Contracting for a Cross-Border Sale of Goods: A Practical Guide

Document type: Guide Practice area: Commercial — International Trade Jurisdiction: United States and international Last reviewed: 5 September 2026

Decision 1 — The CISG: keep it or exclude it

Determine first whether it would apply. It does if both parties' places of business are in Contracting States, the transaction is a sale of goods, and no exclusion applies. Check the counterparty's place of business — not its nationality, and not the address on the letterhead if operations are elsewhere.

Then decide deliberately.

Reasons to keep it: neutrality where neither party will accept the other's domestic law; consistency across an international contract portfolio; genuine familiarity among counterparties and their counsel worldwide; and substantive rules that are not obviously worse than Article 2's.

Reasons to exclude it: reliance on an integrated writing, since the Convention has no parol evidence rule; a buyer's desire for strict conformity rights, since there is no perfect tender rule; the unspecified interest rate; the absence of fee shifting; and the practical reality that your team and the counterparty's understand Article 2.

If excluding, use the full formula:

This Agreement is governed by the laws of the State of [__], excluding its conflict of laws principles and expressly excluding the United Nations Convention on Contracts for the International Sale of Goods.

Do not rely on a bare choice of a US state's law, on selecting "the Uniform Commercial Code," or on silence. Silence selects the Convention.

If keeping it, supplement it: specify an interest rate; specify a fee-shifting rule if you want one; state the notice period and content for non-conformity; and include an express force majeure clause, because the Convention's excuse provision excuses damages only and leaves the counterparty free to avoid.

Decision 2 — The Incoterm

Start from the logistics, not from habit.

Answer four questions:

1. Who is better placed to arrange carriage? The party with freight relationships in the origin or destination market.
2. Who can act as exporter of record in the origin country, and importer of record in the destination country? These require local capability and registration.
3. Who should bear transit risk, and who will insure it?
4. Is the shipment containerized, break-bulk, air, or multimodal?

Then select:

Then specify precisely:

Delivery: FCA Terminal 4, Port of Rotterdam, Netherlands (Incoterms® 2020).

Name the version. Name the place with an address. And for containerized goods, use FCA rather than FOB — the single most common error in this area, because FOB's delivery point is the ship's rail and a container is handed over days earlier at a terminal the seller cannot control.

Remember what Incoterms do not do. They do not address title, price, payment, warranties, remedies, limitation of liability, governing law, dispute resolution, or force majeure. A contract consisting of a price and an Incoterm is missing most of a contract.

Decision 3 — Payment and documents

Match the payment mechanism to the credit risk and the relationship.

If a letter of credit, the documentary requirements are the buyer's real protection, because the credit is independent of the sale contract and the bank pays against conforming documents regardless of disputes about the goods.

Specify the required documents:

• Commercial invoice
• Transport document matching the Incoterm — a negotiable bill of lading, a sea waybill, an air waybill, or a multimodal document
• Insurance certificate, where the seller insures
• Certificate of origin, where preferential duty treatment or origin marking matters
• Inspection certificate from a named independent inspector — this is the buyer's practical protection and should be required if the buyer wants any
• Packing list
• Any regulatory certificate the destination requires

Drafting points:

• Align the credit's terms with the contract's: latest shipment date, expiry, presentation period, partial shipments, transshipment, and the exact document descriptions. A mismatch produces a discrepant presentation and a payment delay.
• State who pays which bank charges.
• Specify the currency and, if relevant, allocate exchange risk.
• Address the presentation period — twenty-one days after shipment is a common default, and a contract requiring documents that take longer to obtain guarantees a discrepancy.

Decision 4 — Quality, inspection, and notice

Specification. Attach it. A contract describing goods by trade name without a specification will be interpreted against whoever drafted it, and under the Convention with reference to negotiations and usage.

Inspection. Decide where and by whom:

• At origin, before shipment, by an independent inspector, with a certificate as a payment document. The buyer's best protection.
• At destination, with defined access, timing, and method.
• Both, with the origin inspection governing conformity for payment and the destination inspection preserving claims.

Notice of non-conformity. Under the Convention the buyer must examine within as short a period as practicable and notify specifying the nature of the non-conformity within a reasonable time, with a two-year outside limit. This defeats more claims than any substantive rule. Address it expressly:

Buyer shall examine the Goods within [15] days after arrival at the Destination and shall notify Seller of any non-conformity within [30] days after arrival, specifying the nature of the non-conformity in reasonable detail, including the affected quantity, the specification not met, and the method of measurement. Failure to give such notice within such period shall constitute acceptance of the Goods, provided that this Section shall not apply to non-conformities not reasonably discoverable on such examination, as to which notice shall be given within [30] days after discovery and in any event within [12] months after arrival.

Warranties. State them expressly, and state what is excluded. Under the Convention, goods must be fit for ordinary purposes, fit for any particular purpose made known to the seller, possess the qualities of any sample or model, and be packaged adequately — a set of implied obligations broadly similar to Article 2's, and disclaimable by agreement.

Decision 5 — Remedies and limitation

The Convention's remedial scheme differs enough from Article 2's that leaving it to the default is a decision, not an omission.

Address expressly:

• What constitutes a fundamental breach, or provide a contractual right to terminate on defined events, which avoids the standard entirely
• A cure period, and the consequence of failure — effectively a contractual Nachfrist
• Whether the buyer may reject non-conforming goods or is limited to repair, replacement, or price reduction
• Price reduction: whether it is available and how computed
• Consequential damages: excluded, capped, or available
• A liability cap, expressed as a percentage of the contract price or a fixed amount
• Liquidated damages for late delivery, with a cap
• Interest on overdue amounts, at a stated rate
• Fee shifting, if wanted — the Convention does not provide it

A drafting caution. Limitations of liability are subject to validity rules, which the Convention leaves to domestic law. A cap that is enforceable under New York law may be unenforceable in the counterparty's jurisdiction, particularly against a claim of gross negligence or wilful misconduct in civil law systems. Take local advice on enforceability where the counterparty's assets are located there.

Decision 6 — The compliance layer

Cross-border sales carry obligations that domestic contracts do not, and the contract should allocate them.

Export controls. The seller must determine whether the goods, software, or technology require a licence, and whether the destination, end user, or end use is restricted. Allocate: who classifies the goods; who obtains licences; who provides end-use statements; and what happens if a licence is denied or revoked. A denial should be a permitted termination event, not a breach.

Sanctions. Screen the counterparty, its owners, the banks, the carrier, the vessel, and the destination. Include representations that neither party nor its owners are sanctioned, that the goods will not be re-exported to a restricted destination, and a termination right if the position changes. This is not boilerplate; sanctions positions change and a contract without a termination right leaves a party performing into an illegal transaction.

Customs and origin. Who is importer of record; who pays duties; how origin is determined and documented for preferential treatment; how the goods are classified; and who bears the risk of a reclassification or a valuation adjustment. DDP puts all of this on the seller, which is why sellers should resist it.

Product regulation. Marking, labelling, certification, and conformity assessment in the destination market. Allocate responsibility, and require the buyer to provide the destination's requirements — the seller frequently cannot know them.

Anti-corruption. Where intermediaries, agents, or customs brokers are involved, representations, audit rights, and termination for breach.

Data and IP. Whether any software, firmware, or documentation accompanies the goods, and on what licence.

Decision 7 — Dispute resolution

The question that governs the choice: where are the counterparty's assets, and what will it take to reach them?

Arbitration is usually right for cross-border sales, because an award under the New York Convention is enforceable in over one hundred and seventy countries, while a US court judgment is enforceable abroad only where local law provides for recognition — which in many jurisdictions it does not.

Specify: the institution and rules; the seat, which determines the procedural law and the supervising courts; the number of arbitrators; the language; and whether emergency relief is available.

Where litigation is chosen, select a forum with a connection to assets, and confirm that a judgment from it will be recognized where enforcement is needed.

In either case: a choice of law clause; a waiver of sovereign immunity if a state entity is involved; and consideration of whether interim relief — an attachment, an injunction against dissipation — is available and from which court.

Negotiating sequence

Week 1. Establish the commercial terms: goods, specification, quantity, price, currency, delivery schedule. Determine the counterparty's place of business and whether the CISG would apply.

Week 1–2. Decide the Incoterm from the actual logistics, in consultation with whoever will move the goods. Do not let the sales team choose it from habit.

Week 2. Run export control classification and sanctions screening before drafting. A restricted destination or a licensable item changes the transaction.

Week 2–3. Draft, addressing in order: governing law and CISG treatment; delivery term with a precise named place; payment mechanism and documents; specification and inspection; notice of non-conformity; warranties and disclaimers; remedies and limitation; compliance allocations; force majeure; and dispute resolution.

Week 3. Reconcile the letter of credit application with the contract — dates, documents, descriptions, and shipping terms. A mismatch here is the most common cause of payment delay.

Week 4. Confirm insurance: who procures it, for what value, against what risks, and with whom as the beneficiary. Under CIF and CIP the seller procures for the buyer's benefit, and CIF requires only minimum cover unless more is agreed.

Working with the transport documents

The transport document is the operative instrument in most cross-border sales, and the choice among them has consequences the sale contract must accommodate.

The negotiable bill of lading. A receipt, evidence of the carriage contract, and a document of title whose transfer transfers constructive possession of the goods. The carrier delivers only against surrender of an original. This is what makes documentary credits work: the bank holds title-equivalent security until payment.

Consequences: originals must physically travel, which takes time; loss of an original is a serious problem requiring an indemnity from the shipper, often bank-backed; and goods arriving before the documents produce a delivery-against-indemnity situation the carrier will charge for.

The sea waybill. Non-negotiable. The carrier delivers to the named consignee on proof of identity, without surrender of a document. Faster and simpler, and appropriate where payment is on open account or where the seller does not need documentary security. Not suitable for a documentary credit where the bank requires control of the goods.

The air waybill. Non-negotiable by nature. Consign to the bank, rather than the buyer, if documentary security matters.

The multimodal transport document. Covers carriage by more than one mode under a single contract. Useful where the shipment moves inland-ocean-inland, and it should match the Incoterm — an FCA sale with a multimodal document naming an inland delivery place is coherent; an FOB sale with one is not.

Drafting points for the sale contract:

• Specify the required transport document exactly, and match it in the credit. "Bill of lading" and "full set of clean on-board ocean bills of lading" are different requirements.
• "Clean" means without a clause noting defective condition of the goods or packaging. A claused bill is a discrepancy and will not be paid against.
• "On board" requires the carrier to have confirmed loading, which under FCA sales may require a specific instruction to the carrier — an issue the Incoterms rules address expressly for FCA sales into a documentary credit.
• The number of originals, and where they go.
• Consignee and notify party, which determine who can take delivery.
• Charges prepaid or collect, which must match the Incoterm.

The recurring practical failure. Goods arriving before documents. The buyer cannot collect without an original bill; the carrier will release against a bank-backed letter of indemnity, at cost. Where transit times are short, use a sea waybill or provide for telex release, and address it in the contract rather than improvising at the port.

A worked sequence: the Vantorre shipment

The transaction. Vantorre Composites, a Belgian manufacturer, sells 180 tonnes of resin to Kettleworth Marine in Florida, $1.4 million, four container shipments over six months.

Week 1 — the CISG question. Belgium and the United States are Contracting States. Kettleworth's counsel, Dolores Amaechi, raises it. Kettleworth wants strict conformity rights and is relying on a detailed specification annexed to the contract. They exclude the Convention and select Florida law, using the full formula.

Week 1 — the Incoterm. Vantorre's sales team proposes "FOB Antwerp," which is what its forms say. Amaechi objects: the resin ships in containers, handed to the carrier at an inland terminal in Ghent. Under FOB, risk stays with Vantorre until the containers are on board in Antwerp — three days after Vantorre loses control of them.

They agree FCA Ghent Container Terminal, Incoterms 2020, with Kettleworth arranging ocean carriage. Vantorre is better off, and its own logistics team confirms it never wanted FOB.

Week 2 — compliance. The resin is classified for export control purposes; no licence is required. Sanctions screening on Kettleworth, its owners, and the carrier returns clear. The contract includes representations and a termination right if the position changes.

Week 2 — payment. An irrevocable documentary letter of credit, confirmed by a US bank, payable at sight against: commercial invoice; full set of clean on-board bills of lading; packing list; certificate of origin; and — Amaechi's addition — a certificate of analysis from an independent laboratory confirming viscosity and cure time within specification.

That certificate is Kettleworth's protection. Without it, the bank pays against documents and Kettleworth's only recourse for out-of-specification resin is a claim against a Belgian seller.

Week 3 — the reconciliation. Amaechi puts the contract and the draft credit side by side. Three mismatches: the credit requires an "inspection certificate" while the contract requires a "certificate of analysis"; the credit's latest shipment date is two weeks before the contract's; and the credit does not permit partial shipments while the contract contemplates four. All three corrected before issuance. Any one would have produced a discrepant presentation.

Week 4 — insurance. Under FCA, transit risk is Kettleworth's from Ghent. Kettleworth procures marine cargo insurance for 110% of invoice value on all-risks terms, and confirms the policy covers the inland leg from Ghent.

Month 4 — a problem. The third shipment's viscosity is at the specification's lower bound. The certificate of analysis, issued at origin, shows conformity; Kettleworth's own testing on arrival shows a marginal failure.

The contract answers it: an inspection at origin by a named laboratory is conclusive as to conformity for payment purposes, and Kettleworth's remedy for a subsequent discovery is a claim, not a rejection, with notice within thirty days specifying the measurement method. Kettleworth gives notice, the parties compare methods, and the discrepancy is traced to sample temperature. The dispute takes nine days and costs nothing, because the contract said what would happen.

Cargo insurance

Whoever bears risk under the Incoterm needs insurance, and the contract should say who buys it and on what terms.

Who insures, by term. Under CIF and CIP, the seller procures insurance for the buyer's benefit and must provide the policy or certificate. Under every other term, the party bearing risk insures for itself — which under FCA, FOB, CPT, and CFR is the buyer, from the delivery point onward.

The level of cover differs. CIF requires only minimum cover unless the parties agree more; CIP requires all-risks cover unless they agree less. This is a real difference, and a buyer under CIF that assumes it has all-risks protection is mistaken. Where CIF is used, specify:

Seller shall procure insurance on Institute Cargo Clauses (A) or equivalent all-risks terms, for 110% of the invoice value, in the currency of the contract, covering the period from [delivery point] to [destination], with Buyer named as the assured or the policy assigned to Buyer, and shall provide the policy or certificate with the shipping documents.

Why 110%. The customary uplift covers the buyer's incidental costs and anticipated profit, and it is the market convention that documentary credits expect.

War and strikes cover. Excluded from standard cargo clauses and available by extension. Specify whether it is required, particularly for routes through areas of conflict.

The carrier's liability is not a substitute. Carriage conventions limit liability by package or by weight, and the limits are far below cargo values for most manufactured goods. Norfolk Southern Railway Co. v. James N. Kirby, Pty Ltd. illustrates how those limitations extend down a chain of carriage contracts to inland carriers. A party relying on a claim against the carrier rather than on insurance will recover a fraction of its loss.

Practical checks:

• Does the policy cover the whole transit, including inland legs at both ends? A policy attaching at the port leaves a gap for the FCA seller's inland movement.
• Is the assured the party who bears the risk at the time of loss? A policy in the seller's name does not help a buyer bearing risk from Ghent.
• Are there warranties in the policy — packing, temperature, stowage — that the shipment may breach?
• Is there a deductible, and who bears it?
• Is the insurer's paper acceptable to the buyer's bank, if the certificate is a credit document?

Errors that recur

• Assuming a domestic choice of law clause excludes the CISG. It selects it.
• Using FOB for containerized goods.
• Confusing who pays freight with who bears risk under CPT, CIP, CFR, and CIF.
• Not naming the Incoterms place precisely, or not naming the version.
• Agreeing DDP without local import capability.
• Not reconciling the letter of credit with the contract, producing discrepant presentations.
• Omitting an inspection certificate from the credit's required documents, leaving the buyer paying against paper.
• Relying on the Convention's excuse provision instead of an express force majeure clause. It excuses damages only.
• Leaving the interest rate unspecified where the Convention governs.
• Selecting a litigation forum whose judgment cannot be enforced where the counterparty's assets are.
• Running export control and sanctions screening after drafting rather than before.
• Vague notice provisions, so a buyer's complaint fails for lack of specificity.

Long-term supply arrangements

Much cross-border trade runs on framework agreements with individual orders beneath them, and the structure raises its own issues.

The two-tier structure. A master agreement setting terms — quality, warranties, liability, compliance, dispute resolution, governing law and CISG treatment — with individual purchase orders specifying quantity, price, delivery date, and Incoterm.

The provision that must be right: an order of precedence clause stating that the master agreement's terms govern and that any conflicting terms on a purchase order, acknowledgment, invoice, or other document are of no effect unless signed by both parties and expressly referring to this Agreement. Without it, the parties re-fight the battle of the forms on every order.

Volume and exclusivity. Whether the buyer commits to volumes, whether the seller commits to capacity, and what happens on a shortfall. Take-or-pay, minimum purchase obligations, and capacity reservation fees are the usual structures. Address forecasting: whether forecasts are binding, in what window, and what liability attaches to a binding forecast the buyer does not take.

Price adjustment. Long-term contracts across currencies need a mechanism: indexation to a published input price, periodic renegotiation with a fallback, currency adjustment clauses, or a hardship clause. A fixed price in a multi-year contract across a volatile currency pair is an unhedged position for one party.

Continuity of supply. Business continuity obligations, notification of supply disruption, allocation provisions if the seller's capacity is constrained, and — for critical inputs — a right to a second source or to a licence enabling manufacture elsewhere.

Quality management. Agreed specifications with a change-control process; incoming and outgoing inspection protocols; audit rights over the seller's facilities; corrective action procedures; and epidemic failure provisions for systemic defects.

Regulatory changes. Which party bears the cost of a change in the destination's product regulation, and whether either may terminate if compliance becomes uneconomic.

Termination. For convenience with notice, for cause with cure, and for insolvency or change of control. And a transition provision requiring the seller to continue supplying for a period after termination, at agreed prices, so the buyer can qualify an alternative. For a critical input, this is the most valuable clause in the agreement.

Handling a dispute

When a cross-border sale goes wrong, the sequence matters and the early steps have consequences.

Step 1 — Determine the governing law, immediately. Whether the CISG applies changes the notice analysis, the standard for termination, the availability of price reduction, and the damages measure. Advising on a claim without settling this first produces wrong advice.

Step 2 — Check the notice position. If the Convention governs, when were the goods examined, when was notice given, and did it specify the nature of the non-conformity? This is the first thing the counterparty's lawyer will raise, and it is frequently dispositive. If notice has not been given, give it now, in the required form, and address the timeliness question separately.

Step 3 — Preserve the evidence. Retained samples, the goods themselves in the condition received, packaging, the transport documents, temperature and handling records, and the inspection certificates. Do not consume, repair, or return the goods before they are inspected and documented.

Step 4 — Identify who bears the risk. Under the Incoterm, was the loss or damage before or after the delivery point? A buyer complaining of damage that occurred in transit under an FCA sale is complaining about its own risk, and its claim is against the carrier and its insurer, not the seller.

Step 5 — Assess the remedies actually available. Under the Convention: avoidance requires fundamental breach or a failed Nachfrist period; price reduction is available without either; damages are limited by foreseeability and reduced by failure to mitigate; and attorneys' fees are not recoverable as loss. Price reduction is the remedy US counsel most often overlooks and frequently the one that fits.

Step 6 — Consider the Nachfrist route. If the goal is to get out of the contract, fixing an additional period of reasonable length and letting it expire is far more reliable than litigating whether the breach was fundamental.

Step 7 — Mitigate, and document it. The Convention requires it and reduces damages by what should have been saved. Resell, repair, or source substitutes, and keep the record.

Step 8 — Consider where enforcement will happen. A claim against a counterparty whose assets are all in one jurisdiction should be brought where it can be enforced. An arbitration award is enforceable under the New York Convention in most of the world; a US judgment frequently is not.

Step 9 — Look at the insurance and the carrier. Where the loss is transit damage, the cargo policy and the carriage claim may be better routes than a contract claim, and both have short notice periods and time bars of their own.

A drafting order of battle

Work through the contract in this sequence. Each decision constrains the next, and taking them out of order produces internal inconsistency.

1. Parties and places of business. Identify the actual place of business with the closest relationship to the contract, not the registered address. This determines whether the CISG applies.

2. Governing law and CISG treatment. Settle this first, because every subsequent drafting decision depends on which default rules operate.

3. Goods and specification. Attach the specification. Define conformity by reference to it.

4. Quantity, price, currency, and payment terms. Including who bears exchange risk and bank charges.

5. Delivery term. The Incoterm, its version, and a precisely named place — chosen from the logistics, not from habit.

6. Transport document required. Matched to the Incoterm and to the payment mechanism.

7. Insurance. Who procures, on what terms, for what value, and for whose benefit.

8. Inspection and acceptance. Where, by whom, on what method, and with what effect.

9. Notice of non-conformity. Period, required content, and consequence of failure.

10. Warranties and disclaimers.

11. Remedies, cure, and termination. Including a contractual cure period, since it substitutes for the fundamental breach analysis.

12. Limitation of liability. With attention to enforceability where the counterparty's assets are.

13. Compliance allocations. Export controls, sanctions, customs and origin, product regulation, anti-corruption.

14. Force majeure. Expressly, because the Convention's excuse provision is narrower than most parties expect and excuses damages only.

15. Dispute resolution. Chosen by reference to where enforcement will be needed.

16. Boilerplate, including notices, assignment, entire agreement (with the caveat that it does not exclude parol evidence under the Convention), no oral modification, and language of the contract.

Then reconcile. The contract against the letter of credit; the Incoterm against the transport document and the insurance; the specification against the inspection protocol; and the compliance allocations against who actually has the capability. Most defects in cross-border sale contracts are internal inconsistencies rather than missing provisions.

Quick reference

The CISG applies by default to sales of goods between businesses in Contracting States. A choice of a US state's law selects it. To exclude, name the state's law, exclude conflict of laws principles, and expressly exclude the Convention.

If you keep it, supplement it: interest rate, fee shifting, notice period and content, and an express force majeure clause — because the Convention's excuse provision excuses damages only and leaves the counterparty free to avoid.

Choose the Incoterm from the logistics. Containerized goods take FCA, not FOB. Under CPT, CIP, CFR, and CIF the seller pays freight but risk passes at origin. Name the version and the place precisely. And remember Incoterms allocate delivery, risk, cost, and customs — nothing else.

The letter of credit is independent of the sale contract. The buyer's protection is in the required documents, and an independent inspection certificate is the one that matters. Reconcile the credit with the contract before issuance: dates, documents, descriptions, partial shipments.

Insurance follows risk, not freight. CIF requires only minimum cover; CIP requires all-risks. Specify 110% of invoice value, all-risks terms, whole-transit coverage, and the correct assured.

Notice of non-conformity defeats more claims than any substantive rule. Specify the period, the required content, and the consequence.

Arbitration for enforceability. A New York Convention award reaches assets in most of the world; a US judgment often does not.

And the discipline that catches most defects: reconcile the contract against the credit, the Incoterm against the transport document and the insurance, and the specification against the inspection protocol. The failures in this area are inconsistencies, not omissions.

Working with the counterparty's counsel

Cross-border negotiations involve lawyers trained in different systems, and a good deal of friction comes from assumptions neither side states.

Assumptions US counsel bring that may not hold. That an integration clause excludes prior negotiations — under the Convention it does not. That a signed writing is required — it is not. That consideration is needed to modify — it is not. That good faith is a background principle only — many civil law systems treat it as an operative obligation with real content. That a limitation of liability will be enforced as written — enforceability is a validity question left to domestic law, and civil law systems often police it more actively.

Assumptions civil law counsel bring that may not hold. That specific performance is generally available — in a US forum, the Convention defers to the forum's own practice, which is restrictive. That the losing party pays costs — the American rule applies in a US forum, and Zapata confirms the Convention does not change it. That extensive boilerplate is unnecessary — in a common law forum it is.

Where these differences produce real disagreement:

• Length and specificity. Common law drafts are longer and enumerate remedies and exclusions; civil law drafts rely more on the applicable code. Neither is wrong, and the practical resolution is to draft to the more explicit standard, since specificity costs nothing and ambiguity costs a dispute.
• Entire agreement clauses. Worth including, with the understanding that under the Convention their effect is evidential rather than absolute.
• Liability caps. Expect resistance and expect enforceability questions. Where the counterparty's assets are abroad, take local advice.
• Dispute resolution. Arbitration resolves most of this, and it is why arbitration dominates cross-border sales of any size.

A practical suggestion. Early in the negotiation, agree explicitly on two things: whether the CISG applies, and what the dispute resolution mechanism is. Those two decisions determine the frame within which everything else is negotiated, and settling them first prevents two lawyers from spending three weeks drafting against different assumptions about what the default rules are.

Sanctions and export controls: the practical workflow

These are the compliance obligations most likely to stop a transaction outright, and they must run before drafting rather than after.

Step 1 — Classify the goods. Determine the export control classification of the goods, and separately of any software, firmware, or technical data accompanying them. Classification determines whether a licence is required for the destination and the end user. Get this from the engineering team with a documented rationale, not from a sales assumption.

Step 2 — Screen everyone. The buyer, its parent and ultimate owners, the consignee if different, the freight forwarder, the carrier, the vessel, the banks, and any intermediary or agent. Screen against the applicable restricted party lists, and re-screen before each shipment in a long-term arrangement — lists change, and a counterparty that was clear at signing may not be at the third delivery.

Step 3 — Check the destination and the end use. Country-based restrictions; end-use controls that apply regardless of classification where the goods will support a prohibited activity; and any red flags in the transaction pattern — unusual routing, a consignee with no apparent connection to the goods, a buyer unwilling to identify the end user.

Step 4 — Determine licence requirements and lead times. A licence application can take months and may be denied. This belongs on the critical path, not in the closing conditions.

Step 5 — Allocate in the contract.

• Who classifies, and who is entitled to rely on the classification
• Who applies for licences and who bears the cost
• End-use and end-user statements from the buyer, with a representation that they are accurate
• A no re-export covenant covering restricted destinations and parties
• Representations that neither party nor its owners is a restricted party
• A termination right, without liability, if a licence is denied or revoked or if a party becomes restricted — this should be a permitted termination, not a breach
• Suspension rights pending resolution
• Audit and information rights sufficient to verify compliance
• Survival of the compliance covenants after termination

Step 6 — Build the ongoing process. In a framework arrangement, re-screening before each shipment, a record of each screening, and a designated person responsible. A one-time screening at signing is not compliance for a three-year supply agreement.

The reason this matters commercially and not just legally. A shipment that cannot lawfully move is a shipment that does not move, and the contract's allocation of that risk determines who bears the cost of goods manufactured, packed, and stranded. Address it before the goods are made.

Related documents

• International sales of goods: the CISG, Incoterms, and the contract you did not know you signed
• International sale of goods contract checklist
• Cross-border sales toolkit: CISG opt-outs, Incoterms selection, and shipping documents
• Using letters of credit in commercial transactions
• International arbitration and the New York Convention: enforcing awards across borders