[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]
331. The CISG applies to contracts for the sale of goods between parties having their places of business in different States. More specifically, according to the two main rules of applicability in Article 1(1), the Convention applies (a) when these States are both CISG 'Contracting States' and (b) when the rules of private international law lead to the application of the law of a (single) Contracting State. This latter rule proved controversial and led to the declaration set forth in Article 95 whereby a State may declare upon ratification that it will not be bound by subparagraph (1)(b) of Article 1. China, the United States and Singapore have ratified the CISG subject to this reservation.
If, for example, a seller in the United States sells to a buyer in State X, a non-Contracting State, Article 95 means that the US courts are not bound to apply the Convention rules even if the relevant rules of private international law lead to the application of US law (i.e. the law of a CISG Contracting State). In this situation, if the relevant conflict-of-Iaws rule points to the seller's law, an American court would apply domestic American law, i.e. the Uniform Commercial Code as enacted in the American state concerned.
Also courts in Contracting States which have not made an Article 95 declaration will sometimes need to consider the effect of that declaration when deciding cases involving a party who resides in an Article 95 declaration State. Courts in a Contracting State which has not made an Article 95 declaration (e.g. Germany) should not apply Article 1(1)(b) in respect of any Contracting State that has made an Article 95 declaration (e.g. USA) when the conflict of law rules of the forum point to the law of the declaring State.
Given the number of variables (parties' places of business, situs of forum court, applicable private international law), the number of possible permutations involving Article 1(1)(b) and the Article 95 reservation is large.