Legal Issues Relating to International Sales Contracts, Dealings and Transactions

Legal Issues relating to International Sales Contracts, Dealings and Transactions

There are numbers of legal issues need to think of when doing international sales contract, dealings and transactions. The legal issues can be complicated outside the home country which involves import licenses, restrictions, taxes and different product standards can all create barriers to trade. This means that the exporter need to modify the product such like change the packaging or have certified to meet local requirements. If breach of the legal issues, it can be very serious that sue or confiscate product by the country.

In the globalization era of the world, international trades seem to be more common and frequent between countries. International trade can be very complicated because there are numbers of legal matters need to be aware when exporting overseas. If the exporters do not familiarize about the legal issues, it might become exposed to significant financial risks. When the exporter deal with another side of importers, the agreement might involve a lot of vague information such like the term and conditions For example, both parties has signed and fulfill the agreements terms, but they are from different countries, the question is which country laws should apply? So it is necessary to state the term and condition or the nation laws clearly when dealing with each others.

In this report, I will discuss a scenario about the international sales of good contracts between Malaysia and China. Food industry will be used for this report. In Malaysia, Food industry is a huge profits business, many exporter outside home country always find way to enter the Malaysia market. In Malaysia, The food Act 1983 and the Food Regulations 1985 of Malaysia will govern the various aspects of food safety and quality control which including food standards, food hygiene, food import and export. The food Act 1983 and Food regulations 1985 is enforce in order to ensure food is safe for human consumption. So when the exporters export goods to Malaysia, exporter are require to conduct legal research and due diligence on trade-related matters in order to enter Malaysia market. All food consignments are subject to random checking, it is to ensure food items imported into Malaysia are safe and comply with the standards and regulations. Some of the food products such like health and medical need to be registered. Besides that, the customs Act 1967 provides for importers act to fulfill the customs requirements before goods are to be imported. The import duty and sales tax are applicable on imported goods and others relevant duties must be paid before the imported goods released. There is another important labeling where the food contains beef or pork is required to specify in the labeling of the product due to the cultural sensitivity issue in the country.

Apart from Malaysia, there are several important legal issues that Malaysia needs to concern when trade with China. In the past, China foreign trade system was characterized by monopolies, communalist and financial subsidies, and plagued by malpractices of all sorts. China has gradually progressed from a foreign trade system monopolized by the state to one of market economy. After China accession to the World Trade Organization, china present foreign trade legal structure is relatively complex and contents complicated. Other than that, the practice of WTO members is to allow enterprises to sell their goods in the internal market and engage in import and export business subsequent to being registered according to law. Parties who wish to engage in foreign trade must fulfill the conditions that set up by the law and it is necessary to obtain a license from the competent authority under the State Council before trade. Before China accession to the WTO, there were four systems which operated side by side and governed the right to engage in foreign trade. They are the licensing system, the registration system, the automatic acquisition system and the agency system. Besides that, there are two sub-categories for the right to trade which is the right to engage in general foreign trade and the self-managed import and export right for manufacturing enterprises. The former can enjoys the right to engage in the import and export of all categories of goods and technology, but for the latter can only engage in the export of goods produced by the enterprise itself.

        When the parties plan to export commodities in China, the parties need to understand the legal system in China. Sometimes, Chinese customs seize the goods of foreign exporters. This happen mostly due to the missing certifications. In this situation, the parties can either provide a CIQ declaration or provide any relevant document to the customs. CIQ stands for China Inspection and Quarantine and operates directly under The General Administration of Quality Supervision, Inspection and Quarantine. It is one of the major quality management institutes. The parties must always aware that what certifications are needed before export the products to China. To get a CIQ declaration, the parties can obtain through third parties who are the importer, distributor or certification company. It is necessary to obtain a CIQ declaration because it shows the commodities are legal. By obtain the CIQ declaration, product information must be clearly stated. Besides that, the quota certificates, business license and importing license need to be clearly written when apply for the CIQ declaration. There is an example for CIQ inspections and labels. Cosmetics products are obligated to apply the CIQ label which affixed for a vast amount of products before enter the china market. The information need to be include name and content of the product, name of the producer, ingredient list, date when produced and instructions of how to use it. After register CIQ declaration, the products are now allows to be imported to China.

For china, both importer and exporter must comply with registration requirements in order to import food products into China. When the Malaysia exporters export food products to China, firstly they will be inspected by China Customs. Customs will reviews the commercial invoice, bill of lading, packing list and inspects the food products in order to confirm their declared value. After the documents checking process, customs will issues a corresponding duty memo for the exporter. This is a kind of tax which must pay to Customs within 15days. There is an example for the first time food exporter to China. For those first time exporter to China, China will conducts AQSIQ for the first time import review. The AQSIQ will review all necessary documents such as document review, label verification and sample inspection. The documents will be conducts by AQSIQ include the manufacturer business license, export certificate, the supply contract with the Chinese buyer, a detailed packing list and a description of the packaging materials. All of the documents are requiring submitting prior to the arrival of the shipment, but they are not reviewed until product arrival and Customs approval. Besides that, exporter need to aware of the AQSIQ inspection. For the label verification, the AQSIQ will inspect the Chinese language labels of pre-packaged food products that are imported for the first time. The seller from China must attach the label requirements correctly which is all standard information such as a list of ingredients, storage requirements and the contact information of the distributor. In China, The AQSIQ is strictly requiring a specific format requirement that include font and label placement. Other that all documents checking, Malaysia exporter also need to aware the China import regulatory. According to the research, China import regulatory environment was dynamic. Their regulations may vary across types of food, and enforced across ports, bureaus, and officers. The time that use to process the exporting food a product is too consumes. For an example, for a certain food products, such as health foods can consume up to 19months to obtain relevant registrations. Even the customs and first time exporter also take up to one month for the shipment, that’s why there are so many unpredictable delays happen.