Key Concepts in International Trade Regulation and Customs Law

Posted on Jan 28, 2026 in Law

Incoterms (ICC Rules)

Incoterms define the allocation of costs, transfer of risk, delivery point, and responsibilities for transport, insurance, and customs. They do not regulate the transfer of ownership, breach of contract, or payment methods.

Group E: Departure (Maximum Buyer Obligation)

  • EXW (Ex Works): The seller makes goods available at their own premises. The buyer bears all costs and risks from that point. The seller has no obligation to load or clear goods for export.

Group F: Main Carriage Unpaid by Seller

  • FCA (Free Carrier): Delivery is made to the carrier nominated by the buyer. If delivery occurs at the seller’s premises, the seller must load the goods. This is the most flexible Incoterm (multimodal).
  • FAS (Free Alongside Ship – Maritime Only): Goods are placed alongside the vessel at the port of shipment. Risk passes before loading.
  • FOB (Free On Board – Maritime Only): Risk passes when the goods are on board the vessel. The buyer bears risk during sea transport.

Group C: Main Carriage Paid by Seller, Risk Passes Earlier

  • CFR (Cost and Freight – Maritime Only): The seller pays the freight. Risk passes at loading.
  • CIF (Cost, Insurance and Freight – Maritime Only): CFR plus the seller provides minimum insurance coverage.
  • CPT (Carriage Paid To): Multimodal. Risk passes when goods are handed to the first carrier.
  • CIP (Carriage and Insurance Paid To): CPT plus higher insurance coverage than CIF.

Group D: Arrival (Maximum Seller Obligation)

  • DAP (Delivered At Place): The seller delivers the goods ready for unloading at the destination. The buyer clears import customs.
  • DPU (Delivered at Place Unloaded): The seller delivers and unloads the goods. This is the only Incoterm requiring unloading by the seller.
  • DDP (Delivered Duty Paid): The seller bears all risks and costs, including import duties and taxes (maximum seller responsibility).

CISG: Vienna Convention on International Sale of Goods

The CISG (Vienna Convention on International Sale of Goods) applies to contracts for the international sale of goods between parties in different Contracting States or via conflict of law rules. It excludes consumer sales, services, ships and aircraft, electricity, and securities.

Key principles include: party autonomy (CISG can be excluded), uniform interpretation, and good faith in international trade.

Obligations and Remedies

  • Seller Obligations: Deliver conforming goods, deliver documents, and transfer property indirectly.
  • Buyer Obligations: Pay the price and take delivery.
  • Fundamental Breach: Substantially deprives the other party of what it was entitled to expect.
  • Remedies: Avoidance, specific performance, damages, and price reduction.

International Transport Regulations

Transport of Goods (Cargo)

  • Maritime Transport: Uses the Bill of Lading and is governed by Hague-Visby or Hamburg Rules. The carrier is liable for loss, damage, or delay, subject to limits.
  • Air Transport: Governed by the Montreal Convention.
  • Road Transport: Governed by the CMR Convention.
  • Rail Transport: Governed by CIM Rules.

Transport of Passengers

Carrier liability covers death, personal injury, and delay. Air passenger transport is governed by the Montreal Convention.

GATT 1947 and Trade Barriers

A trade barrier is any impediment to trade in goods or services. An import trade barrier is any direct or indirect impediment to the entry or sale of imported goods.

Types of Trade Barriers

Barriers include tariffs (import duties) and non-tariff barriers (NTBs) such as:

  • Embargoes and quotas (including auctioned quotas and tariff-rate quotas).
  • Indirect NTBs (e.g., Japanese retail store law).
  • Import licensing schemes.

The GATT 1947 (General Agreement on Tariffs and Trade) aims to reduce tariffs and NTBs through multilateral negotiations and promote free trade while allowing limited protection. Its cornerstone is non-discrimination.

Core GATT Principles

Most-Favoured-Nation (MFN)

Any trade advantage granted to one member must be extended to all GATT/WTO members. Originally conditional, it is now unconditional. MFN is also referred to as Normal Trade Relations (NTR).

Exceptions include national security, foreign policy, and human rights concerns. Example: China received temporary MFN in 1980. Following Tiananmen Square in 1989, the U.S. delinked human rights and trade in 1994, granting permanent NTR in 2000 upon China’s WTO accession.

National Treatment (Article III GATT)

Once goods enter the market, imported products must be treated no less favorably than domestic products regarding internal taxes, regulations, and requirements.

Case: Japan – Taxes on Alcoholic Beverages (1996). Heavier taxation on imported vodka than domestic shochu violated National Treatment.

Tariff Reduction and Quota Elimination

  • GATT focuses on reducing (not eliminating) tariffs, which are considered more transparent than NTBs.
  • Elimination of Quantitative Restrictions (Article XI): Quotas are generally prohibited. Countries must convert NTBs into tariffs (tariffication) and then reduce them.

Exceptions under GATT

  • Article XI – Balance of Payments: Countries may restrict imports to safeguard their external financial position, protect the balance of payments, or prevent a serious decline in reserves. Case: India – Quantitative Restrictions on Imports (1999) (claim rejected by WTO).
  • Article XX – General Exceptions: Measures to protect public morals, human/animal/plant life or health, or exhaustible natural resources are allowed, provided they are not arbitrary or unjustifiable discrimination or disguised restrictions on trade. Cases: US – Gasoline, US – Shrimp, EC – Asbestos.
  • Article XXI – National Security: Broad discretion allowing deviation from GATT obligations for national security reasons.

The World Trade Organization (WTO)

The WTO replaced GATT in 1995 and functions as an umbrella organization. Before the WTO, GATT did not effectively cover services, agriculture, textiles, intellectual property, foreign investment regulation, or dispute settlement.

WTO Structure and Governance

  • The Ministerial Conference is the highest authority and meets every two years.
  • The General Council acts on behalf of the Ministerial Conference and (together with the Conference) can interpret agreements, grant waivers, and submit amendments.
  • The Secretariat provides technical support, legal assistance in disputes, monitors world trade, and assists developing countries.

GATT 1994: Expanded Coverage

GATT 1994 expanded coverage to agriculture, textiles, technical barriers to trade, services (GATS), TRIPS, TRIMS, financial services, and government procurement. It reaffirmed multilateral negotiations, predictability, non-discrimination, unconditional MFN, National Treatment, and the elimination of quotas.

Technical Barriers to Trade (TBT)

The GATT 1994 TBT Agreement does not set standards but requires non-discriminatory application, no unnecessary obstacles to trade, use of international standards, and transparency. Under the least restrictive trade principle, measures must be no more restrictive than necessary. Case: Thailand – Restrictions on Cigarette Imports (1990).

Note: Technical regulations are mandatory; standards are voluntary.

Import Licensing and Government Procurement

  • Import Licensing: Imports may be restricted to licensed goods. Systems must be non-discriminatory and transparent, and the WTO Import Licensing Committee must be notified.
  • Government Procurement: GATT allows an exception to National Treatment, permitting preference for domestic suppliers. The Agreement on Government Procurement (AGP) applies only to signatories and above specific monetary thresholds.

General Agreement on Trade in Services (GATS)

Key principles are transparency, MFN, non-discrimination, and no unreasonable restrictions on transfers of money. Exceptions noted: The U.S. excluded transportation; Japan excluded repair services and couriers.

Agriculture and SPS Measures

The Agreement on Agriculture (1994) seeks to increase export opportunities, reduce trade-distorting subsidies, and convert quotas and NTBs into tariffs. Sanitary and Phytosanitary (SPS) measures may protect human, animal, and plant life but must not be disguised protectionism. Case: EC – Hormones (1998).

Textiles

Textiles were initially governed by the 1974 Multifiber Agreement with quotas. GATT 1994 provided for gradual elimination, and since 2005, textiles have been subject to normal GATT rules.

Unfair Trade Practices and Safeguards

  • Dumping: Selling below normal value, remedied by anti-dumping duties.
  • Subsidies: Creating an unfair advantage, remedied by countervailing duties.
  • Safeguards: Temporary measures against serious injury caused by increased imports. They must be notified to the WTO, time-limited, and non-discriminatory.

Dispute Settlement

The system was strengthened under the WTO. Only governments may bring cases, and the system aims to prevent trade wars. Case mentioned: EC – Bananas.

EU Import Procedures and Customs Law

Importing goods into the EU requires compliance with EU customs law.

Key Procedural Steps

  1. Registration as an Economic Operator: Obtain an EORI number.
  2. Pre-Arrival Declaration: Submit an Entry Summary Declaration (ENS) for security and risk analysis purposes.
  3. Presentation and Declaration: Goods must be presented to Customs, and a customs declaration filed using the Single Administrative Document (SAD).

Customs Treatment and Regimes

Available customs regimes include:

  • Release for free circulation
  • Transit procedure
  • Customs warehousing
  • Inward processing
  • Temporary importation
  • Entry into a free zone

Depending on the product, imports may also be subject to sanitary and phytosanitary requirements, environmental requirements, technical requirements, marketing standards, or import restrictions.

Customs Valuation (Dutiable Value)

Dutiable value equals the transaction value (price actually paid or payable) plus:

  • Packing costs.
  • Selling commissions paid by the buyer.
  • Value of assists.
  • Royalties the buyer must pay.
  • Proceeds of resale accruing to the seller.

It excludes freight charges, insurance and broker’s fees after importation, inland freight, assembly fees, and import duties.

Country of Origin (Rules of Origin)

Goods may be classified based on whether they were wholly obtained, substantially transformed, or last substantially transformed. Rules of origin are essential for tariff classification and trade preferences.

Trade Preferences in the EU

These include:

  • The Generalised Scheme of Preferences (GSP), GSP+, and Everything But Arms (EBA) for least-developed countries.
  • Free Trade Agreements, Economic Partnership Agreements, Association Agreements, Customs Unions, and the Pan-Euro-Mediterranean Convention (PEM).

Enforcement and Penalties

Violations may involve materially false statements, negligence, gross negligence (actual knowledge or reckless disregard), or fraud.

Fraud requires clear and convincing evidence of knowingly made materially false statements or omissions and may result in seizure of goods and penalties up to the value of the merchandise.

Factors Affecting Penalties

  • Aggravating Factors: Obstruction, withholding evidence, misleading information, prior improper shipments, and illegal transshipments.
  • Mitigating Factors: Customs errors, cooperation, immediate remedial action, inexperience, prior good record, and inability to pay.

Prior disclosure is strongly encouraged.

Export Regulations and Controls

Export controls exist to prevent goods and technology from reaching countries that could affect national security. Controls may be unilateral (national export laws) or multilateral. After the disbanding of COCOM, the Wassenaar Arrangement (1996) provides looser multilateral coordination.

Export Control in the EU

Exporters must be established in the EU, obtain an EORI number, select the destination, and verify export viability. This includes checking whether an export licence is required, whether trade restrictions apply, and whether the destination country imposes additional conditions.

Types of Export Licences (EU)

  • General Licences: Covering certain items and destinations.
  • Individual Licences: Specific shipment and end-user.
  • Global Licences: Multiple shipments over time.

Exporters exporting under preferential agreements may need Authorised Exporter (EA) or Registered Exporter (REX) status, allowing self-certification of origin. The export process concludes with the submission of the export declaration and presentation of goods to Customs.

Export Control in the United States

Main legal bases include the Export Administration Act (extended by executive order under IEEPA), the Arms Export Control Act, IEEPA, and the USA Patriot Act. Export controls apply to:

  • Exports and re-exports of commodities and technical data.
  • Products containing U.S. parts.
  • Foreign-made products based on U.S. technical data.

Enforcement is handled by the Department of Commerce through the Bureau of Industry and Security (BIS).

U.S. Export Licensing Process

The process involves determining:

  1. What the item is.
  2. Where it is going.
  3. Who will use it and for what purpose.

Steps include classifying the item under the Commerce Control List (ECCN), identifying reasons for control, consulting the Country Chart, determining whether the item is EAR99 or qualifies for a licence exception, verifying end-use controls, and submitting the licence application.

Reasons for U.S. Export Control

Reasons include:

  • Antiterrorism
  • Chemical and biological weapons
  • Crime control
  • Chemical weapons convention
  • Encryption items
  • Firearms convention
  • Missile technology
  • National security
  • Nuclear nonproliferation
  • Regional stability
  • Significant items
  • Surreptitious listening
  • Short supply
  • UN embargoes

Antiboycott Law and Enforcement

The U.S. Antiboycott Law makes it illegal to comply with a boycott imposed by a foreign country against a country friendly to the U.S. Case: Briggs & Stratton v. Baldridge.

Enforcement and Penalties: Authorities may detain shipments, issue temporary denial orders, warning letters, and impose licence conditions. Severe penalties apply for violations, including fines and imprisonment (e.g., U.S. v. Elkins).

Business Implications: Companies should appoint knowledgeable compliance personnel, watch for warning signs of illegal activity, and actively monitor changes in export and import regulations.