***Need a closing paragraph for this paper. 150 Words***
Upon entering foreign trade deals, an entrepreneur must be aware of the many intricacies and laws in international affairs. International sales contracts are monitored by the United Nations Convention on Contracts for the International Sale of Goods (CISG) from 1980 (“International Contracts”). The governance from this organization makes it possible for countries to trade amongst each other despite differences in culture and language. Their role is crucial because often times countries have different laws and regulations regarding international trade. When attempting to enter trade negotiations with China, India, the U.S.A., France, and Canada international contracts can become a bit confusing to negotiate. The parties involved may choose a set of laws to follow from any of their respective countries, but they must all come to a consensus on which set of laws they will follow. It is important for an entrepreneur to be willing to negotiate with a businessman or woman from other countries over the laws of which the contract and trade will follow. If multiple foreign countries are involved, everyone must be on the same page to avoid confusion or possible faults in the business, resulting in a broken promise in the contract.
To begin, an entrepreneur needs to research and understand how India’s legal system and contract laws differ from those of the United States’ (U.S.). Green and Yoon (2017) claim that although India’s legal system has the basic fundamental principles of Common Law, the laws, processes, and language are notably different and that they differ from state-to-state (p. 683-685). According to Export.gov (2017), “India lacks an overarching government procurement policy and, as a result, its government procurement practices and procedures vary among the states, between the states and the central government, and among different ministries within the central government” (para. 14). Further, according to the Arbitration and Conciliation Act, business disputes in India are typically resolved with an arbitrator (Nidumuri, 2016).
Also, “India remains one of the world’s most challenging major economies with respect to protection and enforcement of IP” and the country also “provides no statutory protection of trade secrets” (Export.gov, para. 3 & 6). Luckily, there are several business associations available to help provide entrepreneurs assistance when entering into a contract with an Indian company. For example, the U.S.-India Investors Forum (USIIF) “provides its members access legal and financial expertise in the Indian and U.S. legal and tax systems” (Export.gov, 2017, para. 9). Finally, an entrepreneur needs to know that there are “[n]umerous sectors [in India] (e.g., textiles and apparel, paper, rubber, toys, leather goods, and wood products) receive various
forms of subsidies, including exemptions from customs duties and internal taxes, which are tied to export performance” (Export.gov, para. 11).
With this information in mind, an entrepreneur should then utilize any available national or domestic organizations to help first identify a reliable Indian business to begin negotiations for procuring fabric. Then, during the initial negotiation process, the entrepreneur to enter into a nondisclosure agreement to serve as a safeguard to protect company assets. Once a reliable fabric business owner has been identified, and there is a mutual interest to work together, the entrepreneur should then enter into a joint venture contract agreement. According to Liuzzo (2016), this type of an agreement is “an activity in which individuals become partners for only a short period of time or for only a single project” (p. 321). Again, this contract provides an important safeguard to protect company assets and minimize losses.
During the contract negotiation phase, the entrepreneur needs to clearly stipulate and define each partner’s roles and expectations in a written contract. In addition to that the contract should also include: the agreed upon pricing, termination of contract details, payment specifications and bank information, and the terms of the governing laws, such as breach of contract, disputes, bankruptcy, taxes, required licensing and registration, and currency exchange (Export.gov, para. 4-5). Also, due to the existing export and import laws between India and China, the government benefits that Indian businesses receive for exporting to China, and the well-established Indian business knowledge of the exporting and carrier shipping process, the contract should also specify the fabric orders to be shipped to the China manufacturing plant is the sole responsibility and liability of the Indian fabric company.
There are a few issues that may arise from this joint venture agreement, such as breach of contract, loss of goods, natural disasters, and lack of protection of intellectual property or trade secrets. As such, an entrepreneur out to invest in insurance to cover lost or stolen products, as well as any pause in operations due to a natural disaster. Should there be a breach of contract, India’s legal system generally handles disputes with an arbitrator. However, an entrepreneur
should also seek legal advice from his or her business lawyer during the dispute process. Another potential issue are the political relationships between the three countries. Therefore, the contract should specify how each of the issues will be resolved should they occur, to any include any political changes that hinder business operations in India. Each of these steps minimizes risks for the first two operations of this international business. Scripture says that being cautious can lead to success, “The prudent see danger and take refuge, but the simple keep going and pay the penalty” (Proverbs 27:12, New International Version).
When researching a firm to convert fabric into children’s shirts on the clients designs you should make sure the contract manufacturer offers the best quality, price and has a solid track record. Be sure not to contract with a third-party sourcing company unaffiliated with the contract manufacture. Do your due diligence to make sure the contracted manufacture is not a shell company that has no little to no assets. The contractor manufacture should have sufficient financial resources. If there is a breach in the contract on behalf of the manufacturer or a product defect is noticed the U.S. buyer only has legal recourse with the third party, not the contracted manufacturer. (Lu, 2016, Make sure you contract with the right party section, para.1)
According to Lu, a detailed bill of materials is essential. The bill of materials is a list of components to be used in fabricating the product. Including a precise bill of materials as a part of the supply agreement is a must when you plan to rely on the contract manufacture to procure raw materials and product components. This will help prevent the contract manufacture from substituting in cheaper materials at its discretion and will reduce product defects and recalls.
(Lu, 2016). Also, include detailed pricing provision in the agreement. “If you want to have a fixed price for the next two years, a volume discount or a specific cost reduction plan, or if you want to specify the pricing model based on the bill of materials or any pricing adjustment mechanism, make sure to include the relevant provisions in the supply agreement or a pricing exhibit.” (Lu, 2016). (Lu, 2016, Detailed bill of materials and pricing provisions, para.2)
Make clear of the quality requirements and product warranty. As apart of the supply agreement include the detailed product, packaging, specifications, and quality control and inspection procedures. In the past, many contract manufacturers in China insisted on no product warranty. Today, more and more contract manufacturers are willing to offer product warranty against product defects for which the contract manufacture are responsible—i.e., design defects for which the U.S. buyer is responsible are not covered—and you should consider asking for one. The warranty period usually is measured from the date of shipment since it would be difficult for the contract manufacture to know the date of sale. (Lu, 2016., Spell out the quality requirements and product warranty, para.3).
Finally, if a dispute arises with the contract manufacture and they cannot meet the product specifications or misses delivery deadlines, you may want to work it out with the manufacture first. If that proves impossible, seeking monetary damages and arbitration in a jurisdiction outside of China governed by U.S. law would be your best option. China is a signatory to the New York Convention on Foreign Arbitral Awards, foreign arbitral awards are readily recognized and enforced in China. In contrast, China has no obligation to recognize and enforce U.S. court judgments. (Lu, 2016, Be smart about dispute resolution, para.6).
As an entrepreneur, make sure to dedicate your plans to God and allow him to guide you in making wise decisions. “Commit to the Lord whatever you do, and he will establish your plans.” (Proverbs 16:3 New International Version)
Upon completion of the garments, the product must be shipped to Canada, the United States, and France to be sold in department stores. Since the garments will be shipped internationally, it is vital to fill out all of the necessary documentation for the shipment. These documents include the bill of lading, the certificate of origin, a commercial invoice, and a packing list (Fleet Logistics Inc., 2016). Without these four documents, a shipment overseas is impossible and the transfer will be denied. According to the U.S. Customs and Border Protection, The bill of lading is a document providing written evidence of a contract between the owner of the goods and the carrier (“Bill of Lading Document”). This document is given from the carrier to the shipper as a sort of receipt of everything being shipped and how it is to be shipped. For the shipment of garments from China, a bill of lading document would exist between the manufacturer in China and the company who ships the order out to France, Canada, and the U.S. A certificate of origin is simply a signed document stating the origin of where the product being shipped is from (Export.gov, 2016). This provides proof of where the product was created, which would help especially if multiple countries were involved in an international exchange such as this. This document would provide the information that the garments were made and manufactured in China. According to the UPS website, a commercial invoice is a document that identifies all of the products being shipped (UPS.com). This is a contract that exists between the seller and the buyer (Export.gov, 2017). Since garments would be sold to three different countries, three separate commercial invoices would be provided. China would have a separate commercial invoice for France, Canada, and the United States. Lastly, a packing list identifies the weight and numerical values of each product in the shipping container (Export.gov, 2016). This document goes into much greater detail regarding the measurements of the boxes and is usually used by the destination country’s customs officials to check the cargo when it has arrived (Export.gov, 2016). For a shipment to be passed to a foreign country smoothly and correctly under international contract law, these documents are vital and without them no transaction may occur. After the shipments arrive in each country, they will be checked by customs officer and be authorized for entry if everything is correct. Once they are approved, the garments are able to be dispersed into department stores where they will be able to be sold to the public for profit.
A business who wants to be successful selling children’s clothes in Canada and France must, therefore, be ready to learn the market dynamics and cope with all the market changes taking place in the business environment. A budding entrepreneur must have a clear understanding of the human nature and remain flexible to any change that may arise during the business engagement (Miti, 2015).
One of the major issues that a budding entrepreneur must be is the need to be pro-active to issues affecting the domestic trading business where international contracts is a major requirement. For Canada and France, they both take part in the International Sale of Goods Contracts Convention Act which is a treaty uniform international sales law. This Convention applies to contracts of sale of goods between parties whose places of business are in different States (“International Sale of Goods Contracts Convention Act”, 2018). With the children’s garments being sold to China and France to be sold in department stores, this act would be a huge priority for any entrepreneur to understand. Because of this, he who is focused on achieving success must also ensure that all the economics relating to the domestic trading business in children’s garments are acceptable to the international contract’s requirements (Shane, 2014).
It is important to avoid being carried away with the previous success that has been realized in the domestic trading business in children’s garments. This caution will prevent instances where that ends up hurting the economic viability of the international contract negotiation, thus hampering the chances of success in the business of children’s garments. In this regard, you must be prepared for any change in the supply and demand of the children’s garments.
You must also understand the fact that striking the right balance between the demand in the domestic trading business in children’s garments and the changes in the economy will increase the chances of achieving success (Georghiou, 2015). You also must understand that the international contract negotiation with Canada and France, it requires a high level of seriousness to win the trust and confidence of the international market players (Bridge, 2014).
A successful business must understand that international contracts require commitments and in-depth understanding of the terms of conditions of the contract, enforceability of the contracts and the legal obligations and responsibilities of each party in the contract. This business law knowledge will enable the them to have an idea of the risks associated with the international contracts and the relevant laws that must be adhered to before being in possession of children’s garments before shipping them to various stores in Canada, and France. As scriptures says in 1st Peter 4:10 (NIV) “Each of you should use whatever gift you have received to serve others, as faithful stewards of God’s grace in its various forms.” Thus, you must view the business of selling children’s garment as a form of service and love all the customers.
The compliance of regulations is key to being able to manufacture and sell products internationally. There are endless laws and standards set by the industry and by the government which shape how retail business is conducted For this company to be able to sell products in the US department stores it would need to enter into specific contracts. The company would need to be in a partly executory contract with China stating that there will be an agreement made to continuously provide products to our company so that we can stock to racks at the stores with clothes. China is the best option to minimize the risks of lost profit or turnaround because it is the workshop of the world. “As the largest manufacturer in the world, China clearly dominates the production of many goods globally” (Gao, p. 1, para 2, 2016). To ensure that this agreement will be kept, the company will have an agent present in China to keep the flow organized. “An ideal distributor will have an extremely good banking relationship to enable the extension of credit and have the capacity to market a full range of products and services. It is important that the agent or distributor have solid infrastructure and facilities such as warehouses, service workshops, showrooms, and competent staff to meet and exceed the expected volume of business” (Unknown, 2017). To avoid misrepresentation and puffing, the company will only use the highest quality fabrics made from the best materials and invest in practices with the manufactures, so no corners are cut in the production process. “Factories are changing their hiring practices as the domestic service industry emerges, China’s western regions grow, and labor protection laws strengthen” (Koty, para. 5, 2016). To avoid risks of child labor laws, the company will keep the age of majority in focus. Laws that would have to be met while selling product in US stores would center around retail law. These specific laws include subjects like protection of consumer rights and fair-trade competition. Retail law also states that the advertisement for the company or products must be truthful to ensure consumers are not being taken advantage of. Complying with the US retail pricing laws will outline how much the company can charge for the products being sold in the department stores. In the book of Romans, it says “Let every person be subject to the governing authorities. For there is no authority except from God, and those that exist have been instituted by God. Therefore whoever resists the authorities resists what God has appointed, and those who resist will incur judgment” (13:1-2, ESV ). Compliance with these laws would spell success for the company to sell its products to the US department stores.
0 comments