I. Introduction

In international trade, standardized abbreviations have been used for a long time (1) to denote the obligations of buyer and seller which are typical of the export and import business. In European and related legal systems, the most commonly applied abbreviations are the INCOTERMS set up by the International Chamber of Commerce (ICC) situated in Paris. The INCOTERMS aim at providing internationally uniform rules for the interpretation of specific clauses. In the past 60 years, the INCOTERMS have been amended and adjusted on several occasions to suit the development of technology. The present version which has been in force since 1 July 1990 is that of the INCOTERMS 1990 (2).

Having been drafted as a set of rules independent of a particular area of trade, the INCOTERMS only deal with part of the primary obligations imposed on seller and buyer in the context of international contracts for the sale of goods. The INCOTERMS do not contain any detailed provisions on delivery times or on the buyer's obligation to pay the price. The INCOTERMS do not regulate the conclusion of the contract of sale either, nor the issue of title, the exemption from a party's obligation to perform and the consequences of failures of performance. In the past, these aspects always had to be dealt with by applying the law which the governing Private International Law referred to. This resulted in a combination of the INCOTERMS having been drafted for internationally uniform interpretation and national sales law.

Since the beginning of this decade, in the export- and import-business the UN Convention on Contracts for the International Sale of Goods (hereinafter CISG) has more and more replaced the national sales laws. In the meantime, the CISG has come into force in 53 contracting states (3). As far as the CISG is applicable, the INCOTERMS are now no longer embedded in a national sales law. Instead, their application has to take consideration of the CISG which according to Art. 7 equally pursues uniform application.

II. Operation of the INCOTERMS

Although the INCOTERMS have been applied for decades, there is still no generally acknowledged legal opinion as to their legal nature and the basis for their operation. Starting points have been and are still being sought for somewhere among customary law, usages, objective rules for interpretation, standard business conditions, soft law and lex mercatoria (4). However, among German legal scholars the view seems to prevail that the general principles of application of the rules of the INCOTERMS phrased by the ICC are similar to those determining the applicability of German standard business conditions (5).

The INCOTERMS alter and supplement the provisions of the CISG. The possibility to alter and supplement the provisions of the CISG is principally provided for by Artt. 6 and 9 CISG. Therefore, within the scope of application of the CISG, these articles form the starting point of the issue of the operation of the rules of interpretation of the INCOTERMS set up by the ICC.

If the contracting parties agree on an INCOTERM by expressly referring to the INCOTERMS 1990, e.g. by incorporating a phrase into their contract such as "CIF New York - INCOTERMS 1990", the obligations of buyer and seller are determined by the rules of interpretation of the CIF-clause provided for by the ICC (6). However, it is known from experience that the parties are usually not familiar in detail with the contents of the rules of interpretation of the respective clauses. Furthermore, the rules on the INCOTERMS (hereinafter referred to as the Rules) are regularly not exchanged between the parties, but instead the parties are expected to inform themselves. This practice is disparate from other specific contractual agreements. Therefore, it is inappropriate to infer from the mere use of a three-letter-code together with the expression "INCOTERMS 1990" the incorporation of its entire catalogue of obligations into the contract as an individual agreement according to Art. 6 CISG. Instead it seems to be more reasonable to interpret the reference to the Rules of a stipulated ICC INCOTERM as a usage agreed by the parties in accordance with Art. 9(1)CISG (7). Though, in most cases it is not required to clearly distinguish between agreements concluded under to Art. 6 CISG and interpreted pursuant to Art. 8(3) CISG and usages agreed on according to Art. 9(1) CISG, as a consequence of the approach explained above, however, other contractual agreements, e.g. general business conditions, would prevail over the Rules on the INCOTERMS.

Since Art. 9(1) CISG requires an agreement between the parties, the aforementioned approach cannot be used if one of the thirteen three-letter-codes laid down in the INCOTERMS, e.g. FOB, is incorporated into the contract, while there is neither an explicit nor a tacit indication to the Rules nor such an indication can be concluded from the practices that the parties have established between themselves. In such cases neither the Rules (8), nor national interpretations can simply be applied (9). From the perspective of the CISG, first of all it has to be examined whether invoking the Rules does not constitute a usage which the parties knew or ought to have known and which in similar situations of international trade is widely known and regularly observed, see Art. 9(2) CISG (10). To assume that certain usages are relevant according to Art. 9(2) CISG, they need neither be globally disseminated nor been applied for a long time (11). The application of Art. 9(2) CISG is especially not excluded by the impossibility to find common usages which in detail comprise all the obligations of seller and buyer in respect of the relevant INCOTERM (12). To invoke Art. 9(2) CISG it is sufficient to determine a common usage pointing towards the application of the Rules in order to interpret the stipulated three-letter-code.

In order to ascertain a usage pursuant to Art. 9(2) CISG, regard is to be had to an interpretation that is reasonably expected from all trade circles involved (13). It can be assumed that US Americans are often more familiar with the American Foreign Trade Definitions, which comprise three-letter-codes partially identical to those used by the INCOTERMS, but differing significantly in their contents (14). Therefore, in practice the reference to the rules on the INCOTERMS should be phrased explicitly (15). Otherwise, the party invoking an INCOTERM has to furnish evidence that reference to the Rules is to be regarded as a usage according to Art. 9(2) CISG (16).

Interpreting the rules on the INCOTERMS similarly to the German standard business conditions, as advocated by some scholars (17), might help if German national law is applicable (18). However, to incorporate standard business conditions into contracts governed by the CISG strict requirements have to be complied with (19). Regarding the Rules, these requirements will rarely be fulfilled. Invoking internationally acknowledged rules of interpretation (20), the relevance of the INCOTERMS as soft law (21) as well as their enforcement as lex mercatoria (22) can hardly be integrated into the system of the CISG except for those cases where these approaches, e.g. pursuant to Art. 8(3) CISG, constitute relevant usages according to Art. 9(2) CISG. Furthermore, these approaches do not provide a convincing solution in cases of conflicts between the INCOTERMS and the American Foreign Trade Definitions.