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  • Taking Your Business Global - How to Begin
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    International Trade Contracts

    So you’ve done your research and identified an international importing or exporting opportunity, and now you want to put a deal in place. The next step is to set up a contract that specifies terms and payments and protects your interests.

    One way to protect your interests is through a letter of credit. Through this document, the bank is authorized as a third party to handle payments. A letter of credit ensures that an exporter is paid only after the importer verifies that the goods and services have met the conditions spelled out in the letter of credit—and vice versa.

    An international banker can explain your options and help you set up a letter of credit that best meets your needs.

    You might also want to learn more about INCOTERMS®. This is a set of standardized three-letter codes for common international trade terminology (e.g. “DAT” stands for “Delivered at Terminal.”) INCOTERMS was developed by the International Chamber of Commerce to help prevent misunderstandings in foreign trade.

    While you’re negotiating your contract, there may be additional documents you’ll need to prepare. Check export.gov for a list of some of these important documents.

    Although you should certainly consult an attorney experienced in setting up international contracts, several organizations publish “model contracts.” Reviewing those can help you understand how small- and mid-sized businesses often set up their contracts.

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    Game Plan

    • Learn more about letters of credit at SCORE.
    • Contact your banker or an international trade expert to see whether securing a letter of credit or similar document makes sense based on your specific situation.
    • Check to see whether INCOTERMS® can help you prevent misunderstandings with foreign trading partners.
    • Review the Small Business Administration’s “Export Business Planner For Your Small Business.”
    • Before you sign a contract, make sure you find out what other documents you might need. Export.gov publishes a list of some of these documents.
    • Take a look at some “model contracts” to learn how international contracts are often structured. The International Trade Centre offers a free PDF download of some of these model contracts.
    • Consider consulting an attorney who specializes in international trade. You can find a list of these attorneys at Lawyers.com or the Export Legal Assistance Network.