In my career I’ve seen companies reach a next level of growth and maturity when faced with their first real opportunity to trade overseas.

This moment may come when local objectives have been solidly and consistently met. A good time to intentionally seek international expansion.

Positive expectations prevail and the entrepreneur is personally engaged in the preparation of the first overseas order, to ensure price, quality, quantity, payment, logistics are effectively agreed, and the order is ready for delivery. These are urgent matters. As a result, operational and commercial elements of the sale are well taken care of (knowing that payment and receivables will deserve a chapter of their own in the next posts).

Entrepreneurs, however, are less present in discussions related to insurance, risk transfer, and differences of interpretation emerging from these issues, not to say post-delivery issues such as customer support, warranty, and order termination. Less time and concern spent on what legal terms apply, especially in case of a conflict. These are non-urgent matters, but equally important.

In my experience, commercial transactions always require a minimum amount of mutual trust and aligned expectations between the parties to flourish and become long lasting. However, trust may unintentionally set aside necessary clarifications about the rules and laws to apply.

Well-known Incoterms™ are useful and act as facilitators of the overseas sale, mainly to risk transfer, insurance, and logistics, lacking however all other elements of the transaction and of the product lifecycle. A pro-forma invoice or the invoice alone is not the right vehicle to ensure enough clear rules for the sale either. Lack of clarity in determining the rules that apply may lead to undesired default situations (with unknown rules and/or jurisdictions – topic to follow in next posts).

My suggestion is to understand the context of the transaction. What if the order is suddenly changed or cancelled? Will it be a one-time sale or has it the potential for development and evolution? Will it include new products in the future? Will the products require customer support, service, or maintenance? Will the purchaser be able to invest in marketing and expand sales? Has the purchaser the potential to become a preferred distributor in the country?

You and your partner will certainly benefit from an objective term sheet detailing a minimum framework for important elements of your first export transaction, which will set the stage for a potential future and long-lasting relationship.

My final take: consider your sale to a new market as the first of many, and you will be convinced you need to raise the bar in respect to a better alignment of expectations with your new overseas partner.