Practical, foreign trade-related recommendations: conclusion of a foreign trade contract

19.08.2015

Legal update No 531, Issue No.1

Goltsblat BLP provides a series of practical, foreign trade-related recommendations to help you organise supply of equipment and other goods to Russia, avoid negative implications of goods being held at the Customs, delays in customs clearance and prosecution. We will also address matters to be discussed with suppliers, carriers and customs brokers (agents) in order to establish harmonious relations with all foreign trade players.

Conclusion of a foreign trade contract

Today's issue deals with conclusion of a foreign trade contract, which is the basis on which most goods are supplied to Russia. If available, the contract is a mandatory document for customs clearance and, as a rule, is also used to open the so-called transaction "passport". Consequently, apart from the commercial component, the contract should be drawn up in consideration of the customs and foreign-exchange legislation.

For this reason, you should:

  • Analyse, discuss with the supplier and amend the commercial offer constituting the basis for the contract.
  • A commercial offer usually contains all essential transaction terms but does not include certain details required for goods importation and customs clearance. Consequently, the parties draw up a bi-lingual foreign trade contract for importation purposes. The description, price of the goods and payment terms specified in the commercial offer should comply with those indicated in the contract. In the event of disputes with the Customs, the commercial offer could be used as evidence supporting the correct HS code stated under the tariff classification and customs value of the goods.

    • Explain the specifics of the customs/foreign exchange legislation to the supplier during the negotiations.

    For example, the supplier must understand that, if the contract value is equal to or exceeds USD 50 000, the first payment thereunder may be made only once a transaction passport is opened.

    • When drawing up the contract, determine the section or group for goods classification under the Eurasian Economic Union's Commodity Classification for Foreign Trade. Specify what information about the goods is required for their classification in accordance with the ten-digit code of the Eurasian Economic Union's Commodity Classification for Foreign Trade and use the explanations thereto for this purpose. In consideration of the information obtained, ask the supplier to provide technical documentation about the characteristics and properties of the goods in order to determine the code under the Eurasian Economic Union's Commodity Classification for Foreign Trade and the set of permission documentation required for import purposes.

    • Specify in the contract only the documents that the supplier may actually provide. Do not charge the supplier with performing more duties than possible.

    For instance, the supplier may be unable to obtain the documents to be provided under the contract, such as a conformity certificate. Impossibility of providing documents will increase lead-in times for supply and will require amendments to the contract.

    • Request approximate, though precise as possible, gross weights and dimensions of the goods at the contract signing stage.

    This allows the supply arrangements to be determined: by one or several trucks, knocked down or complete. This information might also affect the goods delivery terms specified in the contract.

    • Determine in the contract who will return substandard goods and pay/reimburse customs payments and which delivery terms will be used in the event of their replacement.

    In the next legal update, we will tell you about preparing goods for shipment and address the main issues involved in preparing shipping documents.

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