International trade rules: what every exporter should know.

• Author: Bourque, Jean-Francois

On average, almost everyone has witnessed the birth of two nations each year of his or her existence. So, if you are 50 years old, then about 100 new countries will have been created since your birth. Membership of the United Nations (UN) grew from 51 original members in 1945 (there were 74 nation-states at that time) to 191 in 2002.

The magnitude of this process is unprecedented. Now think what this means in terms of business laws: 191 or more countries equals the same number of legal systems.

Another crucial change also occurred in the last 50 years. For the first time in history, growth in world merchandise exports has completely outpaced growth in world output. Merchandise trade increased 18-fold while world merchandise output grew eightfold. Between 1990 and 2001 alone, world merchandise exports grew by 6%, while total merchandise production increased by only 2.4%.

The main legal problem for companies in these cross-border times is that goods and services flow across borders but do not erase them. Businesses have to cope with a much more complex legal mosaic now than 50 years ago. No one--at least in the legal world--foresaw these events. The UN's founders instructed the architects of the UN buildings in New York to allow for an expansion to some 70 members only. Similarly, no systematic way to cope with transborder trade law was planned. Business people tend to think that lawyers complicate issues. But they fail to understand that, in the absence of an international legislature, there is no such thing as a truly "international law".

Twenty years ago, business law was essentially associated in people's minds with a particular nation. Every exporter has to realize that this is no longer the case. A variety of international rules--often outside the scope of national law--are also shaping the way trade is conducted.

Six new types of international trade rules and practices

Although the existence of some 200 legal systems has made international business more complex, the legal landscape is not so bleak as one might imagine. Through trial and error, at least six different processes have developed to harmonize the conduct of international business. These are international trade usages, commercial treaties, model contracts, model laws, regional trade laws and out-of-court dispute settlements.

International trade usages

International Commercial Terms, known as Incoterms, were the first major achievement in standardizing trade practices...