Before you enter into a sourcing contract, you, together with the supplier, should consider what body of law shall be applied to the contractual agreement, i.e. the buyer’s country law, the supplier’s country law or the law applicable through a signed treaty between the two countries. If you do not apply any law to your contractual agreement then the transaction will be illegal.
Once you’ve agreed upon a law to apply, the next step would be understanding the legal barriers to global sourcing and ways of overcoming them. There are many different ways of overcoming the global sourcing barriers with education/training being one of them. You would be able to understand the global sourcing options, opportunities and challenges through education and training. This will help you overcome the global sourcing barriers.
Another great way to overcome the global sourcing barriers and ensure the legal status of the transaction is using a multilingual sourcing broker. Apart from effectively communicating with the foreign supplier, the sourcing broker will help you ensure that you’ve fulfilled all the legal requirements before you buy offshore.
The ease of doing businesses in a foreign country largely depends on its legal and regulatory requirements. For example, prior to 2006, the U.S government subjected textiles and apparel imports from China to quota restrictions. However, in 2006, the U.S government removed those restrictions which resulted in China becoming the sourcing hub for many U.S textile businesses. This clearly indicates the importance of carefully evaluating all the sourcing restrictions or incentives before you buy offshore. Additionally, you need to be abreast of all the customs clearance documentation requirements.
Apart from evaluating all the sourcing restrictions and keeping yourself abreast of all customs clearance documentation requirements, it is also important for you to ensure that you source from a country whose laws you respect and can abide by. On paper, China seems like a great country to source from. However, if you don’t understand its laws or find them contradicting your beliefs then it is best that you don’t source from there. Also, if you believe that a country’s laws do not offer your business enough legal protection then you should not source from that country.
You will gain little if you source from a country whose laws are difficult to understand, difficult to comply with and offer little to no legal protection. Therefore, make sure that you source from a country that provides you legal protection and whose laws are clear and easy to comply with. Vietnam is a hugely popular sourcing destination for many of the world’s businesses. The reason for this is simple—Vietnam is a low cost sourcing country which offers great legal protection to all businesses.
It is important for you to ensure the legal status of the transaction. If you’re not sure how to do that then seek help from a sourcing broker as the broker will be able to educate you on the legal and regulatory requirements of international sourcing.