For Turkish companies exporting goods or services to the United States, or establishing distribution relationships with U.S. partners, the commercial contract is the foundation of the business relationship. A well-drafted international trade contract addresses governing law, dispute resolution, payment terms, delivery obligations, intellectual property ownership, exclusivity, termination rights, and liability limitations.

The governing law clause determines which country's or state's law applies to interpret and enforce the contract. For Turkish companies contracting with U.S. parties, the governing law is typically either U.S. law (often New York, Delaware, or the state where the U.S. counterparty is located) or Turkish law. U.S. counterparties will almost always insist on U.S. governing law.

Within U.S. law, New York is the preferred governing law for international commercial contracts due to its sophisticated commercial law, well-developed body of contract precedent, and the availability of experienced commercial courts.

For Turkish companies, arbitration is generally preferable to U.S. court litigation for several reasons:

• Arbitration awards are enforceable in TURKEY under the New York Convention (to which TURKEY is a party)
• Arbitration proceedings are confidential
• Arbitrators with international commercial expertise can be selected
• Arbitration avoids the risk of a U.S. jury trial

The American Arbitration Association (AAA), JAMS, and the International Chamber of Commerce (ICC) are the most commonly used arbitration institutions for U.S.-TURKEY commercial disputes.

Payment terms in U.S. commercial contracts vary significantly by industry and the relative bargaining power of the parties. Common structures include:

Open account (net 30, net 60, net 90): The buyer pays within a specified number of days after delivery or invoice. This is the most common structure in established commercial relationships but exposes the Turkish exporter to credit risk.

Letter of credit (LC): A bank undertakes to pay the exporter upon presentation of specified documents (bill of lading, commercial invoice, packing list, certificate of origin). LCs provide the highest level of payment security for exporters but are expensive and administratively burdensome.

Documentary collection: The exporter's bank presents shipping documents to the buyer's bank, which releases them to the buyer upon payment (D/P) or acceptance of a draft (D/A). Less secure than an LC but less expensive.

Advance payment: The buyer pays before shipment. Provides maximum security for the exporter but is rarely acceptable to U.S. buyers except for small orders or highly customized goods.

Turkish exporters should also be aware of the Uniform Commercial Code (UCC) Article 2, which governs the sale of goods in the U.S. and implies certain terms (including warranties) into contracts unless expressly disclaimed.

Incoterms (International Commercial Terms) published by the International Chamber of Commerce define the allocation of risk, cost, and responsibility between buyer and seller. The most commonly used Incoterms in U.S. trade include:

FOB (Free on Board): Risk transfers to the buyer when the goods are loaded on the vessel at the port of shipment. The seller is responsible for export clearance; the buyer is responsible for freight, insurance, and import clearance.

CIF (Cost, Insurance, and Freight): The seller pays for freight and insurance to the port of destination. Risk transfers to the buyer when the goods are loaded on the vessel.

DDP (Delivered Duty Paid): The seller is responsible for all costs and risks, including import duties and taxes, until the goods are delivered to the buyer's premises. This is increasingly demanded by large U.S. retailers and e-commerce platforms.

Contracts involving the development, customization, or licensing of intellectual property require careful drafting. Under U.S. copyright law, works created by independent contractors are not automatically "works made for hire" — the contractor retains copyright unless there is a written agreement assigning ownership to the commissioning party.

For licensing arrangements, the license agreement should specify:

• The scope of the license (exclusive or non-exclusive, field of use, territory)
• The term and renewal rights
• Royalty rates and payment mechanics
• Quality control standards (particularly important for trademark licenses)
• Sublicensing rights
• Termination provisions

Distribution agreements frequently include exclusivity provisions — granting the U.S. distributor the exclusive right to sell the Turkish company's products in a defined territory. Exclusivity provisions must carefully address:

• The scope of the exclusive territory (by state, region, or customer type)
• Minimum purchase or performance obligations that the distributor must meet to maintain exclusivity
• The Turkish company's right to sell directly to certain customers (e.g., existing accounts or key accounts)
• The consequences of the distributor's failure to meet performance obligations

Under U.S. antitrust law (Sherman Act, Clayton Act), certain exclusivity arrangements can raise competition concerns — particularly if the Turkish company has significant market power.

Termination provisions are among the most heavily negotiated clauses in distribution and supply agreements. Key issues include:

• Grounds for termination (for cause vs. for convenience)
• Notice periods (typically 30–180 days for convenience termination)
• The consequences of termination (return of inventory, transition assistance, payment of outstanding amounts)
• Post-termination obligations (non-solicitation of customers, return of confidential information, cessation of use of trademarks)

Turkish companies should be aware that several U.S. states have enacted dealer protection statutes that impose additional requirements on the termination of distribution relationships — including mandatory notice periods, good cause requirements, and compensation for goodwill. These statutes apply regardless of the governing law clause in the contract.

U.S. commercial contracts typically include mutual limitation of liability provisions capping each party's liability at the amount paid under the contract in the preceding 12 months, and excluding consequential, indirect, and punitive damages.

Turkish exporters should pay particular attention to product liability indemnification provisions: if a Turkish product causes injury in the U.S., the U.S. distributor or retailer may face product liability claims and will seek indemnification from the Turkish manufacturer. Turkish companies should ensure they have adequate product liability insurance coverage for U.S. sales.

For Turkish companies with ongoing U.S. commercial relationships, developing a standard contract framework — including master supply agreements, distribution agreements, non-disclosure agreements, and purchase order terms — is more efficient and cost-effective than negotiating each contract from scratch.

ULF New York assists Turkish companies in developing these frameworks, drawing on experience with U.S. commercial law and the specific legal and commercial issues that arise in Turkish-U.S. trade relationships.