Incoterms and International Sale of Goods Lawyer in Paris

An international sale of goods rests on three layers that overlap without coinciding: the Incoterms 2020 rule chosen, which allocates delivery, risk and costs; the 1980 Vienna Convention (CISG), which governs formation, the parties’ obligations and remedies; and the national law designated by the governing law clause for everything the Convention does not cover. Most disputes arise from confusing the three.

The firm advises exporters, importers, traders and forwarders dealing with French counterparties on their contracts and general terms, and defends them when a dispute arises.

The risk: an Incoterm that does not say what you think, and a contract that did not provide for the rest

Incoterms settle four questions: place of delivery, moment of transfer of risk, allocation of costs and customs formalities. They do not settle transfer of title, price, payment or remedies. A seller delivering EXW believes it is released at the factory gate but often remains exposed to export formalities; a buyer purchasing CIF believes it is insured while the minimum Institute C cover excludes most damage; a FOB seller who lets the carrier load without a delivery document cannot prove the transfer of risk.

The second risk is the contract’s silence on governing law and jurisdiction. Absent a clause, the CISG applies of its own force between parties in contracting States, with its own rules on examination of the goods, notice of non-conformity within a reasonable time and price reduction; and jurisdiction is determined by the Brussels I bis Regulation or each State’s private international law. The dispute then opens with a year of proceedings on jurisdiction.

The legal solution: aligning the Incoterm, the CISG and the governing law clause

The security of an international sale lies in the consistency between Incoterm, mode of transport, payment method and insurance. A maritime Incoterm (FOB, CFR, CIF) does not suit a container delivered at the terminal; the multimodal rules (FCA, CPT, CIP) are then preferable. The documentary credit must call for documents the Incoterm actually allows the seller to obtain, failing which the bank will reject the presentation. Insurance must attach from the point of transfer of risk.

The contract must then settle what neither the Incoterm nor the CISG resolves: exclusion or adjustment of the Convention, retention of title, notice periods for defects, late-delivery penalties, warranty, governing law and jurisdiction or arbitration, force majeure and hardship. The firm has set out this method in its Incoterms and export payment guide.

How the firm assists you

Upstream, the firm drafts or reviews export or import general terms, framework and distribution agreements, selects with the company the Incoterm suited to each flow and checks consistency with transport documents, the letter of credit and the insurance policy.

In a dispute, it determines the governing law and competent court, applies the CISG notice and formal demand periods, organises evidence of conformity or defect by expert survey, and brings the action for payment, avoidance or damages before the competent court or arbitral tribunal, then enforces the decision in France. These matters are handled together with the international contracts and international commercial litigation pages.

Typical matters

The situations below are illustrative scenarios drawn from the firm’s practice and anonymised.

CIF goods damaged during sea carriage

A French buyer receives corroded machinery sold CIF Le Havre by an Asian supplier. The firm establishes that risk passed on loading, directs the claim against the insurer procured by the seller and obtains compensation despite the minimum cover, the corrosion resulting from defective packing attributable to the seller.

Documentary credit rejected for discrepancies

An exporter’s presentation is rejected by the confirming bank for a discrepancy between the bill of lading and the letter of credit. The firm obtains the buyer’s waiver and, failing payment, sues under the sale contract and the CISG.

French buyer alleging late non-conformity

A buyer refuses to pay eight months after delivery, alleging defects. The firm obtains a ruling that notice was not given within a reasonable time under Article 39 CISG and full payment of the price.

Frequently Asked Questions

What do Incoterms decide, and what do they not?

They allocate delivery, the transfer of risk, the costs of transport, insurance and formalities, and responsibility for export and import clearance. They do not transfer ownership, do not set the price or the payment terms, do not designate the governing law or the forum, and say nothing about breach or limitation periods. Treating an Incoterm as a substitute for a contract is the error that produces most disputes in international sales, because the parties believe more has been agreed than actually has.

Which rule fits which situation?

EXW and the D series place the burden at opposite ends of the chain, FCA, CPT and CIP suit containerised and multimodal traffic, and FOB, CFR and CIF remain appropriate for bulk carried by sea. A container handed over at a terminal is not loaded on board by the seller, which is why FOB is so often misused for container shipments. The rule is chosen for the physical reality of the movement and for the documents the trade requires, not out of habit.

When does risk pass?

At the point the chosen rule specifies, which is rarely the point the parties assume. Under FCA risk passes when the goods are handed to the carrier nominated by the buyer, under CIF on loading on board, under DAP on arrival at the named place before unloading. Naming the place precisely therefore matters as much as naming the rule, because a term used without a precise place is an invitation to argue about where exactly the risk moved.

How do Incoterms interact with the Vienna Convention?

They coexist. The CISG governs the contract of sale, the obligations of the parties, conformity, remedies and the passing of risk in the absence of agreement, while the Incoterm chosen by the parties prevails on delivery and risk as a usage they have adopted. The combination works well in practice, and it is then the contract’s own clauses on inspection, notice of non conformity and limitation of liability that determine how a dispute actually unfolds.

What are the most frequent mistakes?

Using a rule without naming the version, so that no one knows whether the 2010 or the 2020 text applies; naming a place too vaguely; using a maritime rule for a container; assuming insurance exists when the rule does not require it, since only CIF and CIP impose cover and at different levels; and forgetting that under EXW the buyer must carry out the export formalities, which a foreign buyer often cannot do. Each is corrected in a single line of the contract.

How is the customs and VAT position affected?

Considerably. The rule determines who is the exporter and the importer of record, and therefore who carries the customs formalities, who can reclaim import value added tax and who is exposed to a reassessment. Under DDP the seller takes on import clearance and duties in the buyer’s country, which usually requires a local registration it does not have. The tax and customs consequences are checked before the Incoterm is agreed, not once the invoice has been issued.