Recently, escalating international trade disputes and the imposition of tariffs are bound to impact the operations of foreign trade enterprises. Rather than anxiously waiting and watching, it is more prudent to carefully consider how such significant tariff adjustments should be reasonably addressed. Here are some strategies:
Specify Tariff Responsibility in Contracts
When drafting contracts, trade parties should clearly define who bears the tariff costs, including any newly imposed tariffs, to avoid disputes arising from sudden tariff changes. Even under FOB or EXW terms, where tariffs are theoretically the importer’s responsibility, it is advisable to explicitly state the allocation of tariff costs in the contract to mitigate unexpected risks.
Conduct Thorough Background Checks on Importers
Exporters should enhance due diligence on importers through various means (including third-party assessment agencies) to comprehensively evaluate their creditworthiness, financial status, reputation, and the local economic and political environment. Selecting a stable and reliable trade partner helps reduce the risk of importer default due to unforeseen circumstances.
Include Force Majeure Clauses
Trade parties should explicitly stipulate in contracts that sudden tariff policy adjustments qualify as force majeure, allowing for a defined period to negotiate solutions without liability for breach.
Establish Flexible Price Adjustment Mechanisms
Incorporate reasonable and adaptable price adjustment clauses in trade contracts to address rising product costs caused by tariff changes. This helps protect the legitimate rights and interests of both parties while minimizing commercial and legal risks. For example, parties may agree to a one-month negotiation period during which the contract remains in force. If no agreement is reached within that time, the product price automatically adjusts proportionally based on the tariff increase.
Increase the Cost of Importer Default
In response to sudden trade frictions between countries, exporters should strengthen contract performance risk management by increasing advance payment ratios, shortening payment terms, or adding clauses such as "If the importer cancels the order due to tariff adjustments, the deposit will not be refunded." Such measures help deter importer defaults.
