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CISG CASE PRESENTATION

China 16 December 1991 CIETAC Arbitration proceeding (Cold-rolled steel plates case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/911216c1.html]

Primary source(s) for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19911216 (16 December 1991)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1991/05

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: [-] (respondent)

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

GOODS INVOLVED: Cold-rolled steel plates


Case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 16 December 1991 (Cold-rolled steel plates case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/84],
CLOUT abstract no. 858

Reproduced with permission of UNCITRAL

Abstract prepared by Meihua Xu

A Chinese buyer (claimant) and a seller (respondent, believed to be from Germany) entered into a contract for the sale of cold-rolled steel plates. The buyer received the goods delivered to the first destination port. It then trans-shipped them to the second destination. Following an inspection at the second destination, the buyer alleged that the packaging of the goods did not conform to the contract and that rust was present on the goods. The buyer asserted that the goods either became rusty before they passed the ship's rail or were improperly packaged, and filed the arbitration application.

The Arbitration Tribunal held that according to article 38 CISG, the buyer should have inspected the goods at the first destination port, the buyer's failure to do so, its delay in inspecting the goods and inability to preserve them properly during transshipment, led to increased damages for which the buyer should be liable. However, the seller was to be considered liable for improper packaging and some of the damages claimed by the buyer. The seller was accordingly sentenced to refund the buyer.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Articles 9 ; 38 ; 74 ; 77

Classification of issues using UNCITRAL classification code numbers:

9A [International usages];

38A ; 38B ; 38C [Buyer's obligation to examine goods: time for examining goods; Deferral of examination in case of redirection or redispatch];

74A [General rules for measuring damages: loss suffered as consequence of breach];

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

Descriptors: Usages and practices ; Examination of goods ; Damages ; Mitigation of loss

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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): Zhongguo Guoji Jingji Maoyi Zhongcai Caijueshu Xuanbian (1989-1995), (Beijing 1997) No. 80 [477-489]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

Cold-rolled steel plates case (16 December 1991)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

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

   -    The arbitration clause in Contract No. 0485 signed by Claimant [Buyer], __ Machinery Company [of China], and Respondent [Seller], VAI GmbH, on 25 August 1989; and
 
   -    The written arbitration application submitted by [Buyer] on 28 September 1990.

According to the Arbitration Rules, the Arbitration Commission formed the Arbitration Tribunal consisting of ________, the Presiding Arbitrator, and arbitrators_______ and _______.

The Arbitration Tribunal examined the [Buyer]'s arbitration application, the [Seller]'s arbitration defense and evidence submitted by them, and held court sessions in Beijing on 12 March 1991 and 19 June 1991. The [Buyer] and the [Seller] sent representatives to the court sessions. They made oral statements and arguments, and submitted supplementary materials and evidence. On 31 August 1991, accompanied by the [Buyer] and the [Seller], the Arbitration Tribunal went to the site where the goods were stored and conducted a sampling inspection.

Based on the evidence and the court sessions, the Arbitration Tribunal rendered this award by consent.

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

I. FACTS

On 25 August 1989, the [Seller] and the [Buyer] entered into Contract No. 0485, according to which the [Buyer] was to purchase 900 tons of cold-rolled steel plates, totaling US $498,600 C&F Xingang; 3% more or less loading was allowed by the contract.

The [Seller] in fact delivered 873.13 tons of goods, totaling US $483,714.02, which arrived at Xingang on 20 April 1990. After taking delivery of the goods on 10 May, the [Buyer] stored the goods in its warehouse in Beijing, and on 1 July 1990, Beijing Import and Export Commodity Inspection Bureau (hereafter, "Beijing CIB") issued Inspection Certificate No ___, stating that:

"The entire surfaces of the containers of the goods were covered with rust to different extents without moisture proof marks; most of the containers were damaged or deformed; there were no moisture proof papers on the bottom and part of the edges and sides of the goods; surfaces of part of the goods were covered with rust in different extent;" and concluded that

"The rust on the goods was caused by packaging without adding moisture proof marks; improper moisture proof method; the woods used to support the goods were too thin, which could not sustain the weight of the goods and broke easily causing deformation of the packages."

The parties negotiated several times afterward without reaching an agreement on resolving the problem. The [Buyer] filed the arbitration application on 28 September 1990.

II. POSITION OF THE PARTIES

A. [Buyer]'s position

The [Buyer] alleges that the fundamental reason for the occurrence of the aforesaid problems was that the packages of the goods did not conform to the contract. Among the 317 pieces of goods received by the [Buyer], 187 of them had broken wooden pallets, 54 had damaged containers and torn cover papers on the side; 73 containers had severe rust; and that these problems affected over 80% of the entire shipment.

The [Buyer] entrusted the Wood Industry Research Center to analyze the reason for the broken wooden pallets, according to whose analysis, the supporting wood A was European red pinewood with bending resistance of 761kgf/cm². Calculating based on 98 × 40mm × 2850mm (length), it was concluded that without specifying that the goods must be hung up piece-by-piece during loading, 1/2~1/3 of wood A might break. Therefore, the [Buyer] alleges that the width and length of the wood used by the [Seller] could not sustain the pressure when hanging up the goods. In addition, the [Buyer] points out that no caution marks for transportation and storage were found on the packages, which was necessary.

For the above reasons, the [Buyer] asserts that the [Seller] sold the goods to the [Buyer] with defective containers that were stored in warehouse for an unknown period of time, with the result that the [Buyer] suffered severe economic loss of renminbi [RMB] 2,081,000; therefore, the [Buyer] asks for return of the goods, refund of payment, and compensation of damages.

B. [Seller]'s position

The [Seller] counter argues that the containers of the goods were in compliance with the contract requirement and international standards. On 19 February 1990, when the goods were loaded onto the ship named after Xinyang in Hamburg, the Bill of Loading (B/L) issued by the carrier was clean. The [Seller] called the [Buyer] on 15 May 1990 when it was informed by the [Buyer] that the containers were damaged, stating that the goods and the containers had no problem when they were loaded, and that the problem mentioned by the [Buyer] could only have occurred during the sea transportation or the unloading process. The [Seller] therefore suggested that the [Buyer] contact the carrier and the insurance company and refused the [Buyer]'s claim for return of the goods, refund of the payment, and compensation of damages.

[Other issues and positions of the parties]

In addition to the aforesaid problem, the following issues are also in dispute between the [Buyer] and the [Seller]:

      (1) Origin and manufacturer of the goods

       The [Buyer] argues that according to Article 2 of the contract, the origin and manufacturer was indicated as SEVA; however, the [Seller] tampered with it without consent by the [Buyer] by adding "INT/AUSTRIA (SEIT)" after SEVA using a thin dotted line, which was difficult to discover. The [Seller]'s tampering with the contract was to promote a third party's defective goods and to change the original origin and manufacturer of the goods to a third party unacceptable to the [Buyer].

The [Seller] points out that the day before signing the contract, which was 24 August 1989, the [Seller] wrote clearly in the fax sent to the [Buyer] that the goods were from East Germany (E.K.O./G.D.R). Later, after the [Buyer] sent the contract form prepared and signed by it to the [Seller] for signature, the [Buyer] has accepted the [Seller]'s suggestion to modify Article 2 of the contract by deleting "origin and manufacturer" and changing SEVA to SEIT with seal on it on the telephone. The [Buyer] never raised objection to this. Moreover, the [Buyer] raised no objection to the invoice issued by the [Seller] on 19 February 1990 with the manufacturer indicated as East Germany E.K.O.

The [Buyer] rebuts that the [Seller] did called the [Buyer] regarding the modification of Article 2 of the contract, but alleges that the [Buyer] never agreed to this.

      (2) The clean B/L

      The [Buyer] alleges that although the B/L received by the [Buyer] was clean, the [Seller] issued a Letter of Indemnity to the carrier on 19 February 1990, which stated that "the following facts have been confirmed and all rust was on the containers. In order to avoid misunderstanding by a third party, we request not to mention the above issue in the B/L" The [Buyer] therefore asserts that the [Seller]'s issuance of the Letter of Indemnity without informing the [Buyer] was to conceal the facts intentionally, which constituted a fraud.

The [Seller] defends that when there are minor defects on the package of the goods, as a trade usage, the carrier would request the owner of the goods to issue a Letter of Indemnity to avoid misunderstanding and to prevent the carrier from suffering damages. China Ocean Shipping Company (COSCO), a Chinese state-owned transportation company, knowing of this trade usage, asked the [Seller] to issue this Letter of Indemnity only because there was rust on the containers of the goods and raised no objection to the package, which proved that the containers were fine when the goods passed the ship's rail.

      (3) Quality of the goods

       The [Buyer] showed pictures at the court session, pointing out that there were red and white labels on the containers. "The white label was marked with the contract number, and the steel plates used to make the container were covered with rust after tearing off the label; however, the steel plates were new if tearing off the red one, which proved that the goods delivered by the [Seller] were not brand new".

The [Buyer] also mentioned that after checking the goods on the spot, big irregular grey-black rust was found over the surfaces of the sample goods, and according to the inspection certificate issued by Beijing CIB, "(1) FeO was found in the rust after corrosion, and no Cl, Na, Ca were found, which excluded the possibility that rain or sea water caused the rust. (2) The steel has been rusty and corroded for a long time." Thus, the [Buyer] asserts that this proves that the rust existed before the goods passed the ship's rail.

The [Seller] rebuts alleging that the goods delivered were new, and had not been stored in the warehouse for a long time. The [Seller] was planning to load the goods between 27 December 1989 and 3 January 1990; however, the [Buyer] did not issue the L/C until 12 January 1990. Therefore, the [Seller] had to postpone taking delivery of the goods from the manufacturer. The goods were stored in the warehouse for at most 60 days because of the [Buyer]'s delay in issuing the L/C. The [Seller] also argues that from the pictures provided by the [Buyer] at the court session, it could be found that "most of the rust was at the edges of the goods, which indicated that it was caused by fresh water entered into from the damaged containers after improper unloading." Since the containers had no problem when they were loaded in Hamburg, and they were stored outdoors in Beijing after being unloaded at Xingang in April 1990 under conditions in which the containers were damaged and moisture-proof paper fell off. The inspection result that the rust occurred quite early was not unexpected, but the [Buyer] bears the entire responsibility.

      (4) The effectiveness of the inspection certificate

       The [Seller] argues that having the goods inspected in Beijing was not in compliance with the contract, and the result cannot be the basis for compensation.

The [Buyer] counter argues that Article 5 of the contract stipulates that the goods should be inspected at destination, which was different from port of destination as mentioned in Article 7 of the contract. The [Buyer] further quotes Article 38(2) of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, the "CISG") to support its assertion that having goods inspected at destination, Beijing, conformed with the contract, and that the inspection certificate is effective.

      (5) Packaging

       The [Buyer] alleges that the contract stipulates that the packages of the goods should be containers made by steel plates; however, the goods delivered by the [Seller] were covered with envelopes made of several steel plates without stable connections, which did not conform to the contract. The [Buyer] could not even call them "envelopes," because the steel plates did not cover the goods completely, and there were gaps in the middle or edges of them, which could not protect the goods or prevent the goods from getting rusty.

The [Seller] argues that container and envelope have the same meaning in packaging terminology in the metal industry. The [Seller] submitted a letter sent by the manufacturer, E.K.O, on 14 July 1991, which proved that the goods under Contract No. 0485 were packaged in the manner usual for long distance transportation, which was admitted internationally.

Furthermore, the [Seller] states that the wood used for packaging cover was 80 × 80mm and 100 × 40mm, which is affirmed in the Inspection Certificate; however, the Wood Industry Research Center did its calculation based on 80 × 70mm and 98 × 40mm, which could not be applied in this case.

[Buyer's claim]

Based on the above, the [Buyer] alleges that the [Seller] has fundamentally breached the contract, and asks the Arbitration Tribunal to rule that:

1. The contract is avoided; the [Seller] shall make disposal of the goods; the [Seller] shall return the payment of the goods of US $483,714.02, transportation fee, and insurance fee, or entrust the [Buyer] to resell the goods to a third party, and pay the price difference between the price for resale (deducting customs, tax, other governmental charges, and reasonable costs for performing the resale contract) and the original contract price for the goods, transportation fee, and insurance fee;

2. The [Seller] shall compensate the [Buyer]'s other losses:

(1) Loss of customs charge of RMB 756,000 (to be confirmed by Customs);
(2) Loss of bank loan interest of RMB 282,338 (calculated to 12 April 1991);
(3) Storage fee of RMB 32,642 (calculated to the end of March 1991);
(4) Inspection charges of RMB 9,000;
(5) Damages of RMB 180,000 caused by stopping production;
(6) Arbitration fee and attorneys' fee (to be calculated)

The [Seller] asks the [Buyer] to pay the actual costs for resolving this contractual dispute: US $16,543.10.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) Applicable law

The contract was concluded in Beijing, and most of the issues in dispute occurred in Beijing, therefore, the laws of the PRC should be applied.

According to Article 6 of the Law of the Peoples' Republic of China on Economic Contracts Involving Foreign Interest, the CISG is also applicable.

(2) Issues in dispute

The Arbitration Tribunal identifies the issues in dispute in this case as:

  1. The damages on the containers of the goods; and
  2. The quality of the goods.

The two issues are related.

(3) The damages on the containers of the goods

The Arbitration Tribunal notes that the parties have no dispute on the present condition of the containers, instead they dispute when the damages occurred, what the causes were, and who should take the responsibility. In order to get the answer, it is essential to know the condition of the containers when the goods were unloaded after arrived at Xingang.

The Arbitration Tribunal notes that the [Buyer] did not inspect the goods at Xingang, but in Beijing.

Trying to explain the reasons for its not inspecting the goods at Xingang, the [Buyer] repeatedly quoted Article 38 CISG. The Arbitration Tribunal holds that Article 38(2) CISG stipulates that: "if the contract involving carriage of the goods, examination may be deferred until after the goods have arrived at their destination." However, the goods were transported from Hamburg to Xingang, and the contract clearly indicated that the destination port was Xingang; therefore, the [Buyer] should have inspected the goods at Xingang.

The [Buyer] also quoted Article 38(3) to support its reason for not having the goods inspected at Xingang. However, the [Buyer] failed to submit evidence to prove that the [Seller] knew or ought to have known that the goods were to be redirected to Beijing at the conclusion of the contract; therefore, the Arbitration tribunal holds that Article 38(3) CISG cannot be applied in this case.

The agent of the [Buyer] stated in the supplementary opinion submitted on 5 September 1991 that "the inspection agency's inspecting the goods in Beijing instead of at Xingang was based on relevant articles and trade usages for commodity inspection in China, and the [Buyer] did nothing wrong regarding inspection." The Arbitration Tribunal points out that pursuant to Article 6 of the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest, the [Buyer]'s aforesaid assertion could not be accepted.

The Arbitration Tribunal notes that according to Article 38(1) CISG, "the buyer must examine the goods, or cause them to be examined within as short a period as is practicable in the circumstances." The goods in this case arrived at Xingang on 20 April 1990; however, the [Buyer] did not inspect the goods until 1 July, which was two months later and exceeded the "practicable short period."

The primary dispute in this case is the damages on the containers. To examine the containers especially to inspect whether there were damages on them needs neither special tools or equipment, nor special skills or technology, which could have been done by the [Buyer] at Xingang. However, the [Buyer] failed to do so, and also failed to submit evidence proving the condition of the entire containers when the goods were at Xingang.

The only materials available to the Arbitration Tribunal are the "Report on the Quality of the Goods Issued by Guangzhou Ocean Transportation Company Xinyang Ship No. 81 Shipment" and the Damage List issued by China Ocean Shipping Tally Company. The records on the two documents are the same: nine pieces of 317 pieces "bundles off" and four pieces "cover torn".

Even though the quality report and damage list are not inspection certificates or a basis for compensation, based on the existing evidence, which can prove what happened in fact, the Arbitration Tribunal deems that among 317 pieces of goods, the containers of thirteen pieces were damaged to a certain extent, and that the remaining part were in good condition.

The [Buyer] not only failed to inspect the goods at Xingang, but also to preserve the goods properly by transporting the goods to Beijing after it knew or ought to have known that the containers of thirteen pieces of goods had been damaged.

The Arbitration Tribunal examined Inspection Certificate No. ___ issued by Beijing CIB on 1 July 1990, and deems that this inspection certificate indicates the condition of the goods two months after they were redirected to Beijing.

The Arbitration Tribunal notes that according to the evaluation part of the Inspection Certificate, "the wood for supporting was too thin, which breaks easily and could not sustain the weight of the goods during loading and unloading." From a technical point of view, the damaged containers could have been caused by the broken wooden pallet, which could have been prevented by the [Buyer] in advance. As a matter of fact, according to the testing report issued by China Forestry Science Research Institute Lumber Industry Research Center on 20 July 1990, even calculated based on a smaller section, if the steel plates had been hung up piece-by-piece, the bending pressure sustained by wooden pallet should be lower than the bending resistance, and the wooden pallet could not be broken, although this process could be inconvenient for the [Buyer] and increase the costs.

Above all, the Arbitration Tribunal concludes that substantive damages on the containers occurred during the transportation and loading process from Xingang to Beijing and that this was due to the [Buyer]'s failure to take necessary measures to preserve the goods.

(4) The quality of the goods

Based on the oral statement, materials, and pictures provided by the [Buyer], the quality problems alleged by the [Buyer] were not the chemical content, stretching resistance, or hardness of the goods, but the rust on the steel plates caused by outside factors; therefore, the Arbitration Tribunal deems that the parties have disputed not on the quality of the steel plates, but on when the rust on the steel plates occurred, what was the cause of rust, and who should be responsible.

The Arbitration Tribunal notes that the inspection certificate issued by Beijing CIB indicates that the rust on the steel plates was caused by deformed and damaged containers. According to section 3 of the certificate, the deformation and damage occurred after the [Buyer]'s failure to take reasonable measures to preserve the goods and had transported the goods from Xingang to Beijing. The inspection was conducted more than two months afterwards; therefore, it could be concluded that the rust caused by the deformation and damages of the containers was enlarged damages due to the [Buyer]'s failure to take reasonable measures to preserve the goods.

According to Article 22 of the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest and Article 77 of the CISG, the [Buyer] has no right to claim damages for the enlarged loss caused by its failure to take reasonable measures to preserve the goods.

The Arbitration Tribunal notes that the [Buyer] mentioned repeatedly in oral or in written statement that "the steel plates had rust before passing the ship's rail" and submitted an inspection report issued by Beijing CIB on 20 July 1990, which indicated that "1. FeO was found due to corrosion, no element of Cl, Na, or Ca was found, thus, corrosion by rain or sea water can be excluded; 2. The estimated time of occurrence of rust might be early."

In order to make clear the [Buyer]'s aforesaid conclusion, the Arbitration Tribunal asked the [Buyer] to answer the following two questions.

      1. Rain contains no Cl, Na, or Ca. Why can one exclude the possibility of corrosion caused by rain just because no such elements were found?

      2. How early is so-called "rust occurred early"?

The [Buyer] submitted a letter sent by Beijing CIB on 25 June 1991, in which the first question asked by the Arbitration Tribunal was not answered. For the second question, an answer was provided that "due to the differences in the conditions of storage, transportation and natural environment, the exact time of corrosion cannot be concluded, and for the same reason, the causes for corrosion are also complicated." Therefore, the Arbitration Tribunal concludes that this letter cannot be the basis for concluding that the steel plates had rust before passing the ship's rail.

In order to make it clear whether it can be concluded that the steel plates had rust before passing the ship's rail, the Arbitration Tribunal held that it was necessary to check the goods with perfect containers on the spot.

On 31 August 1991, the Arbitration Tribunal went to the site stored with the steel plates with the two parties. The representatives of the two parties chose two pieces of goods with relatively perfect containers. After unpacking and checking 24 pieces of steel plates, it was found that:

(1)  The steel plate right next to the moisture-proof paper has severe rust;
(2)  One steel plate has an about 1cm² irregular rust;
(3)  There is a 10cm² triangle rust at the corner of one steel plate;
(4)  Edges of the majority of the steel plates have minor rust;
(5)  Powdery yellow dots are found on the edges of some steel plates,
     which disappear by finger touch and appear metal gloss.

Pictures were taken of the aforesaid goods, and the two parties were required to provide explanations. On 5 and 9 September 1991, the two parties submitted supplementary materials. Based on its own observation and after consulting professionals, and referencing the supplementary materials provided by the two parties, the Arbitration Tribunal concludes that:

      1. The above check was done after the goods had been stored for one year and four months, and the condition observed was the condition after long-time storage.

      2. Except for the steel plate right next to the moisture-proof paper, the other steel plates have minor rust, especially the irregular rust and triangle rust mentioned in above (2) and (3); thus the rust marks occurred occasionally.

      3. From the facts that the moisture proof paper adhered to the steel plate and the rust was concentrated where they adhered, it can be concluded that the rust on the steel plate right next to the moisture-proof paper was caused by long-time storage, with the result, the moisture-proof paper deteriorated and had reaction to rust-proof oil.

      4. Based on above, [Buyer]'s assertion that the rust existed before the steel plates passed the ship's rail cannot be accepted.

      5. The rust on the steel plates relates to storage for one year and four months; however, it also reflects some insufficiency on the goods' packaging, moisture proofing, and rust proofing.

(5) Package of the goods and moisture-proof, rust-proof issues

The Arbitration Tribunal examined the packaging requirement in the contract and holds that except for lacking some labels, the [Seller] packaged the goods in accordance with the contract. The inspection of the goods with relatively perfect containers also indicates that the containers can protect the goods during sea transportation and within a reasonable storage period.

The Arbitration Tribunal notes that there was no stipulation regarding a quality warranty in Article 14 of the contract; therefore, it can be supposed that had the [Buyer] taken reasonable measures to preserve the goods when receiving them at Xingang instead of simply storing them for a long time, the steel plates should have been in good condition.

However, the Arbitration Tribunal must point out that the [Seller]'s packaging of the goods and its moisture proof and rust proof procedures were insufficient. As mentioned in Section (4), the 1cm² irregular rust on one steel plate and the 10cm² triangle rust on the other one demonstrate that there were missing points or weak points in applying the rust-proof oil. The wooden pallet was too thin. Even though the [Buyer] could have and should have taken reasonable measures to prevent their breaking, such as hanging up the goods piece-by-piece, it would be inconvenient and add extra costs to the [Buyer].

Regarding the fact that the containers were damaged when they arrived at Xingang, the Arbitration Tribunal notes that according to the stipulation in the contract that the [Seller] shall be liable for the damages and rust of the goods due to improper packaging, the [Seller] shall take proportional responsibility for the rust on thirteen pieces of goods.

(6) The origin and manufacturer of the goods

The Arbitration Tribunal examined the original contract and holds that it is obvious that the [Seller] made changes to the contract and sealed it, and that the [Buyer]'s raising no objection during the performance of the contract could be considered an acceptance of the modification. In addition, the identification of the manufacturer, namely the E.K.O, was expressly indicated on the invoice issued by the [Seller], but the [Buyer] made no objection to it. Therefore, the [Buyer]'s assertion that the [Seller] tampered with the contract cannot be accepted.

(7) The letter of indemnity

The letter of indemnity to the carrier is a contract between the [Seller] and the carrier, which is beyond the scope of this case; therefore, the Arbitration Tribunal will not hand down an opinion on this.

(8) The Tribunal's conclusion

Based on the above, the Arbitration Tribunal concludes that:

      1. There are insufficiencies in the [Seller]'s packaging of the goods and rust proof, and moisture proof procedures;

      2. Containers of thirteen pieces of goods were damaged and there was rust on those goods;

      3. The above caused inconvenience and extra costs to the [Buyer]

The Arbitration Tribunal therefore rules that the [Seller] shall compensate the [Buyer] US $20,000 with no interest.

(9) [Seller]'s counterclaim for costs

For the [Seller]'s claim for compensation, the Arbitration Tribunal holds that although this seems to be a reasonable expense incurred to resolve the dispute, the [Seller] failed to follow the procedure for filing a counterclaim as provided in Article 9 of the Arbitration Rules; therefore, this claim of the [Seller' is dismissed

(10) The arbitration fee

[Buyer] shall pay 80% of the arbitration fee and [Seller] shall pay 20%.

III. THE AWARD

1.  [Seller] shall compensate the [Buyer] US $20,000;

2.  [Buyer]'s other claims are dismissed;

3.  The [Buyer] shall pay 80% of the arbitration fee; the [Seller] shall pay 20%.

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] and Respondent, believed to be of Germany, 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].

** 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.

*** John W. Zhu, LL.M. China University of Political Science and Law (National Graduate Scholarship); Bachelor of Law, Southwest University of Political Science and Law; Double Degree, English Literature, Sichuan International Studies University, Chongqing, China. Focus: International Economic Law.

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