Five strategies for negotiating international business contracts

14/03/2014

Negotiating International Business Contracts

Negotiating International Business Contracts

When doing business internationally, there are numerous areas for negotiation. What happens if the merchandise is damaged during transportation? What inspections or authorization paperwork is necessary? When will payment be made, in which currency and by what date? What, if anything, will the packaging consist of? What are the regulations related to importing and exporting the product, in all countries involved with the transaction?

Negotiation is where these and numerous other questions should be answered. If the contract does not address these questions, or is not clear,  they will be answered by applying the law of whatever country or international convention has been chosen to govern the contract.

Negotiation is the fulcrum of commercial transactions. When parties consider buying or selling, importing or exporting goods, it is with the intention of gaining something that will benefit their bottom line.

These gains are often at the expense of other parties who have their own gains in mind. The final agreement on what will be exchanged is often the result of rounds of negotiations full of concessions: some voluntary and some based on foreign legislation (for example, some countries dictate local owners must retain 51 percent of legal ownership of a venture).

1) Hire a consultant

If there is no in-house expertise skilled in the international negotiation arena, retain one to help. If cost is an issue, purchase literature or search online to subscribe to an accredited expert.

2) Choose your team wisely

Consider a small, competent team to manage expenses, schedules and communication more effectively, especially if travel is necessary. Also, if there is a language or cultural barrier, be sure to include a translator and/or customary expert as part of your team.

3) Gauge your counterpart’s bargaining power and negotiation style

Usually one party has substantially more to gain or lose from an international venture. Over or underestimating the balance of bargaining power can result in unnecessary concessions or failed negotiations. Similarly, if you approach negotiations too aggressively and your counterpart is more passive, or if you are technically focused and they are financially focused, the business venture will not seem like a good fit.

4) Meet them in person

If at all possible, it is important to meet with prospective parties face-to-face. Be conscientious of cultural norms. Be on time, dress in appropriate attire and demonstrate proper manners and respect. First appearances go a long way in establishing the tone and trust level for further negotiations. Similarly, choosing a neutral site or persuading them to come to your home territory can help you overcome or address cultural biases.

5) Fix the agenda and keep detailed records

In addition to being perceived as professional and informed, an agenda (or a checklist) helps keep time, expenses and schedules in check, limits the number of issues that can be overlooked, keeps further rounds on track, and provides reference for future negotiations.

This content is an excerpt from the Legal Aspects of International Trade textbook. Enhance your knowledge and credibility with the leading international trade training and certification experts.

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About the author

Jacob Varghese

Author: Jacob Varghese

Jacob is the VP of Marketing and Technology at the Forum for International Trade Training. Focused on improving the customer experience. A Content chef; words, images, some code and a healthy serving of web analytics.

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