LEGAL DIMENSIONS OF

INDIAN FOREIGN TRADE

BY ATISH KUMAR SINGH

CONFLICT OF LAWS

● EXPORTERS HAVE TO DEAL WITH DIFFERENT LEGAL

SYSTEMS
● EXPORTER MUST CONTEND WITH FOREIGN LAWS WHICH
MAY HAVE INFLUENCE ON THE CONTRACT OR ANY
DISPUTE REGARDING IT.
● AFFECTED BY INTERNATIONAL BOUNDARIES AND
GEOGRAPHICAL DISTANCE
WRITTEN VS CONSTRUCTED CONTRACTS
● GENERALLY USED AS A RULE IN
LARGE EXPORT SHIPMENTS FOR
LONG TERM CONTRACTS.
● WELL DOCUMENTED AND
DETAILED
● LARGE PART OF INDIAN EXPORTS
● IF NO CONTRACT HAS BEEN MADE
DOES NOT MEAN THERE IS NO
CONTRACT.
● IT IS CALLED A CONSTRUCTED
CONTRACT WHICH MEANS
EXISTENCE OF CONTRACT CAN BE
INFERRED FROM RELEVANT
DOCUMENTS VIZ. TELEX,
MESSAGES, PROFORMA
COMMERCIAL INVOICE OR LETTER
OF CREDIT
EXPORT IMPORT
CONTRACTS
THE BOUNDARY RELATIONSHIPS
 FOREIGN TRADE DEVELOPMENT AND
REGULATION ACT, 1992

● REPLACED THE EXPORT-IMPORT CONTROL ACT, 1947.

● ALL ORDERS MADE UNDER THE EXPORT- IMPORT ACT SALL CONTINUE TO BE
INFORCE AS LONG AS THEY ARE NOT CONSISTENT WITH THE FT(D&R) ACT, 1992.
● UNDER THIS ACT, A CODE NO. IS GRANTED.
● IT CAN BE SUSPENDED OR CANCELLED. “IF A PERSON HAS MADE AN EXPORT OR AN
IMPORT IN A MANNER GRAVELY PREJUDICIAL TO THE TRADE RELATIONS OF INDIA WITH
ANY FOREIGN COUNTRY OR TO THE INTEREST OF OTHER PERSONS ENGAGED IN
EXPORT- IMPORT OR HAS BROUGHT DISREPUTE TO THE CREDIT OR THE GOODS OF THE
COUNTRY.”
 FOREIGN EXCHANGE AND MANAGEMENT
ACT, 1999

● SECTION-7 OF THIS ACT PROVIDES THAT FOR ALL CASH EXPORTS THE FOREIGN
EXCHANGE PROCEEDS FROM THE EXPORTS MUST BE BROUGHT BACK TO INDIA
WITHIN 180 DAYS.
● THE FOREIGN EXCHANGT MANUAL WHICH IS ISSUED UNDER THE FERA BY THE
RBI PROVIDES THAT AN EXPPORTED NORMALLY CANNOT PAY MORE THAN 12.5%
TO HIS AGENT ABROAD FOR THE SERVICES PROVIDED BY HIM.
PRESHIPMENT INSPECTION AND QUALITY
CONTROL ACT, 1963

● INORDER TO PROTECT THE IMAGE OF THE COUNTRY AS AN EXPORTER THE G.O.I.

HAS UNDER THIS ACT PROVIDED THAT ITEMS WHICH ARE SUBJECT TO THIS ACT
CANNOT BE EXPORTED UNLESS A DESIGNATED AGENCY CERTIFIES THAT THE
QUALITY OF THE PRODUCTS BEING EXPORTED IS AS PER THE STANDARDS LAID
DOWN.
 CUSTOMS ACT, 1962

● THE AUTHORITY TO CHECK THE EXPORT- IMPORT CONSIGNMENTS IS GIVEN

UNDER THIS ACT.
● ALL EXPORT CONSIGNMENTS WILL BE CHECKED BY THE CUSTOMS AUTHORITIES
AT PORT OR AIRPORT TO ASCERTAIN THAT THE GOODS BEING SHIPPED ARE
THOSE WHICH DECLARED IN THESE DOCUMENTS AND THAT NO UNDER/ OVER
INVOICING IS INVOLVED.
INTERNATIONAL COMMERCIAL PRACTICES

● 2 DOCUMENTS PREPARED BY THE INTERNATIONAL CHAMBER OF COMMERCE,

PARIS ARE WIDELY USED:

○ UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS( UCP),

1993

○ INTERNATIONAL COMMERCIAL TERMS ( INCO terms), 2020

TYPES OF LEGAL ISSUES IN INTERNATINAL
TRADE

A. RELATING TO EXPORT- IMPORT CONTRACTS.

B. RELATING TO RELATIONSHIPS BETWEEN EXPORTERS AND AGENTS/
DISTRIBUTORS.
C. THOSE RELATING TO PRODUCTS LIKE TRADEMARKS, PATENTS, PRODUCT
LIABAILTY AND PROMOTION.
D. RELATING TO CREDIT CONTRACTS (LETTER OF CREDIT).
 A. ELEMENTS OF EXPORT CONTRACT

13. INSPECTION
1. THE PARTIES
14. DOCUMENTATION
2. THE DESCRIPTION OF THE PRODUCT
15. MODE OF PAYMENT
3. QUALITY
16. CREDIT PERIOD, IF ANY
4. PRICE PER UNIT
17. WARRANTIES
5. TOTAL VALUE
18. PASSING OF RISK
6. CURRENCY
19. PASSING OF PROPERTY
7. TAX AND CHARGES
20. AVAILABILITY/ NON- AVAILABILITY
8. PACKING
OF EXPORT- IMPORT LICENSES
9. MARKING AND LABELLING
21. FORCE MAJEURE
10. MODE OF TRANSPORT
22. SETTLEMENT OF DISPUTES
11. DELIVERY: PLACE AND SCHEDULE
23. PROPER LAW OF THE CONTRACT
12. INSURANCE
24. JURISDICTION
 C.I.F. CONTRACT

● CIF is considered an expensive option when buying goods. This is because the seller uses
a forwarder of his or her choice who may charge the buyer more in order to increase the
profit on the transaction. Communication can also be an issue because the buyer relies
solely on people who are acting on behalf of the seller. The buyer might still have to pay
additional fees at the port, such as docking fees and customs clearance fees before the
goods are cleared.
 F.O.B. CONTRACTS

● FOB contracts relieve the seller of responsibility once the goods are shipped. After the
goods have been loaded—technically, "passed the ship's rail,"—they are considered to be
delivered into the control of the buyer. When the voyage begins, the buyer then assumes
all liability.
● The buyer can, therefore, negotiate a cheaper price for the freight and insurance with a
forwarder of his or her choice. In fact, some international traders seek to maximize their
profits by buying FOB and selling CIF.
 B. EXPORT AGENCY AGREEMENT

● AGENCY AGREEMENT IS A LEGAL DOCUMENT, WHICH ESTABLISHES COMMERICAL

RELATIONSHIP BETWEEN THE PRINCIPAL AND THE AGENT. IT INCORPORATES THE
CONDITIONSMUTUALLY AGREED UPON BY THE CONCERNED PARTIES FOR THE
CONDUCT OF BUSINESS. WHEN NEGOTITATING AN AGENCY AGREEMENT, THE
INDIAN FIRM SHOULD BE CAREFULL ON CERTAIN POINTS:
1. PARTIES TO A CONTRACT
2. CONTRACTUAL PRODUCTS
3. CONTRACTED TERRITORY
4. CUSTOMERS/ POTENTIAL CUSTOMERS
5. ACCEPTANCE/ REJECTION OF ORDERS
6. PAYMENT OF COMMISSION
7. SETTLEMENT OF DISPUTES
8. RENEWAL AND TERMINATION
 AGENCY AGREEMENT VS. DISTRIBUTION
AGREEMENT
● AGENCY AGREEMENT
1. DIRECT CONTRACTUAL
RELATIONSHIP BETWEEN EXPORTER
AND PARTY PLACING ORDER.
2. TITLE AND RISK OF GOODS REMAIN
WITH PRINCIPAL.
3. CREDIT RISK IS TO BE BORNE BY THE
PRINCIPAL
4. THE PRINICIPAL MAY BE SUBJECT TO
THIRD PARTY LIABILITY ON PART OF
ANY ACTION TAKEN DURING THE
COURSE BY THE AGENT
● DISTRIBUTION AGREEMENT
1. CONTRACTUAL RELATIONSHIP IS
ONLY BETWEEN PRINICPAL AND
DISTRIBUTOR AND NOT WITH
ULTIMATE BUYER.
2. TITLE AND RISK OF THE GOODS
PASS ON TO THE DISTRIBUTOR.
3. CREDIT RISK IS BORNE BY THE
DISTRIBUOTR.
4. A DISRTIBUOTR DOES NOT POSE
ANY THIRD LIABAILITY TOWARDS
THE PRINCIPAL.
 C. LAWS RRELATING TO PRODUCTS

● TRADE MARKS:
TRADE MARKS ARE WORDS OR DESIGNS OR COBINATOIN OF THESE.TRADEMARKS
ARE EXECTED TO PERFORM VARIOUS FUNCTIONS LIKE ENHANCING OR CREATE
DISTINCTION, HELP IN IDENTIFYING THE PRODUCT, SYMBOLISE THE QUALITY ETC.

● PROTECTION THROUGH TRADEMARKS:

BEFORE A NEW TRADEMARK IS REGISTERED, THE REGISTERING AUTHORITY,
CONDUCTS A CHECK AND IF NO EVIDENCE OF A SIMILAR TRADE MARK IS FOUND IT
WILL BE PUBLISHED IN THE OFFICAL JOURNAL OF THE REGISTERING AUTHORITY.
 PRODUCT LIABILITY

● PRODUCT LIABILITY CAN BE DEFINED AS THE RESPOSNIBILITY BORNE BY THE

MANUFACTURERS, DISTRIBUTORS AND RETAILERS FOR ANY CONSEQUENTIAL
INJURIES/ DAMAGES FROM PRODUCTS THEY MAKE OR SELL.

● THERE ARE 3 RECOGNISED BASES OF PRODUCT LIABILITY:

1. NEGLIGENCE ON THE PART OF THE MANUFACTURER/ SELLER.

2. THE PRINICIPLE OF STRICT LIABILITY.

3. IMPLIED WARRANTIES.
 LAW RELATING TO PACKAGING AND
PROMOTION

● INFORMATION TO BE GIVEN ON THE PRODUCT PACKAGE IS LISTED OUT IN THE

DETAILED RULES ON PAKCAGAING OF FOODSTUFFS, ETC WHICH GENERALY
INCLUDE CHEMICAL COMPOSITION OF THE PRODUCT, NET WEIGHT, DATE OF
MANUFACTURE ETC.
● SPECIAL PRECAUTIONS TO BE TAKEN WHILE USING THE PRODUCT, IF ANY, MUST
BE CLEARLY INDICATED.
● LAWS REGARDING PRODUCT AVERTISING NEED TO BE TAKEN CARE OF IN ORDER
TO PROTECT THE MANUFACTURER FRO FACING ANY FUTURE LEGAL ACTION. IF
THERE ANY VOLUNTARY CODE OF CONDUCT FOR INDUSTRY MEMBERS, THEN
THE SAME NEED TO BE GIVEN SUFFICIENT CONSDIERATION WHILE PROMOTING
THE PRODUCTS.
 LAWS RELATING TO LETTERS OF CREDIT
● THE EXPORTER WANTS TO ENSURE THAT HE IS PAID FOR HIS MERCHANDISE
BEFORE THE POSSESSION AND TITLE TO THE MERCHANDISE PASS TO THE
IMPORTER. THIS IS SOUGHT TO BE ACHIEVED THROUGH THE INTERMEDIARY OF
THE BAND WHICH OPENS A LETTER OF CREDIT ON BEHALF OF THE IMPORTER,
NAMING THE EXPORTER AS BENEFICIARY.

● A LETTER OF CREDIT REPRESENTS A CONTRACTUAL RELATIONSHIP BETWEEN THE

OPENING BANK AND THE BENEFICIARY, THA IS THE EXPORTER. THE BANK IN FACT
MAKES A COMMITMENT UNDER L/C THAT IT WOULD MAKE PAYMENT OF THE
AGREED SUM, AS INDICATED IN THE L/C, SUBJECT TO THE CONDITION THAT ALL
DOCUMENTS AS ASKED FOR ARE SUBMITTED TO THE BANK AND ON SCRUTINY,
FOUND TO BE IN ORDER.
● UCP GENERAL PROVISIONS AND DEFINTIONS ARTICLE 3 PROVIDES: “ CREDITS, BY
THEIR NATURE, ARE SEPARATE TRANSACTIONS FROM THE SALES OR OTHER
COTRACTS ON WHICH THEY MAY BE BASED AND BANKS ARE IN NO WAY
CONCERNED WITH OR BOUND BY SUCH CONTRACTS.”
 PARTIES TO THE LETTER OF CREDIT

1. THERE IS FIRST A CONTRACTUAL RELATIONSHIP BETWEEN THEIMPORTER AND

THE EXPORTER
2. THERE IS A BANKER-CUSTOMER RELATIONSHIP BETWEEN THE IMPORTER AND
OPENING BANK. SIMILARLY, THERE IS A RELATIONSHIP BETWEEN EXPORTER AND
THE NEGOTIATING BANK.
3. THIRD RELATIONSHIP IS BETWEEN THE TWO BANKS.
4. THE FOURTH RELATIONSHIP IS BETWEEN THE BENEFICIARY AND THE OPENING
BANK.
 DOCTRINE OF STRICT COMPLIANCE

● UNDER THE DOCTRINE OF STRICT COMPLIANCE, THE BANK HAS THE RIFHT TO
REJECT ANY DOCUMENT WHICH IS NOT IN STRICT CONFORMITY WITH WHAT IT
IS ASKED FOR IN THE LETTER OF CREDIT.
● THERE IS NO MAJOR OR MINOR DISCREPANCY IN DOCUMENTS. ANY
DISCREPANCY MAKES THE DOCUMENT LIABLE FOR NON-ACCEPTANCE.
METHODS OF DISPUTE
SETTLEMENT
ARBITRATION AND LITIGATION
 ARBITRATION VS LITIGATION

● LIMITATIONS OF LITIGATION:
1. COURT PROCESS IS PROVERBIALLY SLOW, TIME CONSUMING AND FORMALISTIC
2. AVOIDABLE NECESSITY OF EXPERT WITNESSES AND OTHER EVIDENCE.
3. INCOVENIENCE TO THE PARTIES
4. ADVERSE PUBLIC IMAGE
5. BITTERNESS AND DISRUPTION OF TRADE RELATIONSHIPS
6. DIFFERENT LAWS AND PROCEDURES
ARBITRATION VS LITIGATION

● ADVANTAGES OF ARBITRATION:
1. QUICKNESS
2. INEXPENSIVE
3. PROMOTES GOODWILL
4. SOUND AND COGENT DECISION
5. PRIVACY
 INTERNATIONAL ARBITRATION

● ARBITRATION BECOMES INTERNATIONAL AT LEAST WHEN ONE OF THE PARTIES

INVOLVED IS RESIDENT OR DOMICILED OUTISDE OF INDIA. OR THE SUBJECT MATTER
OF THE DISPUTE IS ABROAD.
● THE LAW APPLICABLE TO ARBITRATION PROEEDING MAY BE INDIAN LAW OF
FOREIGN LAW DEPENDING UPON THE TERMS OF CONTRACT AND RULES OF
CONGFLICT OF LAW.
● IN THE CASE OF INERNATIONAL TRANSACTIONS ARBITRATION CAN TAKE PLACE
EITHER IN THE EXPORTER’S COUNTRY OR IMPORTER’S COUNTRY. SO IT IS NECESSARY
OT HAVE A LEGAL SYSTEM FOR THE RECOGNITION AND ENFORCEMENT OR ABITRAL
AWARD GIVEN IN ANOTHER COUNTRY. THE INTERNATIONAL “NEW YOR
CONVENTION” ON RECOGNITION COUNTIRES WHICH RECOGNISE AND ENFORCE
ARBITRAL AWARDS GIVEN IN THE COUNTRIES WHICH ARE SIGNATORIES TO THIS
CONVNETION
 LAWS FOR ENFORCEMENT OF FOREIGN
AWARDS IN INDIA

● INDIA, BEING A SIGNATORY TO THE 1927 GENEVA AND THE 1958 NEW YORK
CONVENTION HAD ENACTED ARBITRATION (PROTOCOL AND CONVENTION) ACT,
1937 AND THE FOREIGN AWARDS( RECOGNITIONN AND ENFORCEMENT) ACT, 1961.
THE PROVISIONS OF THE TWO ACTS ARE MADE APPLICABLE TO FOREIGN AWARDS
MADE IN OTHER COUNTRIES AND ARE NOTIFIED BY THE GOVERNMENT.

● THE ARBITRATION AND CONCILIATAION ACT,1996 HAS REPEALED ALL THE EARLIER
ACTS REGARDING ARBITRATION AND FOREIGN AWARDS. IT HAS FURTHER
STRENGTHENED AND CLARIFIED THE PROVISIONS RELATING TO INTERNATIONAL
COMMERICAL ARBITRATION.
 PROCEDURE FOR ENFORCEMENT IN INDIA

1. APPLICATION SHALL BE FILED BY A PERSON INTERESTED IN A FOREIGN AWARD

BEFORE COURT HAVING APPROPRIATE JURISDICTION OVER THE SUBJECT MATTER.
2. APPLICATION THEN SHALL BE NUMBERED AND REGISTERED IN THE COURT AS A
SUIT BETWEEN THE 2 PARTIES.
3. DIRECT NOTICE SHALL BE ISSUED BY THE COURT TO THE OTHER PARTY REQURING
THEM TO SHOW CAUSE FOR NON FILING OF THAT AWARD.
4. IF THE COURT IS SATISFIED THAT THE FOREIGN AWARD IS ENFORCEABLE, IT SHALL
ISSUE A DECREE AND NO APPEAL SHALL LIE EXCEPT IN SO FAR AS THE DECREE IS IN
EXCESS OR NOT IN ACCORDANCE WITH THE AWARD.
 ENFORCEMENT OF INDIAN AWARDS IN
FOREIGN COUNTRIES

● SINCE INDIA IS A RATIFIED MEMBER OF THE 1927 GENEVA CONVENTION AND THE
1958 NEW YORK CONVENTION, IT WILL ALSO BE ABLE TO ENFORCE LAWS IN
FOREIGN COUNTRIES THAT HAVE RATIFIED THESE CONVENTIONS.

● HOWEVER FOR THE COUNTRIES WHO HAVEN’T RAIFIED THESE CONVENTIONS,

ENFORCEMENT OF AWARDS WOULD LARGELY DEPEND ON PRINCIPLES OF
PRIVATE INTERNATIONAL LAW AND WOULD BE MORE DIFFICULT IN
APPLICATION.