China 29 September 2000 Nantong Intermediate People's Court [District Court], Jiangxi Province (Taihai Co., Ltd Japan v. Jiangxi Sainty International Group, Ltd Textile Import & Export Nantong Company) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000929c2.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: (2000) TZJCZ No. 134
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Japan (plaintiff)
BUYER'S COUNTRY: People's Republic of China (defendant)
GOODS INVOLVED: Agricultural excavators
APPLICATION OF CISG: The sole reference to the CISG is in the penultimate paragraph of the opinion which reads:
"In accordance with Article 4 and Article 88(1) of the General Principles of Civil Law of the PRC, Article 16 of the Law on Economic Contracts with a Foreign Element of the PRC, Article 37 and Article 67 of the Law on Contract of the PRC and Article 30 of the United Nations Convention on Contracts for the International Sale of Goods, this Court renders the following judgment."
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Chinese): Click here for pdf of Chinese text; see also CISG-China Case [IPC/12]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=66>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
Translation [*] by Wenwen LIANG [**]
This Court admitted the case involving a sales contract dispute between the Plaintiff (Japan) Taiping Co. [Seller] and the Defendant Nantong Clothing Import and Export Company of Jiangxi Shuntian International Group ("Shuntian Co."). A court panel was established. Open hearings were held on 15 August, 23 August, 29 September 2000. The authorized counsel Song Lianpu and Sun Wei for the [Seller], the legal representative Ling Fuyan and the authorized counsel Li Weiping for the Defendant Shuntian Co. attended the hearings. The case is now closed.
The [Seller] pleaded as follows:
In July 1999, China Shanghai Yintuo Enterprise Development Co. Ltd [Buyer] ordered six Sumitomo excavators from the [Seller], required delivery of four of them for the first time, stated that a letter of credit had been opened. The [Seller] dispatched four excavators to Nantong port from Yokohama port. But the [Seller] could not get payment on the letter of credit issued by the Nantong Branch of the Bank of China which the [Seller] received on 4 August 1999. Since the four excavators were already delivered for shipping by the [Seller], [Buyer] found Shuntian Co. as agent [Shuntian Co. is hereinafter referred to as "Buyer's Agent"] and signed a confirmation letter of purchase with the [Seller] on 18 August 1999, stipulating that the [Buyer's Agent] purchased four excavators from the [Seller] at the price of Japanese yen [JPY] 4,750,000, totaling JPY 19,000,000, equal to renminbi [RMB] 1,476, 984, payment by irrevocable letter of credit with payment 90 days after sight. To reduce the cost of the warehouse fee, the [Seller] delivered the bill of lading to the [Buyer's Agent] via the [Buyer].
On 1 November 1999, the [Seller] received the carrier bill issued by the Sino-Japan International Transport Company, indicating that the Nantong Customs Declaration Co., Ltd. ("Declaration Co.") went through customs declaration and took delivery of the goods on 6 September. On 11 November 1999, the [Seller] received the second copy of the original bill of lading from the Nantong Branch of the Bank of China and was informed that the applicant, i.e., the [Buyer's Agent], refused payment, because another copy of the original bill of lading was missing, a copy which should have been posted by the [Seller] to the [Buyer's Agent]. The [Seller] believes that the reason that the goods were detained by the customs is illegal trading in the tariff exemption certificate and it has nothing to do with the [Seller] or [Buyer's Agent]. The [Buyer's Agent] has legally completed customs clearance through the Declaration Co. and has the goods in the warehouse of its own clothing factory. The [Buyer's Agent] has in fact completed the sales relationship with the [Seller] and is thus obliged to make payment. Thus the [Seller] requests the Court to order the [Buyer's Agent] to:
|1.||Pay the price of goods of JPY 1,900,000, equal to RMB 1,476,984;
|2.||Pay the interest loss incurred from 6 December 1999 to 30 June 2000 totaling RMB
|3.||Bear the litigation fee.|
The [Buyer's Agent] did not submit any written presentation but pleaded during the
hearing as follows:
The [Seller] did not deliver the bill of lading or the goods. The staff of the [Buyer's Agent] Zhang Yu went to the port to prevent the illegal taking of the goods by [Buyer] and Beijing Huateng Agricultural and Husbandry Co., Ltd. ("Huateng Co.") and to reduce the risk of the letter of credit. It is reasonable to suspect the [Seller] and the third party stakeholder colluded to cheat foreign currency. The [Seller]'s abuse of the right to claim caused this case and all the responsibilities should be borne by the [Seller]. The claim of the [Seller] that the [Buyer's Agent] shall perform the obligation of payment has no factual or legal basis.
In July 1999, [Buyer] ordered Sumitomo excavators from the [Seller], stipulating that four excavators be shipped first and imported through a Nantong company as agent. The [Seller] delivered four excavators for shipping in early August but could not get payment on the letter of credit which the [Seller] received. To open another letter of credit, [Buyer] decided to look for another import agent and got [Buyer's Agent], recommended by Wang Jianbu of Nantong Xinpu Group Co., Ltd. [Seller] signed confirmation letter of purchase No. Nt-99188 with the [Buyer's Agent] The terms were:
|-||Date: 18 August 1999;|
|-||Goods; Sumitomo excavators; Amount: 4;|
|-||Price: CIF Nantong, unit price: JPY 4,750,000, total: 19,000,000;|
|-||Payment: 100%100 confirmed irrevocable letter of credit with payment 90 days after sight;|
|-||Shipment period: Before 31 August 1999;|
|-||Destination: Nantong China from Yokohama.|
The confirmation letter also covered insurance and documentation, stipulating that the originals to be sent to the [Buyer] are the bill of lading, invoice, packing bill, quality certificate, certificate of origin and telegram.
The [Seller] faxed the signed and sealed confirmation letter of purchase on 20 August 1999 to the [Buyer's Agent], but did not receive any confirmation letter of purchase signed and sealed by [Buyer's Agent]. The legal representative of [Buyer's Agent] signed the confirmation letter of purchase and with it applied for a letter of credit with the Nantong Branch of the Bank of China. In [Buyer's Agent]'s application for opening a letter of credit with the Nantong Branch of the Bank of China, it was expressly stated that a certificate of beneficiary is needed and the beneficiary will mail through DHL all the originals of the bill of lading, signed commercial invoice, and packing bill.
On 30 August 1999, the Nantong Branch of the Bank of China issued irrevocable letter of credit no. LC95G0074/99 with [Buyer's Agent] as applicant and [Seller] as beneficiary, due date and place: 21 September 1999, Japan, amount: JPY 1,900,000, 90 days after sight draft, payer of the draft is the Nantong Branch of the Bank of China; partial transfer or transfer is prohibited, destination is Nantong, China; the latest date of shipping is 990831, the goods are four Sumitomo excavators, at the price of JPY 4,750,000, CIF Nantong China. The documents required in the letter of credit are:
|1.||A signed invoice in triplicate, specifying the number of the contract and letter of credit;|
|2.||A second bill of lading clean on board in triplicate, to order of shipper and to order, expressing freight prepaid and notice to applicant;|
|3.||Insurance policy in duplicate 110% of the invoice amount;|
|4.||Packing bill in triplicate;|
|5.||Fax from the beneficiary to the applicant regarding packing and shipping details within 48 hours of shipping;|
|6.||Beneficiary certificate submitted to the issuing bank by the beneficiary;|
|7.||A set of originals of the first bill of lading in triplicate, signed commercial invoice, and packing bill, sent directly to the applicant through DHL, and the mail receipt.|
The documents should be submitted within 21 days after packing and within the validity of the letter of credit, with no further confirmation order. On 27 August 1999, [Buyer's Agent] filed foreign currency payment for import with Jiangxi Branch of China State Administration of Foreign Exchange. On 1 September 1999, [Seller] submitted to Nantong Branch of Bank of China a mail receipt and a beneficiary certificate, specifying that regarding the letter of credit LC95G0074/99 of JPY 190,000,000, we hereby certify that we have sent directly through DHL to [Buyer's Agent] the set of originals of originals of the first bill of lading in triplicate, signed commercial invoice, and packing bill. In support of this fact are two copies of the confirmation letter of purchase, application of letter of credit for import, letter of credit, filing form of foreign currency payment for import, provided by the [Seller], letter of credit, mail receipt, testimony of witness Wang Jianbu, provided by the [Buyer's Agent], beneficiary certificate obtained by the Court, and parties' statements.
On 13 August 1999, Sino-Japan International Transport Company issued in Tokyo a seaway bill of lading no/ YNT-02, specifying that:
|-||The consigner is [Seller]; consignee to order;|
|-||The notify party is [Buyer's Agent];|
|-||The no. of the letter of credit is LC95G0074/99;|
|-||Place of consignment: Yokohama Japan;|
|-||Name of ship: World Trader;|
|-||Shipping port: Yokohama Japan;|
|-||Discharge port: Nantong China;|
|-||Place of delivery: Nantong;|
|-||Four containers, No. serial no. and marks;|
|-||Goods specification: Sumitomo excavators:|
|-||CIF; freight paid;|
|-||Number of bills of lading: Three;|
|-||Shipping date: 13 August 1999.|
On 6 August 1999, AIU Insurance Company issued a seaway insurance policy in Tokyo, Japan, with [Seller] as applicant. On 25 August 1999, [Seller] issued invoices with [Buyer's Agent] as buyer and packing bill.
In support of the facts above are the original and copy of bill of lading, invoice, packing bill, seaway insurance policy submitted by the [Seller], copy of bill of lading submitted by the [Buyer's Agent], as well as the parties' statements.
It is found that on 23 August 1999, Party A [Buyer's Agent] and Party B Huateng Co. and [Buyer] signed a supplement import agency contact, stipulating that:
|-||Huateng Co. and [Buyer] authorize [Buyer's Agent] to import four Japanese
excavators at JPY 4,750,000 per unit, totaling JPY 1,900,000,
|-||Destination of goods is Nantong Jiangxi.
|-||Party B to provide 30% of the total price as a guarantee for opening a letter of credit,
approximately RMB 400,000, the remaining amount and other expenses shall be paid
within one month after taking delivery;
|-||Party B can only take two excavators before paying the total price and the other two
excavators shall be under the control of Party A. Party A is entitled to sell the goods
and retains the right to claim for other loss against Party B if Party B fails to make full
payment after one month.
|-||Party B shall bear the responsibility for the quality of goods, shipping date and customs
clearance and Party A shall bear no responsibility.
|-||Party A shall be responsible for opening irrevocable letter of credit 90 days after sight,
shipping period to the end of August 1999, immediately after receiving the money as
guarantee from Party B.
|-||Party B shall provide the agency fee, 0.5% of the total price, to Party A voluntarily and bear all the expenses of import and opening letter of credit.|
All three parties signed and sealed the contract. On 10 August 1999, [Seller] and Huateng Co. signed an import contract stipulating that Huateng Co. import from [Seller] four Sumitomo excavators at JPY 5,000,000 per unit, totaling JPY 2,000,000, destination Nantong Jiangxi; Huateng Co. provide 30% of the price of goods as guarantee, approximately RMB 400,000, to support application for irrevocable letter of credit 90 days after sight. Both parties signed and sealed the contract.
In support of the facts above are the import agency contract, import contract submitted by the [Buyer's Agent], testimony of Wang Jianbu and the parties' statements.
It is also found that at the end August 1999, [Seller] did not send through DHL directly to [Buyer's Agent] but gave [Buyer] via other parties the originals of bills of lading and other documents. In late August 1999, Wang Jianbu got the import agency contract among [Buyer's Agent], [Buyer] and Huateng Co., packing bill, invoice, Huateng Co.'s import tax exemption form and a copy of the bill of lading, through [Buyer] and Huateng Co., went through customs clearance through Declaration Co. Later, [Buyer's Agent] gave the Declaration Co. a blank delegation letter of customs declaration of imports with the seal of [Buyer's Agent], for customs clearance of the four excavators as import agent.
The Declaration Co. accepted a delegation letter of importing agricultural excavators from Huateng Co. and went through customs inspection of the four excavators on behalf of Huateng Co. at Nantong customs on 3 September 1999. On the same day Huateng sent a letter to Nantong customs informing that Huateng Co.'s staff Qian Yaokang (actually staff with [Buyer]) shall deal with the customs declaration procedures at Nantong customs. Nantong customs let the goods through on 6 September after inspection. The inspection record specifies that the operator and consignee is Huateng Co., two small agricultural excavators, JPY 5,000,000 per unit, total JPY 20,000,000.
On the same day, Wang Jianbu got from Qian Yaokang of [Buyer] an original bill of lading endorsed by [Seller] and submitted to the Declaration Co., with payment of other fees, got bill of lading issued by Jiangxi Nantong Shipping Agency Co. from the Declaration Co.. Wang Jianbu, giving the bill of lading to Qian Yaokang, went to take delivery with Qian Yaokang from Nantong Port Container Co.. The consignee on the bill of lading is the Declaration Co.. The bill of lading specifies that regarding the following goods procedures have been completed and fees paid, thus ready to be delivered to consignee; bill of lading numbered: YNT02, mark, container number, goods number, container number all consistent with the original bill of lading. The consignment record of the container company specifies that the consignee is the Declaration Co., the seal of the consignee is "China International Transport Jiangxi Group Nantong Co. Import Business", while all the others are consistent with the bill of lading. Qian Yaokang and others took delivery and unpacked the container at the port and hired two vehicles for transport.
When the customs declaration broker Zhang Yu of Shuntian arrived at the port, the containers were opened but the fee of certificate was not paid. Zhang Yu asked that two excavators be sent to Haosheng Clothing Co. (Nantong). Zhang Yu signed in the consignment record form and wrote down the number of the transport vehicle, when the goods left the port. Later, four excavators were placed temporarily in Haosheng Clothing Co. (Nantong). On 6 September1999, the Declaration Co. sealed the bill of lading noting that "goods were taken on 6 September." On 10 September 1999, the Declaration Co. returned the blank delegation letter of customs declaration of imports with the seal of [Buyer's Agent], not used during customs declaration. On 9 November1999, Sino Japan International Transport Co. faxed [Seller] that:
Regarding the four Sumitomo excavators of your company, the manager of your declaration agent in Nantong Mr. Dai Jianhua informed us that the agent delivered the goods to Wang Jianbu on 6 September 1999 on receipt of the original bill of lading signed by your company. This bill of lading was kept in my company and the delivery of goods was completed.
On 7 September and 8 October 1999, the four excavators in this case and the RMB 400,000 as guarantee for opening letter of credit were detained by Nantong customs on suspicion of trafficking.
In support of the facts above are a delegation letter of customs declaration of imports, bill of lading, bill of lading issued by Jiangxi Nanatong Shipping Agency Co., delivery record, fax to [Seller] from Sino Japan International Transport Co., submitted by the [Seller], delegation letter of Huateng Co., seaway bill (copy) of China International Transport Jiangxi Group Co., China International Transport Japan's notice of telex release, notice of arrival of Jiangxi Nantong Shipping Agency Co., delivery record, import customs declaration form, submitted by the [Buyer's Agent], testimony of witnesses Jin Guorui, Dai Jianhua, Cui Jingxiang, Wang Jianbu and Zhang Yu, inspection record of imports by the customs, goods inspection records by the customs, customs declaration form of imports, document of detaining the guarantee of RMB 400,000, found by this Court.
Later, the [Seller] applied to the bank for negotiation. The Nantong Branch of the Bank of China wrote to the Japanese bank on 11 November 1999 that:
The payment notice of the letter of credit LC95G0074/99 at JPY 1,900,000 shall be returned, as the applicant refused to accept inconsistent documents, and we hereby return to you through DHL the above documents (including the second original bill of lading) and close the transaction. Furthermore we have received from you no information on another original copy of the bill of lading and information on the goods.
The [Seller] resorted to this Court on 30 June 2000 after the bank's refusal of payment on the letter of credit and failure to recover the price of goods from the [Buyer's Agent].
In support of facts above, are two telexes with the bank submitted by the [Seller], an opinion on the bill of lading of [Buyer's Agent], a letter to the Japanese bank from the Nantong Branch of the Bank of China on inconsistencies of the letter of credit, the refusal of payment letter to the bank by [Buyer's Agent], found by this Court and the parties' statements.
This Court holds that the international sales contract relationship should be presumed to be valid and effective based on the confirmation letter of purchase contract between the [Seller] and the [Buyer's Agent], as the [Buyer's Agent] performed the obligation to apply for a letter of credit despite the fact that the [Seller] did not receive a confirmation signed by the [Buyer's Agent]. The confirmation letter of purchase contract, as it contains nothing violating the law and reflects the true intention of the parties, should be held valid and effective, and should have been performed by the parties in accordance with the principle of good faith.
The [Buyer's Agent] had applied to a bank to open a letter of credit. Consistency between letter of credit and bill of lading is essential to payment. The letter of credit provides that the beneficiary shall send to [Buyer's Agent] through DHL an original bill of lading, corresponding invoice, and packing bill, and submit the mail receipt to the bank. The [Seller] did not perform the obligation of mailing documents to the [Buyer's Agent] as specified in the letter of credit and confirmation letter of purchase, but gave the original bill of lading to another company which went through customs clearance and exchange for bill of taking delivery with the original bill of lading endorsed by [Seller] from the Declaration Co. as agent of the shipper, and took delivery of goods.
The bill of lading is to order which means that the holder gets ownership of the goods with no need of endorsement once the [Seller] signed on the back. According to the applicable law of customs, the consignee of imports is the customs declarant which is this case is Huateng Co. The failure of the [Seller] to deliver the bill of lading to the [Buyer's Agent] caused the [Buyer's Agent] to lose the right to take delivery. The submission of the beneficiary certificate and an altered mail receipt to the bank forged the fact that the [Seller] had performed the obligation to mail through DHL to the [Buyer's Agent] originals of bill of lading and other documents and thus to obtain payment on the letter of credit. This is commercial fraud and against the legal principles of equality and mutual benefit and good faith.
Pursuant to the principle of rights in proportion to obligations, the claim of the [Seller] against the [Buyer's Agent] for the price has no ground of performing the obligation of delivery of goods, as the [Seller] did not deliver to the [Buyer's Agent] the proof of ownership to the goods and [Buyer's Agent] actually did not take delivery of the goods. The [Seller]'s argument that the signature of an employee of the [Buyer's Agent] Shuntian Zhang Yu in the delivery record is proof that the [Buyer's Agent] received the goods, is not sound, as the signature is not sufficient to prove that [Seller] has passed ownership to the goods to [Buyer's Agent] through the shipper.
Zhang Yu's asked to keep two excavators in Haosheng Clothing Co. (Nantong) in order to prevent payment on the letter of credit and protect his own company, when Zhang Yu did not receive the original bill of lading and bill of taking delivery and other companies had taken delivery and unpacked the container, actually controlling the goods without making payment. Thus the argument of the [Seller] is not sound in fact or in law and not admitted by this Court.
In accordance with Article 4 and Article 88 (1) of the General Principles of Civil Law of the PRC, Article 16 of the Law on Economic Contracts with a Foreign Element of the PRC, Article 37 and Article 67 of the Law on Contract of the PRC and Article 30 of United Nations Convention on Contracts for the International Sale of Goods, this Court renders the following judgment.
|-||The claim of the [Seller] [Seller] is rejected;|
|-||The litigation fee of RMB 19,402 shall be borne by the [Seller].|
Appeal is available within 30 days after receipt of this judgment to [Seller] and 15 days to [Buyer's Agent]. Appeal in triplicate shall be made through this Court to the Jiangxi High People's Court, together with deposit of litigation fee of RMB 19,402 (bank account of Jiangxi High People's Court: Jiangxi Road Office, Nanjing, Agricultural Bank of China, Account no. 033290801083832).
Chief Judge: Xu Wenquan
Acting Judge: Zhang Ji
Acting Judge: Wang Yan
29 September 2000
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff (Japan) Taiping Co. is referred to as [Seller], Shanghai Yintuo Enterprise Development Co. Ltd, of the People's Republic of China is referred to as [Buyer], and Defendant Nantong Clothing Import and Export Company of Jiangxi Shuntian International Group is referred to as [Shuntian Co. or Buyer's Agent].
** Wenwen LIANG, Ph.D. candidate, University of Manchester, UK; LL.M. Wuhan University, China.Go to Case Table of Contents