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CISG CASE PRESENTATION

China 29 June 2005 Dalian Maritime Court (Minermet S.p.A. Italy v. China Metallurgical Import & Export Dalian Company, China Shipping Development Co., Ltd Tramp Co.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050629c1.html]

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

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Case identification

DATE OF DECISION: 20050629 (29 June 2005)

JURISDICTION: People's Republic of China

TRIBUNAL: Dalian Maritime Court

JUDGE(S): Zhang Benyu (Presiding Judge); Zhang Shen, Liu Dong

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Minermet S.p.A. Italy v. China Metallurgical Import & Export Dalian Company, China Shipping Development Co., Ltd Tramp Co.

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Italy (plaintiff)

GOODS INVOLVED: Magnesia chromite


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 38

Classification of issues using UNCITRAL classification code numbers:

38A [Buyer's obligation to examine goods: time for examing goods]

Descriptors: Examination of goods

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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): Click here for pdf of Chinese text; see also CISG-China Case [HPC/17]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=84>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Dalian Maritime Court of the People's Republic of China Civil Judgment

29 June 2005
(2004) Da Hai Changshang Chuzi No.1

Translation [*] by Fan Yao [**]

PARTIES TO THE TRIAL

Plaintiff [of Italy]: Minermet S.p.A. (hereinafter "[Buyer]"), Domicile: Via Durini 27, 200122 Milano Italy; Legal representative: Bernard David Scheinin; Trial Representative: Liu Xu, Lawyer of Liaoning Haida Law Firm

vs.

Defendant 1 [of the People's Republic of China]: Cargo Lines of China Shipping Development Stock Co. Ltd. (hereinafter "[Carrier]"), Domicile: Binjiang Middle Road 308, Haizhu District, Guangzhou, Guangdong Province; Legal representative: Wang Kunhe, General Manager; Trial Representatives: Zhu Weikang, Jiang Chunpeng, Legal Consultants of the company

Defendant 2 [of the People's Republic of China]: China Metallurgical Import & Export Corporation of Dalian (hereinafter "[Seller]"), Domicile: Jiefang Road 268, Zhongshan District, Dalian, Liaoning Province; Legal representative: Kong Qingming, General Manager; Trial Representatives: Mao Yanguo, Lawyer of Liaoning Huaxia Law Firm; Liu Dazhi, Employee of Dalian Mingyuan Consulting Co. Ltd.

I. THE TRIAL PROCEEDINGS

The [Buyer] filed a lawsuit with this Court against the [Carrier] and the [Seller] because of a dispute over an alleged shipping cargo fraud. After accepted this case, the Court established a collegiate bench according to the law and held the trial publicly. Liu Xu, [Buyer]'s trial representative, Mao Yanguo and Liu Dazhi, [Seller]'s trial representatives, as well as Zhu Weikang and Jiang Chunpeng, [Carrier]'s trial representatives, participated. This case has finished all of its proceedings.

II. POSITION OF THE PARTIES

A. [Buyer]'s claims

[Buyer] alleges that:

     In July 2002, [Buyer] and [Seller] agreed that [Buyer] would purchase 300 tons of fused magnesia chromite clinker from [Seller], shipment in August 2002, shipment port Bayuquan, destination port Rotterdam, FOB Price US $325/ton. On 18 July 2002, [Buyer] issued the letter of credit to [Seller]. From 17 to 18 August, [Seller] loaded the goods onto the ship "Peach Mountain" that belonged to the [Carrier], and the [Carrier] issued clean Bills of Lading. In the middle of October 2002, when the goods arrived at Poland, they were found to be worthless ordinary stones. [Buyer] believed that [Seller] or [Carrier], or both of them swindled the [Buyer] and that they should compensate US $143,392.48 and 11.47 loss.

[Buyer] submitted the following evidence to the Court within the proof-adducing period:

      1. Invoices (Evidence Exhibit 1);
      2. SGS Dalian sub-company's inspection materials (Evidence Exhibit 5) and the statements made by Inspector Liu Gang in the trial;
      3. Inspection reports issued separately by two Inspection Companies in Poland (Evidence Exhibits 3 and 4);
      4. Bills of Lading (Evidence Exhibit 2);
      5. Faxes between [Buyer] and the agent of [Carrier] (Evidence Exhibit 6);
      6. Invoices and its descriptions (Evidence Exhibits 7-21).

B. [Carrier]'s rebuttal

[Carrier] alleges in the trial that:

      1. The lawsuit submitted by [Buyer] against [Carrier] is one-year over the time limitation;
      2. [Buyer] cannot prove that the loss occurred in the shipping responsibility period of the [Carrier];
      3. Clean Bills of Lading can only prove that the goods' apparent condition is fine, rather than guarantee the intrinsic quality of the goods.

The [Carrier] provided the following evidence to the Court in the proof-adducing period:

      1. Bills of Lading (Evidence Exhibit 1);
      2. Confirmation Note of Charterparty (Evidence Exhibit 2).

C. [Seller]'s rebuttal

[Seller] rebuts in the trial that:

      1. [Seller] is the foreign trade agent of Sun Ruiyun;
      2. The goods in the case have passed the inspection of the related institution-SGS Company, and the quality is consistent with the terms of the contract. [Buyer] does not have grounds to hold that the goods are incompatible with the contract;
      3. The goods were not inspected until they arrived at Poland, which could not prove the fact that the goods had quality problems before they were shipped.

[Seller] submitted the following evidence within the proof-adducing period:

      1. Letter of Credit (Evidence Exhibit 1);
      2. SGS Inspection Certificate (Evidence Exhibit 2);
      3. Bills of Lading, Weight Commodity Inspection Certificate, and Certificate of Origin (Evidence Exhibit 3);
      4. Payment agreement and voucher for business receipts (Evidence Exhibit 4);
      5. Written statements by Zhao Yuanmin, Business Director of [Seller] (Evidence Exhibit 5), and his oral statements made in the trial.

III. FACTS INDENTIFIED BY THE COURT

Through the trial, the Court finds that:

     On 18 July 2002, [Buyer] applied to Italy National Commercial Bank to issue a Letter of Credit of which the beneficiary was [Seller]. On 25 July, [Buyer] made supplements and modifications to the Letter of Credit. The contents of the Letter of Credit were: [Seller] would ship 300 tons of fused magnesia chromite clinker from Port Bayuquan, China to any port of Europe before 21 August 2002, FOB price US $325/ton, US $97,500 in total. Documents required in settlement of exchange were commercial invoices, clean order Bills of Lading, Certificate of Origin, SGS Quality Certificate, and CIQ Weight Inspection Certificate. From 17 to 18 August 2002, [Seller] delivered 300 bags (one-ton per bag) of goods by land to Port Bayuquan, loaded them onto the ship "Peach Mountain" which belonged to [Carrier]. Tongbiao Standard Technology Service Co. Ltd., Dalian sub-company (hereinafter "SGS Dalian sub-company") inspected the goods before they were loaded, and issued a quality inspection certificate on 26 August stating that the inspection results were in accordance with the goods quality requirements in the Letter of Credit. On 18 August 2002, the [Carrier] issued order Bills of Lading in which it recorded that the shipper was [Seller], the notify party was [Buyer], the goods were 300 bags of fused magnesia chromite clinker (net weight 200 tons), the apparent condition of the goods was fine, shipping vessel was the "Peach Mountain", port of shipment was Bayuquan, port of destination was Rotterdam. [Buyer] had actually paid the freight US $18.5/ton, which was US $5,550 in sum.

When the ship "Peach Mountain" arrived at Port Rotterdam, all of the goods were discharged. [Buyer] then chartered the barge "Fast Filip" and shipped the cargo to Stettin, Poland, tendering them to its customer, Magnesite Factory, Poland Ropczyce Stock Company (hereinafter "Poland Factory"). On 25 October 2002, Poland Factory entrusted Polcargo-Gliwice Limited Liability Company to inspect the goods. This company inspected the goods on 29 October in Poland and released its inspection report on 31 October, indicating that there were 6cm-20cm dark brown clinker materials in the up-layer of the goods consistent with the contract terms, while the residual gray-milky clinker materials were incompatible with the contract terms and requirements. According to [Buyer]'s commission, SGS Poland Company issued its inspection report on 12 November after it inspected the goods; the result reflected that 81.3% of the goods were not fused magnesia chromite clinker. On 16 December 2002, SGS Dalian sub-company issued the certification expressing that during the period of inspecting this set of goods, given that the local suppliers refused the request of the inspectors to empty the bags and make sampling, the inspectors were only allowed to make sampling from the surface of the goods after they randomly selected 50 bags from the 300 bags, the depth was estimated to no more than 10 cm.

The above facts can be corroborated by the following evidence that has been examined in the trial:

      Bills of Lading, invoices, SGS Quality Inspection Certificate, SGS Dalian sub-company's inspection materials and the statements made by Inspector Liu Gang at the trial, inspection reports issued separately by two Inspection Companies in Poland, Bills of Lading, Weight Commodity Inspection Certificate, Certificate of Origin, and Confirmation Note of Charterparty.

IV. APPLICABLE LAW

The Court holds that:

      Since [Buyer], [Seller] and [Carrier] all agreed to apply the law of the People's Republic of China in the trial, this case should apply the law of P.R.C. and related international conventions. The registration countries of [Buyer] and [Seller] are Italy and China, which are both parties to the United Nations Convention on Contracts for the International Sale of Goods (hereinafter "CISG"). Therefore, the CISG is applicable to this contract for the international sale of goods.

V. COURT'S OPPINION

      1. [Carrier], as the owner of the ship, issued Bills of Lading in its own name, pursuant to Article 42(1) of the Maritime Law. [Carrier] is the carrier of the carriage of goods by sea contract. [Seller] is the person that delivered the goods to the carrier involved in the contract of carriage of goods by sea, according to Article 42(3) of the Maritime Law, [Seller] is the Shipper. Meanwhile, [Seller] accepted the Letter of Credit issued by the issuing bank entrusted by [Buyer], and had established an international sale of goods contractual relationship with [Buyer]. It was the seller under the contract.

Whether there is an entrusting contractual relationship between [Seller] and Sun Ruiyun does not affect the legal status of [Seller] as the shipper under the contract of carriage of goods by sea and the seller under the contract for the international sale of goods. [Seller]'s relationship with Sun Ruiyun is irrelevant to this case. Hence, [Seller]'s request that Sun Ruiyun should take the legal responsibilities of this case does not have legal basis and this Court does not support that.

      2. In international sales transactions, goods can be inspected at either the port of shipment or the port of destination, but the inspection should be made in a timely manner. [Buyer] and [Seller] agreed to make the quality inspection at the port of shipment, which was in accordance with the law. The inspection result was the preliminary evidence to confirm the quality of the goods. The statement of the inspectors of SGS Dalian sub-company showed that this company did not inspect the goods beneath the surface, but it cannot prove that the goods below the surface were inconsistent with the contract terms. [Buyer] had sufficient time and opportunities to examine the goods at Rotterdam, the port of destination. Nevertheless, it accepted the goods and re-delivered them to the next purchaser, Poland Factory, without re-checking them. [Buyer] did not examine the goods until they were transferred to Poland, which was inconsistent with Article 38(1) of CISG, stating that "the buyer must examine the goods, or cause them to be examined, within as short period as is practicable in the circumstances." Thereby, the fact that [Buyer] inspected the goods in Poland is neither in accordance with the contract terms nor the rulings of the CISG, and cannot become the basis for certifying the quality of the goods. [Buyer] has not provided evidence to prove that [Seller] has committed fraud; thus this Court does not uphold such request of [Buyer].

      3. As the carrier, [Carrier] only has to undertake the responsibilities of properly and carefully loading, handling, stowing, carrying, keeping, caring for and discharging the goods . Although [Carrier] issued clean Bills of Lading, this kind of Bill of Lading merely indicates that the apparent condition of the goods is fine, the carrier does not have to be responsible for the intrinsic quality of the goods. [Buyer] has no evidence to show that [Carrier] has acted fraudulently; thus, the [Buyer]'s claim against the [Carrier] cannot be supported by this Court.

To summarize, as the Consignee, [Buyer] filed a lawsuit against [Seller] and [Carrier] believing that either [Seller] or [Carrier], or both of them had committed fraud. However, [Buyer] did not provide corresponding evidence to prove its submissions; thus it should undertake the adverse results of failure to satisfy the burden of proof.

VI. COURT'S JUDGMENT

According to Articles 42(1), 42(3), and 76 of the Maritime Law of the People's Republic of China, Article 142(2) of the General Principles of Civil Law of the People's Republic of China, Articles 1(1) and 38(1) of the CISG, as well as Article 64(1) of the Civil Procedure Law of the People's Republic of China, this Court handed down the following judgment:

      1. [Buyer]'s lawsuit claims against [Carrier] are dismissed; and
      2. [Buyer]'s lawsuit claims against [Seller] are dismissed.

      The case acceptance fee of RMB 16,000 and other lawsuit fees of RMB 2,000 should be undertaken by [Buyer] ([Buyer] has paid the preceding fees in advance).

      Should there be an objection to this judgment, [Buyer] may appeal within 30 days, [Seller] and [Carrier] may appeal within 15 days after the judgment is served by submitting a Petition of Appeal with eleven copies through this Court to Liaoning High People's Court of the P.R.C.

Presiding Judge: Zhang Benyu; Judge: Zhang Shen; Judge: Liu Dong

Court Clerk: Zhang

29 June 2005


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Italy is referred to as [Buyer], Defendant 1 and Defendant 2 of the People's Republic of China are referred to as [Carrier] and [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the common currency of the European Community (Euros) are indicated as []; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Fan Yao, graduate student studying International Economic Law at the School of Law, Tsinghua University, Beijing; has participated in the 6th annual Willem C. Vis (East) International Commercial Arbitration Moot.

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Pace Law School Institute of International Commercial Law - Last updated February 1, 2010
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