Newsletter: US Tariff Turmoil - Legal Implications for International Sales Contracts from a Swiss Law Perspective

Current Situation: Temporary Suspension of New US Import Tariffs

On 2 April 2025, the US government announced new and increased tariffs on a wide range of imported goods from around the world. While many of these tariffs are currently in place - generally around 10%, but substantially higher for certain types of goods - the US government recently introduced a 90-day suspension until July 2025 of newly announced tariffs on goods imported from certain countries. For products originating from China significantly increased tariffs continue to apply. As a result, companies importing into the US from a range of countries face heightened costs and legal uncertainties.

This newsletter provides an overview of the legal implications on affected contracts and possible legal mechanism for risk reallocation from a Swiss law perspective.

Who Bears the Risk? A Matter of Contractual Terms

The allocation of risk related to the new US tariffs primarily depends on the specific contractual terms agreed between the parties. In international commercial transactions or procurement processes, parties typically rely on the Incoterms (International Commercial Terms) of the International Chamber of Commerce (ICC) to define not only responsibilities for transport and insurance but also to allocate customs duties.

Of the most commonly used Incoterms, the situation is as follows:

• Under DDP (Delivered Duty Paid), the seller bears the import duties and risk of new and increased tariffs.

• Under CIF (Cost, Insurance, and Freight), CFR (Cost and Freight), DAP (Delivered at Place), EXW (Ex Works), FCA (Free Carrier) or FOB (Free on Board), the buyer bears the import duties and risk of new and increased tariffs.

In the absence of Incoterms or other specific contractual terms, the applicable law determines the allocation of the customs duties. Under Swiss law, international contracts for the sale of goods are governed by the CISG (UN or Vienna Convention on Contracts for the International Sale of Goods) provided that the requirements set out in Art. 1 to 6 CISG are fulfilled. If the parties have explicitly excluded the application of the CISG, the Swiss Code of Obligations (Swiss CO) applies to such international sales contracts.

Under both regulations in application of Articles 7(1) and 31 CISG and Article 189 Swiss CO respectively, the buyer generally bears the transportation costs including import duties unless the parties have agreed that the buyer's location is the place of performance.

Possible Legal Mechanism for Risk Reallocation

Companies concerned about potential future tariff increases or currently affected by the new and increased US tariffs may consider the following legal mechanisms to renegotiate or adjust their contractual obligations.

1. Specific Contractual Reservation to Review Transport Price

Following the disruptions caused by Covid-19 in the global transportation and shipping industry, some parties have inserted clauses in their contract that would allow them to review the contractually agreed purchase or transport price in case of events having an extraordinary influence on transportation costs. Such clauses however are often designed and worded to encompass global pandemics or similar phenomena, while it may be difficult to extend them to the new tariffs imposed by the US government.

In case such clauses were incorporated into an international sales contract, and it is not clear whether they include changes of import tariffs, they would need to be interpreted under the applicable law.

2. Force Majeure and Hardship Clauses

Many commercial contracts include force majeure clauses, which relieve a party from performance due to extraordinary events beyond its control. In practice, such clauses rarely define events with sufficient clarity. Governmental orders or trade restrictions are seldomly listed as explicit triggers. The applicability of force majeure clauses also depends on whether the clause in question requires the event to make performance of the contract impossible or merely uneconomical. Where the clause lacks specific detail, the provision must be interpreted in light of the applicable law.

The parties may also have agreed on a hardship clause which provides for renegotiation of the contractual obligations if performance becomes excessively onerous due to unforeseen events. Such a clause should clearly define what constitutes hardship (e.g., tariff increases above a defined threshold) and set out mechanisms for renegotiation or contract adjustment. The parties may also agree on having the performances under a contract rebalanced by a third party in case of hardship. Long term supply contracts often contain clauses for the revision of prices combined with multi-tier dispute resolution clauses that promote preliminary talks and negotiation.

In 2020, the ICC published an update of its model clauses on force majeure and hardship, which may serve parties as inspiration when drafting their contract.

3. Hardship under the CISG

Although the CISG does not contain a specific provision dealing with questions of hardship, Article 79 CISG is widely interpreted – both in legal doctrine and case law – as covering hardship scenarios. Hardship under the CISG must be (1) uncontrollable, (2) unforeseeable at the time of the conclusion of the contract and (3) not reasonably avoidable. Whether these requirements are met in light of the new tariffs imposed by the U.S. government must be carefully assessed based on the circumstances and the contract in question. In particular, the specific goods, the time the contract was entered into, and the new applicable tariff rate in relation to the total contract price must be considered. For example, a party to a contract that was entered into before President Trump was officially nominated as candidate of the Republican Party may be more successful in arguing that the new tariffs were unforeseeable than a party whose contract was only entered into at the beginning of this year.

In accordance with Article 79 CISG, the party claiming hardship can suspend performance during the period for which hardship exists without being liable for a failure of performance. Although sometimes suggested by the legal doctrine, the CISG does not require the parties to renegotiate the terms of the contract. Courts and arbitral tribunals may also not modify or terminate the contract. However, although Article 79 CISG does not provide for unilateral contract adaptation, the party claiming hardship may seek to encourage renegotiation by signaling its intention to suspend performance if no adaption is reached.

4. Clausula rebus sic stantibus under the Swiss CO

Under the Swiss CO and in contrast to the CISG, the doctrine of clausula rebus sic stantibus allows courts or arbitral tribunals to adapt a contract if fundamental circumstances change after the contract has been concluded. As a last resort, the doctrine even allows a contract to be terminated, if this is in accordance with the presumed intention of the parties.

To apply the doctrine of clausula rebus sic stantibus the Swiss Federal Supreme Court requires that the change of circumstances is (1) beyond control of the obligor, (2) unforeseeable and (3) leads to a fundamental alteration of the equilibrium of the contract. Again, whether these requirements are fulfilled is to be carefully assessed based on the specific circumstances and the contract in question.

Proactive Contract Management Is Key

Given the continued uncertainty in global trade policy, companies should review their existing contracts, especially those involving cross-border transactions and US imports. We recommend considering the following for future contracts:

• clarifying the allocation of tariff-related risks in contracts and the possibility to adjust the contract price (particularly considering the new US tariffs that have been suspended until July);

• including tailored hardship clauses;

• considering the legal framework (CISG, Swiss CO, etc.) applicable to each transaction.

Taking these steps can help mitigate legal and financial risks and provide greater flexibility in the face of future tariff changes.

For questions about contract adaptation, dispute resolution, or international trade law, our team at Wartmann Merker is happy to assist.