International Contract Considerations

Legal update note: This article is current as of July 2026 and is for general business information. International contract law, tariffs, customs rules, sanctions, export controls, tax rules, and trade policy can change quickly. Businesses should have counsel review specific cross-border contracts and coordinate customs, VAT, tariff classification, and tax issues with qualified trade, customs, and tax advisors.

Cross-border deals are easier to sign than ever. They are also easier than ever to get wrong. A business can agree on price, delivery, and payment terms in a few emails — but if the contract does not address language, governing law, the CISG, dispute resolution, tariffs, customs duties, sanctions, taxes, and enforcement, the deal can become expensive fast.

Why International Contracts Need Extra Care in 2026

An international contract shares the essential terms of any domestic agreement — identifying the parties, describing the goods and services, and setting the price. But a handful of provisions carry outsized weight when a deal crosses a border, and in 2026 the list has grown. International contract risk is no longer just about which country’s law applies. It is also about whether a tariff, trade restriction, customs problem, or sanctions issue changes the economics of the deal after you have already signed.

The sections below walk through the clauses that deserve special attention — including the tariff and trade-policy risk that has moved to the front of nearly every cross-border negotiation this year. For a broader primer on drafting pitfalls, see our guide to common business contract issues.

Official Language Clause

If the parties use more than one language, the contract should say which version controls if a dispute arises. Text translated from one language to another can unintentionally create disagreements about meaning, because of differences in syntax and interpretation between the source and the translation. Naming a single controlling version keeps a translation dispute from becoming a contract dispute.

Governing Law and the CISG

The governing-law clause specifies which country’s laws apply to the agreement and would control in a dispute — one of the most important clauses in the contract. U.S. federal law and your home state’s law are usually preferable, but the other party may insist their country’s law controls. That is difficult: foreign law may be written in another language (for example, German law in German), and your U.S. attorney may not read it. If you cannot fully understand and get competent advice on the pitfalls of the other side’s local law, retaining counsel in that country to review the agreement is often worth the cost.

There is also a treaty that can apply whether or not you think about it. The United Nations Convention on Contracts for the International Sale of Goods (CISG) can apply to contracts for the international sale of goods when the parties are located in different Contracting States. The United States is a CISG country, and the CISG has been in force for the U.S. since January 1, 1988. It is similar to the Uniform Commercial Code that governs the sale of goods in the U.S.

The trap is that a governing-law clause that simply says “New York law” or “California law” may not be enough to keep the CISG out. If the parties do not want the CISG to apply, the contract should say so clearly and expressly. Some businesses opt out because they prefer familiar state commercial law, such as UCC Article 2; others are comfortable with the CISG. Either way, the choice should be deliberate, not accidental.

Forum Selection and Dispute Resolution

International contracts should say where disputes will be heard and how the result will be enforced. Disputes can be resolved through mediation, arbitration, or litigation, and for cross-border deals mediation or arbitration is often preferable. A key reason is enforcement: arbitral awards may be easier to enforce across borders under the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards) than a domestic court judgment.

A well-drafted clause should identify the forum, the arbitral institution or rules (for example, the American Arbitration Association’s international rules), the seat of arbitration, the language, the number of arbitrators, and whether emergency or interim relief is available. Consider the practical burden of the arbitration location too, given the international travel it may require of your team.

The New Priority: Tariffs and Trade-Policy Risk

Tariffs are now one of the most important contract issues in cross-border deals. A tariff increase can change the economics of a supply agreement overnight. But a tariff spike is not automatically a force majeure event. In many contracts — and under the law of many common-law jurisdictions, which tend to read force majeure clauses narrowly — increased cost alone does not excuse performance unless the contract says so.

That means the party who agreed to a fixed price may be stuck with the increase unless the contract has a price-adjustment, change-in-law, or tariff-specific mechanism. Fixed price does not mean fixed cost. If a seller agrees to a fixed price without a tariff adjustment mechanism, a new duty can compress the margin or force a difficult breach decision. If the contract does not allocate tariff risk at all, the party left holding the cost may have limited options.

A quick note on language: it is worth using neutral, durable terminology in the contract — a “tariff / trade-policy clause,” a “price-adjustment clause,” or a “change-in-law clause” — rather than political nicknames that may not age well or map cleanly onto the actual government action.

Drafting a Tariff / Trade-Policy Clause

Current drafting practice is moving toward express clauses that address tariff and trade-policy risk rather than relying on generic force majeure language. A tariff clause should not be vague. It should tell the parties exactly what happens if the cost of performing the contract changes because of government trade action. A well-built clause usually addresses:

• a broad definition of covered governmental action;
• tariffs, duties, customs changes, trade restrictions, import/export controls, sanctions, and embargoes;
• a materiality threshold that triggers the clause;
• a notice deadline;
• a documentation requirement for the cost increase;
• a duty to mitigate;
• a price-adjustment or cost-sharing mechanism;
• a renegotiation period;
• suspension rights;
• termination rights; and
• a dispute-resolution pathway that coordinates with the rest of the contract.

Force Majeure, Change-in-Law, MAE, and Price-Adjustment Clauses

Force majeure, change-in-law, MAE, and price-adjustment clauses all deal with changed circumstances, but they do not do the same job. Force majeure may excuse or delay performance when an event prevents performance. A change-in-law clause may address new legal obligations. A price-adjustment clause may shift or share increased costs. An MAE (material adverse effect) clause may matter in M&A or financing contexts. And a termination-at-will clause may provide an exit even when none of the others applies.

The important point is that these clauses should be coordinated. A contract that has a tariff clause in one section and a conflicting fixed-price clause in another is asking for a dispute. Reviewing them together — the way we approach diligence-grade contracts — is how you avoid building a contradiction into your own agreement.

Incoterms and Who Bears the Duty

Incoterms — the standardized trade terms published by the International Chamber of Commerce — can decide who carries shipping, customs, and duty risk. They allocate transport cost, risk of loss or damage, and responsibility for customs formalities and duties. EXW and DDP are good examples of how differently they can split the burden. EXW generally places more responsibility on the buyer, while DDP generally places more responsibility on the seller, including import duties and delivery to the destination.

Incoterms do not replace the contract, but the wrong Incoterm can quietly shift tariff and customs risk to the party least prepared to manage it. Make sure the Incoterm you choose lines up with your pricing and your tariff clause rather than working against them.

Sanctions and Export Controls

Sanctions and export controls are different from ordinary price risk. They can override private contractual expectations entirely. If a regulation makes performance illegal or restricted, the parties need both a compliance path and an exit path — the contract cannot simply assume performance will always be lawful.

A strong international contract should address compliance with import/export laws, sanctions, and restricted-party screening; any required licenses; suspension rights; termination rights; and indemnity for violations. Export-control violations can carry serious consequences, so this is one area where the contract language and real-world compliance need to match.

Taxation, Customs, and VAT

Taxation in a cross-border deal is not just income tax. International contracts can raise value-added tax (VAT), withholding tax, customs valuation, duties, tariff classification, transfer pricing, and import/export reporting issues. Most countries impose VAT on goods and services consumed within their borders, each with its own rules and applicable treaties, so you need to determine whether your transaction is taxable in any country involved, including the United States.

The contract should identify who is responsible for taxes, duties, customs clearance, VAT documentation, and required filings. These are specialized areas: businesses should coordinate with an international tax advisor and a customs broker before signing, not after a shipment is delayed at the border.

What Businesses Should Do Now

If you are contemplating an international transaction, a short pre-signing checklist goes a long way: name a controlling language; choose your governing law and decide expressly whether the CISG applies; specify your forum, arbitral rules, and seat; add a tariff / trade-policy clause and confirm it does not conflict with your pricing; pick the right Incoterm; build in sanctions and export-control compliance; and settle who bears taxes, VAT, and customs duties. If you also operate in more than one U.S. state, our guide to multi-state business compliance covers related ground.

Most of these issues are cheap to address before signing and expensive to fix afterward. Having counsel review the specific contract — and coordinating tax, customs, and trade questions with the right advisors — is the most reliable way to allocate the risk on purpose rather than by accident.

Legal Disclaimer: This article is current as of July 2026 and is provided for general informational purposes only. It is not legal advice, tax advice, customs advice, or trade-compliance advice, and it does not create an attorney-client relationship. International contract issues are highly fact-specific and may depend on governing law, treaty status, party location, product classification, Incoterms, sanctions/export controls, customs valuation, tax rules, dispute forum, and enforcement strategy. Businesses should consult qualified legal counsel before signing, revising, terminating, or enforcing cross-border contracts, and should coordinate tax, VAT, customs, tariff classification, and import/export questions with qualified tax, customs, and trade professionals.