It happens thousands of times every day: a business in country A sells products to a business in country B. What laws apply?
The CISG Treaty
This question can be solved in one of two different ways, in a lot of cases. One way is by the application of international law.There is an international treaty called the UN Convention on the International Sale of Goods 1980, also called the Vienna Convention. According to the Wikipedia article on the UN CISG, by May 2016 the treaty had been ratified by 85 countries.
The CISG treaty provides a set of rules that apply to international business-to-business sales, but not to business-to-consumer sales. These rules cover many of the key issues in any product sale agreement, including:
- the obligation of the seller to deliver goods that match the agreed quantity and quality
- how and when the ownership in the goods. is transferred
- the buyer’s obligation to pay the price and accept delivery
- what happens when the parties fail to act as promised
If the buyer and seller are located in countries that have signed the CISG treaty, then the rules apply to their transactions for buying and selling products.
INCOTERMS: International Trade Rules
Another possibility is that the buyer and seller can agree that a set of trade rules will control their relationship. One of the most widely used sets of international trade rules is INCOTERMS, which has been developed by the International Chamber of Commerce. These rules include a lot of language applying to the transportation, insurance, and transfer of possession of goods being sent from one country to another. For example, under these rules the parties can cover the entire journey of goods being sent from a factory to a cargo facility, placed on a ship, unloaded at another cargo facility, and placed on a truck and delivered to their destination.
THE CISG treaty provides a generic set of rules that apply to international business-to-business sales. INCOTERMS provides a set of rules that are designed to facilitate shipments of products, and to allocate the costs associated with the different phases of the shipment journey. There are other special contractual terms that can be chosen by parties, which may be designed for particular industries. To find out more about INCOTERMS, you can read the Wikipedia article on this subject.
“Merchants, driven by economic goals, have always spoken in a common language.” – Indira Carr, author of International Trade Law
International trade is very important. Over time, sets of rules have evolved to give buyers and sellers of products some confidence that they can do business with each other in a logical manner.
[Photo credit: APL Post-Panamax Container ships, by NOAA, courtesy of Wikimedia Commons and used here as a Public Domain photographic work. This article is not intended as legal advice for any particular person. The author, James Irving, is a business and contract lawyer located in Perth, Western Australia. Please visit the Irving Law website for more information.]
