Export and Import Trade: Nature, Types, Duties, Risks Arising From Such Contracts and, Applicable Laws

Export and import trade are fundamental components of international commerce, facilitating economic growth, access to foreign markets, and cross-border exchanges of goods and services. These transactions are governed by complex legal frameworks that regulate contractual obligations, risk allocation, and dispute resolution. This paper examines the nature of export and import trade, their classifications, the duties of the parties involved, and the risks associated with such transactions. Additionally, it analyzes the applicable international and domestic legal frameworks, including Nigerian statutes, judicial precedents, and trade agreements such as the World Trade Organization (WTO) Agreements, the United Nations Convention on Contracts for the International Sale of Goods (CISG), and the Nigeria Customs Service Act, 2023. The study concludes that compliance with trade laws, effective risk management, and proper contractual structuring are vital for ensuring the efficiency and security of international trade.

Introduction

Export and import trade are essential drivers of globalization and economic development, enabling nations to specialize in production, expand their markets, and foster international cooperation¹). These transactions involve various legal and regulatory considerations, including contractual obligations, payment terms, taxation, and trade restrictions^.

International trade is regulated by a combination of international agreements, national laws, and institutional frameworks. The World Trade Organization (WTO) plays a significant role in shaping trade policies, dispute resolution mechanisms, and market access². In Nigeria, statutory laws such as the Customs and Excise Management Act (CEMA)(now repealed)³, the Nigeria Customs Service Act, 2023, and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act⁴ govern cross-border trade activities. Additionally, agreements such as the African Continental Free Trade Agreement (AfCFTA), 2018⁵, aim to reduce trade barriers and enhance intra-African trade.

Despite the benefits of international trade, various risks—such as political instability, exchange rate fluctuations, and regulatory changes—can affect trade transactions. Legal scholars emphasize that foreign investment laws and trade regulations must evolve to accommodate emerging trade challenges and ensure sustainable economic growth⁶). Courts⁷ and arbitration tribunals⁸ also play a crucial role in resolving disputes arising from export and import contracts.

This paper explores the nature, types, duties, risks, and legal frameworks governing international trade, with a focus on Nigerian and international regulatory instruments.

Meaning and Nature of Export and Import Trade

Import and export trade refers to the exchange of goods and services across international borders. These transactions are essential for global commerce, allowing countries to access goods they do not produce locally while selling their surplus products in foreign markets. According to Michael Trebilcock & Robert Howse, export and import trade facilitate economic specialization, allowing nations to focus on producing goods where they have a comparative advantage¹).

Import Trade

The process of bringing goods and services from a foreign country into the domestic market for consumption. The Nigerian Customs and Excise Management Act (CEMA)(repealed)⁹), defines “import” as the bringing of goods into Nigeria from another country, and “export” as taking goods out of Nigeria¹⁰). The Nigeria Customs Service Act, 2023, which repealed and replace the CEMA defines “import” as bringing goods or services into Nigeria from another country, making them subject to customs regulations¹¹.

Export Trade

Export Trade is the process by which goods and services are sent from one country to another for sale or trade. Export means taking goods or services out of Nigeria for sale or commercial purposes¹².

The nature of international trade is influenced by economic, legal, and political factors, including trade agreements, customs regulations, and foreign exchange policies.

Economic Nature

1. Comparative Advantage Theory: Countries should specialize in producing goods in which they have lower opportunity costs¹³.
2. Trade Liberalization: Nations reduce trade barriers, as seen in agreements like the African Continental Free Trade Agreement (AfCFTA), 2019.
3. Financial and payment mechanisms: Payment may be made through letters of credit (UCP 600 rules under ICC), bank guarantees, or open accounts.

Legal Nature

1. Regulatory Frameworks – Governed by national and international laws, such as: Customs and Excise Management Act (CEMA)¹⁴), Foreign Exchange (Monitoring and Miscellaneous Provisions) Act⁴, World Trade Organization (WTO) Agreements, etc.
2. Dispute Resolution Mechanisms – Courts and arbitration bodies like the International Chamber of Commerce (ICC) Arbitration Tribunal and the World Trade Organization (WTO) Dispute Settlement Body handle trade conflicts.
3. Cross-border nature: Transactions involve parties from different jurisdictions.
4. Logistics and transportation: Trade requires shipping agreements, customs clearance, and risk management.

Political Nature

1. Trade Policies – Governments use tariffs, quotas, and subsidies to regulate trade.
2. Export and Import Restrictions – Nations impose sanctions and embargoes for political reasons¹⁵. 

Types of Import and Export Trade

International trade is classified into different types based on the nature of transactions, the purpose of goods, and the parties involved. Nigerian and international laws recognize various categories of import and export trade, each governed by specific legal provisions.

Types of Import Trade

Import trade involves bringing goods and services into a country from a foreign market. The following are the major types:

1. Free Import: This refers to goods that can be imported without restrictions, subject to payment of customs duties and compliance with regulatory requirements. Nigeria Customs Service Act, 2023 Requires importers to declare goods but allows unrestricted trade for non-prohibited items¹⁶. Also General Agreement on Tariffs and Trade (GATT) 1994¹⁷ Prohibits unnecessary restrictions on imports.
2. Restricted Import: Certain goods require government approval, licenses, or permits before they can be imported due to safety, health, or economic concerns. Customs and Excise Management Act¹⁸ Grants the Nigerian government the power to restrict certain imports. Also Import Prohibition List (Trade Malpractices (Miscellaneous Offences) Act¹⁹), Bans or restricts items like firearms, hazardous chemicals, and certain agricultural products.
3. Prohibited Import: Some goods are completely banned from entering a country for legal, health, or security reasons. Export (Prohibition) Act((Cap E22, LFN 2004)), Section 1 Prohibits the import of certain goods to protect domestic industries and national security. Nigeria Customs Service Act, 2023 empowers customs to seize prohibited imports²⁰.
4. Government Import: These are imports made by a government for public projects, infrastructure development, or national security. Example: Importation of railway equipment by the Nigerian Railway Corporation (NRC) under government contracts.
5. Private Import: Imports made by individuals or businesses for commercial or personal use. Example: Companies importing industrial machinery or raw materials for manufacturing.
6. Import by Letter of Credit (L/C): This involves using a bank-issued Letter of Credit (L/C) to facilitate transactions between importers and foreign suppliers. The Uniform Customs and Practice for Documentary Credits (UCP 600, ICC Rules) governs the operation of L/C transactions internationally. The Nigerian Court recognized Import by Letter of Credit in the case of FCMB Ltd v. SCOA (Nig.) Ltd²¹, where it was held that banks must ensure strict compliance with L/C terms before releasing funds.
7. Direct Import: Importers purchase goods directly from foreign suppliers.
8. Indirect Import: Importing through agents or intermediaries.
9.  Industrial Import: Importing raw materials and machinery for production purposes.

Types of Export Trade

Export trade involves selling goods and services to foreign markets. It is classified into different categories:

1. Direct Export: This occurs when a manufacturer or producer sells goods directly to a foreign buyer without intermediaries. The Nigerian Export Promotion Council Act²², supports businesses engaged in direct export. Judicially, exporters can seek damages for contract breaches in direct export transactions²³.
2. Indirect Export: In this type, goods are sold to an intermediary (e.g., an export agent or distributor) who then resells them to a foreign buyer. Example: Nigerian agricultural products are exported by traders to Europe and Asia through licensed export agents.
3.  Entrepôt (Re-Export): This refers to the importation of goods into a country for the sole purpose of re-exporting them to another country, often after processing or repackaging. The GATT 1994, in Article XI, recognizes re-export trade and allows duty exemptions for transit goods in free trade zones. Similarly, the Nigeria Export Processing Zones Act²⁴, establishes Free Trade Zones (FTZs) for re-export trade.
4.  Government Export: This involves goods or services exported by a government agency for international trade agreements or diplomatic relations. Example: Nigeria’s crude oil export by Nigerian National Petroleum Corporation (NNPC).
5. Private Export: Exportation by individuals or businesses for profit. Example: Dangote Group exporting cement to other African countries.
6.  Countertrade (Barter Trade): This involves exchanging goods without monetary transactions, often used in international agreements between governments. The African Continental Free Trade Agreement (AfCFTA) 2019 supports trade agreements that allow barter exchanges²⁵.
7.  Merchant Export: Traders purchase goods domestically and export them.
8.  Service Export: Non-tangible trade such as consultancy, financial services, and IT solutions.
9.  Duties of Parties in Export and Import Trade

In international trade, importers and exporters have specific legal duties under Nigerian and international laws. These duties ensure contract compliance, regulatory adherence, and trade facilitation.

Duties of Parties in Export and Import Trade

In international trade, importers and exporters have specific legal duties under Nigerian and international laws. These duties ensure contract compliance, regulatory adherence, and trade facilitation.

Duties of the Exporter

An exporter (seller) is responsible for ensuring that goods meet quality standards, proper documentation, and contractual obligations. Specifically, these are the duties of the Exporter: 

1. Duty to Deliver Goods as Agreed: The exporter must deliver the correct goods, in the right quantity, and of agreed quality. See Sale of Goods Act, 1893– Goods must correspond with the contract description and be of merchantable quality²⁶. The Court has upheld this statutory  requirement in U.T.C. (Nig.) Ltd v. Pamotei²⁷ when it stated that exporters must ensure the quality and fitness of goods.

2. Duty to Comply with Export Regulations: The exporter must obtain licenses, permits, and regulatory approvals before shipping goods. It is a requirement of the Nigerian Export Promotion Council Act²⁸, that exporters must register and comply with regulations. Also, exporters must repatriate foreign earnings through authorized banks²⁹.

3. Duty to Provide Proper Documentation: Exporters must provide commercial invoices, packing lists, certificates of origin, and customs declarations. For instance, the Nigeria Customs Service Act, 2023, mandates export declarations³⁰. Incoterms 2020 (International Commercial Terms by ICC) defines exporter documentation duties to include:

1. Provision of Commercial Invoice and Proof of Delivery.
2. Export Customs Clearance and Licenses. For instance, Nigeria Customs Service Act, 2023, in section 28, requires exporters to declare goods before shipment.
3. Transport and Shipping Documents, e.g Bill of Lading (for sea shipments) and Airway Bill (for air cargo).
4.  Insurance Documents (If Applicable) If the trade is under CIF (Cost, Insurance, and Freight) or CIP (Carriage and Insurance Paid To), the exporter must provide an insurance policy or certificate in favor of the buyer³¹.
5. Certificate of Origin: The exporter must provide a Certificate of Origin when required for customs clearance or preferential trade agreements (e.g., AfCFTA)³².
6. Packing List and Quality Certificates: The exporter must provide a detailed packing list and, if necessary, inspection or quality certificates.

4. Duty to Ensure Proper Packaging and Labeling: Goods must be properly packaged and labeled to meet customs and import country standards. This duty is expressly provided by the Standards Organization of Nigeria (SON) Act, 2015³³

5. Duty to Arrange Transportation and Insurance (Depending on Contract Terms): If the contract states, the exporter must arrange for shipping and insurance. Marine Insurance Act, Cap M2, LFN 2004, allows exporters to obtain marine insurance for goods³⁴.

Duties of the Importer

An importer (buyer) is responsible for payment, compliance with customs laws, and proper acceptance of goods. Below are the specific duties:

1. Duty to Pay for Goods as Agreed: The importer must pay the agreed price within the contract terms³⁵. It has been held in FCMB Ltd v. SCOA (Nig.) Ltd (supra) that a buyer’s failure to honor a Letter of Credit can lead to contract breach.
2. Duty to Obtain Import Licenses and Permits: Certain imports require government approval or special permits. The Nigeria Customs Service Act, 2023 in section 167, requires importers to obtain necessary import approvals.
3. Duty to Pay Customs Duties and Taxes: The importer must pay customs duties, tariffs, and VAT on imported goods³⁶.
4. Duty to Inspect and Accept Goods Upon Arrival: The importer must inspect goods for defects or non-compliance before acceptance³⁷ It states that a buyer has the right to reject defective goods. In Soleh Boneh Ltd v. Government of Nigeria³⁸, the  Court held that an importer must notify the seller immediately of defects to claim damages.
5.  Duty to Comply with Foreign Exchange and Payment Regulations: Importers must use authorized financial channels for payment. For instance, Section 1 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act requires import payments to go through official financial institutions.

Risks Arising from Export and Import Contracts

Commercial Risks

These risks arise from business transactions between buyers and sellers. They include:

Non-Payment Risk: this is covered under Uniform Customs and Practice for Documentary Credits (UCP 600). Importers may fail to pay for goods due to insolvency or financial difficulties. See the case of FCMB Ltd v. SCOA (Nig.) Ltd. Held that failure to honor a Letter of Credit amounts to a contract breach.

Contract Breach: Governed by the CISG for international sales contracts. Either party may fail to meet contractual terms, such as late delivery or supplying defective goods. Remedy is provided in section 35 of the   Sale of Goods Act, 1893– Buyers have the right to reject defective goods³⁹.

Political Risks

Government policies and political instability can affect trade. These may occur in the forms of:

Trade Restrictions: Governments may impose import bans, tariffs, or export quotas that affect trade contracts. For instance, Section 18 of the defunct Customs and Excise Management Act allows Nigeria to restrict or prohibit imports. Also, Nigeria Customs Service Act, 2023, in section 167, grants customs power to seize prohibited goods.

War and Political Unrest: Conflicts in trade regions can lead to loss of goods and contract terminations.

Currency and Exchange Rate Risks

Fluctuations in exchange rates can affect the cost of trade transactions. They are:

Currency fluctuations: Affected by exchange rate volatility and forex policies. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act requires foreign trade payments through authorized banks⁴⁰. The implication is that if the Naira depreciates against the USD, Nigerian importers will pay higher costs for foreign goods.

Inflation risks: Impact purchasing power and trade stability.

Legal and Regulatory Risks

Failure to comply with laws and regulations can lead to penalties, contract breaches, or trade restrictions.

Customs Compliance Risks: Goods may be seized if they fail to meet import/export requirements. The Nigeria Customs Service Act, 2023 requires accurate customs declarations⁴¹.

Dispute Resolution Risks: International disputes may lead to litigation or arbitration delays. The United Nations Convention on Contracts for the International Sale of Goods (CISG, 1980) governs trade disputes⁴².

Transportation and Logistics Risks

1. Shipping delays: Due to port congestion, strikes, or customs delays.
2. Challenges in shipping, handling, and delivery can lead to loss or damage of goods.
3.  Goods may be damaged in transit due to improper handling, theft, or accidents. Carriage of Goods by Sea Act, Cap C2, LFN 2004, section 3, holds carriers liable for cargo loss. In The MV Argun Case (2003), the Courts held shipping companies responsible for cargo damage.
4. Port Delays and Clearance Issues: Importers may face delays in customs clearance due to regulatory bottlenecks.

Force Majeure Risks

Unforeseen events, such as natural disasters, pandemics, or strikes, can disrupt trade. Article 79, CISG 1980 exempts parties from liability for force majeure events. During the COVID-19 Pandemic (2020), many international trade contracts were delayed due to global lockdowns and shipping disruptions.

Mitigating Risks in Import and Export Trade

To reduce these risks, parties can:

1. Use Letters of Credit (L/C) for secure payments.
2. Obtain marine insurance for goods in transit (Marine Insurance Act, Cap M2, LFN 2004).
3. Include arbitration clauses in contracts to settle disputes under ICC Arbitration Rules.
4. Stay updated on government trade policies and foreign exchange regulations.

Applicable Legal Frameworks in Export and Import Trade

International Instruments

1. United Nations Convention on Contracts for the International Sale of Goods (CISG)

2. World Trade Organization (WTO) Agreements: Provide global trade policies and dispute resolution mechanisms.

3. International Chamber of Commerce (ICC) Incoterms: Define international trade terms.

4. African Continental Free Trade Agreement (AfCFTA): Facilitates intra-African trade.

5. Incoterms 2020 (International Commercial Terms by ICC)

6. Hague Rules (1924) – Established carrier liability for cargo loss or damage.

7. Hague-Visby Rules (1968) – Amended The Hague Rules, increasing carrier liability and updating legal provisions.

8. Hamburg Rules (1978) – Introduced more shipper-friendly provisions, shifting liability burdens.

9. Rotterdam Rules (2008) – A modern framework addressing multimodal transport but not widely adopted.

Nigerian Statutes

1. Export (Incentives & Miscellaneous Provisions) Act, Cap E19, LFN 2004: Regulates export incentives and taxation.

2. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F34, LFN 2004: Controls foreign exchange transactions in trade.

3.Customs and Excise Management Act (CEMA) (now repealed)

4. Nigeria Customs Service Act, 2023.

5. Import Prohibition List (Trade Malpractices (Miscellaneous Offences) Act Cap T12, LFN 2004).

6. Export (Prohibition) Act Cap E22, LFN 2004.

7. The Nigerian Export Promotion Council Act Cap N108, LFN 2004.

8. Nigeria Export Processing Zones Act Cap N107, LFN 2004.

9. Standards Organization of Nigeria (SON) Act, 2015.

10. Marine Insurance Act, Cap M2, LFN 2004.

11. Carriage of Goods by Sea Act, Cap C2, LFN 2004.

 Judicial Precedents in Trade Disputes

1. Soleh Boneh Ltd v. Government of Nigeria (1978) 2 Lloyd’s Rep. 557 – Established Nigeria’s liability in international trade contracts.

2. U.T.C. (Nig.) Ltd v. Pamotei (1989) 2 NWLR (Pt.103) 244 – Addressed breach of contract in international trade agreements.

3. F.C.M.B. Ltd v. S.C.O.A. (Nig.) Ltd (2003) 3 NWLR (Pt. 773) 231 – Clarified obligations under letters of credit in Nigerian trade law.

Conclusion

Export and import trade play a critical role in economic growth but involve various risks and legal complexities. Compliance with international and domestic trade laws, effective contractual management, and risk mitigation strategies are essential for successful cross-border transactions. Strengthening Nigeria’s regulatory framework and adopting global best practices will enhance trade efficiency and economic development. In the light of this study, it is a desideratum, and thus recommended that good understanding of the regulatory legal and institutional frameworks should be sought prior to engaging in export and import trades.

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About the Author

Sunday Nelson Ogboso, Esq. is a practising Attorney at the law firm of I.I Ekwerekwu, Ekwerekwu & Co. located at No. 2 Court Road, Onitsha, Anambra State, Nigeria. He is also a legal scholar and corporate law expert pursuing a Master’s degree in Corporate, Commercial, and Business Law at Nnamdi Azikiwe University, Awka. He is passionate about constitutional law, business law, and governance reforms in Nigeria.

Email: [email protected] | Phone: 09032032811.

1.  M. Trebilcock & Howse R., Regulation of International Trade (4^th Edition, Routledge 2013 [↩] [↩]
2. World Trade Organization, World Trade Organization Report 2022:  Climate Change and International Trade (WTO, Geneva 2022) [↩]
3. Cap C45, LFN 2004 [↩]
4. Cap F34, LFN 2004 [↩] [↩]
5. The AfCFTA is a trade agreement established by the African Union (AU) to create a single market for goods and services across 54 African countries. It aims to boost intra-African trade by eliminating tariffs on 90% of goods, facilitating free movement of people, and promoting industrialization and economic integration. The agreement officially came into force on May 30, 2019 following its ratification by the minimum required threshold of 22 countries. [↩]
6. M. Sornarajah, The International Law on Foreign Investment (3^rd Edn, Cambridge University Press 2010 [↩]
7.  See U.T.U.(Nig.) Ltd v. Pamotei (1989) 2NWLR (Pt.103) 244, where the Supreme Court of Nigeria awarded damages in favour of UTC Nig. Ltd against a foreign supplier for breach of contract by failing to meet quality standard. See also FCMB Ltd v. SCOA (Nig.) Ltd (2003)3 NWLR (Pt. 773)231. [↩]
8.  See Soleh Boneh v. Government of Nigeria (1978) 2 Lloyd’s Rep.557., where an Arbitration Tribunal ruled in favour of Soleh Boneh Ltd, an Israeli company and awarded damages against Nigeria for non-payment for goods supplied and work done as contracted. [↩]
9.  Cap C45, LFN 2004 (Now Repealed [↩]
10. See section 2(1 [↩]
11. See section 2 [↩]
12. Section 167 [↩]
13.  David Ricardo, On the Principles of Political Economy and Taxation, 1817 [↩]
14.  Cap C45, LFN 2004 (replaced by Nigeria Customs Service Act, 2023 [↩]
15.  e.g., U.S. sanctions on Iran. [↩]
16. See section 28 thereof [↩]
17.  Article XI [↩]
18. Cap C45, LFN 2004 (Now Repealed) Section 18 [↩]
19. Cap T12, LFN 2004 [↩]
20. See section 167 of the Act [↩]
21. (2003)3 NWLR (Pt. 773) 231 [↩]
22.  Cap N108, LFN 2004, Section 3 [↩]
23. See U.T.C. (Nig.) Ltd v. Pamotei 1989) 2 NWLR (Pt. 103) 244 [↩]
24. Cap N107, LFN 2004, see section 1 [↩]
25. See Article 3 [↩]
26. Section 14 [↩]
27. (1989) 2 NWLR (Pt. 103) 244 [↩]
28. Cap N108, LFN 2004, see Section 3 [↩]
29. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F34, LFN 2004, Section 17 [↩]
30. See section 28 [↩]
31. See Marine Insurance Act, Cap M2, LFN 2004, Section 4, which Requires exporters to ensure proper insurance where applicable. [↩]
32.  See the African Continental Free Trade Agreement (AfCFTA) 2019, Article 19. It equires proof of origin for preferential tariff treatment. [↩]
33. See section 5 which requires compliance with packaging standards. See also GATT 1994 (Article IX: Marking of Imported Products) – Requires proper labeling for trade. [↩]
34. See section 4. The ICC Arbitration Case No. 7565 (1994) – Oil Export Dispute – Held that exporters must ensure transport and insurance in CIF contracts. [↩]
35. See Sale of Goods Act, 1893 (Section 28) – Payment must be made per contract terms. [↩]
36. Section 28 of the Nigeria Customs Service Act, 2023, provides that importers must clear customs and pay duties. [↩]
37. See Section 35 of the Sale of Goods Act, 1893. [↩]
38. (1978) 2 Lloyd’s Rep. 557 [↩]
39. In U.T.C. (Nig.) Ltd v. Pamotei (1989), exporters must ensure quality compliance. [↩]
40. Section 17. [↩]
41. Section 28 [↩]
42. See Article 1 [↩]