RM: Hey Mike, how are you?
MG: Hi Rich. Not bad. Do you have a minute?
RM: Sure, what can I do for you?
MG: Well, I was here late last night working on the Adam Gemminnello transaction, and I wanted to check a few things with you. I’ve done a lot of domestic sales agreements, but this one is international, and I don't want to miss any details.
RM: OK, so what do you need to know?
MG: Well, when we met with Adam yesterday we discussed the choice of law. Someone mentioned the CISG, the Convention on International Sales of Goods. Are we required to follow the CISG for this transaction?
RM: No, not at all. We can choose the CISG, because the U.S. and Italy have both signed the treaty. But we could also choose to apply domestic law, if both parties agree—then U.S. laws would apply.
MG: OK, I see. We need to decide between the CISG or Article 2 of the Uniform Commercial Code.
RM: Exactly. You should decide on that before you draft the choice of law provision.
MG: Got it. Right. So my other question involves shipping terms. In the meeting, everyone kept saying that the Italian linens would be CFR New York. What does CFR mean? I’ve never heard of that term before.
RM: CFR? “CFR” stands for “cost and freight.” CFR means that the seller is responsible for paying the cost and freight charges for shipping the goods. So if we say that the Italian linens will be CFR New York, then Andretta Corredi has to pay the cost and freight charges for shipping the linens here.
MG: So, is it standard practice in international trade for the seller to pay for cost and freight?
RM: Well, no, there are a lot of different possibilities. In fact, the International Chamber of Commerce has drafted a set of trade terms that govern the insurance and shipping of goods in international trade. They’re called International Commercial Terms, or “Incoterms” for short. In general, the terms specify who has to take control of goods and provide insurance at particular points in the shipping process. CFR is just one of these Incoterms.
MG: Hmm, ok. It looks like I’ve got some work to do on this. Thanks a lot. Can I call you if I have any more questions?
RM: Sure, any time.