Unit 2
MBA/BBA/B.com/ PGDBM /UGC Net
By
Dr. Anand Vyas
Constituents of the Export Sales Contract
• The export contract is used for the international sale of certain products
(industrial supplies, raw materials, manufactured goods), which are projected for
resale, where the buyer is a trader, importer, distributor or wholesaler that will
sell the products to another company or merchant. Though it is common practice
to export products based a proforma invoice or quotation received from
exporters, it is a safe practice to use written and legal export contracts.
• A major point of distinction between a domestic and export contract lies in
identifying the proper law governing the export contract. This is not a problem for
domestic sales contracts because the proper law will always be the Indian law in
India. It will be the respective national laws in each country so far as their
domestic transactions are concerned. But in export transactions, there are two
nations, that of the exporter and importer. Therefore, the question arises, which
country’s law will apply to an export contract.
An export sales contract, also known as an export agreement or export sales agreement, is a legally binding
document that outlines the terms and conditions of a transaction between an exporter and an importer. The specific
constituents of an export sales contract may vary depending on the nature of the transaction, the parties involved,
and the industry. However, here are some common elements typically included in an export sales contract:
1. Parties: Clearly identify the exporter (seller) and the importer (buyer) by providing their legal names, addresses,
and contact details.
2. Product Description: Provide a detailed description of the goods or products being exported, including
specifications, quantity, quality, packaging, and other relevant information.
3. Price and Payment Terms: Specify the unit price, total value, currency, payment method, and schedule.
4. Delivery Terms: Define the agreed-upon delivery terms, including the place of delivery, transportation mode, and
responsibilities for costs, insurance, customs, and documentation.
5. Packaging and Labeling: Outline the packaging requirements and labeling instructions for the goods to comply
with regulations and prevent damage during transit.
6. Quality Assurance and Inspection: Establish the quality standards, inspection procedures, and required
certifications or documentation to ensure compliance.
7. Intellectual Property Rights: Address any intellectual property issues and specify the rights and obligations of both
parties.
8. Force Majeure: Include a clause to address unforeseen events beyond the parties' control that may hinder or
delay contract fulfillment.
9. Dispute Resolution: Specify the mechanism for resolving disputes, such as mediation, arbitration, or litigation, and
the applicable jurisdiction.
Contract of Affreightment: Terms of Delivery
& Incoterms standards
• Affreightment (from freight) is a legal term relating to shipping.
• A contract of affreightment is a contract between a ship-owner and a charterer, in
which the ship-owner agrees to carry goods for the charterer in the ship, or to
give the charterer the use of the whole or part of the ship’s cargo-carrying space
for the carriage of goods on a specified voyage or voyages or for a specified time.
The charterer agrees to pay a specified price, called freight, for the carriage of the
goods or the use of the ship.
• A ship may be let, like a house, to a person who takes possession and control of it
for a specified term. The person who hires a ship in this way occupies during the
specified time the position of ship-owner. The contract under which a ship is so
let may be called a charterparty but it is not, properly speaking, a contract of
affreightment, and is mentioned here only to clarify the distinction between a
charter-party of this kind, which is sometimes called a demise of the ship, and a
charter-party that is a contract of affreightment.
• Express stipulations
• It must not be supposed that even these primary obligations, which are
introduced into every contract of affreightment not by express terms of the
contract.
• It has now become common form to stipulate that the shipowner shall not
be liable for any loss arising from the negligence of his servants, or that he
shall not be liable for loss by the excepted perils even when brought about
by the negligence of his servants.
• And with regard to seaworthiness, it is not uncommon for the shipowner to
stipulate that he shall not be responsible for loss arising even from the
unseaworthiness of the ship on sailing, provided that due care has been
taken by the owner and his agents and servants to make the ship
seaworthy at the commencement of the voyage.
International Purchasing Systems Constituents
• Purchasing refers to the activities related with the acquisition of goods, raw materials or services
necessary for firms to accomplish their business goals. This is referred as international purchasing
when those purchasing activities are carried out in international markets to support the firm’s
operations and ensure a reliable source of supply. With the economic globalization process one
can experience that domestic and international purchasing activities are becoming blurred and
are converging in a single function within firms.
• Economic Order Quantity and Purchasing
• The economic order quantity (EOQ) model is used in inventory management by calculating the
number of units a company should purchase for its inventory with each batch order to reduce the
total costs of its inventory. The costs of its inventory include holding and setup costs
• Purchase-to-Pay
• Purchase-to-Pay is an integrated system that fully automates the goods and services purchasing
process for a business. The system gets its name because it handles all aspects of the acquisition
from the purchase of goods to the payment of the vendor. The Purchase-to-Pay system begins
with requisitioning, then proceeds to procurement, and ends with payment.
Strategy and its Interface with the Management of
the Global Supply Chain
• The global supply chain involves the entire process of sourcing raw
materials, manufacturing products, and delivering them to customers
worldwide. It includes activities such as procurement, production,
transportation, warehousing, and distribution.
• The management of the global supply chain requires careful planning
and coordination to ensure that products are available to customers
in the right place, at the right time, and in the right quantity. This is
where strategy comes into play.
Effective supply chain strategy involves several key
elements:
1. Objective Setting: Clearly defining the goals and objectives of the supply chain,
such as reducing costs, improving customer satisfaction, or increasing
responsiveness.
2. Network Design: Designing an optimal supply chain network that includes the
location and number of facilities, transportation routes, and inventory
positioning to achieve efficiency and meet customer demands.
3. Supplier Management: Selecting and managing suppliers effectively to ensure a
reliable flow of materials and services, while also fostering strong relationships
and implementing quality control measures.
4. Risk Management: Identifying and mitigating risks that may disrupt the supply
chain, such as natural disasters, geopolitical instability, or supplier disruptions,
through contingency planning and risk mitigation strategies.
5. Technology and Innovation: Leveraging technology, such as supply chain
management systems, data analytics, and automation, to enhance visibility,
efficiency, and decision-making throughout the supply chain.
6. Performance Measurement: Establishing key performance indicators (KPIs) and
metrics to track and evaluate the performance of the supply chain, allowing for
continuous improvement and alignment with strategic objectives.
Negotiating the Contract
• This five-step process will help to build the foundation critical negotiations with critical suppliers
of all types.
1 Understand your mission and business drivers
• It is essential to understand the fundamentals of your own business so you can develop a
negotiation strategy that complements the overall strategy. What are the essential business
objectives of your company? What markets do you serve, who are your customers, what are their
requirements and what are the operational goals of your business? Without a strong
understanding of the business issues that makes your organization tick, you will never be able to
successfully negotiate at any level.
2 Understand their mission and business drivers
• Understanding what business issues drive your suppliers will allow you to develop successful
situational negotiation strategies. It is easy to compile intelligence on your suppliers so you can
understand their pressures. This process can also be a good way to determine pricing trends,
market constraints, regulatory issues or other important issues that the supplier may not quickly
share.
3 Be authentic to build credibility and trust
Negotiation can be an emotional exercise, with the pressure of the bottom line creating an
environment of conflict and mistrust both inside and outside of the company. Those emotions are
not limited to the usual buyer and supplier dust-ups, but internal judgments and misconceptions as
well, as the importance of the supply chain gain greater company recognition. Avoid posturing,
bluffing, lies or deceit. These are tactics of a bygone era. Be yourself, adhere to your personal and
organizational values and proudly represent your company. Trust is an underappreciated business
and personal attribute. Gain it and keep it.
4 Work towards a positive outcome for all parties
Win-win negotiations are a bit of a misnomer. It does not mean each party gets exactly what they
want, or there is one giant compromise in the “let’s split the difference” model. In a win-win
negotiation, both parties can compromise so each side captures some level of value. Win-win
negotiations in a relationship-based environment take on a long-term approach with a balance of
success for both sides over time. One-off negotiations, perhaps for a piece of capital equipment,
may lend itself to less of a relationship-based win-win model, replaced with a more traditional style
of negotiation. Experienced buyers can negotiate over range of business situations.
5 Create a plan for evaluation and assessment
Negotiations are not singular events, but continuous efforts that need ground rules and
communication frameworks. Leave little to chance and revisit performance often. Identify issues
early to avoid conflict later. Establish key performance indicators in the contract that will form a
basis for discussion.
Selecting the International Logistics Operator
Strong reputation and knowledge of your industry.
The reputation of a logistics provider plays an important role. A
provider must adapt to customer needs and satisfy demand with best-
in-class service focused on cost efficiencies and superior quality. Find a
provider that has proven knowledge in your business area.
Logistics management from start to finish.
To facilitate logistics management, choose a provider with the expertise
and resources to manage transportation logistics in an integrated way,
as well as specific storage and value-added services, without neglecting
details, such as packing and security, that make the difference in
handling freight.
Worldwide presence.
A provider that has developed specialized services according to market demands
will help companies find solutions anywhere in the world. Having a strong presence
in these markets ensures a single point of contact throughout the process. In
addition, the diversity of customs regulations and individual security precautions of
destination countries can create obstacles. With a provider that operates
internationally, you gain the market knowledge, including customs regulations and
foreign trade compliance, of other parts of the world.
Security and Technology.
Consider how the logistics provider will ensure the safe delivery of a shipment
from the moment it leaves the facility to the final destination. This is especially
important when handling dangerous goods. Transparency and integration of IT
systems for transport and warehouse management also is vital. Ideally, the IT
service provider operates with unified global core systems enabling seamless
information flow.
Covers all modes..
For air, maritime, and domestic transportation, strict criteria for selecting a
logistics provider ensures consistent quality levels.
Criteria of Selecting the Third-Party Logistics
Operator
• Cultural alignment.
• Company infrastructure.
• IT capabilities.
• Metrics
