Export Business

I'd like to start by saying that foreign trade is an exchange of goods and services  between various countries. In this context let me tell U that foreign trade in Russia may successfully be carried on direct between Russian enterprises and foreign firms and indirect through middlemen:

Direct sales.

The most common means of doing business nowadays is through straight sales of foreign goods in exchange for foreign currency or commodities, which were produced in our country (countertrade).

Countertrade is a term, which denotes various methods of linking two export operations. In countertrade transaction the Seller agrees to take full or partial payment in goods.

Frame work Agreement

Normally it is advisable to conclude the framework agreement within which the individual countertrade transactions shall operate. But sometimes in a contract it is usually to build the

1. The clear definition of the mutual obligation of the parties.

2. Specification of the countertraded goods and condition of setting the value on FOB and CIF basis.

3. Restrictions of the market where the goods may be sold/

4. The arrangements for settlement account and evidence account and for the payment of the credit balance of terminations of the agreement in cash.

5. The conditions of participating of the factor in a countertrade process.

6. Penalty provision for non-performance of the countertrade obligations by the exporter.

7. A choice of law clause and arbitration clause.

Sometimes the framework agreement takes a form of a letter of intent, which is undesirable because a letter of intent is not enforceable in law.

Countertrade covers barter, counterpurchase, buyback, reciprocal sales.

A barter deal involves an exchange of goods to an equal value.

Counterpurchase refers to short and medium-term transactions. The western Seller commits himself to purchase an agreed value of the Buyers products to help finance the original sale.

Buyback refers to long-term contracts and is connected with the development projects supported with huge credits. Buyback involves two phases, one for the delivery of equipment to the Buyer and a second for the delivery of the end product to the Seller.

Reciprocal sales or counter deliveries. These are two contracts; the export contract and the countersale. Then there is the so-called commercial triangular form, which involves a third party in this or that way. It is rather complicated and varies from country to country, from deal to deal.

Companies prefer doing their business abroad through intermediaries: agents & distributors.

It necessary to distinguish clearly between the Agent & the Distributor. The essential difference is that whereas the commercial Agent is engaged in the negotiation with customers about the contract for the sale of goods on behalf of a principal & for his account for which the Agent reserves & agreed commission. The Distributor operates on his own account as an independent purchaser for sale of the Supplier's products, getting his remuneration from whatever profit he may make out of these sales.

The relations between the Distributor & the Supplier are determined by a distributorship agreement, stating that the Supplier grants to the Distributor the sole & the exclusive right to purchase from the Supplier certain specified goods for sale in a given territory.

Agency agreement is usually concluded for terms of 3 or 5 years, while distributorship agreement is signed for longer periods, after which the matter can be reviewed with & intention of prolonging its effect.

Indirect sales is supplying goods through middlemen agencies, distributors, JV, through signing licensing agreements. And a part of it can be carried on at auctions, commodity exchanges, fairs, by tenders.

Also, you can buy & sell commodities at commodity exchanges, auctions & by tenders.

Commodity exchanges are centers in commodity markets where all dealings either in actuals or in futures

Auction is a method of selling publicly, letting intending buyers gether and compete with each other by making bids.

The goods like fur, tea, spices whose quality varies from year to year, from lot to lot cannot be accurately graded and are sold at auctions according to sample.

Tender is a written offer by a supplier to supply certain goods and services at a started price, usually in competition with other tenders. Trade by tenders is often used in developing countries for construction work or for delivery of goods.

Fair is a special place where producers can advertise their new goods, attract more customers and conclude profitable contracts.

Foreign economic restructuring has effected the development of foreign trade, the banking system and the role of Russian enterprises in the economy. The main point of the foreign trade reform are:

• enterprises now have a right to conduct international trade;
• industrial enterprises are allowed to maintain hard currency bank accounts;
• great emphasis is made on export and import world marketing technique;
• inward investment by means of joint ventures is encouraged.

One of the most serious problems facing Russian economy is not convertibility of the ruble, which is a serious handicap in relations within trade counter-parts. The economic reform sets a task to make ruble convertible.

A joint venture can be created between any number of foreign and Russian enterprises. A joint venture has limited liability. It should be self-supporting and self-financing. J/V offer foreign investors direct access to the Russian market.

The main features of interest to the Russian participant are:

1. To satisfy the requirements for the domestic market,
2. To attract foreign technology and foreign management experience

If the parties want to form a partnership a Protocol of Intent is normally signed. A J/V becomes a juridical person after it has been registered with the Ministry of Finance. The foundation documents and the Feasibility Study are the most important documents for the application procedure. The foundational documents include the Agreement between the partners on the establishment of a J/V and the Charter or Statute of J/V. The feasibility study covers the objective of a company, the working capital, the product to be manufactured, and the technical back-up of a project.

A J/V must be managed by a Board of Directors. The Board is governing body which sets out the strategy of a company.

The authorized fund is formed from initial contributions made by the Parties and may be supplemented from the profits of J/V.

A J/V is a legal person. It may sue and may be sued.

After deductions have been made to the funds the rest profit is divided between the partners in proportion to the share of the   authorized fund belonging to the individual participant.

There are some other methods of international trade such as tolling, consignation, leasing, and futures.

• Tolling is a kind of commercial deal based on the exchange of raw materials for finished goods being produced from these raw materials. Both parties in a deal benefit from tolling.
• Consignation is a method of trade by providing the goods by the exporter to be sold by the importer. The exporter still retains and the owner of the goods. The importer does not own the goods but is responsible for its safety.
• Leasing is one of the forms of credit of durable exports(cars, equipment, machinery).It is based on the lease of equipment with the future buyout by a higher price which includes leasing payments and a cost of equipment. The seller is interested in selling of the equipment, but the buyer does not have any capital to buy.
• Futures are trade in future contracts to buy and sell standardized class of commodity at a started price at some fixed time in the future (commodity exchange.