Growing BusinessEXPANSION

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  • Expanding Your Business Through Exporting
    Game Plan

    Setting Up Your Exporting Contract

    Ready for your first exporting transaction? You’ll certainly need a contract to protect your interests. In addition to that contract, you might also consider using a letter of credit or insuring your transaction to minimize risk.

    With a letter of credit, your buyer applies through its bank. Your bank will assess the buyer’s letter of credit and send it to you. When you’ve sent the goods and the buyer approves the shipment, the buyer’s bank sends funds to your bank and deposits the money into your account.

    This approach makes sure that an exporter is paid only when the importer verifies that the goods and services have met the conditions spelled out in the letter of credit—and vice versa.

    However, letters of credit may be expensive to arrange. Another option is to secure an insurance policy from the Export-Import Bank of the United States. These insurance policies may cover much of the risk of a buyer not paying you under certain situations.

    An international banker can explain your options and if you decide to do so, can help you set up a letter of credit that best meets your needs.

    While you’re negotiating your contract, note that there may be additional documents required before you ship your goods. These include invoices, packing lists, bills of lading, and other documents.

    Finally, an international contract can be a complex document, so you should consult an attorney who specializes in international trade for advice on setting up a contract.

    Game PlanGame Plan

    Game Plan

    • Review some “model contracts” to see how international contracts can be written. The International Trade Centre offers a free PDF download of some of these model contracts.
    • Learn more about how letters of credit work from the Export-Import Bank.
    • Find out how to use Export-Import Bank small business insurance instead of a letter of credit to secure your transaction.
    • Find out which documents you may need to prepare in advance of exporting your goods.
    • Consider consulting with an attorney who specializes in international trade. You can find a list of these attorneys at Lawyers.com or the Export Legal Assistance Network.