The American president's all-purpose remedy is raising legal questions in cross-border supply contracts: Who pays the new tariffs? If the parties have referred to Incoterms in their contracts, the following applies:

If the parties have agreed on “DDP” (Delivery Duty Paid), the supplier must provide the goods cleared through customs and ready for unloading at the agreed destination. The supplier bears all costs up to the delivery of the goods, including any customs duties. In the case of “FOB” (=Free on Board), on the other hand, the supplier only brings the goods on board the designated means of transport at the place of shipment, and the transfer of risk takes place upon loading; from then on, the buyer bears all risks and costs.

If nothing has been stipulated in the contract and no Incoterms have been included, the contract must be interpreted to determine who bears the customs duties. According to Section 448 (1) of the German Civil Code (BGB), the seller bears the delivery costs in the purchase contract, while the buyer bears the acceptance and shipping costs. Customs duties are considered shipping costs and are therefore to be borne by the buyer. Under Italian law, in the absence of an express provision, it is assumed that the buyer bears the costs.

In practice, customs duties can seriously jeopardize the willingness and ability of the contracting parties to perform. In principle, the seller bears the risk – but if the limits of what is foreseeable are exceeded, German law may provide for a right to price adjustment under Section 313 BGB. During the coronavirus pandemic, case law has gained a lot of practical experience in this area and the situation appears to be comparable. Whether Trump should be compared to C19 – that should be left to the reader to decide.