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CISG CASE PRESENTATION

China 4 February 2002 CIETAC Arbitration proceeding (Steel bar case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020204c2.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20020204 (4 February 2002)

JURISDICTION: Arbitration ; China

TRIBUNAL: China International Economic and Trade Arbitration Commission [CIETAC] (PRC)

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2002/17

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Singapore (respondent)

BUYER'S COUNTRY: People's Republic of China (claimant)

GOODS INVOLVED: Steel bar


UNCITRAL case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade Arbitration
Commission (CIETAC) 4 February 2002 (Steel bar case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/112],
CLOUT abstract no. 1101

Reproduced with permission of UNCITRAL

Abstract prepared by Yun Wang

A buyer from China and a seller from Singapore entered into a contract for the purchase of screw-thread steel. According to the contract, the bulk of the payment for the goods would be made with a letter of credit (L/C) and a small portion of the money would be paid by direct transfer into an account designated by the seller. The seller would start loading the ship once the buyer had transferred the money. Following the signing of the contract, a L/C was timely issued, but the money transfer by the buyer to the seller was, for various reasons, delayed. At the same time, the seller made repeated requests to amend the L/C to extend the time for the loading of the ship and the term of validity of the L/C itself. On two occasions the buyer agreed to amend the L/C, but on the third occasion the buyer wanted to delay the shipping until further notice. Afterwards, the buyer requested replacement of the screw-thread steel with wire rod, and refused to take delivery of the goods on the pretext that no import licence was obtained. The seller had to resell the goods to another buyer. The buyer claimed that the seller had been slow in booking a ship to deliver the goods, while the seller claimed that the buyer was slow in making payments and in receiving the goods. A dispute then arose between the parties and the buyer initiated arbitration proceedings, requesting the Arbitration Tribunal to order the seller to refund part of the money paid by the buyer, with interest. The seller made a counter request for an order for the buyer to pay the difference between the contracted price and that in the resale contract, with interest.

The parties' places of business were in two States Parties to the CISG. The seller made clear in its statement that the Convention was applicable; the buyer did not make any explicit objection, and invoked the Convention in its statement. The Tribunal held therefore that the dispute should be governed by the Convention.

The Tribunal held that the buyer should not have delayed the bank transfer, and the seller for this reason had the right to delay the delivery. The Tribunal further found that the time taken by the seller to book a ship was reasonable, and that the delay had been caused by the buyer. The Tribunal found that the buyer's request for the replacement of screw-thread steel by wire rod constituted using an inappropriate reason to unilaterally cancel the contract. As for the buyer's inability to obtain an import licence; according to the Tribunal, the buyer had failed to notify the seller in a timely manner, and therefore it did not have the right to use the clause of force majeure in the contract to make counter arguments to excuse its slowness in taking delivery of the goods (Article 79 CISG). On the contrary, the fact that the buyer had used this inappropriate reason to unilaterally cancel the contract was a fundamental breach of contract (Article 25 CISG). The buyer's behaviour was the reason for the seller's failure to deliver the goods. In view of this, the Tribunal rejected all the requests made by the buyer, and ruled that the buyer should compensate the seller for damages caused by the difference in the price of the goods resold (Article 75 CISG). However, the Tribunal found that the seller had not resold the goods within a reasonable time, and therefore did not support its request for the payment of interest on the damages due to the difference in price.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 75 ; 77 ; 79 [Also cited: Articles 52 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectations, etc.];

75A1 ; 75B1 [Damages established by substitute transaction after avoidance: resale by aggrieved seller; Relationship between avoidance and substitute transaction: reasonable substitute transaction];

77A [Obligation to take reasonable measures to mitigate damages];

79B ; 79E [Impediments excusing party from damages; Notice of impediment]

Descriptors: Fundamental breach ; Cover transactions ; Mitigation of loss ; Exemptions or impediments

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Joint translation project:
New York University School of Law
and Pace University School of Law


 

China International Economic & Trade Arbitration Commission
CIETAC (PRC) Arbitration Award

Steel case (4 February 2002)

Translation [*] by Ma Mingfei [**]

Edited by Cheng Shu [***]

-  Particulars of the proceeding
-  Facts
-  Position of the parties
-  Opinion of the Arbitration Tribunal
-  Award

PARTICULARS OF THE PROCEEDING

The China International Economic and Trade and Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case (Case number: R__) according to:

   -    The arbitration clause in Sales Contract No. DCGA99101 signed by Claimant [Buyer], Shantou ___ Co., and Respondent [Seller], General ___ Trading Pte. Ltd., on 2 February 1999; and
 
   -    The written arbitration application submitted by the [Buyer] on 1 December 2000.

This case is qualified to use the Arbitration Rules of the Arbitration Commission (hereafter, the "Arbitration Rules") which became effective on 1 October 2000.

The [Buyer] appointed Mr. Zhou __ as arbitrator. The [Seller] appointed Mr. Jin __ as arbitrator. The Chairman appointed Mr. Cao as the presiding arbitrator according to Article 24 of the Arbitration Rules. The above three arbitrators formed the Arbitration Tribunal on 5 April 2001 to hear this case.

The Respondent [Seller] submitted a counterclaim on 9 April 2001 and paid the arbitration fees in advance according to the Arbitration Rules. The Arbitration Commission accepted the counterclaim.

On 16 July 2001, the Arbitration Tribunal opened the court session in Beijing. Both parties sent arbitration agents to attend the session. The parties made oral statements and answered the Tribunal's questions. After the court session, both parties submitted supplementary statements and evidence.

This Arbitration Tribunal asked the Secretary-General of the Commission to extend the time to render the Arbitral Award. In accordance with this request and the Arbitration Rules, the Secretary-General extended the time period until 5 February 2002.

This case has been concluded. The Arbitration Tribunal hands down this award by a majority of the arbitrators and in accordance with article 54 of the Arbitration Rules.

The following are the facts, the Tribunal's opinion and the award.

FACTS

On 2 February 1999, the [Buyer] and the [Seller] signed Contract DCGA99101 (hereafter, the "Contract") with the following terms:

   -    Goods: 7,600 tons deformed steel bars, origin: Russia;
   -    Price: US $185 per ton;
   -    Transport: CNF Shantou;
   -    Payment: US $175 by L/C (The L/C should be issued before 11 February 1999) and US $10 per ton remitted to the account appointed by Seller;
   -    Shipment: The [Seller] should load all steel before 5 March 1999;
   -    Other provisions: The expiry date of the L/C shall 26 March 1999.

On 5 February 1999, the [Seller] faxed to the [Buyer] and urged the [Buyer] to remit the US $10 per ton, total US $80,000 to the account appointed by the [Seller].

On 10 February 1999, the opening bank issued the L/C.

   -    Item 44C of the L/C stipulated that the [Seller] should ship the goods before 5 March 1999;
   -    Item 31D of the L/C stipulated that the expiry date of the L/C is 26 March 1999 in Singapore.

On 12 February 1999, the [Buyer] received the invoice from the [Seller].

On 22 February 1999, the [Seller] faxed to the [Buyer] that it had not received the payment of US $80,000 and advised that immediate shipment is not possible. In its fax, the [Seller] urged the [Buyer] to remit the $80,000 payment and asked for three modifications to the L/C, modifications to the beneficiary in Item 59. to the loading port in Item 44A, and to the name of manufacturer in Item 45A.

On 22 February 1999, the [Buyer] stated by fax that, according to the contract, the US $10 per ton should be paid to the [Seller] within seven working days after the contract is signed. The [Buyer] received the original invoice from the [Seller] on 12 February 1999. However, due to the Spring Festival, the bank did not work until 23 February 1999. Therefore, the [Buyer] was not able to remit the US $80,000 payment aforesaid. The [Buyer] advised that it would remit "this week".

On 23 February 1999, in accordance with the request of the [Seller], the [Buyer] asked the opening bank to modify the L/C. There were modifications requested by the [Buyer] (the name of beneficiary and manufacturer) and modifications requested by the [Seller]:

  Former New
Loading port Any port of Russia Far East Vladivostok or Nakhodka
Specifications of goods If diameter is 12 to 25 millimeter, at least five specifications; if diameter is 25 millimeter, maximum amount is 1,000 tons. 12 millimeter - 1,800 tons; 14 millimeter - 1,600 tons; 16 millimeter - 1,800 tons; 22 millimeter - 1,800 tons; 25 millimeter - 1,000 tons.
Latest shipping date 5 March 1999 10 March 1999
Period of validity of L/C 26 March 1999 1 April 1999

On 25 February 1999, the [Seller] faxed to the [Buyer] thanking the [Buyer] for the fax on the modification of the L/C, and urged the [Buyer] to fax the remittance receipt of US $80,000 to the [Seller].

On 25 February 1999, the [Seller] asked the [Buyer] to modify the L/C again, including the modification of: Item 44B on the description of the port of destination; Item 46A(5) on the description of the issuing institute of "Certificate of Chinese Origin", and to cancel Item 46A(7).

On 26 February 1999, the [Buyer] faxed to the [Seller] that payment of US $80,000 will be remitted that day and that the remittance receipt will be faxed to the [Seller] in the afternoon. The [Buyer] agreed to modify the L/C; and asked the [Seller] to be sure to arrange for the carrying ship as soon as possible.

On 2 March 1999, the [Seller] faxed to the [Buyer] and informed that it had not received the payment of US $80,000 and asked the [Buyer] to fax the remittance receipt in order to inquire about it.

On 3 March 1999, the [Seller] received the information from the receiving bank that the payment of US $80,000 has been transferred. After deducting the bank fees, the balance was US $79,995.

On 5 March 1999, the [Seller] informed the [Buyer] of the name of the carrying ship and the berthing time of the port of departure (10 to 14 March), and asked the [Buyer] to modify the shipping time (before 16 March 1999) on the L/C.

On 8 March 1999, without any response from the [Buyer], the [Seller] faxed to the [Buyer] and pointed out that according to the contact, the [Buyer] should have paid the US $80,000 before 11 February, but this payment was not remitted to the [Seller] until 2 March leading to the delay of the sailing date. As per the fax to the [Buyer] on 5 March, the carrying ship has been found, please postpone the shipping period and the period of validity of the L/C.

In a telephone call on 10 March 1999, the [Buyer] asked the [Seller] to postpone the shipping period for a period of time. The [Seller] faxed to the [Buyer] on that day and stated that "... it is to our surprise to hear from you today that you wish to delay the shipment to a much later date to be advised," stating that, of course the [Seller] will try its best to persuade its supplier to agree to your request, but if the [Seller]'s supplier does not cooperate, the [Seller] has no choice but to require the [Buyer] to take full responsibility for the [Seller]'s loss and pay for compensation based on the contract.

On 30 March 1999, the [Seller] asked the [Buyer] to modify the L/C, including:

   -    Postponement of the period of validity of the L/C to 6 May 1999;
   -    Setting the shipping time as before 15 April;
   -    Increasing the total amount of goods from 7,600 tons to 8,000 tons; and
   -    Setting forth the specification of the goods more concretely.

On 30 March 1999, the [Buyer] faxed to the [Seller] and stated that "... because the match ratio of deformed steel bar provided by your Co. is very different from the former and less than 8,000 tons, now our Co. asked to change deformed steel bar 7,600 (8,000) tons to rod bundle 7,600 (8,000) tons ..." [Translator's note: See later reference to this fax in the Arbitral Tribunal's opinion accompanied by the statement of the Tribunal that "it is difficult to understand" what this means.]

On 9 April 1999, the [Seller] faxed to the [Buyer] and stated that the goods have been prepared for a long time, the goods should be dispatched to the [Buyer] at the latest before 14 April 1999 and, if that cannot be done, the [Seller] has to sell the goods to other buyers and claim as compensation the difference between the price in the contract and the price of resale. In response to import license difficulties alleged by the [Buyer] over the telephone phone (see comments on that subject below), the [Seller] pointed out that if the [Buyer] is not able to receive the import license before 14 April 1999, the [Buyer] should resell the goods to other buyers in order to carry out this deal.

On 12 April 1999, the [Seller] faxed to the [Buyer] again and restated the points expressed in the fax of 9 April.

Both parties have disputes as to their respective responsibilities

POSITION OF THE PARTIES

[Buyer]'s position

The [Buyer] claimed that the important fact of this case is that after the contract was signed, the [Buyer] issued the L/C in good time, and that the amount of the L/C accounted for 94.6% of the total payment.

   -    Because of Chinese foreign exchange controls, for the [Buyer] to pay US $76,000 via telegraphic transfer according to the contract, it is required that the [Seller] provide an original invoice in order for [Buyer] to purchase the foreign exchange.
 
   -    After the [Buyer] informed the [Seller] of this, the [Seller] sent the original invoice to the [Buyer], but this was delayed until 12 February 1999. That is a Friday, the next day is Saturday and the day after that is Sunday. The following Monday is 15 February. Because of the Chinese Spring Festival, the bank did not resume work until 22 February. On 22 February, the [Buyer] immediately contacted the bank and remitted US $80,000 to the [Seller] on Thursday.

Although the [Buyer] did not remit the US $76,000 within seven working days, the [Buyer] did not delay any time in remitting the US $76,000 due to the Chinese foreign exchange controls known by the [Buyer] and the [Seller].

On 22 February 1999, the [Seller] asked the [Buyer] to extend the shipment date stipulated in the L/C from 5 March 1999 to 10 March 1999, under the condition that the [Seller] knew clearly that the [Buyer] had not remitted the US $76,000 according to the contract. The period of validity of L/C was postponed from 26 March 1999 to 1 April 1999. The behavior of the [Seller] indicated clearly that under the premise of not having received the US $76,000, the [Seller] nevertheless accepted that it would ship and deliver before 10 March 1999.

On 24 March 1999, the [Buyer] amended the L/C. But the [Seller] had not actively searched for a loading ship in a timely manner. Although the [Buyer] had urged [Seller] to arrange for the shipment two times on 26 February and 1 March, the [Seller] still refused to find the loading ship. It was not until 3 March, that the [Seller] began to look for the loading ship after the [Seller] received the US $80,000 via telegraphic transfer from the [Buyer]. On 5 March, the [Seller] found a loading ship, but this ship was not able to ship within the shipment date stipulate in the L/C.

From the process aforesaid, it is not difficult to see that the [Seller] did not fulfill the obligation of supplier to actively arrange for the loading ship in good faith. The [Seller] asked the [Buyer] to amend the shipment date in the L/C under the condition that the [Seller] did not receive the payment of US $76,000, it is actually that the [Seller] made the acceptance that the shipment would be before 10 March under the condition of without receiving the payment of US $76,000. Due to this acceptance, the [Seller] has abandoned the right of defense about delivery after receiving the payment; the [Seller] was still amenable to shipment on 10 March 1999, although the [Seller] had not received the payment of US $76,000 which is authorized by the United Nations Convention on Contracts for the International Sales of Goods (CISG).

It is a pity that the [Seller] did not fulfill its acceptance to deliver on the shipment date stipulated on the L/C after amendment, although the [Buyer] urged the [Seller] to arrange for the shipment as quickly as possible by written form twice. Although the [Buyer] informed the [Seller] that the payment of US $76,000 has been remitted and faxed the telegraphic remittance receipt, the [Seller] did not do anything. It was not until 3 March that the [Seller] began contact with the ship after the [Seller] received the payment. But at that time there was no suitable ship available for loading before 10 March; the ship which the [Seller] contacted was only able to arrive at the port between 10 March and 14 March.

The [Seller] then put forward to amend the L/C again. But at that time, the Chinese government had noted that the <Specific imports of goods registration certificate> held by the [Buyer] would expire due to invalidity on 31 March 1999. Considering the voyage from the Russian port to the Chinese Shantou Port and the fact that the ship found by the [Seller] was not suitable to anchor at the Shantou East Seaport, it was not possible to extend the validity of the <Specific imports of goods registration certificate> held by the [Buyer], so after explaining the circumstance aforesaid, the [Buyer] refused the application for amendment to the L/C from the [Seller] and revoked the contract.

In fact, in the fax of 30 March 1999, the [Seller] asked to amend the L/C again with the big alteration of supplying amount, specification and match ratio. It is not difficult to see that the [Seller] had not prepared the goods at all before 30 March 1999, because the goods supplied by the [Seller] on 30 March are different from the goods the [Seller] contracted to provide to the [Buyer] in amount, specification and match ratio.

After this, the [Seller] faxed to the [Buyer] many times and put forward to amend L/C again. But the [Buyer] refused all of these requests, because it was not possible for the [Buyer] to obtain the import license. As the contract has been revoked, the application for amendment to the L/C sent to the [Buyer] was actually a new offer, but this offer was not accepted by the [Buyer]. The new contract has not been concluded; there was no new legal relationship between the parties.

To sum up, the fault and liability for not performing the contract is due to the failure to perform the new acceptance that the [Seller] should load the ship before 10 March. The [Seller], for the sake of 5.4% of the payment, abandoned its obligation to act in good faith in actively searching for the loading ship to assure the shipment before the deadline stipulated on the amended L/C -- so much that at the time of shipment and delivery, the [Seller] had not prepared the goods at all. Therefore, the fault and liability for the failure to perform the contract is attributed to the [Seller]. The [Seller] did not deliver in accordance with the contract. The [Seller] fundamentally breached the contract.

The [Buyer] applied for arbitration according to the arbitration clause in the contract, and filed claims requesting that:

   (1)   The [Seller] should immediately return the US $80,000 paid by the [Buyer];
 
   (2)   The [Seller] should pay interest of US $8,946.85 on that amount (temporarily calculated to 15 December 2000 until the day of actual payment);
 
   (3)   The [Seller] should compensate the [Buyer] for attorneys' fees of US $1,067.40 (converted into renminbi [RMB] 8,859.42), traveling expenses [RMB] 2,000 incurred by the arbitration process;
 
   (4)   The [Seller] should bear the entire arbitration fee.

[Seller]'s position

In response, the [Seller] submitted a statement of defense and filed a counterclaim alleging that:

      In this case, it is clear that until 30 March 1999, although the shipment of the goods was delayed for various reasons, the [Seller] still expected to deliver and the [Buyer] still wanted to receive the goods, and the obligations of the two parties under the contract were not released. On 30 March 1999, the [Buyer], via fax, asked the [Seller] to change the goods from deformed steel bar to rod bundle. The reasons for this request are: (1) the deformed steel bar provided by the [Seller] is very different from the former; (2) the amount is less than 8,000 tons.

Because the second reason did not stand solidly (the contract stipulated 7,600 tons, the [Seller] expected to deliver 8,000 tons in the fax sent on 30 March 1999), the only one problem which should be resolved is whether a change of the match ratio of the deformed steel bar would be a fundamental breach of contract and whether that would give the [Buyer] the right to revoke the contract and respond with a new offer to purchase rod bundle.

The clause regarding the "diameter/weight" of the goods stipulated that the diameter of the goods was 12 to 25 millimeters, in at least five specifications approximately equal in amount, except that, for the 25 millimeter specifications, the amount would be at the most 1,000 tons. On 30 March 1999, the only difference in the fax from the [Seller] to the [Buyer] was that the goods of 25 millimeter amounted to 1,500 tons. This was not a reason to enable the [Buyer] to cancel the contract. Article 52(2) CISG stipulates that:

"If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity."

According to this regulation, the [Buyer] was entitled to refuse to take delivery of the excess part under the condition that the [Seller] delivered 500 excessive tons of goods of 25 millimeter, but the [Buyer] had no right to cancel the contract and refuse to accept delivery of the goods. If the [Buyer] refused to accept delivery of the added 500 tons of 25 millimeter goods, the remaining part was 7,500 tons.

According to the quantity clause of the contract, the [Seller] was entitled to deliver less than 10% of the stipulated amount, at least 6,840 tons (7,600 - 7,600 * 10%); therefore, the [Seller] was still in accord with the requirements of the contract, though the [Seller] delivered 7,500 tons. And in the fax of 30 March 1999, the [Seller] did not express that the [Buyer] had no choice in accepting delivery of the goods according to specification written in the fax. If the [Buyer] did not wish to receive the goods of this specification, the [Buyer] should have informed the [Seller] and given the [Seller] a chance to change the goods. The [Buyer]'s behavior of refusal to accept delivery of the goods without any negotiation was not in good faith. The [Buyer] breached the contract. Moreover, the [Buyer]'s refusal to extend the L/C was a fundamental breach of contract.

The [Seller] was not at fault in the delay of dispatch. According to the contract, the [Buyer] should have remitted the US $80,000 to the account appointed by the [Seller] within seven working days after the contract; it was impossible to attach the condition that the [Seller] should issue the original invoice and mail it to the [Buyer] before the remittance. Afterward, the [Buyer] asked the [Seller] to mail the original invoice before the remittance which led to a series of subsequent delays. It was more important that the two parties agreed to perform the contract under the condition that the dispatch of the goods has been delayed. In this circumstance, the delay of dispatch was not a valid basis for the [Buyer] to refuse to extend the validity time of the L/C and the shipment period. The [Buyer] did not extend the L/C after 5 March 1999; this was actually a refusal to accept delivery, and the [Buyer] breached the contract fundamentally.

Because of this, the [Seller] suffered economic loss.

Article 75 CISG states:

"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance ... the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."

Article 74 CISG states:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach ..."

According to article 75 CISG, the [Seller] was entitled to ask the [Buyer] to compensate for the balance between the contract price and resale price. In this case, the concrete amount and calculating process were as follows:

      (1) The unit price of the goods under the contract was US $185 per ton CNF Shantou;

      (2) The first resale contract (hereafter, Resale Contract I) signed on 20 May 1999 stipulated that the unit price of the goods was US $178 per ton CIF Kampongsom; it is necessary to subtract the balance of insurance fees and freight in order to compare the contract price with the resale price in this case.

The insurance fees for the transport of steel from Russia to Asian areas was 1-3‰, and calculated on 2‰, Resale Contract I contained the insurance fees US $0.36 per ton (US $178 per ton *2‰), otherwise the freight from the port of Nakhodka in Russia to Cambodia was US $27 per ton, but the freight under the contract (from Russia to China) was only US $13 per ton; the balance of both was US $14 per ton (27 minus 13).

Therefore, after adjustment for the insurance fees and freight, the price was US $163.64 per ton (178 minus 0.36 minus 14).

      (3) The second resale contract (hereafter, Resale Contract II) signed on 14 October 1999 stipulated that the unit price was US $150 per ton CFR Singapore, it contained the freight US $25 per ton which was US $12 per ton more than the freight to China (25 minus 13). Therefore, after Resale Contract II price subtracts the balance of freight under the contract price in this case, the price (the match price of the contract of this case) was US $138 per ton (150 minus 12).

      (4) The average price of Resale Contract I and Resale Contract II was US $150.82 per ton CNF [(163.64 + 138)/2]. The [Seller]'s loss by reselling the goods was US $34.18 per ton (185 minus 150.82), so the [Seller]'s total loss of balance was US $259,768 (US $34.18 per ton * 7,600 tons).

There was also an interest loss due to the delay of resale of the goods. In this case, if the [Buyer] had not violated the contract and had extended the L/C according to the request from the [Seller] via fax on 30 March 1999, the goods could have been dispatched before 14 April 1999, and the [Seller] could have received the payment before 30 April 1999. Therefore, the [Seller] was entitled to have the [Buyer] compensate the interest loss incurred by delay of receiving the resale payment.

The goods under Resale Contract I were shipped on 6 June 1999, the contract stipulated the payment should be made within 120 days after the shipment date, so the date of receiving the payment should be 4 October 1999. The goods under Resale Contract II were shipped on 9 November 1999. According to the general custom in the trade, the [Seller] should receive the remittance on 24 November (15 days after the bill of lading date). The middle date under the two contracts was 29 October 1999, the time of delay on receiving payment was six months (from 30 April 1999 to 29 October). Under the two resale contracts, the average resale price was US $150.82 per ton; the total resale price under the contract of this case was US $1,146,232 (US $150.82 per ton * 7,600). If the base amount for calculating interest was US 1,146,232 and the period for calculating interest was six months and the interest rate was 8% per year, the [Seller]'s interest loss because of the delay on resale of the goods was US $45,849.28 (US $1,146,232 * 6 months * 8% / 12).

The interest loss on the balance. The [Seller]'s loss of balance aforesaid was US $259,768. Because the [Seller] did not receive this balance, the [Seller] was entitled to claim compensation for the interest on the balance. This interest should be calculated from 1 May 1999 (if the [Buyer] had not violated the contract, this payment would have been received before 30 April 1999). The interest should apply to the balance due to the [Seller], US $259,768. The interest rate was 8%. The interest should be calculated until the date when the arbitral award is been executed.

The [Buyer] should bear the [Seller]'s attorneys' fee of renminbi [RMB] 90,000 incurred by this arbitration.

The [Seller] had received the balance payment US $80,000 from the [Buyer]. Therefore, the [Buyer] should pay the compensation (not contain the interest of the balance loss) US $225,617.28 (259,768 + 45,849.28 - 80,000) and renminbi [RMB] 90,000 after subtracted the US $80,000.

Thereafter, the parties filed supplementary statements and evidence with the Arbitral Tribunal many times. The responses were as follows:

[Buyer]'s supplementary response

The [Buyer] claimed that:

      (1) The [Seller] did not prepare the goods within the period under the contract. The [Seller] alleged that "on 5 March 1999 10,000 tons of goods had been prepared in Hai Shenwei, then the [Seller] allocated the goods according to the measure and match and faxed to the [Buyer] on 30 March 1999, and asked the [Buyer] to amend the L/C according to the measure and match of the goods." This indicated that the [Seller] had not prepared the goods under the L/C, the 10,000 tons of goods in Hai Shenwei were not supplied for the [Buyer].

On 25 February 1999, the amended L/C according to the [Seller]'s request stipulated that the specifications of the goods were:

   -    1,700 tons of 12 millimeter;
   -    1,500 tons of 14 millimeter;
   -    1,700 tons of 16 millimeter;
   -    1,700 tons of 22 millimeter; and
   -    1,000 tons of 25 millimeter.

But among the goods in Hai Shenwei, there were:

   -    2,947 tons of 12 millimeter which was more than the amount under the contract by 1,247.51 tons; and
   -    1,045.09 tons of 14 millimeter which was less than the amount under the contract by 454.91 tons; and
   -    1,500.85 tons of 14 millimeter which was less than the amount under the contract by 199.15 tons; and
   -    1,503.41 tons of 25 millimeter which was more than the amount under the contract by 503.41 tons; and
   -    1,063.36 tons of 15 millimeter and 1,904.55 tons of 20 millimeter.

However, there were no goods of the last two kinds under the contract and L/C. Among these goods, there were no goods of the specification of 16 millimeter stipulated in the contract and L/C.

From the above comparison, it is clear that among the goods received by the [Seller] on 5 March 1999, some specifications were decreased by 2,354.06 tons in all, and other specifications were increased by 4,718.83 tons. This means that among the 7,600 tons of goods under the contract, there were 7,072.89 tons of goods (take up 93%) that were not in accord with the specification. It was obvious that it could not be negotiated because of the loading goods not in accord with the specification stipulated in the contract and L/C.

The [Seller] faxed to the [Buyer] on 30 March 1999 and suggested that the [Buyer] should amend the L/C; it was indicated that the [Seller] did not intend to supply the [Buyer] with the goods in Hai Shenwei. These goods were not the [Buyer]'s goods; therefore the [Seller] dealt with the goods on 30 March 1999, the [Seller] did not prepare the goods needed by the [Buyer] on 5 March 1999.

It was in vain that the [Seller] tried to combine the contract signed with Shenzhen Co. with the contract signed with the [Buyer] to prove that the [Seller] had prepared the [Buyer]'s goods; it still could not prove that the goods in Hai Shenwei contained the [Buyer]'s goods. First of all, the [Seller] did not provide enough evidence to prove whether these goods were supplied for Shenzhen Co. Secondly, the goods subscribed by the [Buyer] were 7,600 tons not 8,000 tons. Even among these 10,000 tons of goods, there were 2,000 tons goods supplied for Shenzhen Co., according to the L/C, among the goods prepared by the [Seller], some specifications were decreased by 2,354 tons, and some specifications were increased by 2,718.83 tons; the unqualified goods took up 67% of the 7,600 tons goods under the contract. The [Seller] should have clearly known that it could not negotiate by using the specification of the goods seriously against the contract and L/C, which also breached the contract fundamentally.

      (2) The [Seller] altered the specifications of the goods many times without agreement from the [Buyer], and the goods sold to the third-party were not the ones under the contract signed by the [Buyer] and the [Seller].

Even according to the [Seller]'s allegations:

   -    The [Seller] has prepared the [Buyer]'s goods, but under the condition that the shipment could not be within the period stipulated in the L/C;
 
   -    The [Seller] changed the specifications of the goods without agreement from the [Buyer] and sold the changed goods to the third-party; these goods were not the ones under the contract.

According to the [Seller]'s supplementary evidence submitted to the Arbitral Tribunal used to prove the loss on resale on 26 July 2001, the [Buyer] had told the legal representative of the [Seller] via phone on 29 March 1999 that because the [Seller] did not ship according to shipment period stipulated in the amended L/C, after the contact had been released, and because the [Seller] changed the specifications of the goods without agreement from the [Buyer] and resold the goods the third-party, this released the supply contract with the [Buyer].

The behavior of dealing with the goods of changed specifications belonged to a new contract without any legal relation with the [Buyer]. The loss caused by reselling the goods seller should be borne by the [Seller] itself.

      (3) The [Seller] did not search for the ship in a timely manner. On 22 February 1999, in circumstances in which the [Seller] clearly knew that the [Buyer] had not paid the US $76,000 according to the date recited in the contract, the [Seller] asked the [Buyer] to postponed the shipment period from before 5 March 1999 to before 10 March 1999, and to extend the validity of the L/C from 26 March 1999 to 1 April 1999. This was actually an acceptance of shipment before 10 March under circumstances in which the [Seller] had not received the US $80,000 payment. Because of the acceptance, the [Seller] has abandoned the right of defense of receiving first and then delivery that is authorized by the CISG. Although the [Seller] had not received the payment of US $76,000, the [Seller] still authorized shipment and delivery before 10 March 1999. Therefore, the two parties actually changed the receiving condition under the contract; the two parties should perform their obligations according to the new shipment and delivery condition.

The [Seller] could not load the ship before 10 March 1999, so the [Seller] asked to amend the L/C a second time and postponed the shipment period to 16 March 1999. But the [Buyer] did not accept that, because the [Seller] did not perform the obligation of shipment in good faith. After the [Buyer] informed that it had remitted the payment US $76,000 and faxed the telegraphic remittance receipt, the [Seller] still did not do anything, the [Seller] did not began to search for the ship until [Seller] received the remittance on 3 March. But at that time, there was no suitable ship available for loading before 10 March.

To sum up:

   -    The [Seller] did not prepare the goods supplied for the [Buyer] within the period stipulated in the contract and L/C and did not rent the ship in time;
 
   -    The [Seller] by now still could not prove the economic loss because of this case, the request for the compensation for [Seller]'s economic loss is not supported by reasonable evidence and should be rejected according to the law.
 
   -    The fault and liability for failure to perform the contract is that of the [Seller]. By its failure to perform the supplying obligation, [Seller] breached the contract fundamentally. The US $80,000 should be returned to the [Buyer], and the [Seller] should compensate for the loss of the interest.
 
   -    The [Seller] also should also compensate the [Buyer] for the traveling fees renminbi [RMB] 30,000 and lawyer fees [RMB] 178,594.20.

[Seller]'s supplementary response

The [Seller] pointed out that:

      (1) There was no obligation to deliver before receiving the balance payment of US $80,000

      According to the payment clause in the contract, the balance of the payment should be remitted to the account appointed by the [Seller] at the unit price of US $10.00 within seven working days. Based on this regulation, the premise of delivery is that the [Seller] had received the balance payment, because the [Seller] could not deliver after seven contract days, the [Seller] should deliver after a series of conditions had been achieved, for example, the L/C had been issued, the goods had been prepared, the ship had been arranged. Under payment by L/C, [Seller] would be at risk if it shipped without receiving payment, and [Seller] in order to protect its benefit had no obligation to dispatch before receiving the balance of US $80,000. Viewing the transaction from the process of the performance, in the intention of the two parties, the [Buyer] should first pay, and then the [Seller] should dispatch the goods.

      (2) The [Seller] prepared the goods within the period set forth in the contract.

      The [Buyer] alleged that the [Seller] did not prepare the goods within the period set forth in the contract. In fact, the contract of this case did not stipulate the concrete specification of the goods but only stipulated that "diameter 12 to 25 millimeter, at least five specifications, the quantity is equal approximately; if there is specification of 25 millimeter, the amount is at the most 1,000 metric tons." This means, according to the contract, the [Seller] was entitled to match the concrete specification of the goods before delivery. On 22 February 1999, in the fax from the [Seller] to the [Buyer], the description of the concrete measure of the goods was the one decided by the [Seller] primarily what was more important was that the contract in this case only stipulated dimension of the measure of the goods; it did not stipulate the concrete measure; therefore, the [Seller] did not violate the contract and damage the [Buyer]'s benefit when [Seller] adjusted the concrete measure before the delivery time. On 1 March 1999, the [Seller] signed a contract with its supplier to purchase 10,000 tons deformed steel bars in order to provide goods to the [Buyer] and another company. The measure of the 10,000 tons of goods was very different from the primary measure ascertained in the fax on 22 February 1999. In this situation, the [Seller] had to adjust the former measure. On 30 March 1999, the [Seller] faxed to the [Buyer] and ascertained the measure of the goods finally according to the measure of the prepared goods. When one compares the measure of the goods with the measure of the goods in Hai Shenwei port, it is clear that the 8,000 tons of goods mentioned in the fax were part of the goods prepared.

To sum up, based on the contract, the [Seller] was entitled to adjust the measure of the goods according to the goods supplied by the former seller before delivery; the [Seller] had prepared the goods before the delivery was possible, the [Seller] adjusted and ascertained the measure of the goods prepared for the [Buyer] according to the goods which had been prepared. However, the [Buyer] refused to receive the entire goods without putting forward the details of the goods' measure in advance and putting forward the request for modification after the event, therefore the [Buyer] breached the contract fundamentally.

      (3) The goods resold by the [Seller] were the goods under the contract.

      The [Seller] had stated in the oral hearing that the good resold by the [Seller] were the goods under the contract, and filed comprehensive evidence to support this. The evidence indicated that the measure proportion of the 8,000 tons of goods resold to Cambodia Co. and Singapore Co. was the same as the measure proportion with the [Buyer].

      (4) The invalidity of the [Buyer]'s <Specific import of goods registration certificate> is the [Buyer]'s fault.

      The [Buyer] did not file the import license with the Arbitral Tribunal. If the [Buyer] did not submit this license, the [Buyer] was not entitled to claim that it could not receive the goods due to expiration of the license, because the [Buyer] could not prove that [Buyer] had held it.

Supposing that the [Buyer] indeed held the license, which party should be responsible for the fault of not using the license? If the reason of Chinese foreign exchange control indeed existed, the [Buyer] should have told the [Seller] this when the contract was signed. In this way, the two parties could have stipulated that "the [Buyer] should remit US $80,000 to the account appointed by the [Seller] within seven days after the [Buyer] received the original invoice from the [Seller]." If the contract contained this stipulation, the [Seller] would mail out the original invoice immediately after the contract was signed in order to save time. Until 5 February 1999, the [Seller] still urged the [Buyer] to remit the US $80,000 as soon as possible. This indicated that the [Buyer] still did not mention the matter about the original invoice. The time of delay of delivery caused by this was at least five days. Suppose that on 6 February 1999, the [Buyer] had asked the [Seller] to mail the original invoice, there were five days between 2 February and 6 February. If not for this delay, the [Buyer] would have been able to remit the US $80,000 before the Spring Festival, and the dispute in this case would not have arisen.

The [Buyer] received the original invoice on 12 February 1999. Because the original invoice must be mailed instead of sent by fax, the [Seller] had no unreasonable delay in mailing the original invoice.

Nor did the [Seller] have any fault in renting the ship. The [Buyer]'s claim that the ship rented by the [Seller] was not suitable to anchor at Shantou East Port could not be supported. The [Buyer] did not demur that the ship was not suitable to anchor. If the ship discharged at other ports, when it arrived at Shantou port, the sea gauge was shoal, it was possible to anchor.

The [Seller] had contacted for a ship on 2 or 3 March 1999 and found a ship on 5 March. This was the earliest ship the [Seller] could find under that condition. The ship would finish the shipment by 13 March. The amended L/C in this case stipulated that the latest shipment date was 10 March 1999. If the L/C was not extended, and the goods were dispatched from Russia port after 10 March, the L/C would not be negotiated. Had the [Buyer] faxed the remittance receipt to the [Seller] according to the [Seller]'s request on 2 March 1999, and the [Seller] found a ship on 3 March, there would not have been any unreasonable delay or violation of an obligation of goodwill.

To sum up, assuming that the real reason why the [Buyer] did not receive the goods is that the "import license" could not be used within the period of invalidity, it was because of the [Buyer]'s fault of delay.

Moreover, an inability to use the import license is not a "force majeure" event that would exempt the [Buyer] from liability. According to Article 79 CISG, if the [Buyer] claimed for exemption for force majeure-type reasons, certain conditions must be satisfied

            1. An impediment must have occurred. The [Buyer] did not testify when the Chinese government issued the notice and what was the content of the notice, and why this prejudiced the delivery.

            2. The impediment must have been unpredictable. Assume that the [Buyer] had obtained an "import license" that expired on 31 March 1999. When the [Buyer] concluded the contract in this case, it was predictable that the license will be invalid after expiration.

            3. The impediment or its consequences could not be overcome or avoided. Assuming the [Buyer] had held an "import license" that expired on 31 March 1999 when the [Buyer] concluded the contract, if there had not been an unreasonable delay in the process of the [Buyer]'s performance, the goods would have been able to arrive at the Chinese port in time and be processed through customs. Therefore, the impediment in this case was avoidable even though it really happened.

            4. The [Buyer] must inform the [Seller] of the impediment in a timely manner. In this case, the reason why the [Buyer] did not receive the goods was that the match ratio of the deformed steel bar provided by the [Seller] were far from the former, not that the behavior of Chinese government. In other words, the [Buyer] still expressed to the [Seller] that it was doing its best to apply for the "import license" after 31 March 1999. In a word, the [Buyer] never declared to the [Seller] that it could not perform the obligation of receiving the goods because of force majeure. Moreover, the contract stipulated that "the [Seller] is not responsible for the delay on delivery or shipment because of common acceptable events of force majeure, but the [Seller] must inform the [Buyer] of the event by phone immediately and airmail to the [Buyer] the certification issued by the official government or chamber of commerce at the place where the disaster occurs to the [Buyer] within fifteen days after the disaster occurs." According to the principle of equality, this clause is applicable to the [Buyer] as well as the [Seller]. The [Buyer] submitted to the Arbitral Tribunal a certification issued by Economic Committee of Shantou on 12 June 2001. If the [Buyer] had provided a valid certification of force majeure to the [Seller], the [Seller] could have used it to exempt itself from liability to its supplier according to the force majeure clause in the contract the [Seller] had entered into with its supplier. In that case, the [Seller]'s loss would not have occurred, and the dispute between the [Seller] and the [Buyer] could have been solved that way.

Since the [Buyer] did not send the clear information to the [Seller] about the occurrence of the force majeure event in time and did not provide a valid certification of force majeure, the [Buyer] should be responsible for all the loss that occurred.

OPINION OF THE ARBITRATION TRIBUNAL

1. The applicable law

The [Buyer]'s place of business is in China and the [Seller]'s in Singapore. Both China and Singapore are Contracting States of the United Nations Convention on Contracts for the International Sales of Goods of 1980 (CISG). Furthermore, the [Seller] clearly stated that the CISC should apply to this case. Although the [Buyer] did not express itself as clearly, the [Buyer used language such as "according to the CISG" in its statement, and it may be deemed that the [Seller] had no demurral to that. Therefore, the Arbitration Tribunal rules that the CISG shall be applied to this case.

2. Whether the [Buyer] is liable for the delay in the payment of US $80,000 and whether the [Seller] has justifiable reason to postpone the delivery based on that

-  Liability for the delay in payment of US $80,000

According to the stipulation of the contract, the [Buyer] should remit US $80,000 calculated as US $10 per ton to the account appointed by the [Seller] before 9 February 1999. The [Seller] informed the [Buyer] of its bank account on 6 February 1999. But the [Buyer] did not give the US $80,000 to Industrial and Commercial Bank of China until 6 February 1999.The [Seller] did not receive it until 3 March.

The two parties had no dispute on the fact of the [Buyer]'s delay on payment. The dispute between two parties is:

The [Seller] alleged it was the [Buyer]'s breach of contract; whereas the [Buyer] alleged that, because of Chinese foreign exchange controls, the [Buyer] must get the [Seller]'s original invoice, but the [Buyer] did not receive the original invoice from the [Seller] until 12 February, and that, due to the Spring Festival, the [Buyer]'s bank did not remit until 26 February. Therefore, the [Buyer] alleged that it was not responsible for the delay.

The Arbitral Tribunal concluded that:

   -    The contract, did not stipulate that [Seller] must submit the original invoice before receiving payment of the US $80,000);
 
   -    The [Buyer] should know the requirement that the Chinese foreign exchange control asks for the original invoice, but the [Seller] did not know this regulation (and the [Buyer] did not submit any evidence to prove that the [Seller] should have known of it).
 
   -    Therefore, the delay on remittance concerned with the original invoice is the [Buyer]'s fault. Because the [Buyer] did not stipulate it in the contract, it has nothing to do with the [Seller].
 
   -    As to the holiday of Spring Festival, it is not caused by the [Seller]. Therefore, as the [Buyer] is liable for the delay in the remittance of US $80,000, it is deemed that the [Buyer] breached the contract.

As the [Buyer] is liable for breach of contract concerning the delay on payment of US $80,000, the next question is:

-  Was the [Seller] entitled to postpone the delivery?

As to this, the [Seller] stated that it had no obligation to dispatch the goods before receiving the US $80,000.

The Arbitral Tribunal deems that according to the contract, the [Buyer] should remit the payment calculated as US $10 per ton before 9 February 1999 and issue the L/C calculated as US $175 per ton on 11 February. The Arbitral Tribunal notes that Industrial and Commercial Bank of China branch in Shantou issued the L/C on 10 February 1999. This means that the [Buyer] issued the L/C on time. In this case, even though the [Buyer] did not pay the money calculated as US $10 per ton (total US $80,000), as long as the [Seller] delivers on time, and the bill submitted by the [Seller] is in accord with the condition of L/C, and it is credible to receive the 95% of the payment. As a merchant, the [Seller] has two choices:

   (1)   Taking a 5% risk at the most, deliver and submit the bill on time; or
   (2)   Elect not to take any risk and deliver only after receiving the full US $80,000.

The [Seller] may choose (1), but it has no duty or obligation to choose (1). The [Buyer] did not pay US $80,000 on time and formally breached the contract. It was reasonable for the [Seller] to choose (2). It should be deemed that the position of the [Seller] is acceptable. The [Seller] was entitled to postpone the delivery because of the [Buyer]'s delay on the payment of the full US $80,000.

3. About the amendment to the L/C in the last ten-day of February 1999

The [Seller] asked to amend the L/C many times, especially to amend the delivery time on the L/C. The [Buyer] alleged that this should be regarded as evidence that the [Seller] had not prepared the goods in time, and therefore the [Seller] was not able to deliver in time.

The amendment to the L/C was from 22 to 25 February 1999. For [Seller]'s request of 22 February 1999, the amended content mainly had to do with specifications and quantity of the goods except for some spelling of some words, and the delivery time was changed from 5 March 1999 to 11 March 1999. The [Buyer] applied for amendment to the issuing bank on 23 February, and the issuing bank modified the specification and quantity of the goods on 25 February, but the amended delivery time was 10 March 1999.

The Arbitral Tribunal notes that in international sales of goods, it is common for parties to make modifications to Letters of Credit:

One party may put forward a request for amendment, the other party may (1) refuse, i.e., not agree to amend; (2) the parties negotiate to amend it, with the party who requests providing some compensation; (3) the parties agree to amend, but reserve the right to claim for compensation; or (4) the parties may agree to amend unconditionally.

From 22 to 25 February 1999, four days in all, the [Buyer] agreed to amend unconditionally. It should be deemed that the amendment of the issuing bank on 25 February 1999 resulted from making more concrete the specification, quantity and match ratio of the goods and amendments to the delivery period agreed to by both parties. Since the two parties amended the L/C unconditionally, it is not necessary to investigate the reasons for the amendments to the L/C (There may be many reasons, not certainly the preparation of the goods).

4. Regarding the correspondence from the [Seller] on 5 March 1999 to inform of the name of the ship and the correspondence from the [Buyer] on 29 March 1999 (remark: instead the two parties both mistakenly said that the date was 30 March.)

The [Buyer] alleged that on 26 February 1999 and 1 March 1999, the [Buyer] had asked the [Seller] to arrange for the ship and for shipment many times, but the [Seller] did not do it actively. The [Buyer] alleged that the [Seller] began to search for the ship after receiving US $80,000 and delayed the time, so the [Seller] should be held liable.

The [Seller]'s correspondence about the name of the ship had been sent out on 5 March 1999, i.e., the [Seller] sent it out within two days of receipt of the US $80,000. Was this an unreasonable delay? The Arbitral Tribunal rules that it was not. The Tribunal noted that the [Buyer] had written that it would fax the remittance receipt to the [Seller] "this afternoon" in the correspondence on 26 February. But it can be shown from the correspondence from the [Seller] on 2 March that by 2 March, the [Buyer] still had not faxed the remittance receipt to the [Seller]. So the fault is ascribed to the [Buyer], because although it had answered, it had not faxed the remittance receipt to the [Seller] at that time. The liability for delay on the time should therefore not be laid upon the [Seller]; it was caused by the [Buyer]'s fault. In fact, considering that the [Seller] only received the US $80,000 from its own issuing bank on 3 March, the correspondence sent to the [Buyer] on 5 March was in time and reasonable.

The correspondence from the [Seller] on 5 March 1999, in addition to providing the ship's name and tonnage also asked to change the delivery period to before 16 March 1999. The [Seller] asked the [Buyer] to affirm that. The [Seller] faxed to the [Buyer] and urged [Buyer] again on 8 March and 10 March, but the [Buyer] did not reply to any of these communications. The Arbitral Tribunal notes that there was the following text in the fax from the [Seller] to the [Buyer] on 10 March 1999: "... it is to our surprise to hear from you today that you wish to delay the shipment to a much later date to be advised." This indicates that it was the [Buyer], not the [Seller], that asked to delay the shipment. The [Buyer] did not send any correspondence to the [Seller] until 29 March, and wrote that: "... because the match ratio of deformed steel bar provided by your Co. is very different from the former and less than 8,000 tons, now our Co. asked to change deformed steel bar 7,600 (8,000) ton to rod bundle 7,600 (8,000) ton ..."

It is difficult to understand the expression in the correspondence from the [Buyer] to the [Seller] on 29 March. As to the requirement of the specification and quantity of deformed steel bar under the contract, the contract stipulated that "diameter 12 to 25 millimeter, at least five specifications, the quantity is equal approximately, if there was the specification of 25 millimeter, 1,000 tons at the most". The L/C was issued in accord with that. When the [Seller] asked to amend the L/C on 22 February 1999, the goods' specification put forward by the [Seller] was: 12 millimeter--1,800 tons, 14 millimeter--1,600 tons, 16 millimeter--1,800 tons, 22 millimeter--1,800 tons, 25 millimeter--1000 tons, total 8,000 tons in all. When the [Buyer] applied for the issuing bank to amend the L/C on 23 February 1999 and the issuing bank amended the L/C, the match ratio of the goods was: 12 millimeter--1,700 tons, 14 millimeter 1,500 tons, 16 millimeter 1,700 tons, 22 millimeter 1,700 tons, 25 millimeter 1,000 tons, total 7,600 tons in all. There was not any change until 29 March 1999. It means that the match ratio of the deformed steel bar and the quantity of 7,600 tons is decided by the [Buyer] itself. According to this, the sentence "the match ratio of the deformed steel bar is very different from the former and less than 8,000 tons" was the [Buyer]'s own idea, but the [Buyer] blamed the [Seller] in the correspondence which is difficult to understand.

In terms of the content of the correspondence from the [Buyer] on 29 March 1999, the essence of the [Buyer]'s conduct is that the [Buyer] revoked the contract unilaterally for a nonexistent reason. Because rod bundle and deformed steel bar are two different kinds of steel goods, if there is a change to provide rod bundle, the modification of the contract cannot solve the problem unless it can lead to a new contract.

5. About the <Specific import of goods registration certificate>

The [Buyer] stated that on 10 March 1999, it had faxed to the [Seller] and alleged that "the [Buyer]'s import license <Specific import of goods registration certificate> may be invalidated because of the [Seller]'s delay in renting ship. ...and told the [Seller] that if the [Seller] could not load the ship on time, the [Buyer] would terminate the contract." However, in the materials submitted by the [Buyer] and the [Seller], there was no evidence to indicate that the [Buyer] had sent such a fax. The fact that could be relevant to this is the correspondence from the [Seller] stating: "... it is to our surprise to hear from you today that you wish to delay the shipment to a much later date to be advised" in the correspondence from the [Seller] to the [Buyer] on 10 March. But from that sentence, we cannot find information about the [Buyer]'s import license <Specific import of goods registration certificate> and its possible invalidation.

The Arbitral Tribunal notes that the certification from Shantou economic committee on 12 July 2001 proved that a <Specific import of goods registration certificate> indeed existed. Then, there is an issue whether the matter of <Specific import of goods registration certificate> can be regarded as an act of the government that would exempt the [Buyer] from liability according to force majeure. The contract clause on "manpower force majeure" is for the benefit of the [Seller]. Supposing that the stipulation of force majeure under the contract is also applied to the [Buyer], then, the [Buyer] needs to: (1) inform timely; (2) submit the certification from the government or chamber of commerce within 15 days, if the [Buyer] indeed faxed (maybe by phone) the problem about the <Specific import of goods registration certificate> on 10 March 1999, but it did not submit the certification from the government or chamber of commerce within 15 days. The certification from Shantou economic committee seen was issued on 12 July 2001; it was not submitted by the [Buyer] within 15 days but 825 days! Moreover, in the correspondence from the [Buyer] on 29 March, the reason why the [Buyer] did not want deformed steel bar was said to be the problem of specification and match ratio and the quantity less than 8,000 tons, rather than the invalidation of the <Specific import of goods registration certificate>. Therefore, the Tribunal concludes that the [Buyer] terminated the contract unilaterally and breached the contract fundamentally.

6. Resolution of the [Buyer]'s arbitration claims and the [Seller]'s counterclaim

The [Buyer] filed four claims; the [Seller] filed three counterclaims.

-  The [Buyer]'s first claim and the [Seller]'s first counterclaim

The [Buyer]'s first claim seeks to have the [Seller] return the US $80,000 paid by the [Buyer]. The [Seller]'s first counterclaim seeks to have the [Buyer] compensate US $225,617.28. The [Seller] has deducted the US $80,000 paid by the [Buyer] when the [Seller] calculated this compensation. With respect to the US $80,000, the [Buyer]'s claims and the [Seller]'s counterclaim are complementary. The decision on supporting the [Buyer]'s claims or the [Seller]'s counterclaim depends on whether it was the [Buyer] or the [Seller] who breached the contract.

According to the investigation, analysis and hearing by the Arbitral Tribunal, the Tribunal has affirmed that the reason why the contract had not been performed and why the [Seller] did not deliver is that the [Buyer] terminated the contract unilaterally and breached the contract fundamentally. According to the CISG, the [Buyer] should compensate the [Seller] for the loss that occurred because of this.

The [Seller] resold the contract goods. According to the CISG, the [Seller] is entitled to have the [Buyer] compensate the loss.

However, the [Buyer] demurred with respect to the [Seller]'s resale of 4,000 tons of deformed steel bars on 20 May 1999 and 4000 tons again on 14 October, alleging that the specifications and quantities are different from the specifications and quantity stipulated by the two parties on 25 February 1999, and also different from the specifications and quantities stipulated by the two parties on 30 March 1999. The [Buyer] alleged that the [Seller] did not file evidence to support that the two resales of deformed steel bars were of the goods the [Seller] had prepared to sell to the [Buyer]. The [Seller]'s response was:

The contract stipulated that "diameter 12 to 25, at least 5 specifications, the quantity is equal approximately, if there is the specification of 25 millimeter, the quantity is at the most 1,000 tons; the quantity 7,600 metric tons (+/-10%)", as long as accord with this stipulation, it is the goods under the contract. The [Seller] alleged that the goods resold by it were in accord with the scope under the contract.

The Arbitral Tribunal notes that the [Buyer] offered the following statement in rebuttal:

The deformed steel bars resold by the [Seller] were not the goods the [Seller] purchased from its supplier and intended to sell to the [Buyer]. The [Buyer] made a graph in order to compare the "stipulation on 25 February 1999", the "stipulation on 30 March 1999" and "the [Seller]'s way of resale".

The Arbitral Tribunal deems that the defense of the [Buyer] is actually about what is the "contract goods". Concerning on the character of the relation on the supply and demand such as deformed steel bar, the Arbitral Tribunal deems that the contract only stipulated the scope of the specification and the principle of quantity match ratio, did not specially stipulate concrete specifications and quantity, and did not stipulate how to make sure of the concrete specifications and quantity match ratio. This stipulation has its own special meaning. "The stipulation on 25 February 1999" and/or "the stipulation on 30 March 1999", specified the match ratio of specification and quantity, which is the concrete performance of the contract; it did not modify/replace the stipulation of the contract. Therefore, whether it is the "contract goods" is not based on the negotiation or "stipulation", but is inferred from whether it is in accordance with the description of the goods. From the graph made by the [Buyer], it can be indicated that in fact, whether the "stipulation on 25 February 1999", the "stipulation on 30 March 1999" or "the [Seller]'s way of resale" are all in accord with the description of the goods. Therefore, the Tribunal concludes that the deformed steel bar resold by the [Seller] was in accord with the stipulation under the contract.

Therefore, according to the CISG, the [Seller] is entitled to have the [Buyer] compensate for the loss of price balance.

The Arbitral Tribunal checked the [Seller]'s first counterclaim about the calculation on the loss of the compensation. The Tribunal deems that the [Seller] considered the price difference between the CNF price of the contract of this case and the CIF price of the First Resale Contract; and considered the deduction of the US $80,000; moreover, although the [Seller] resold 4,000 + 4,000 = 8,000 ton, the compensation was calculated on 7,600 tons under the contract, so this calculation is reasonable.

In its compensation claim, the [Seller] had also calculated interest due to delay in receiving the payment. The Arbitral Tribunal deems that according to the CISG, the [Seller] should resell the good within a reasonable period. In fact, the resale time was very late. Although it relates to the demand of the deformed steel bar's specification in the market, the delay on resale was not caused by the [Buyer]. Therefore, the Arbitral Tribunal does not support the claim for interest in the [Seller]'s first counterclaim. The Arbitral Tribunal deems that the [Buyer] shall pay the compensation US $179,768.

In fact, the [Buyer]'s first claim has been covered by the [Seller]'s first counterclaim, so the Arbitral Tribunal does not support the [Buyer]'s first claim.

-  The [Buyer]'s second claim and the [Seller]'s second counterclaim

The [Buyer]'s second claim seeks to have the [Seller] pay the interest on US $80,000; The [Seller]'s third counterclaim seeks to have the [Buyer] pay the interest of the compensation. The Arbitral Tribunal deems that either the return of US $80,000 or compensation for the resale price balance is decided after the award has been handed down. It means the debt relation between the [Buyer] and the [Seller] occurs after the award has been made. Therefore the Arbitral Tribunal does not support the request for interest from the [Buyer] or the [Seller].

-  The remaining claims of the parties

The [Buyer]'s third and fourth claim and the [Seller]'s second counterclaim all concern the arbitration fee and claims for other case fees. The Arbitral Tribunal deems that the arbitration fees for the [Buyer]'s claims shall be borne by the [Buyer]. The arbitration fees for the [Seller]'s counterclaims shall be borne by the [Buyer] (90%) and the [Seller] (10%). The [Buyer]'s attorneys' fees and traveling fees shall be borne by the [Buyer]; the [Seller]'s attorneys' fees, renminbi [RMB] 90,000. should be compensated by the [Buyer].

7. The [Buyer] appointed Mr. Zhou Linbin as arbitrator. Arbitrator Mr. Zhou Linbin had expensed renminbi [RMB] 5,000 for this case. This expense shall be borne by the [Buyer].

AWARD

According to the investigation, analysis, hearing and cognizance by the Arbitral Tribunal, the Arbitration Tribunal:

   (1)   Reject all claims of the [Buyer] and rules that:
 
   (2)   The [Buyer] shall pay the [Seller] US $179,768 to compensate the [Seller] for the loss of price difference by reselling the goods;
 
   (3)   The [Buyer] shall pay the [Seller] renminbi [RMB] 90,000 to compensate for the attorneys' fees paid by the [Seller] because of this case;
 
   (4)   The [Seller]'s third counterclaim is rejected;
 
   (5)   The arbitration fee for the [Buyer]'s claims in the amount of renminbi [RMB] 39,640 shall be borne by the [Buyer] entirely. The [Buyer] has paid the aforesaid amount in advance. The counterclaim arbitration fee of this case is US $7,116, of which the [Buyer] shall bear US $6,404.40 and the [Seller] shall bear US $7,116. The [Seller] has paid the aforesaid amount in advance, therefore the [Buyer] shall pay US $6,404.60 to the [Seller].
 
   (6)   The [Buyer] shall pay the above amount, totaling US $186,172.40 and renminbi [RMB] 90,000, within thirty days after the date of this award; otherwise, a yearly interest rate of 4% shall be added.

This is the final award.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Buyer]; Respondent is referred to as [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Ma Mingfei, Ph.D, Wuhan University Institute of International Law, P. R. China.

*** Cheng Shu, LL.M., Dean's Graduate Scholar at NYU School of Law; LL.B. from Shanghai University School of Law, China.

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Pace Law School Institute of International Commercial Law - Last updated January 20, 2012
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