Contracts under Incoterms

How to prepare an international trade contract in compliance with Incoterms?

International trade is inextricably linked with the need to draw up a foreign economic contract, agree on the terms and conditions between the parties to an international transaction and reflect them in the text of the foreign trade contract. One of the main conditions of a foreign economic contract is the terms of delivery of goods, which differentiate the responsibilities of the seller and the buyer. To systematize delivery rules in foreign trade, international Incoterms rules were developed, which represent the basis for the supply of goods with the designation for each delivery rule of the responsibilities of the parties, transportation conditions, insurance, packaging, customs clearance, risk distribution, loss and damage to goods, etc. Depending on the chosen delivery basis, the terms of delivery of the goods also depend.

Preparation of a foreign trade contract according to Incoterms: how to draw up an international contract taking into account Incoterms

A foreign economic contract is an agreement between a seller and a buyer located in different countries, the text of which must reflect all the terms of the foreign trade transaction: the name of the transaction partners, the subject of the contract, quality, quantity of goods, terms of delivery of goods, price for the goods supplied, payment terms , sanctions, liability, legal addresses and signatures of the parties, etc.

The international rules of Incoterms have significantly simplified the drafting of a foreign economic contract by taking over the descriptive part of the delivery conditions, reflecting in each basis certain conditions for different types of supplies of goods. Incoterms rules allow partners from different countries to understand the terms of delivery of goods in the same way. When drawing up a contract, it is important to choose not only the delivery basis, but also the version of the Incoterms rules that will apply to the foreign economic contract being concluded. Each new edition of the Incoterms rules does not cancel the previous edition, so the parties can choose the delivery basis not from the latest edition, but, for example, from Incoterms 2010.

There are four categories of delivery bases according to the international rules of Incoterms:

1. E – the minimum obligations of the seller to supply goods, almost all the main risks and expenses are borne by the buyer;
2. F – the seller must deliver the goods to the designated place, after which all risks pass to the buyer, the seller is also responsible for customs clearance for export, delivery and customs clearance in the country of arrival of the goods lies with the buyer;
3. C – the seller is responsible for delivery until it is handed over to the carrier, while the seller is obligated to insure the cargo in favor of the buyer;
4. D – on this basis, the delivery of goods is carried out by the seller on a turnkey basis until the goods are delivered to the buyer.

In each group, delivery bases are identified, specifying delivery conditions, mode of transport, insurance, responsibilities of the parties, and customs clearance.

To draw up a foreign economic contract, the parties to the future transaction stipulate all the basic and additional terms of the contract, and also select the delivery basis. When drawing up a foreign economic contract, the parties choose a supply basis that meets all the necessary conditions for a specific delivery, and the remaining conditions are formalized in separate provisions in the foreign economic contract.

It is important to note that the Incoterms rules do not reflect some aspects of a foreign economic transaction that the parties need to further agree on and reflect in separate terms of the contract:

1. consideration of disputes during contract execution;
2. ownership rights to goods;
3. force majeure circumstances;
4. not all bases provide for cargo insurance, etc.

It should also be noted that for a number of countries, the Incoterms rules are advisory in nature; in this case, the parties may not apply the delivery bases defined by Incoterms and reflect all the conditions in the foreign economic contract without reference to Incoterms.

At the same time, the terms of a foreign economic contract are checked, read and used not only by the participants in the foreign trade transaction themselves, but also by cargo carriers, customs authorities, and insurers, therefore the use of the delivery basis according to the Incoterms rules allows all participants to uniformly interpret the terms of the goods supplied.

Drawing up an additional agreement to an international trade contract

Changing circumstances not only in the field of legislation regulating foreign economic activity, but also the economic and political situation in the country and the world, as well as the circumstances of the delivery itself lead to the need to adjust the concluded foreign economic contract. All changes made to the foreign economic contract are reflected in the additional agreement to it.

It should be noted that the additional agreement is concluded only to the current contract, and the additional agreement reflects the following conditions (changes):

1. delivery, payment or contract terms;
2. the details of the parties to the contract;
3. related to the product: labeling, packaging, shipping conditions;
4. duties or responsibilities of the parties to the contract, etc.

The additional agreement must be signed by an authorized person. It is important to note that if a foreign economic contract is declared invalid as a whole, all additional agreements concluded to it become invalid. At the same time, invalidation of individual parts of the contract does not lead to the invalidity of the entire foreign economic contract; such a provision is provided for in Article 180 of the Civil Code of the Russian Federation. Moreover, if an additional agreement is declared invalid, this does not entail the invalidity of the foreign economic contract itself.

When drawing up an additional agreement, it is necessary to carefully approach its presentation and correctly reflect the date and number of the foreign economic contract to which the additional agreement is concluded. It is also necessary to check that the conditions introduced by the additional agreement are consistent with the remaining clauses of the foreign economic contract, and in case of discrepancies, it is necessary to make appropriate changes to all interrelated terms of the contract by the same additional agreement.

Attention to detail when drawing up a foreign economic contract, as well as an additional agreement to it, will allow you to avoid additional questions from regulatory authorities, cargo carriers, and specialists during customs clearance.

Legal services

1. Legal advice on the drafting of a foreign trade contract and the use of Incoterms
2. Help in choosing a delivery basis according to Incoterms rules
3. Legal support in drawing up a foreign economic contract
4. Representation of interests in negotiations with foreign partners on the issues of drawing up and forming the terms of a foreign economic contract
5. Drafting an addendum to foreign trade contract