The International Sales Agreement – Some Differences

Negotiating an international sales agreement requires additional care and work to be accomplished successfully.

  • The foreign sales agreement, even if no strategic alliance is created, will be based on a different level of trust and personal comfort than a domestic one.
  • The costs of structuring an international sale are high. This means that encouraging, if not obligating the other party to multiple sales with a Master Sales Agreement would be worthwhile.International-Strategic-Alliances-Flags
  • Unlike the normal domestic sales contract, the international sales contract relationship may morph into an international strategic alliance.  It may be to your benefit to to encourage the longer term sales relationship.
  • That means the negotiations  will be that much different as well.

Foreign Accounting and Taxes

It always amazes me when someone goes for even the most basic international contract and fails to take into account the differences in accounting rules and especially in taxes. I have been involved in a transaction where the definition of an accounting term was paramount to the deal. The contract presented by the foreign company had the definition in three places, none of which was understandable by our team and each of which had major tax implications one way or the other. They should have used an expert such as an international accounting firm.

Listening More Carefully

Nuances in the negotiation may influence the final terms of the sales contract. Understanding what the other party, who may be speaking English as a second language, requires concentration. I once saved a deal – actually an M&A transaction {Link}, but the point is a good one – where the deal almost fell apart due to an argument about inventory turns (a measure of how fast investment in inventory is showing a return). Because I was free to listen, I heard something that indicated the ratio was calculated very differently in the country in question, and put the parties back in synch.

The international sales agreement is rarely a simple document to negotiate. Special care should be taken and additional expertise involved in accomplishing such a relationship.

Posted in Business Practices, Uncategorized

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