In this work international trade transactions relate to the exportation 1of goods or services from

one country to another. These transactions are referred to as export transactions and are divided
into two categories: those based on a contract for the international sale. Of goods and those
which involve the supply of services to another country, such as the construction of works and
installations.

EXPORT TRANSACTIONS BASED ON A CONTRACT OF SALE

These contracts may be carried out by an exporter selling goods 1-4 directly to an importer
abroad or the exporter may choose to create a marketing organisation abroad and conduct
business through agents, branch offices, distributors or subsidiary companies.

Selling directly abroad is generally the favoured means of those whose business is usually
conducted in the home market or where the volume of exports to any one country does not
justify the creation or establishment of a form of representation abroad. The latter is more
appropriate where the volume of trade is rather more than occasional. Direct export sales may be
transacted regularly or carried out as isolated transactions. Trading through representatives
abroad may be carried out under the direct control of the UK exporter or through looser
arrangements such as the use of independent distributors, who may carry the products of other
exporters in addition to those of the UK principal. The exporter may, alternatively, choose the
option of establishing a branch office or subsidiary in the country to which the exports are
directed. These methods of export trading are examined in Part 8.

Trading by means of sales contracts and through representatives abroad are not exclusive
methods of export trading, but are complementary in that the exporter who has appointed
permanent representatives abroad normally carries out individuai export transactions with them,
or through them, by virtue of contracts of saie. This work will examine export trading based on
the contract of sale, and also deal with cxport trading carried out through marketing
organisations in other countries.
EXPORT TRANSACTIONS FOR THE CONSTRUCTION OF
WORKS AND ISSTANLATIONS
These transactions generally involve the building af large infrastrueture works, such as dams or
roads or the building of a factory with ethe attendant transfer of technology, often from an
industrialised to a less industrialised nation. The construction contract may proceed by invitation
to tender but there also exist other procurement methods. This process is simply stated as the
construction phase of the contract and may be accompanied or followed by contracts for the
supply of machinery or other equipment to be provided on the basis of an export sale. This type
of transaction is examined in Part 6.

THE EXPORT TRANSACTION

104 This work is concerned only with the contract of overseas sale, that is contract under which
goods leave the country destined for a buyer abroad, whether by land, sea or air, in containers or
as ordinary cargo. All other contracts of sale, though they may be preparatory to the export of
goods, are domestic sales and therefore outside the scope of this work. It must be noted that in
some sales transactions for example under anlex works contract, the performance takes place
entirely within the country of the seller of the goods and therefore the contract exhibits all the
characteristics of a domestic sale. In practice there is no difficulty in determining whether the
contract of sale has as its objective the exportation. Of goods from the country because of the
terms of the transaction, such as the arrangements made for the transport of the goods to
destination, and the fact that the buyer resides abroad. A great variety of transactions are export.

Transactions and the rights and duties of the parties will vary according to the arrangements they
have made regarding the place of delivery, the transportation of the goods and the method of
payment of the purchase price. Mercantile custom has developed a number of trade terms and
described methods of performance of export transactions. The examination of those terms in the
following pages will attempt to indicate the diversity and the practical use of the chosen means
of performance.

Contracts for the international sale of goods exhibit a characteristic which is not present in
domestic contracts of sale, in that they are entwined with other contracts. These other contracts
include the contract for the cartiage of goods by whatever means has been agreed, the contract of
insurance, and perhaps a contract with a bank or banks under which payment for the goods is to
be effected.

In many export transactions the delivery of shipping documents to the buyer or the agent of the
buyer plays an important, if not pivotal, role in the performance of the transaction. These
documents are usually the bill of lading, the commercial invoice and the insurance policy. It is
therefore clear that within an export transaction there may be many constituent transactions, cach
of which will be examined in Parts 1, 2, 3 and 4

Because of the international character of the transaction and its complexity, regard must be had
to the possibility of a dispute arising between the parties. Although this work is based on the
presumption that English law will apply to the sale and to all other incidental transactions, it may
not do so. Its application or otherwise is determined by examination of an area of law known as
the conffict of laws, which will decide where and by what means a dispute may be resolved and
in accordance with which law. These matters are set out in Part 5.

THE PARTIES AND THE MEANS INVOLVED IN THE EXPORT

TRANSACTION
The parties who are involved in an export transaction are numerous 1and are desctibed variously.
The exporter may sell directly to the importer abroad or may sell to an export house or
confirming house which will act either as the agent of the importer or as a principal in its own
right. If it acts as agent it will earn commission from the importer; if it acts as principal it will
earn the profit on the resale abroad.

The exporter may appoint an agent or set up a branch office, both of which possibilities are
examined in Part 8. Alternatively the exporter may conelude a sole distribution agreement, a
licensing agreement, franchising agreement or enter a joint venture with a party abroad.

A sole distribution agreement involves the distributor abroad being granted sole or exclusive
rights to represent the exporter.

Although the distributor is not an agert as such, he does not bave to account to the exporter for
profits made in selling the goods in question. What this means ought to be specified clearly by
the parties, but the agreement will generally involve the granting of sole trading rights, in a
specifed territory, of specified goods. The exporter will generally agree not to compete with the
distributor or allow others to do so. Care must be taken if the distributor is appointed in the
territories in which the law of the European Community applies, as there are strict laws
safeguarding competition. These interests are set out in Part 8.

A licensing agreement involves the granting by an owner in a particular territory of a form of

intellectual property, such as a patent or a trade mark, to a licensee of a right to exploit that
property in another territory. The advantage of this type of arrangement is that the licensce
provides the capital needed and will carry the commercial risk of the transactions. Two matters
are to be noted: the issue of quality control must be dealt with in the licensing agreement and
indeed the Ticensor should protect his reputation by insisting on a right to test samples of the
goods produced under icence. Further the issue of compliance with the relevant laws concerning
techaology transfer when licensing in a less industrialised state must be dealt with, and the
relevant European Community law when licensing in a state covered by that legislation.

Where the exporter has a strong and recognisable-corporate image, the so-called brand, a
particular form of licensingFanchising—may be adopted. Under this arrangement the exporter-
franchisor-will rigidly control the way in which the importer-franchisce-conducts the business of
selling the goods abroad. The strict control is designed to achieve uniformity between outlets so
that customers, wherever they may be, cannot distinguish between outlets owned by the
franchisor and those run by the franchisce. Quality control is therefore rigidly maintained. The
franchisce will own the outlet and raise his own capital and will source, to the extent of the
franchise agreement, goods from the franchisorexporter.

A joint venture lis a common undertaking created by two or more participants for a specific
purpose, usually of a commercial nature The common undertaking may take one of various legal
forms and does not necessarily result in the creation of a separate legal entity, as the venture may
be purely contractual. Aside from the common project planned, the joint venture partners will
pursue their own commercial objects. The ioint venture is the preferred vehicle for the conduct of
international transactions of certain lesser industrialised nations who have adopted legislation
which encourages foreign investment and the protcction of their own essential interests. Such:
oint enterprise may, in the European context, be in the form of an European Economic Interest
Grouping (EETG), whose purpose is to facilitate and develop the businesses of the participants.
The business must be related to the business of the members and its objects must be defined in
the contract of formation. In the context of the export trade, the EEIG may be used to create joint
buying offices, therefore enabling a more competitive price to be sought from the suppliers, or a
joint sales office which could, among other matters, facilitate market studies, thereby ensuring
the benefits of an economy of scale. The major forms of overseas organisation, agency, branch
offices and subsidiaries are dealt with in Part 8.

The accelerating development of technology has afforded exporlers the opportunity of dealing in
a paperless environment. The means by which electronic data interchange is conducted and its
potential application in export transactions are examined in Part 10.

As economies continue to internationalise, the GATTPTO provides an example of global co-

operation in the development of a mutilateral trading system. A new chapter outlining the
development and work of the WTO and providing an introduction to its dispute settlement rules
and procedure is found in Part 11.