need to be drafted equally cautiously. Small and medium-sized companies are
well advised to organize expertise and support, if needed.
As an open economy, Switzerland exports goods and ser-
vices globally to a wide variety of sector: consumer
goods, services, and capital goods. Even if the products
or services and thus the logistics requirements can be
very different, there are nevertheless common risks and
pitfalls within the worldwide export that are to be
avoided by export newcomers wherever possible. Different
cultural attitudes and perceptions can make negotiations
very difficult. It has become common knowledge
that many Asians communicate more indirectly and it can
be considered rude to say ‘no’. In the Arab Gulf states,
similar behaviour can be observed in some cases. Whereas
in Switzerland or in nearby countries, such as Austria and
Germany, honesty and a direct approach are important, in
many other regions the matter is often approached rather
indirectly and the person comes before the matter. To
avoid surprises, it is highly recommended to become
familiar with the customs of the customer country in
advance.
Drafting, negotiating, and concluding
international contracts
It may be tempting for two new business parties (foreign
buyer and exporter), who get along well and are negotiating
a promising business transaction, to seal a deal with a hand-
shake. However, the expectations of the parties may be very
different (among other things, because of the different cul-
tural background). If problems arise in the handling of the
business transaction, no written proof of the facts of the
agreement is available.
To be on the safe side, it is very recommended to draft
contracts precisely in such a way that the contract
provides a guide on how to complete important project
steps during execution and at any stage evidence is avail-
able to prove adequate contract performance (a require-
ment for good project management). For this purpose,
clearly formulated key project execution issues such as
scope of delivery and services, exclusion of goods and
services, technical requirements, testing and acceptance
procedures, and warranty obligations make transaction
processes much easier and avoid conflicts that may very
quickly become unexpected cost traps and, for small- and
middle-sized companies, might even pose a threat to their
existence.
Project execution issues in export contracts
Clear definitions of deliveries and services are indispensable for
a successful export transaction. Before signing a contract, the
exporter should consider the following questions: What is in-
cluded in the scope of supply andservices? What isexcluded from
the scope of supply and services? Where are interfaces to the
customer, to other suppliers and/or third parties? Who takes the
responsibility for these interfaces?
Furthermore, it may make a big difference whether the
exporter has to supply an entire system designed to fulfill a
specific purpose (contractual ‘fitness for purpose’require-
ment) or an individual stand-alone product.
In addition to a clear scope of delivery and services, the
delivery schedule and, in case of delays, the handling and
limitation of legal consequences of delay and warranties
may be essential for a successful transaction: When do the
delivery/performance periods start? Are all export/import
formalities fulfilled? What happens in the event of a delay?
In the case of liquidated damages for delay have to be paid
Global Policy (2019) 10:3 doi: 10.1111/1758-5899.12731 ©2019 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 10 . Issue 3 . September 2019 421
Special Section Article
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