7 steps to drafting an export contract
Setting up a contract for international wine trade is not essential, and in many cases you may prefer to secure a first order with an importer before asking them to sign an export contract.
If and when you do decide to draft an export contract, it’s important to know that it requires time, due diligence and plenty of communication with your importer. To protect your brand, your wine and your business, you must ensure you have everything critical to the exporting process in writing before you ship your product.
It’s best to seek advice or assistance from a legal professional who is familiar with wine exporting, with experience in the region you plan to export to. If you need referrals for legal service providers, or general exporting advice, you can contact Austrade Advisory Services online.
If you decide that an export contract is the best way forward for your business, this page will walk you through the process. Here are seven key considerations when drafting a wine-export contract.
Export contracts are rare in North America and other major markets
Unless you are a large wine company, it may not be advisable to set up an export contract when you are starting out. A large Australian supplier like Casella Family Brands may have a contract with a large importer like Deutsch Family Wine & Spirits, for example, to hold each other accountable for sales performance. However, for the vast majority of Australian wineries appointing an importer, they simply won’t have the leverage to demand a contract.
There is often so much work and red tape to get a contract in place that it can slow, stall or even halt a potential partnership or first order. In many instances, it may be preferable to win the first order, then look at putting a contract in place longer-term. That way, once your products are in-market, you can look to include more accurate volume expectations.
1. Double-check your market access and compliance requirements
By now you should have already confirmed your market access requirements, but it’s a good time to revisit them to ensure your wine can be legally imported to your preferred market before contracts are signed. The Export Market Guides detail import requirements including import procedures, duties and taxes, labelling requirements and wine standards. However it’s a good idea to also check in with your importing party to ensure there hasn’t been any recent changes.
Your contract will need to include information on your compliance with requirements in your export market.
Make sure you focus on:
- Local regulatory standards: Depending on the market, you may need to include or provide evidence of your product's country of origin, warnings and correct labelling, and more. Your buyer should be able to provide you with the details of these local regulatory standards.
- Export documentation: Customs offices often need specific documentation so they can clear wine products for export or import. You will normally be expected to provide these documents when you ship your wine. Check with your buyer to find out exactly what documents you need to provide. It is best to spell out – in your contract – who will be providing which documents to ensure legal compliance and customs clearance of the wine.
- Insurance: You must have adequate policies in place to cover all your business-related insurances. Include information about each party's required insurances in your contracts. You can include details on the insurance your buyer needs to arrange. This will provide further clarity around expectations and responsibilities.
- Quality assurance (QA): QA ensures that products meet certain baseline standards. These standards apply both in your domestic and international markets. When exporting Australian wine, you will also need to consider sampling requirements.
2. Confidentiality agreement with your buyer
Before you start serious discussions with a potential buyer, have them sign a confidentiality or non-disclosure agreement (NDA). NDAs are legal contracts used to protect sensitive information, and because a great deal of confidential information passes between you and your buyer during negotiations, you'll need to protect this information. By signing an NDA, your buyer agrees to keep the information discussed to themselves.
You can use IP Australia's IP Contract Generator to create your own NDA for use with potential wine buyers.
3. Master your Incoterms®
You should already be familiar with the Incoterms® relevant to your wine export agreements. Before signing off on any contract with a buyer, make sure you understand both your – and your buyer’s – obligations for transactions and shipping.
It is always preferable to find out your buyer's preference for Incoterms® before you negotiate the rest of the contract.
4. Confirm your export pricing
You must be clear on your export pricing before you start negotiating with your buyer. You must also know your break-even figure, and the lowest price you are willing to accept in this transaction. You should also work with your importer to understand exactly how your export price will translate into an on-shelf RRP in export markets.
5. Draft a contract
If you intend on drafting a wine export contract yourself, the International Chamber of Commerce (ICC) has a number of templates for international trade. Each template will guide you and help you to understand what you need to include in your final contract.
If you draft your own contract, make sure you have a lawyer review and sign off on it, preferably a local lawyer who is qualified to practise in your target market and has experience with other Australian wine exporters. Contract law is highly technical and varies by state, province and country.
Common contract clauses
Clauses or terms set out your and your wine buyer's duties, rights and privileges under contract. Typical contract clauses include:
- delivery and passing of title to the goods
- the duration or ‘term’ of the agreement
- performance measures and targets
- termination of the contract
- governing law for the contract
- dispute resolution
- product warranties; and
- Intellectual property (IP).
Find out more about negotiating contract terms.
6. Negotiate terms and clarify conditions
When you are in discussions with your wine buyer, there are many topics that will be up for negotiation, such as:
- pricing and payment terms
- exclusive ownership of, or right to distribute your wine
- representation of your wine brand
- territory and locations your buyer covers
- your ordering and delivery process; and
- size of the order.
Once the relevant information has been discussed and agreed, it should form the 'Terms and conditions' (T&Cs) of your contract agreement. Outlining the agreed T&Cs reduces the risk of misunderstandings and damage to the relationship.
Be aware that contracts are sometimes not valid in other countries, so it’s important to seek legal advice to ensure your contract is applicable in your importer or distributor’s country too. Also consider whether you need to translate the contract into your buyer’s native language – if so, you may need to hire a legal representative who speaks that language to go over the contract and ensure the buyer is able to understand and agree with the terms.
Navigating potential hurdles
If you plan to write volumes or exact dollar amounts into your export contract, how will you actually police this? Are you prepared to walk away or change distribution channels if these requirements are not met?
Be aware this situation can become more problematic once a distributor has your brand and stock in-market.
7. Finalise the export contract
Once you and your wine buyer have negotiated and agreed on the terms and conditions, and your draft contract is prepared, make sure a qualified lawyer reviews it. This will ensure you are moving forward with a contract that is enforceable should anything go wrong.
Once a final contract is agreed upon, both parties will sign and date the contract. Once this occurs, the contract is legally binding. And your international sales can begin! Be sure to keep a copy of the contract for your records.
Related reading
Partner evaluation and due diligence
Wine Export Ready has been developed in partnership with Austrade.