As most people are aware, in the past 12 months or so it has become easier for various commodities to be exported to China. This has been a positive step for numerous industries and sectors, including the agricultural sector, and provides for another potentially lucrative overseas market to be put into the mix.
With the sale of any commodity or product overseas, it is important you are aware of the risks and try to limit your exposure to these risks as much as possible. The most significant risk faced by most providers will be not getting paid.
As a starting point, it should go without saying the sale of any goods overseas should only take place when there is a written contract. A handshake will simply not cut it and will expose you to significant risk if things do not go to plan.
In terms of the content of a written contract, there are a number of things you will need to be aware of and consider. Firstly, what laws apply to the contract? There can be significant differences between the laws in Australia and the laws in other countries and it shouldn’t be assumed that, just because you are selling the goods in Australia, the laws here will apply. This will be particularly important if you find yourself in a dispute with another party, as potentially you could find yourself having to commence or defend court proceedings in another country, which has the potential to significantly add to the costs and difficulty in dealing with the dispute.
Following on from this, you should consider what laws apply in the country to which you are sending the goods? This is important to know, even if the contract says the laws of Australia will apply. Some countries may not recognise court orders made in Australia. If a country does not recognise a court order from Australia, you may end up in the situation where you have successful court proceedings in Australia only to be unable to do anything with that decision in another country.
Consideration should also be given on the timing of any payments, so as to minimise your costs exposure. As an example, it may be a greater percentage of the sale price is received upfront, or the buyer takes possession and payment is made in full before it leaves port in Australia.
Obviously there will be differing scenarios, in terms of your negotiating power, but these are the types of matters that should be considered before agreeing to any sale. While having more markets to sell your commodities into is generally always a positive, it is important to take steps to protect yourself and not be left with a big hole in your finances.
This article was published in The Stock Journal on 13 June.