Legal considerations with exporting into Africa
1. Rights and duties of parties involved in export trade transactions.
Let us assume that you want to export a cargo of fertilizer into Africa. In assessing your various options you will need to consider four fundamental issues – the export quadrilateral.
The first is the form of the contract in terms of which the goods are to be supplied, delivered and paid for. The terms of the agreement will, in turn, be determined to some degree by which party is obliged to arrange for the transport and insurance of the goods and how the importer is going to finance the trade.
Many (if not most) sales into Africa are based on the ubiquitous INCOTERMS, developed by the International Chamber of Commerce. Briefly the Incoterms provide a fairly simple set of trade terms that set out certain basic obligations of the buyer and seller, and allocate the costs associated with those obligations. There are various terms depending on when the parties intend delivery of the goods to take place, the mode of transport and the manner in which the product is being shipped. In this regard there are three basic options – bulk, break bulk or containerised. What should the exporter look out for in particular? - it is extremely important that the term most appropriate to the method of packaging and mode of transport is used – for example, a common error is to use terms reserved for the shipment of bulk and break bulk goods by sea (the so-called “F” terms – FOB, CIF and CFR) for goods being shipped in containers. These terms are irreconcilable with the container trade and will expose the seller to unnecessary risks.
And don’t forget to include a properly considered force majeure clause to cover any unforeseen events beyond one or both parties’ control.
It is also worth considering whether there are specific standard contracts for the trade of the goods in question. For example, coal, sugar, grains and feeds and vegetable oils have their own generally recognised trade terms – first time users should seek appropriate advice when using these terms as they contain a number of onerous terms and obligations.
If we assume that the exporter is selling the fertilizer in bulk and would prefer to arrange for the insurance and delivery of the goods, then the services of two types of experienced broker are required – the shipbroker to arrange and charter a suitable vessel (or space on the vessel) and an insurance broker to secure appropriate insurance for the goods. Again, there are relatively standard contract terms available in each case. The shipment will be along the lines of a standard voyage charterparty – although, again, specific trades have their own charterparty terms and their own peculiarities – and the shipment of the goods will be evidenced by the bill of lading (which may be used to represent the goods and transfer the ownership of the goods). There are standard terms for insurance of the goods – and, inevitably, there are terms developed for specific trades and goods.
The fourth element is the financing of the goods. How will the importer pay for those goods? There are many options available, but most goods exported to Africa are sold against letters of credit.
Co-ordination is key – the goods must be made available in time for the arrival of the ship, the time limits in the letter of credit observed and delivery to the importer made within the contractual terms.
No matter how well the deal is put together, there is always a risk that disputes will arise. In the circumstances, an appropriate method of resolving any such dispute is required. It is now fairly common to see a range of dispute resolution options include – simple disputes can be resolved by decision makers of the two parties meeting to negotiate a settlement. If that does not resolve the issue, the dispute can be referred to mediation or arbitration either using the rules of established arbitration institutions. Neutral venues are often easier to agree upon – but be careful to review the costs of using neutral venues. It is also wise to make sure that access to the Courts is reserved in case urgent relief is required, or where the arbitration process cannot be triggered for whatever reason.
Not unsurprisingly, there are arbitration associations and forms specific to certain trades – they often have very strict time limits and documentary provisions.
English law still seems to be the most acceptable law agreeable to parties to agreements involving the import of goods in Africa, although the commercial pragmatism of South African Roman Dutch law is gaining favour.
3. How best can SA exporters protect themselves from risks associated with exporting into Africa?
Knowledge of local conditions (both physical and regulatory) is key – you need to identify the logistical challenges of getting your goods to the agreed destination, the procedures for importing the goods, whether additional insurance is required by the importing state, local legislation governing the import and movement of certain goods and so on. But identifying the risks is only the first step – knowing how to mitigate them is another – again, specialist advice should be sought regarding the shifting of contractual and transport risks to the buyer or an insurer. There are only a few lawyers, bankers, brokers and logistics operators who have a proper understanding of the challenges and opportunities available in Africa – the prudent exporter will seek them out for advice.
4. Best advice when embarking on an export drive into Africa.
The old carpentry adage applies – measure twice and cut once. Test the opportunity carefully and take appropriate advice from people who have been there, done that.