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CISG CASE PRESENTATION

China 10 October 2002 CIETAC Arbitration proceeding (Curtain case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/021010c1.html]

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

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Case identification

DATE OF DECISION: 20021010 (10 October 2002)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2002/10

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Curtains


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 8 ; 53 ; 78

Classification of issues using UNCITRAL classification code numbers:

8C [Interpretation in light of surrounding circumstances];

53A [Obligation of buyer to pay price of goods];

78B [Rate of interest]

Descriptors: Intent ; Price ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

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Case text (English translation)

Queen Mary Case Translation Programme

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

Curtain case (10 October 2002)

Translation [*] by Zheng Xie [**]

Edited by Meihua Xu [***]

The China International Economic and Trade Arbitration Commission (hereafter, the "Arbitration Commission") accepted this case (Case number: G_____) on 9 July 2001, according to:

   -    The arbitration clauses in Sales Confirmation No. 2000STF03010Y, and Sales Confirmation No. 2000STF03012Y signed by Claimant [Seller], Suzhou__ and __ Co. Ltd (Group) China, and Respondent [Buyer], __ International Inc. of the United States, on 23 November 2000 and 15 December 2000, respectively; and
 
   -    The written arbitration application submitted by the [Seller] on 4 September 2001.

The Arbitration Rules of China's International Economic and Trade Arbitration Commission [hereafter, the Arbitration Rules], which took effect on 1 October 2000, apply to this case. Because the amount disputed is less than RMB 500,000, the Summary Procedure applies to this case.

On 19 November 2001, the Secretariat of the Arbitration Commission sent the Arbitration Notice with Appendixes to the parties by express mail.

Because the parties did not jointly appoint or authorize the Chairman of the Arbitration Commission to appoint a sole arbitrator, according to Article 65 of the Arbitration Rules, on 8 January 2002, the Chairman appointed Mr.__ as the sole arbitrator who formed the Arbitration Tribunal to hear this case.

On 10 January 2002, after discussing with the Secretariat of the Arbitration Commission, the Arbitration Tribunal decided to hold a court session in Beijing 1 February 2002. On 10 January 2002, the Secretariat sent the notice of formation of the Arbitration Tribunal and the notice of the court session to the parties by express mail.

The [Buyer] asked the Arbitration Tribunal to delay the court session because it could not attend on 1 February 2002. After discussing with the Secretariat, the Arbitration Tribunal agreed with the [Buyer]'s request and postponed the court session until 4 March 2002. The Secretariat by sent the notice postponing the court session to the parties by express mail.

On 4 March 2002, the Arbitration Tribunal opened the court session in Beijing. Both parties' representatives presented. They made statements and answered the Arbitration Tribunal's questions. After the court session, the parties submitted supplementary materials.

Because the parties submitted considerable evidence and written opinions after the court session, the Arbitration Tribunal, after discussing with the Secretariat, decided to schedule a second court session in Beijing on 14 August 2002. Both parties' representatives attended the second court session. They made statements and answered the Arbitration Tribunal's questions. The [Seller] changed its arbitration claims in the court session, and confirmed the change after the court session. The Secretariat sent the [Seller]'s finally confirmed arbitration claims to the [Buyer].

This case is complicated. The parties needed considerable time to collect evidence, and they submitted new evidence many times. Thus, the Arbitration Tribunal could not hand down the award within the period stipulated in the Arbitration Rules. According to Article 52 of the Arbitration Rules, in response to the Arbitration Tribunal's proposal, the Secretariat permitted the extension of the hearing period four times. The final deadline for the Arbitration Tribunal to hand down the award was 14 October 2002.

This case is concluded. According to the written materials submitted by the parties and the court session, the Tribunal handed down the award.

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

FACTS

The [Seller] and the [Buyer] signed Sales Confirmation No. 2000STF03010Y, and Sales Confirmation No. 2000STF03012Y on 23 November 2000 and 15 December 2000, respectively. According to the two Sales Confirmations, the [Seller] sold curtains to the [Buyer]:

   -    Delivery term. FOB Shanghai in both cases;
   -    Contract prices. US $94,945.80 and US $35,017.70, respectively;
   -    Payment terms: 20% of the contract price and 30% of the contract price in advance, respectively, and the remaining amount paid by T/T within 60 days after the goods arrived at the destination port and after the goods were loaded, respectively.
   -    Arbitration. Both Sales Confirmations included arbitration clauses, which provided that unresolved disputes should be submitted to the Arbitration Commission for arbitration.

POSITION OF THE PARTIES

The [Seller]'s position

On 30 April 2000, the [Seller] and the [Buyer] signed Contract No. 2000STF03007Y. Due to financial problems, the [Buyer] did not make the payment. The Contract could not be performed. However, the goods were ready for delivery; three containers of the goods were shipped, and the remaining six containers were stored in the factory. Considering the [Buyer]'s difficulty, the [Seller] agreed to revise the Contract. The original Contract provided that the remaining six containers of the goods should be shipped in 2000. This was revised to provide that only three of the six remaining containers should be shipped in 2000.

Accordingly, the [Seller] and the [Buyer] signed Sales Confirmations No. 2000STF03010Y and No. 2000STF03012Y. After signing these Sales Confirmations, the [Seller] fully performed its duty to deliver the goods. Although, on 24 November 2000 and 13 April 2001, the [Buyer] made five payments for part of the contract price under the sales confirmations, [Buyer] failed to make full payment of the contract price within the stipulated time. [Seller] alleges that [Buyer] still owes US $52,934.34.

The Contract Law of the People's Republic of China provides that parties should perform their contractual duties. The [Buyer] failed to perform its duty to pay in full. This caused the [Seller] to suffer severe loss. To protect its legal rights, the [Seller] has filed the following claims

1. The [Seller] requests the Arbitration Tribunal to rule that the [Buyer] shall immediately pay the remaining contract price under the two Sales Confirmations, i.e., US $52,934.34, and the loss of interest of US $ 1,407.49:

   -    At the annual interest rate of 7%, the interest on the remaining contract price under Sales Confirmation No. 2000STF03010Y is US $833.97 calculated from 1 March 2001; and
 
   -    Interest on the remaining contract price under Sales Confirmation No. 2000STF03012Y is US $573.52 calculated from 1 April 2001.

The total amount of the remaining contract price and interest is US $54,341.83.

2. The [Seller] requests the Arbitration Tribunal to also rule that the [Buyer] shall bear the arbitration fee and pay the [Seller] for the expenses incurred for this case.

The [Buyer]'s position

1. The basic facts of this case

      (1) The [Buyer] and the [Seller] had a long standing textile business relationship and signed five sales confirmations

The [Buyer] and the [Seller] had a long standing import and export relationship in the curtain trade. The conditions for the parties' cooperation were that the [Buyer] bought curtains from the [Seller]; the price term was FOB; the [Seller] would assist the [Buyer] to get textile export quotas, for which the [Buyer] would pay the [Seller]'s corresponding quota fee. From 11 April 2000 to 15 December 2000, the parties signed five sales confirmations for the import and export of curtains. The detailed transactions were as follows:

[The first of these sales confirmations]. On 11 April 2000, the parties signed Sales Confirmation No. 2000STF03004YD (hereafter, the "Confirmation No. 4YD",) which confirmed that the [Seller] should sell to the [Buyer] goods with the total value of US $61,200.

[The second sales confirmation]. On 30 April 2000, the parties signed Sales Confirmation No. 2000STF03007Y (hereafter, the "Confirmation No. 07Y",) which confirmed that the [Seller] should sell to the [Buyer] goods with the total value of US $481,040.

[The third, fourth and fifth sales confirmation]. Because the above Confirmation No. 07Y was not fully performed, after negotiation the parties agreed to sign new sales confirmations for the un-performed part of Confirmation No. 07Y. Thus, the parties signed Sales Confirmation No. 2000STF03010Y (hereafter, "Confirmation No. 10Y), Sales Confirmation No. 2000STF03011Y (hereafter, "Confirmation No. 11Y") and Sales Confirmation No. 2000STF03012Y (hereafter, "Confirmation No. 12Y") on 23 November, 29 November and 15 December 2000, respectively.

   -    Confirmation No. 10Y provides that the [Seller] should sell to the [Buyer] goods with the value of US $94,945.80;
   -    Confirmation No. 11Y provides that the [Seller] should sell to the [Buyer] goods with the value of US $46,851;
   -    Confirmation No. 12Y provides that the [Seller] should sell to the [Buyer] goods with the value of US $35,017.70.

These facts show that the parties entered into a series of textile import and export transactions.

      (2) During the performance of the contracts, the parties, by their conduct, revised the price, quantity, etc. stipulated in the contracts

      In order to perform the above sales confirmations, the [Seller] made a total of six deliveries from 19 May 2000 to 24 December 2000. The price, quantity, etc. of the goods under these six deliveries did not comply with the contracts. For example, Confirmation No. 4YD stipulated that the [Seller] should sell to the [Buyer] goods with a value of US $61,200, but the customs invoice and the B/L show that the [Seller] has delivered goods with a value of US $43,562.49. Meanwhile, the unit price and the quantity of the goods indicated in the customs invoice were not in compliance with the contract. This fact shows that the parties revised the contract by their conduct.

According to the customs invoices, the total value of the goods in the above six deliveries by the [Seller] was US $209,452.68. From 12 April 2000 to 16 April 2001, the [Buyer] made nineteen payments in the total amount of US $421,377.

2. The [Buyer] paid the [Seller] for the full contract price and other expenses

      (1) The character of the transactions in this case is that they were not only import and export textile transactions but also quota transactions

      Although there was no definite stipulation in the Confirmations, the parties, by the oral agreement, provided that the [Seller] should help the [Buyer] get textile export quotas, and the [Buyer] should pay the [Seller] for the corresponding quota fee. Accordingly, the payment which the [Buyer] should pay the [Seller] included two parts, i.e., the contract price and the quota fee.

      (2) According to the customs invoices, the B/L and the payment order, the [Buyer] had paid the full contract price

      According to the relevant laws, international trade customs and the parties' performance, the customs invoices, the B/L and the payment order should be the basis for calculating the payments.

The transactions in this case were a series of textile import and export transactions. On one hand, during the performance of the contracts, the parties, by their conduct, modified the Confirmations, and meanwhile due to the continuity of the transactions and the successiveness of the performances, when doing each transaction, the parties did not specify which contract the transaction was corresponding to; on the other hand, because this case is related to customs clearance, international transportation, etc, the relevant customs invoices, the B/L, the payment order should be the basis for judging the parties' performance.

As official certificates with legal validity, the commercial invoices, which the parties submitted to the Customs and the export permit should be the legal basis to determine the total value of the goods which the [Seller] sold to the [Buyer]. In fact, it is international sales of goods custom that the value and quantity of the goods sold are decided according to official commercial invoices.

The Bill of Lading (B/L) is a certificate of ownership and represents the goods under the B/L; it can be used to prove the quantity and specifications of the goods delivered. The B/L can also show that the [Seller] often delivered the goods not in accordance with the contracts. Thus, the performance of the Confirmations in this case, and especially the [Seller]'s actual performance should be judged according to the commercial invoices, the B/Ls etc.

According to all of the B/Ls and commercial invoices related to this case, as to the series of textile transactions, the [Seller] delivered the goods for a total contract price of US $209,452.68, so the total contract price which the [Buyer] should pay is US $209,452.68. According to the bank's payment order, the [Buyer] had paid a total of US $421,377.

According to the above facts, the amount which the [Buyer] had already paid is much more than the value of the goods which the [Seller] delivered.

      (3) The [Buyer] had also paid off the entire quota fee

            I. The method to calculate the quota fee

            The parties did not specify the method to calculate the quota fee, but only decided it by negotiation through their correspondence. Thus, the method of calculating the quota fee should be determined by the relevant correspondence.

   -    According to the fax which the [Seller] sent to the [Buyer] on 29 September 2000, the quota fee should be US $4 per piece.
 
   -    On 15 December 2000, the [Seller] sent a fax to the [Buyer] stating that the parties had agreed to revise the method of calculating the quota fee as US $3/kg for the last three Confirmations.
 
   -    It must be noted that in the fax sent on 15 December 2000, the [Seller] again modified the relevant method and agreed to calculate the quota fee under Confirmation No. 11Y by US $0.70/kg, but this method has not been used because this Confirmation was not performed.

Thus, among the six deliveries, the quota fee under the first four deliveries was calculated as US $4 per piece, and for the last two deliveries as US $3/kg.

            II. The total amount of the quota fee

            The commercial invoices show that the curtains by the first four deliveries were 25,134 pieces. According to the above method, the total amount of the quota fee for the first four deliveries was US $100,536 (25,134 4 = 100,536).

The commercial invoices show that the total weight of the goods by the last two deliveries was 11,907 kg. Thus, the total amount of the quota fee for the last two deliveries was US $35,721 (11,907 3 = 35,721).

Based on the above calculation, the quota fee which the [Buyer] should pay was US $136,257.

            III. The [Buyer] had paid the entire contract price and the quota fee.

            The total amount which the [Buyer] should pay includes the contract price and the quota fee, so the [Buyer] should pay 209,452.68 + 136,257 = US $345,709.68.

Although the total amount which the [Buyer] should pay was US $345,709.68, the [Buyer] had already paid US $421,377. Thus, the [Buy] had performed its duty to make the payments. In addition, the amount which it had already paid was much more than the amount which it should have paid (it had paid US $75,667.32 more.)

The above facts show that the [Buyer] had fully performed its duty to pay the contract price and the quota fee.

3. Because the transactions between the parties were consecutive, and also because the [Buyer] trusted the [Seller], the [Buyer] had not checked the amount which it should pay and that which it had already paid, which caused the [Buyer] to be mistaken about the amount that it should pay.

Trusting the [Seller]'s calculation, the [Buyer] mistakenly thought that it still owed the [Seller] some contract price after having already paid the full amount. According to the basic principle in civil and commercial law, this mistake falls within the category of mistake about facts, so it has no legal validity and cannot change the fact that the [Buyer] had paid off the amount which it should pay and also paid more. Based on the [Buyer]'s mistake, the [Seller] alleged a so-called "creditor's right"; this allegation of the [Seller] should not be sustained.

4. Other issues in this case

      (1) The applicable law

      The laws of the PRC and United Nations Convention on Contracts for the International Sale of Goods apply to this case.

Because the parties did not specify the applicable law, the applicable law shall be determined by the principle of conflict of laws in the place when the arbitration is processed. According to the principle of conflict of laws in the relevant contract law of the PRC, "If the parties to a contract involving foreign interest do not stipulate the applicable law, the laws of the country which has the proximate connection with the contract shall apply." In this case, both the [Seller]'s business place and the shipping place are in China. According to the general principle of international private law, the country which has the proximate connection with the contracts in this case is China. Thus, the laws of the PRC apply to this case.

China, where the [Seller]'s place of business is located, and the United States, where the [Buyer]'s place of business is located, are Contracting States of United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG). Therefore, according to Article 1(1)(a) of the CISG, this Convention also applies to this case.

      (2) The jurisdiction of the Arbitration Tribunal

      The Arbitral Tribunal has jurisdiction over all transactions in this case.

Based on the arbitration clauses in the Sales Confirmations, the Arbitration Tribunal has jurisdiction over this case. The [Buyer] alleges that due to the continuity and uniformity of the transactions in this case, the Arbitration Tribunal not only has jurisdiction over Confirmations No. 10Y and No. 12Y, for which the [Seller] filed the arbitration application for, but also has jurisdiction over the B/Ls, the invoices and the payment order under Confirmations No. 4YD and No. 07Y, which were related to the entire transactions.

In addition, the total amount which the [Buyer] should pay was US $345,709.68 and the total amount which the [Buyer] had already paid was US $421,377. Therefore, the extra amount paid was US $75,667.32. As to this overage, the [Buyer] reserves the right to file a counterclaim at the proper time requesting the [Seller] to make a refund.

The [Seller]'s response

In response to these allegations by the [Buyer], the [Seller] states:

1. The performance of the five Sales Confirmations signed by the [Seller] and the [Buyer]

      1.1 Phase I

      The [Seller] and the [Buyer] signed Sales Confirmations No. 2000STF03004YD and No. 2000STF03007Y on 11 April 2000 and 30 April 2000, respectively.

            1.11 After signing the Sales Confirmation No. 2000STF03004YD, the [Seller] delivered two containers of the goods to the [Buyer] on 19 May 2000; the related B/Ls are No. GWSNSHLALA13442 and No. CMAUSUN02885.

            1.12 The goods under these two B/Ls, respectively, were:

-   280 cartons X 12 sets/carton = 3,360 sets. Total value: 3,3605 = US $16,800; and

-   693 cartons X 12 sets/carton = 8,316 sets. Total value: 8,148 4.91 = US $39,986.19 (the price for 148 sets unpaid)

            1.13 After signing Sales Confirmation No. 2000STF03007Y, the [Seller] delivered three containers of the goods on 8, 13 and 23 June 2000, respectively. The related B/Ls are No. CSA3228 No. ESLSA00641785 and No. ESLSA00641800.

            1.14 The goods under these three B/Ls, respectively, were:

-   783 cartons X 12 sets/carton = 9,396 sets. Total value: 9,396 sets 5.32 /set= US $49,986.72;

-   820 cartons X 12 sets/carton = 9,840 sets. Total value: 9,756 sets 5.32 /set = US $51,901.92 (84 sets less shipped); and

-   894 cartons X 12 sets/carton = 10,734 sets. Total value: 10,734sets 5.32/set = US $57,104.

Based on the above calculation, when the five containers of goods were shipped, the [Buyer] should have paid the [Seller] US $215,779.71, and had already paid US $176,888, so it paid US $38,891.71 less. On 24 October 2000, the [Seller] by fax informed the [Buyer] of the above statistics.

            1.15 According to the parties' agreement, after the [Seller] shipped a container of goods, the [Buyer] was to pay off the price for this container when the next container was shipped. Because the [Buyer] did not pay off the price for the fifth container of goods, i.e., US $38,891.71, the [Seller] refused to ship any more goods to the [Buyer] and urged it to perform the duty for the remaining three containers of goods under Sales Confirmation No. 2000STF03007Y.

            1.16 Then, the [Seller] and the [Buyer] negotiated the unresolved disputes on the unpaid contract price and the performance of the contracts. The correspondence was described as follows:

                  a. On 1 November 2000, the [Seller] sent a letter to the [Buyer] urging it to perform the duty under Sales Confirmation No. 2000STF03007Y and requesting it pay off US $38,891.71, which the [Buyer] did not pay within the period stipulated in the Contract.

                  b. On 6 November 2000, the [Buyer] sent a letter to the [Seller] confirming that it had received the five containers of goods with the total value of US $344,131 delivered by the [Seller], but that it had paid US $327,041 through October 20 and owed the [Seller] only US $17,090, not US $38,891.71.

                  c. On 8 November 2000, the [Seller] replied to the [Buyer]'s fax sent on 6 November, explaining that the amount of US $20,000, which the [Buyer] remitted to Hong Kong, was not deducted from the US $38,891.71, and that if deducted, the amount which the [Buyer] owed to the [Seller] was US $18,891.71.

                  d. On 9 November 2000, the [Buyer] replied to the [Seller]'s fax sent on 8 November, requesting to ship an additional three containers of goods, and promising to pay off the price of each container each month, i.e., December 2000, January and February 2001.

                  e. On 13 November 2000 the [Seller] replied to the [Buyer]'s fax sent on 9 November, stating that if the [Buyer] immediately paid the [Seller] both the price of US $18,891.71 and the deposit, the [Seller] would ship the goods as soon as possible.

                  f. On 14 November 2000, the [Buyer] sent to the [Seller] a letter with the announcement confirming that the [Buyer] owed the [Seller] US $17,090

                  g. On 16 November 2000, the [Buyer] confirmed both the acceptance of the [Buyer]'s fax sent on 14 November and the unpaid amount calculated by the [Seller], i.e., US $18,891.71 through 14 November.

                  h. On 23 November 2000, according to the parties' agreement, the [Seller] and the [Buyer] signed Sales Confirmation No. 2000STF03010Y.

                  i. On 27 November 2000, the [Seller] sent a letter to the [Buyer] confirming that it had received the payment of US $37,880 by T/T, which included the unpaid amount of US $18,891.71 and 20% of the contract price, i.e., US $18,988.

      1.2 Phase II

      Through the above negotiations, after getting the [Buyer]'s promise to pay the amount owed and considering that it was hard for the [Buyer] to accept the remaining six containers of goods in 2000, the [Seller] signed with the [Buyer] Sales Confirmations No. 2000STF03010Y and No. 2000STF03012Y on 23 November 2000 and 15 December 2000, respectively.

            1.21 According to Sales Confirmation No. 2000STF03010Y, on 29 November 2000, the [Seller] delivered one container of goods to the [Buyer] and the related B/L was No. S02023.

            1.22 The goods under this B/L were 879 cartons 12 sets / carton = 10,548 sets. Total value: US $94,945.80.

            1.23 According to Sales Confirmation No. 2000STF03012Y, on 24 December, 2000, the [Seller] delivered another container of goods to the [Buyer] and the related B/L was No. SHLAX303932.

            1.24 The goods under that B/L were 373 cartons of 4,440 sets with the total value of US $33,433.70.

     1.3 The goods under the four contracts in this case were shipped by seven containers including two under Sales Confirmation No. 2000STF03004YD, three under Sales Confirmation No. 2000STF03007Y, one under the Sales Confirmation No. 2000STF03010Y and one under Sales Confirmation No. 2000STF03012Y. Before the last two containers were shipped, on 27 November 2000, the [Buyer] paid off the amount owed for the former contracts, i.e., US $18,891.71, which can be proved by the parties' corresponding faxes, accounts records and payment certificate. Until then, the [Seller] and the [Buyer] had fully performed Sales Confirmations No. 2000STF03004YD and No. 2000STF03007Y, and had no objections. If the [Buyer] owed the [Seller] any unpaid contract price, this unpaid amount was incurred under Sales Confirmations No. 2000STF03010Y and No. 2000STF03012Y.

      1.4 Because the unpaid price, which the [Buyer] owed to the [Seller], was under Sales Confirmations No. 2000STF03010Y and No. 2000STF03012Y, the [Buyer]'s request that the Arbitration Tribunal should consolidate Sales Confirmations No. 2000STF03004YD and No. 2000STF03007Y with this case lacks legal basis. These two Sales Confirmations are beyond the arbitration scope of this case. Therefore, the Arbitration Tribunal should make a judgment only over Sales Confirmations No. 2000STF03010Y and No. 2000STF03012Y.

2. Moreover, it is the [Seller]'s position that the [Buyer] provided forged and incomplete pro forma invoices and packing lists. Therefore, the actual quantity of the goods which [Seller] delivered, should not be determined only by the invoices for customs clearance, but should also comprehensively refer to the commercial invoices, the B/Ls and the parties' corresponding faxes and other relevant documents.

      2.1 The [Seller] disagrees with the [Buyer]'s aforesaid evidence material for the following reasons:

            2.11 After checking all of the documents, the [Seller] finds that there were in total seven transactions between the [Seller] and the [Buyer]. However, the [Buyer] only admitted that it had received six deliveries, but not the delivery on 13 June 2000. In fact, many documents show that the [Seller] had shipped the goods under this delivery, and that the [Buyer] had received them.

            2.12 In order to make the quantity and weight of the goods described in the pro forma invoices and the packing lists in conformity with the quotas so that the goods could go through customs clearance, the [Buyer] forged the [Seller]'s pro forma invoices and packing lists. However, both quantity and weight described in forged pro forma invoices and packing lists were far less than those of the goods which were actually delivered. In addition, the format of the forged pro forma invoices and packing lists was not in accordance with that of the true ones.

            2.13 The [Buyer] had sent a fax to the [Seller] confirming that the goods which the [Seller] had shipped were totally 31,998 sets packed in three 40 inch containers and one 20 inch container. However, the pro forma invoices and packing lists provided by the [Buyer] could not prove the above result, but the documents provided by the [Seller] could prove it.

            2.14 According to the packing method stipulated in the Sales Confirmation and the general packing method, i.e., 12 sets per carton, if the calculation was made based on the data described in the [Buyer]'s forged documents, each of the [Seller]'s last three deliveries was thousands of sets less. However, as to such severe breach, the [Buyer] had never, in the faxes with the [Seller], claimed for damages or compensations for the non-conforming quantity. In international sales of goods practice, it is unbelievable that the [Buyer] would not have claimed for damages for such a large amount less of the goods.

      2.2 Due to the above mentioned situation, according to the principle of equity, the [Seller] holds that it is appropriate to use the B/Ls issued by the third party as the basis to calculate the quantity of goods which the [Seller] had actually shipped and the quantity which the [Buyer] had actually received, because the parties did not raise any objection to the quantity and the packing method recorded in these B/Ls, which are described as follows:

   The number of the L/C   Calculation (Sets)   Quantity
 of the goods 
 Suzhou
 Quantity
 of the goods 
Notes

 1  GWSNSHLALA13442 2812=3360 3360 3360  
 2 CMAUSUN02885 69312=8316 8316 5774 168 sets less shipped
 3 CSA3328 78312=9396 9396 7715  
 4 ESLSA00641785 82012=9840 9840 None The [Buyer] neither provided any relevant documents nor admitted receiving of this delivery; 84 sets less shipped
 5 ESLSA00641800 89412=10728 10734 8285 6 sets more shipped
 6 S02023 87912=10548 10548 10257  
 7 SHLAX303932 37312=4476 4440 4440 36 sets less shipped

The above calculation results show that the quantity of the goods recorded in the documents which the [Seller] submitted to the Arbitration Tribunal was conforming, and that the quantity described in the [Buyer]'s documents was far less conforming.

3. The [Buyer] had no so-called mistaken judgment and acknowledgement as it alleged at all.

The faxes sent between the parties from 1-27 November 2000 show that as to the goods under the first five deliveries, the parties repeatedly checked and verified the accounts, and the [Buyer] finally confirmed that it still owed the [Seller] US $18,891.71. Thus, the parties had no doubt on the first five deliveries, and the [Buyer] had no mistaken judgment and acknowledgement of the fact whether it owed some contract price to the [Seller].

4. After checking and verifying the relevant accounts, the [Seller] finalized its arbitration claims as follows:

      (1) [Seller] requests the Arbitration Tribunal to rule that the [Buyer] shall pay the [Seller] for the remaining amount of contract price under the above two Sales Confirmations, i.e., US $52,935.21, which is equal to RMB 437,244.83 calculated at the foreign exchange rate of 1 : 8.26;

      (2) [Seller] requests the Arbitration Tribunal to rule that the [Buyer] shall pay the [Seller] for the loss of interest, totaling US $4,451.35 (at the annual interest rate of 7%), equal to RMB 36,768.15 calculated at the foreign exchange rate of 1 : 8.26; the above amount includes US $2,534.82, the interest on the unpaid amount of contract price under Sales Confirmation No. 2000STF03010Y and calculated from 1 June 2001 to 1 September 2001, and US $1,916.53 under Sales Confirmation No. 2000STF03012Y and calculated from 1 July 2001 to 1 September 2001.

      (3) [Seller] requests the Arbitration Tribunal to also rule that the [Buyer] shall pay the [Seller] for the prepaid arbitration fee of RMB 25,786.

The total amount of the above claims is RMB 499,798.98.

The [Buyer]'s response

As to the non-conformity between the commercial invoices provided by the [Seller] and the customs invoices/the B/Ls, the [Buyer] alleges that:

1. When as between the customs invoices and the commercial invoices/B/Ls provided by the [Seller], there is a difference in the descriptions of the quantity, value, etc, of the same goods, the customs invoices should prevail for the following reasons.

      1.1 The [Buyer]'s export permit and customs invoices, which had been verified and ascertained by the Ministry of Foreign Trade and Economic Cooperation, are legal documents; the [Seller]'s commercial invoices were issued by itself. Thus, when there are differences between the documents, the customs invoices with the legal validity should obviously prevail.

      1.2 According to the Sino-US textile trade negotiation results, China imposes a "voluntary quota control" on textiles exported to the United States. According to this system, the United States set a quota on textiles imported from China each year, and then the Chinese government, based on a ratio and principle, divides this quota by export permits to every province or to some large import and export companies. China must strictly follow the quota to control the textiles exported to the United States. Otherwise, the exceeding part would be forfeited or a very high fine would be imposed by the relevant U.S. agency. Thus, the importer in the United States shall import goods with the quantity strictly conforming to that stipulated in the export permit/quota schedule; otherwise, it would face forfeiture or fine. According to this system, the [Buyer] must import the goods in accordance with the export permit/quota schedule, so the quantity of the goods described in the export permit is true.

2. The [Seller] alleges that the [Buyer] forged the invoices, but the fact is that the customs invoices and the packing lists are in conformity, can be cross-proved, and constitute a chain of evidence. However, the so-called invoice provided by the [Seller] as the essential evidence, was issued by the [Seller] itself, and the quantity recorded in this invoice was unilaterally confirmed by the [Seller], but not verified by the [Buyer] or any other third party; this invoice is not in conformity with the export permit/customs invoice and the packing list, so its truthfulness should be doubted.

THE ARBITRATION TRIBUNAL'S OPINION

I. The scope of this arbitration

The [Seller] filed the arbitration application and claims only under the Sales Confirmations No. 2000STF03010Y and No. 2000STF03012Y (hereafter, "Confirmation No. 10Y " and "Confirmation No. 12Y ") and requests the Arbitration Tribunal to hear and rule on the disputes under these two Confirmations. In its response, the [Buyer] alleged that because of the continuing textile trade relationship between the [Seller] and the [Buyer], and also due to the consecutiveness and uniformity of the transactions under the two Sales Confirmations in this case and the former Sales Confirmations No. 2000STF03004YD, No. 2000STF03007Y and No. 2000STF03011Y (hereafter, Confirmations No. 04YD, No. 07Y and No. 11Y), the Arbitration Tribunal should consolidate, hear and rule on the disputes under these five Sales Confirmations.

The Arbitration Tribunal holds that although the parties performed consecutive transactions under the five Sales Confirmations, each Sales Confirmation includes an arbitration clause, the [Seller] only submitted the disputes under Confirmations No. 10Y and No. 12Y for arbitration. Accordingly, the Arbitration Tribunal shall only hear the disputes under these two Sales Confirmations; otherwise, it goes beyond the authority. Although at the first court session, the [Seller] orally agreed that the Arbitration Tribunal hear the disputes under the five Confirmations, it insisted, in the written documents submitted after and at the second court session, that the Arbitration Tribunal should hear only the disputes under Confirmations No. 10Y and No. 12Y. Thus, in order to avoid going beyond its authority, the Arbitration Tribunal decided to only hear the disputes under Confirmations No. 10Y and No. 12Y.

II. The value of the goods which the [Seller] had already delivered to the [Buyer]

The Arbitration Tribunal finds that the goods which the [Seller] delivered to the [Buyer] under these Confirmations were as follows:

      (1) Under Confirmation No. 10Y, the [Seller] delivered one container of goods (10,548 sets packed in 879 cartons) on 19 November, 2000; the B/L was No. S02023; the total price was US $94,945.80; and

      (2) Under Confirmation No. 12Y, the [Seller] delivered one container of goods (4,440 sets packed in 373 cartons) on 24 December 2000; the B/L was No. SHLAX303932; the total price was US $33,433.70.

In its response, the [Buyer] alleged that the commercial invoices provided by the [Seller] and the customs invoices were not in conformity, and that the legally valid customs invoices and B/L should prevail. The [Seller], in turn, alleges that the so-called [Seller]'s invoices provided by the [Buyer] were forged by the [Buyer] for the purpose of going through the customs clearance, so it could not be used to prove the [Seller]'s actual delivery. The Arbitration Tribunal sustains the [Seller]'s allegation for the following reasons:

      (1) The invoices and the packing lists issued by the [Seller] were in Chinese/English parallel columns; the invoices and the packing lists provided by the [Buyer] to prove its allegations were only issued in English, so the truthfulness of the evidence is doubted;

      (2) The quantity of the goods described in the invoices and the packing lists in English submitted by the [Buyer] is not in conformity with the quantity delivered by the [Seller] that has been confirmed by the [Buyer]'s fax sent to the [Seller];

      (3) After checking the quantity and value of the goods, the [Buyer]'s representative signed both the English/ Chinese invoice No. SUGS100591-A dated 24 November 2000 and issued by the [Seller] for the goods under Confirmations No. 10Y, and the English/Chinese invoice No. SUGS100601Y dated 4 December 2000 and issued by the [Seller] for the goods under Confirmation No. 12Y; the above fact shows that the [Buyer] confirmed the quantity and value of the goods recorded in the [Seller]'s English/Chinese invoices.

According to the above analysis, the Arbitration Tribunal holds that the total value of the goods delivered by the [Seller] under Confirmations No. 10Y and No. 12Y was US $ 94,945.80 + US $33,433.70 = US $128,379.50.

III. The amount which the [Buyer] had already paid to the [Seller]

The Arbitration Tribunal finds that after signing the two Sales Confirmation in this case, from 24 November 2000 to 16 March 2001, the [Buyer] had made five payments to the [Seller] totaling US $94,336 as follows:

   -    US $37,880 on 24 November 2000;
   -    US $10,500 on 21 December 2000;
   -    US $15,956 on 27 February 2001;
   -    US $10,000 on 16 March 2001; and
   -    US $20,000 on 13 April 2001.

The [Seller] alleged that among the above five payments, the first payment of US $37,880 included the unpaid amount of US $18,891.71 under the formerly signed Confirmations No. 04YD and No. 07Y, and after this amount was deducted, from 24 November 2000 to 16 March 2001 the [Buyer] made five payments for Confirmations No. 10Y and 12Y, totaling US $ 75,444.29, so the [Buyer] still owes US $128,379 .50 - US $75,444.29 = US $52,935.21.

The [Buyer] alleged because the transactions were performed consecutively, it did not check and verify the unpaid amount under Confirmations No. 04YD and No. 07Y, and had provided a mistaken acknowledgement; thus, it is necessary to recalculate the value of the goods delivered and the amount paid under the five Sales Confirmations; in addition, the [Buyer] reserves its right to file a counterclaim for the extra amount which it had paid.

After reviewing and checking the correspondence between the parties and the certificates of delivery and payments, the Arbitration Tribunal holds that it can be ascertained that the [Buyer] has already paid US $75,444.29 under Confirmations No. 10Y and No. 12Y for the following reasons:

      (1) The above first payment of US $37,880 included the unpaid amount of US $18,891.71 under Sales Confirmations No. 04YD and No. 07Y. On 16 November 2000, the [Buyer] sent a fax to the [Seller] stating that the [Buyer]'s representative, Mr. Wu Jun, agreed, "I think it is unnecessary to recalculate the unpaid amount under the former contracts, and this amount can be determined by your calculation." However, the unpaid amount described in the [Seller]'s fax sent on 13 November 2000 was US $18,891.71. In the application for payment of US $37,880 sent to the [Buyer] on 13 November 2000, the [Seller] described this amount as "the unpaid amount and the payment in advance, i.e., 20% of the contact price," which shows that the above amount included the unpaid amount under the former contracts. Thus, the unpaid amount under the former contracts, i.e., US $18,891.71, shall be deducted when the amount under the two Confirmations in this case is calculated.

      (2) If [Buyer] doubts whether there was some unpaid amount under the former contracts, the [Buyer] can file for arbitration of the disputes under the former contracts, which can be heard by another arbitration tribunal. Because the Arbitration Tribunal's authority in this case is limited to the disputes under Confirmations No. 10Y and 12Y, it need not decide whether this amount of US $18,891.71 was a mistaken account, but deduct this amount when calculating the payment made for this case according to the parties' agreement, which is within the Arbitration Tribunal's authority in this case.

IV. The [Seller]'s arbitration claims

      (1) Based on the above analysis, the Arbitration Tribunal holds that under Confirmations No. 10Y and 12Y, the value of goods which the [Seller] had already delivered to the [Buyer] was US $128,379.50, and the amount which the [Buyer] had already paid to the [Seller] was US $75,444.29, so the [Buyer] still owes the [Seller] US $52,935.21. Thus, the Arbitration Tribunal sustains the [Seller]'s first claim, which is that the [Buyer] shall pay the [Seller] US $52,935.21.

      (2) Confirmations No. 10Y and No. 12Y provided that the unpaid amount of contract price should be paid by T/T within 60 days after the goods arrived at the destination port and after the goods were shipped, respectively. The [Seller] delivered the goods under Confirmations No. 10Y and No. 12Y on 29 November 2000 and 24 December 2000, respectively, so the [Seller] claims for the interest on the contract price under the Confirmations No. 10Y and 12Y calculated from 1 June 2001 and 1 July 2001, respectively, to 1 September 2002.

The Arbitration Tribunal holds that the [Seller]'s claim for interest is reasonable, but because it is hard to accurately ascertain which payments of the five made by the [Buyer] from 24 November 2000 to 16 March 2001 were under Confirmation No. 10Y and which under No. 12Y, the interest on the contract price under both two Sales Confirmations shall be calculated from 1 July 2001. As to the annual interest rate of 7% which the [Seller] alleged, the Arbitration Tribunal holds that it should be adjusted to an annual rate of 5% according to the bank's loan rate at that time. Accordingly, the [Buyer] shall pay the [Seller] for the interest on the unpaid contract price, i.e., US $52,935.21 X 5% X 14/12 = US $3,088.

      (3) The [Buyer] shall pay the entire arbitration fee.

AWARD

The Arbitration Tribunal handed down the following award:

      (1) The [Buyer] shall pay the [Seller] for the unpaid contract price of US $52,935.21;

      (2) The [Buyer] shall compensate the [Seller] for the loss of interest on the contract price, i.e., US $3,088; and

      (3) The arbitration fee is RMB 27,493, which shall be paid by the [Buyer]. The [Seller] has prepaid RMB 27,493 to the Arbitration Commission, and this payment is fully offset by the arbitration fee, so the [Buyer] shall pay the [Seller] RMB 27,493 to compensate it for the offset amount.

      (4) The [Buyer] shall pay the [Seller] for the amount listed above in (1), (2) and (3) within 40 days after this award is handed down; otherwise, interest shall be added at the annual rate of 8%.

This is the final award.


FOOTNOTES

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

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

*** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

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Pace Law School Institute of International Commercial Law - Last updated February 8, 2008
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