Protect yourself legally when exporting to the US
We regularly advise our clients in the East of England in connection with the export of goods and services into the United States, writes Paul Palik, Associate at Birketts LLP.
Although exporting outside of the EU can appear daunting and complicated, doing business in the US is still attractive. The US is a huge trade market with whom we share the same language and a similar commercial culture.
Preparation is vital. The US is a competitive market that places a large premium on customer service. There are also significant differences between each of the states. You need to do your research and a prudent exporter will utilise the help available to it.
Government support organisations can help you through the minefield of trade restrictions and you should take advantage of the guidance, general information and specific advice available from UK Trade & Investment. Your local Chamber of Commerce can also help you to plan your export activities (for example, the Suffolk Chamber of Commerce offers an excellent online export readiness assessment and peer to peer knowledge sharing).
You don’t have to do it alone and in some cases it is more cost effective for an exporter to enter into a new market place with the assistance of an experienced trading partner.
You can appoint an agent and/or a logistics provider to deal with the insurance and delivery obligations as well as taking on the import and export requirements.
As with any commercial contract you enter into in this country, your legal agreement with a US based party should include clear and unambiguous terms. It should include provisions setting out how and when delivery and payment should be made. It should also properly apportion risk and limit liability. As you would expect, it should also state which party will handle customs clearances and which party will pay import taxes.
Litigation is perhaps more common in the US than back home and so particular attention should be given to how rights will be enforced and how disagreements will be settled. A well written agreement will include carefully drafted alternative dispute resolution procedures to help avoid expensive court proceedings.
Generally, we recommend that you should seek to have the commercial contract governed by the laws of England but this will not always be possible and your legal relationship may be bound by the laws of a particular state in the US. Where this is the case, you should seek independent legal advice in connection with that state’s laws.
In general, the biggest impact of an agreement being governed by US law is that it will automatically be deemed to contain a fundamental duty of good faith and fair dealing.
This is not the case under English law where there is no generally implied duty to act in good faith (except in limited areas such as “relational contracts” where long term relationships require a high degree of cooperation, communication, trust and predictable performance).
The extent of the good faith obligation in US law is not completely clear. While the Uniform Commercial Code holds merchants to a high standard and requires parties to act with honesty and observe reasonable commercial standards of fair dealing and trade practice, it is unclear whether the obligation to act in good faith is separate from the precise wording of an agreement.
Consequently, it may be possible that you could suffer a claim for breach of an implied term of the contract even where you have complied with the written terms.
Intellectual property rights
If you currently use a trademark in the EU or the UK, it may be worth considering registering it in the US as well. In addition, before commencing any trading activities in the US you should check that you do not infringe any pre-existing trademark within the US. If intellectual property rights are being created as part of your supply obligations, you must also make sure that the ownership is properly documented.
Commencing export into a new country provides an ideal opportunity to conduct a risk assessment to ensure that you have adequate anti-corruption procedures in place. Developing a robust code of conduct is a good internal starting point but you should also ensure that your commercial contracts contain anti-bribery clauses to help protect you from bribery committed by third parties.
Often the identities of the parties with whom you do business will be as important as the wording of the legal agreement. Consequently, you should investigate their reputation and financial position. Where possible, it is sensible to speak to other importers who have dealt with them.
The US has intricate and complex liability laws. Your domestic insurance policy may not provide sufficient cover. As a result, it is essential that you carry out a comprehensive review of your insurance requirements with your insurance provider. You should consult with appropriately qualified tax advisors at an early stage so that you know what taxes you need to pay and when you need to pay them.
• You can contact Paul Palik for advice on 01603 756496 or via email – paul-palik [at] birketts.co.uk