The document discusses key considerations for international commercial agreements when counterparties are located in different countries. It notes that while 90% of terms may be the same as domestic agreements, additional terms are needed to address differences in legal systems, payment concerns, and cross-border logistics. Key issues that must be resolved include contract language, governing law, payment terms, transportation, and enforcement. The document provides guidance on topics like currency risk, taxes, warranties, force majeure, and compliance with export laws and regulations.

1. International Commercial Agreements
– What Matters When Your Counterparty Has a
Different Country Code
NCMA Boston Chapter
2d Annual International Contracts Forum
Dror Futter, Esq.
dfutter@mccarter.com
©McCarter & English, LLP 2015 January 22, 2015

2. Disclaimer
♦ Tell me you did not see this coming …
♦ Disclaimer
– This presentation and these materials are for
informational purposes only and not for the
purpose of providing legal advice. You should
contact your attorney to obtain advice with
respect to any particular issue or problem. The
opinions expressed in this presentation are
those of the author alone and may not reflect
the opinions of the firm or any other attorney.
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3. International Commercial Agreement
♦ Same – International Commercial Agreements
share 90%+ of the same terms you would find
in a domestic agreement
♦ Different – International Commercial
Agreements require additional/different terms
to bridge differences in legal systems, address
payment and enforcement concerns, and
address additional logistics involved in cross-
border transactions.
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4. Issues to Be Resolved
♦ What Will the Contracting Language Be?
♦ Which National Law Will Govern?
♦ Payment
– Currency
– Currency Risk
– Risk of Non-Payment
♦ How Will the Logistics of Transport and
Export/Import Be Handled?
♦ How will the Contract Be Enforced?
4

5. Contract Language
♦ Clear preference for English
♦ Certain customers will insist on local language
♦ Possible to have multiple language versions of
the agreement, but critical to be clear about
which version is definitive in cases of conflict
or ambiguity
♦ If the definitive agreement is not in English,
critical to have the final version reviewed by
someone fluent in the contract language and
having a legal background5

6. Choice of Law/Venue
♦ Clear Preference for US Law/Venue
– Does the Company have assets in the US to
enforce against?
♦ A small subset of customers will insist on local
law. Often times it is possible to agree on
arbitration in a neutral third country under that
country’s law.
– Europe – London, under English law
– Asia – Hong Kong or Singapore, under local law
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7. Negotiating Under Foreign Law
♦ Often impractical to engage local counsel for
the entire negotiation
♦ Alternative is to negotiate with your regular
legal support and have a local attorney review
the final draft to highlight country-specific
issues
– Important that the other party understand
ahead of time that this review will occur
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8. If You Are Under Foreign Law
♦ Since much of international commercial law is
similar, sometimes local variations can be
missed
♦ Local Differences in Application of Legal
Concepts
– What is “good faith”?
– What are “best efforts”/”reasonable efforts”?
– What kinds of damages can be limited or
precluded?
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9. Foreign Law
♦ Is government approval required for the
transaction?
♦ Legal process rights may be different and
responsibility for legal fees may vary
♦ Local law may be more tolerant of partial
performance
♦ Business practices vary
– In some countries insurance which is common
in the US can be unavailable or uncommon
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10. Regulatory Compliance
♦ Regulatory compliance may require
customization for a particular jurisdiction, or a
change to the product as a whole, such as:
– Additional disclaimers on a web site or
packaging
– Different consumer labeling requirements
– Requirements for accessibility
10

11. Complying with Foreign Standards
♦ Many foreign countries have import
certification requirements or import conditions
on issues such as:
– product standards
– certification requirements
– electricity regulations
– packaging and recycling laws
– quality expectations
– See: www.export.gov/%5C/regulation/eg_main_018220.asp
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12. Taxes
♦ Taxes, duties and fees vary widely
– Most countries outside the US have some form
of Value Added Tax
♦ When both parties live under different tax
regimes, makes it even more important to
specify responsibility for the resulting
payments
12

13. United Nations Convention on Contracts for
the International Sale of Goods (CISG)
♦ 83 Ratifying Countries
– Major Exceptions: Hong Kong, India, South Africa, Taiwan, and
the United Kingdom
– Some have ratified with reservations
♦ Similar to the Uniform Commercial Code in the US –
provides default provisions in sales of goods transactions
♦ Unless excluded by the express terms of a contract, the
CISG is deemed to be incorporated into (and supplant)
any otherwise applicable domestic law(s) with respect to a
transaction in goods between parties from different
Contracting States.
♦ Interpretation of CISG can vary country-to-country
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14. Payment - Currency Risk
♦ In every international sale there is currency
risk
♦ Commercial Agreement needs to allocate that
risk
♦ If you cannot get the agreement priced and
payment made in US dollars:
– Greater importance for payment terms
– Include mechanisms for periodic price
adjustments in response to currency swings
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15. Payment Terms
♦ International Transactions Increase the Risk
Associated with Customer Credit
– Significantly higher costs of collection for late payment
– Significantly more difficult to assess credit worthiness
of many customers
♦ Responses
– Upfront payments
– C.O.D.
– Letters of Credit
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16. Incoterms
♦ Standardized trade definitions
♦ 3 Letters Each
– EXW, FAC, FAS
♦ Created and maintained by the International
Chamber of Commerce
♦ More than 120 member countries
♦ Most Recent Version – 2010
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17. Incoterms - Applicability
♦ Incoterms rules Do Not
– apply to contracts for services
– determine how title to goods will transfer
– protect seller or buyer from risk of loss
– define contractual rights' other than for delivery
– specify details of the transfer, transport, and
delivery of goods
– define remedies for breach of contract
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18. Incoterms - Applicability
♦ Incoterms Do allocate responsibility for:
 Export customs declarations
 Transport to port of export from seller
 Loading/Unloading at ports of export and import
 Transport from port of export to port of import
 Transport from port of import to buyer
 Insurance
 Import customs clearance
 Import taxes
♦ Incoterms specify location of activities
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19. Incoterm Variations
♦ Group 1. Incoterms that apply to any mode of transport are:
♦ EXW Ex Works ♦ DAT Delivered at Terminal
♦ FCA Free Carrier ♦ DAP Delivered at Place
♦ CPT Carriage Paid To ♦ DDP Delivered Duty Paid
♦ CIP Carriage and Insurance Paid To
♦ Group 2. Incoterms that apply to sea and inland waterway
transport only:
♦ FAS Free Alongside Ship
♦ FOB Free on Board
♦ CFR Cost and Freight
♦ CIF Cost, Insurance, and Freight
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20. Incoterms – International Commercial
Terms
Incoterm
2010
Export
customs
declaration
Carriage to
port of
export
Unloading
of truck in
port of
export
Loading on
vessel in
port of
export
Carriage
(Sea/Air) to
port of
import
Insurance
Unloading
in port of
import
Loading on
truck in port
of import
Carriage to
place of
destination
Import
customs
clearance
Import taxes
EXW Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FCA Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FAS Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FOB Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer
CPT Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer
CFR(CNF) Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer
CIF Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer
CIP Seller Seller Seller Seller Seller Seller Buyer/Seller Buyer/Seller Buyer Buyer Buyer
DAT Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer
DAP Seller Seller Seller Seller Seller Seller Seller Seller Seller Buyer Buyer
DDP Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
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http://en.wikipedia.org/wiki/Incoterms

21. Incoterms – Revenue Recognition &
Taxes
♦ Revenue Recognition typically requires
– Delivery
– Transfer of Title
♦ Selection of Incoterms will determine when/where
delivery has taken place
♦ Location of delivery may also impact where the
sale is deemed to have occurred for purposes of
local taxation
– For example, utilizing EXW origin supports claim that
seller was not doing business in the buyer’s location
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22. 22
♦ Limit to Workmanship and Materials
♦ Specify period
♦ Exclusions
♦ Limit to repair or replace
♦ Who pays shipping?
♦ What are timetables for repair or
replacement?
Warranties

23. 23
♦ International Transactions Raise the Likelihood of the Occurrence of
What are Often Termed Force Majeure Events:
– Government actions
– Changes in laws
– Military Actions/Political Unrest
– Labor Unrest
♦ Explore Possibility of Insuring Such Risks – such as Political Risk
Insurance
Force Majeure

24. 24
♦ Export Regulations
♦ Foreign Corrupt Practices Act
– UK Bribery Act of 2010
♦ Office of Foreign Assets Control
♦ Anti-Boycott Regulations
Export Laws/Regulations

25. 25
♦ Discuss your international sales plans with
your insurance broker. Existing policies may
limit coverage or exclude it entirely.
♦ Consider other corporate changes to support
international sales.
– Will you be opening a sales office?
– Will your personnel be traveling abroad
frequently?
Insurance

26. 26
Dror Futter
McCarter & English, LLP
4 Gateway Center, 100 Mulberry Street, Newark, NJ 07101
Email: dfutter@mccarter.com
Dror Futter is a partner in McCarter & English’s Technology Transactions and Venture Capital and
Emerging Companies practices.
Previously Dror was General Counsel to Vidyo, Inc., a videoconferencing company, where, among other
things, he negotiated and documented sales agreements for both direct and indirect channels, purchase
agreements, software licenses, service agreements and strategic agreements in the US, Asia and
Europe. Before Vidyo, he was a partner and General Counsel of the New Venture Partners LLC venture
fund. While there, he helped to form funds, and advised multiple start-ups and corporate spin-offs in the
information technology and telecommunications industries, as well as serving as the venture fund’s legal
counsel. He also advised portfolio companies with respect to commercial, mergers and acquisitions,
employment, Internet/ecommerce and intellectual property law matters. In addition, during his tenure at
New Venture Partners, Dror negotiated, structured and documented strategic alliances with British
Telecom and Philips and handled the acquisitions of assets of over twenty ventures from companies
including British Telecom, Philips, Intel, IBM, Boeing, Freescale, Unilever, IDEO, Maxim and Telstra..
Dror is a graduate of Columbia University Law School and Princeton University.
Speaker Biography