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CISG CASE PRESENTATION

China 17 October 1996 CIETAC Arbitration proceeding (Tinplate case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961017c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19961017 (17 October 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/47

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Republic of Korea (respondent)

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

GOODS INVOLVED: Tinplate


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 9 ; 12 ; 74 ; 77 ; 96 [Also cited: Article 11 ]

Classification of issues using UNCITRAL classification code numbers:

7A33 [Principles of interpretation: applications of good faith standards];

9D [Usages and practices];

12A [Declaration by State preserving domestic formal requirements: effect of reservation under article 96 rejecting article 11];

74A ; 74A1 [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit];

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

Descriptors: General principles ; Good faith ; Formal requirements ; Declaration, Art. 96 ; Damages ; Profits, loss of ; Mitigation of loss

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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): Zhong Guo Guo Ji Jing Ji Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1996 vol., pp. 1970-1977

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.21, 49, 140, 170, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

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


 

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

Tin plate case (17 October 1996)

Translation [*] by Bin Hu [**]

Translation edited by Meihua Xu [***]

According to the arbitration clause in Sales Contract 94 HSSH - ES1135 between the Claimant [Buyer], Ningbo ___ International Trading Co., of the People's Republic of China, and Respondent [Seller], Korean ___ Company, and the written petition made by [Buyer] on 21 August 1995 to the Arbitration Commission, China International Economic & Trade Arbitration Commission (CIETAC, formally known as Foreign Trade Arbitration Commission under China Council for the Promotion of International Trade) has agreed to hear this case.

The Secretariat of the Arbitration Commission sent separate Arbitration Notices to both [Buyer] and [Seller] on 4 September 1995, and upon receipt, [Seller] failed to name an arbitrator within the designated time. The Director of the Arbitration Commission therefore has named Mr. D as arbitrator for the [Seller] per the provisions of Rule 26 of the Arbitration Rules (effective 1 June1994). Meanwhile, as the parties failed to co-name a presiding arbitrator as stipulated in the Arbitration Law as well as the Secretariat Announcements of (95) No. ___ and No. ___, the Director of the Arbitration Commission has named Mr. P as presiding arbitrator per the relevant rules under the Arbitration Law.

Mr. P, Mr. A, as named by [Buyer], and Mr. D therefore formed a Tribunal on 14 November 1995 for this case.

[Seller] subsequently sent a letter to the Arbitration Commission Secretariat on 21 November 1995, stating that its failure to timely name an arbitrator was because it had been negotiating with [Buyer] for a possible settlement of the case, and hoped for a second chance to name an arbitrator, which the Arbitration Commission then granted. [Seller] named Mr. S as arbitrator for the case, who joined Mr. A and Mr. P for the Tribunal on 6 December 1995 to continue the case. Thereafter, Mr. P, for work-related reasons, and Mr. A, for health reasons, retired from the Tribunal as presiding arbitrator and arbitrator. In accordance with the relevant provisions of the Arbitration Law and Arbitration Rules, the Director of the Arbitration Commission named Mr. Z as substitute presiding arbitrator for the case, and [Buyer] named Mr. W as its substitute arbitrator.

The Tribunal made up of Mr. Z, Mr. W, and Mr. S conducted a hearing for this case on 16 April 1996 in Beijing. Both parties were represented by agents. After the hearing, the parties submitted written documents as requested by the Tribunal. Upon the Tribunal's request, on 7 August 1996 the Arbitration Commission granted the Tribunal's leave to postpone issuance of the award until 14 November 1996.

Examination of the case has been completed, and the Tribunal has ruled. The facts of the case, the opinion of the Tribunal, and the award are as follows:

I. FACTS OF THE CASE

On 10 August 1994, [Buyer] and [Seller] entered into Sales Contract No. 94 HSSH - ES1135 (hereinafter, the Contract) in Shanghai, which provided:

   -    Goods. [Buyer] would purchase from [Seller] 200 tons of Korean-made tin plates, according to the specification E#100 0.23 x 730 x 827 mm (R. W.);
 
   -    Price. At a unit price of US $830 CNF FO Shanghai/ton, (including packing cost). The total value of the goods is US $166,000;
 
   -    Shipment. To be shipped no later than November 1994.
 
   -    Method of payment. By Letter of Credit to be opened 30 days prior to the shipping date.

On 27 October 1994, [Buyer] opened an irrevocable Letter of Credit with Bank of China, Ningbo Branch, under No. LC92A00610/94. However, [Seller] defaulted on the contract by failing to deliver the goods as stipulated, which resulted in the present dispute.

[POSITION OF THE PARTIES]

[Buyer]'s position

[Buyer] stated:

     (1) Facts

Pursuant to the Contract underlying the present dispute, [Buyer] on 28 October 1994 entered into a sales contract for industrial and mineral products under serial number A9418868 (Hereinafter the "Domestic Sales Contract") with a customer, Fenghua ___ Trading Co. Pursuant to this Domestic Sales Contract, [Buyer] was to purchase 200 tons of tin plates for resale to Fenghua, with a deadline for delivery of 15 December 1994, at Ningbo. Due to [Seller]'s failure to fulfill its contract obligations, [Buyer] was unable to carry out its obligations under the Domestic Sales Contract. Fenghua ___ Trading Co. therefore brought a lawsuit in the Civil Court of Haishu District of Ningbo City, seeking damages of renminbi [RMB] 500,000 against [Buyer] based on the Domestic Sales Contract.

   -    A settlement was reached upon court directed mediation, with the result that [Buyer] would compensate Fenghua for damages of RMB 270,000 and also with a litigation fee of RMB 6,560. This settlement was confirmed per court mediation record number (1995) ___ dated 23 February1995.
 
   -    In addition, [Buyer] has incurred other expenses relating to the present Contract for opening the Letter of Credit in the amount of RMB 2,326.48, and for sending faxes in the amount of about RMB 2,000.

The above totals RMB 280,886.48.

[Buyer] requests:

   1. That [Seller] compensate [Buyer] for economic loss in the amount of RMB 280,886.48;
 
   2. [Seller]'s specific performance of the Contract;
 
   3. That [Seller] compensate [Buyer] for its prepaid attorneys' fees of RMB 500,000 and the arbitration fee.

During the hearing on 16 April 1996 in Beijing, [Buyer] submitted a "Supplemental Request for Arbitration," in which it modified the second request of its arbitration petition asking [Seller] to compensate [Buyer] expected profit of RMB 432,200. This was calculated as: the Domestic Sales Contract price (RMB 9,200/ton x 200 tons = 1,840,000) - cost under the present Contract (US $166,000 x 8.3 = RMB 1,377,800) - other expenses (about RMB 30,000) = RMB 432,200.

[Seller]'s position

[Seller] argues that:

[Seller] would agree to compensate [Buyer] in the amount of US $3,320. Other than that, [Seller] requests all claims made by [Buyer] be denied.

[Seller] reasons as follows:

     1. The failure of the performance of this Contract was due to [Buyer]'s violation of principles of good faith

[Seller] acknowledges that it was unable to deliver the contracted goods before 30 November 1994, but calls attention to the fact that this was not due to [Seller]'s unwillingness to perform the contract, but due to a strike in its factory. Pursuant to Article 15 of the Contract, if [Seller] fails to deliver on time, [Buyer] has the right to cancel the pertinent portion of the contract, or to accept a late delivery on the condition that Buyer agrees to accept Seller's payment of penalty. According to this Article, when [Seller] was unable to deliver on 30 November 1994 and thereby asked for postponement of delivery, [Buyer] should, according to the principle of good faith, choose between the two options for a legal remedy: either cancel [avoid] the Contract, or, take the penalty payment and allow for postponed delivery. However, [Buyer] made no choice.

In fact, should [Buyer] take whichever of the above legal remedies, [Seller] could have fulfilled its obligation with [Buyer]'s cooperation and continued to deliver. This was the only measure to minimize the so-called loss for [Buyer]. On 22 November 1994, [Seller] sent a fax to [Buyer] to explain the untimely delivery, and expressed the hope that [Buyer] would cooperate by extending the shipping date and the effective date in the Letter of Credit to 31 December 1994 and 15 January 1995, respectively. However, [Buyer] made no reply. On 1 December 1994, [Seller] informed [Buyer] again by fax that 200 tons of the goods could be produced upon good efforts by around the 20th, when shipping would be arranged and shipping be made as quickly as possible. On 3 and 5 December 1994, [Seller] contacted [Buyer] again for confirmation of delivery date and the corresponding modification of the Letter of Credit, to which [Buyer] made no reply whatsoever. Had [Buyer] consented to late delivery and modified the Letter of Credit for the purpose of reducing the loss, [Buyer] would suffer a loss of at most 2% of the Contract price, rather than the large amount of damages that [Buyer] is now claiming.

     2. The "loss of profit" claimed by [Buyer] is not credible

           (1) [Buyer]'s "loss of profit" claim is without legal foundation

If this case is governed by the Law of Foreign Economic Contracts of the People's Republic of China [FEC Law] and the United Nations Convention on Contracts for the International Sale of Goods [CISG], then, in accordance with Article 19 of the FEC Law and Article 74 of CISG, [Buyer]'s claim of "loss of profit" cannot be sustained because [Seller] could not have foreseen it when signing the Contract. [Buyer]'s witness, Mr. Chen, an employee of [Buyer], testified on 22 April 1996 that [Buyer] informed [Seller] when signing the Contract that the tin plates were to be purchased for use with export of canned oranges; and that if the [Seller]'s factory failed to timely supply the cans to [Buyer], there would be a failure of an export contract of about two million U.S. dollars. From this, it can be seen that what [Buyer] could have anticipated at the time of signing the Contract was the loss from being unable to perform the export contract when the [Seller]'s factory (rather than Fenghua) was unable to provide the cans for export, not the loss of profit for being unable to provide the tin plates material to Fenghua.

           (2) [Buyer]'s "loss of profit" claim is not supported by facts

Pursuant to Regulatory Measures for Import/Export of Processing Materials of RMBPRC Customs Office, imported materials for purposes of export after processing shall not be sold on the domestic market; if for some reason the purpose is shifted to the domestic market, customs duties, product duties (gains taxes) must be paid. The only thing contemplated by the Domestic Sales Contract between [Buyer] and Fenghua was the sale of raw material, and nothing was said about the deal of Fenghua providing canned oranges to [Buyer]. Furthermore, [Buyer] produced no evidence or document attesting to the effect that the canned oranges purchased from Fenghua were for export purposes. According to the Domestic Trading Contract, [Buyer]'s import of the tin plates from [Seller] was for resale purposes. Therefore the actual cost should be the import price of RMB 1,377,800 yuan + customs duties (15%) of RMB 206,670 yuan + gains tax (17%) of RMB 234,226 yuan + transportation fee from Shanghai to Ningbo of RMB 30,000 yuan, in a total amount of RMB 1,848,696 yuan. This would mean, [Buyer]'s contract with Fenghua, suppose it were true, would yield negative profit. In other words, the loss of profit expected by [Buyer] is based on tax evasion and therefore cannot be sustained.

     3. [Buyer] should bear the consequence since it failed to take reasonable measure to reduce the loss

[Buyer] was aware that [Seller] was unable to deliver on time when it received [Seller]'s fax on 22 November 1994. There was considerable time between then and the delivery date of [Buyer]'s Domestic Sales Contract with Fenghua. [Buyer] had plenty of time and opportunities to purchase substitute material from the market as tin plate is a very common raw material. In fact, Zhejiang ___ Import/Export Corp. had 500 tons of tin plates in stock at the end of 1994. Had [Buyer] been willing to take steps to reduce its loss, it absolutely had the time and opportunity to make inquiries to domestic or international suppliers for the tin plate it needed. On this point, [Buyer] produced no evidence that it had taken any necessary measures to reduce its loss. Therefore, the so-called "loss" (which [Seller] does not admit) would be, at most, the difference in price between the substitutes and the Contract goods.

     4. The Domestic Sales Contract cannot be the valid basis for claiming damages

The Domestic Sales Contract was signed on 28 October 1994, with a delivery date on 15 December 1994, and an expiration date till 18 December 1999. In other words, that contract is effective for about five years. In a contract of such a long duration, in which no specific provision was made as to the purpose of the goods or necessity of timely delivery, the delivery date would be one of the anticipated dates. It can be derived that a delivery date of 15 December 1994 may be extended if [Buyer] was unable to make timely delivery, till any time before 18 December 1999.

     5. The civil court Settlement Agreement cannot be the effective basis for claiming damages.

The Settlement Agreement reached in the Civil Court of Haishu District of Ningbo City made no conclusive announcement as to the dispute arising under the Domestic Sales Contract, or to the interpretation of the contract clauses. Nor did it provide any basis for the settlement. Therefore, the Settlement Agreement should not be binding upon [Seller]. Besides, [Buyer] admitted that it had not paid the full amount under the Agreement for damages claimed by Fenghua. Meanwhile, [Buyer] produced no evidence showing payment of such damages, which means that [Buyer] has not in effect made any payment to Fenghua. If [Buyer] itself does not abide by the Agreement, how can the Agreement be the basis for claiming damages against [Seller]?

     6. [Seller]'s responsibilities

[Seller]'s fault was the failure to deliver the goods before 30 November 1994. Based on the previously stated facts, [Seller] could have shipped the goods before 31 December 1994, which was a thirty-one day delay and for which its responsibility was to pay the Contract penalty of sixteen days. As provided in Article 15 of the Contract, [Seller] should pay a penalty of 2% of the Contract price, which is US $3,320.

[Buyer]'s response

[Buyer] made rebuttals to [Seller]'s argument:

1. [Buyer]'s good faith to perform the Contract is sufficiently demonstrated by it fulfilling the duty of opening the Letter of Credit in accordance with the Contract provisions. [Seller] made an undue request on 22 November 1994 for postponement of delivery, and ten days later, made a further request for altering the specification and quantities of the goods on 3 December, to which [Buyer] could in no way accept. It was [Seller] who failed to perform the Contract and acted in bad faith.

2. To determine [Buyer]'s expected profit [Buyer] mainly relied on the fact that the tin plates imported by [Buyer] were for making export products, and that, in fact, [Buyer] had informed [Seller] at the time of signing the Contract that the imported tin plates were for making export products. In accordance with the Regulatory Measures for Import/Export of Processing Materials of the PRC Customs Office, [Buyer] was absolutely entitled to the tax-free treatment. Hence, no such tax should be deducted from the expected profit. In addition, [Buyer]'s resale of the goods to Fenghua does not fall in the category of "domestic trade" prescribed in the above regulatory measures, and no tax was imposed on it. In the accounting of the expected profit, it was correct for [Seller] to deduct transportation cost. It was inappropriate, however, for [Seller] to assert the deduction of excessive cost for transportation by sea, because [Seller] overlooked road transportation between Shanghai and Ningbo, which is excellent and low cost. In fact, the cost could be very low if [Buyer] used its own trucks.

3. [Buyer] was unable at that time to take measures to reduce loss. [Buyer]'s goods in the Domestic Sales Contract conform to those in the present Contract as to name, specification and quantity. [Seller] being a Korean company was unable to deliver due to short supply, and [Buyer] being a Chinese company was unable to find Korean products on the Chinese market within a short time. Moreover, the 500 tons of tin plates in stock at ___ Import/Export Corp. of Zhejiang, as claimed by [Seller] were Japanese-made tin plates, not the products of Korea as stipulated by the Contract; nor did the tin plates conform to the contracted goods in specification. Besides, [Seller]'s assumption that [Buyer] must have known the information of the 500-ton tin plates in stock at ___ Import/Export Corp. of Zhejiang, is merely subjective imagination.

4. The Settlement Agreement made by the Civil Court of Haishu District of Ningbo City was effective. Pursuant to the relevant rules of China's civil procedure, the settlement agreement must be supported by facts, in accordance with the law, and reached after verification of facts and legal obligations. Once it is signed by parties, it is equally effective as a court decision. The damages specified in the Agreement constitute direct damages of [Buyer], and the Agreement is conclusive evidence as to damages incurred and the amount thereof.

II. THE TRIBUNAL'S OPINION

     (1) Applicable law

Contract 94HSSH - ES1135 is an agreement between the parties for the international sale of goods. Although they did not specify any applicable law in the contract, both parties cited in their respective petition and response relevant provisions of the United Nations Convention on Contracts for the International Sale of Goods of 1980 [CISG] and of Chinese laws. The Arbitration Tribunal is therefore of the opinion that the CISG and Chinese laws shall apply in the present case. Where the CISG or Chinese law is silent, trade usage shall apply.

     (2) Delivery and responsibilities

The Contract provided that [Seller] is to deliver to [Buyer] all-new tin plates, specification E#100 0.23 x 730 x 827 mm (R. W.) originally made in Korea, with a delivery date of November 1994, loading port being a major port in Korea, to the destination of the Port of Shanghai; and upon failure to timely deliver by Seller, except for force majeure, Buyer has the right to cancel the Contract or to accept a late delivery on the condition that Buyer agrees to take Seller's payment of penalty. Buyer may agree to give to Seller a grace period of fifteen days. On these provisions, the parties disagree as to: What was the latest date of delivery? And what measures should Buyer take in case of Seller's failure to provide timely delivery?

The Tribunal is of the opinion that when a contract specifies a delivery date as the month of November of 1994 without otherwise an actual final date, international trade usage would interpret it as the last day of November of 1994, which is 30 November 1994.

[Seller] acknowledges in its response that it should have delivered before 30 November 1994 according to the Contract, but that it could not, in fact, not because it was unwilling to perform the Contract, but due to a factory strike. In view of the fact that a factory strike is not included in Article 14 of the Contract as a force majeure event, and that it is clear that [Seller] in its response did not intend to rely on force majeure as its reason for untimely delivery, the Tribunal is of the opinion that [Seller] cannot be excused from breaching the Contract by failure to deliver on time due to a factory strike.

[Seller] contended that it failed to deliver the goods that it could have delivered because [Buyer] acted in bad faith. [Seller] submitted its faxes of 22 November, 1 December, 3 December and 5 December 1994, alleging that it requested [Buyer] for many times to understand its situation, to which [Buyer] made no response. The Tribunal examined the four faxes, and found that in none of them did [Seller] request, per Article 15 of the Contract, for postponement of delivery.

First of all, Article 15 of the Contract provides that [Seller] may request a fifteen days grace period from [Buyer], that is, to extend the delivery till 15 December 1994; whereas, [Seller] requested in its fax of 22 November 1994 to extend the delivery to 31 December 1994.

Second, [Seller] made no expression to pay the late delivery penalty in its faxes to [Buyer], in which it requested an extension of time.

Third, [Seller] requested in the aforementioned faxes not only an extension of time to deliver, but also modifications to price terms, shipping methods, specification of goods, etc.

These requests were beyond the scope of Article 15.

Upon receipt of [Seller]'s faxes, [Buyer], in accordance with the provisions of Article 11 of the CISG (China made a reservation when signing the CISG, requiring written format) and of Article 7 of the FEC Law, made no written response, which should be interpreted as rejecting all requests put forward in [Seller]'s faxes. [Seller] thus was not relieved of its obligations to deliver before 30 November 1994 under the Contract.

[Seller] further stated that upon [Seller]'s failure to deliver on time, [Buyer] ought, in accordance with the provisions of Article 15 of the Contract, to have cancelled [avoided] the Contract through written notice, or given consent to the delayed delivery; where no such cancellation was announced, nor consent given for a late delivery, [Buyer] breached the Contract and violated the principle of good faith. The Tribunal is of the opinion that [Buyer] has expressed its objection to late delivery by refusing to reply to [Seller]'s faxes. As to the issue whether [Buyer] should have announced cancellation [avoidance] of the Contract, the Tribunal notes that Article 15 of the Contract makes no mention as to when such announcement should be made, and therefore, [Buyer] may make such announcement at any reasonable time. Because cancelling the Contract under Article 15 is an option, rather than obligation, for [Buyer], and a remedial measure for Buyer when Seller breaches the contract under the CISG and Chinese laws, [Buyer]'s entitlement to damages should not be compromised simply because it did not timely announce a cancellation [avoidance] of the Contract.

[Seller] further stated that, upon [Seller]'s failure to deliver on time, [Buyer] ought to have purchased substitute goods from the Chinese market, so as to reduce loss. The Tribunal is of the opinion that since the contracted goods agreed on between [Buyer] and [Buyer]'s customer, Fenghua, were products made in Korea, and so were the goods under the present Contract, it would have been unreasonable for [Buyer] to purchase goods of different origins and specifications. [Buyer]'s failure to purchase substitute products does not relieve [Seller] from its obligations.

     (3) [Buyer]'s claims

[Buyer]'s final petition for arbitration includes claims that [Seller] compensate [Buyer] for economic loss in the amount of RMB 280,886.48, for loss of expected profit of RMB 432,200, and for prepaid attorneys' fees of RMB 50,000 and the arbitration fee.

     1. The economic loss of RMB 280,886.48

Because of [Seller]'s breach of Contract and failure to deliver, [Seller] should compensate [Buyer] for direct economic loss. Such loss as claimed by [Buyer] in the amount of RMB 280,886.48 includes [Buyer]'s remedial payment of RMB 270,000 to [Buyer]'s customer Fenghua under the Settlement Agreement, the court cost of RMB 6,560, and the expenses of RMB 2,326.48 for opening the Letter of Credit as well as fax expenses of RMB 2,000. The Tribunal is of the opinion that [Buyer]'s payment of RMB 270,000 to Fenghua as liquidated damages under the Settlement Agreement was the direct result of [Seller]'s breach of Contract, and although this was a settlement [Buyer] entered into with Fenghua, the settlement, which has gone into effect, is reasonable and legally binding. The Tribunal sustains [Buyer]'s claim for damages based on this. Also sustained are the claims for the processing fee for opening the Letter of Credit of RMB 2,326.48, the litigation fee of RMB 6,560, and the fax expenses of RMB 2,000, all as a result of [Seller]'s breach of the Contract.

Based on the above, [Seller] should compensate [Buyer] for economic losses in the amount of RMB 280,886.48.

     2. The expected profit

[Buyer] demands compensation of loss of expected profit in the amount of RMB 432,200, from which import duties and gains taxes were not deducted, whereas [Seller] claims they should have been deducted. The Tribunal would not repeat the parties' contentions. The Tribunal is of the opinion, however, pursuant to the provisions of CISG Article 74, and the Supreme People's Court's Advisory Opinion Regarding Certain Issues (for Applying FEC Law) Article 6, Clause (1), that [Buyer] is entitled to compensation for the loss of expected profit as a result of [Seller]'s failure to deliver. However, [Buyer] should deduct the import duties and gains taxes when calculating the loss of expected profit, for the reasons that:

One, both the Contract between parties and the contract between [Buyer] and Fenghua are exclusively trading contracts for sales of goods, neither of which specified that the goods were for processing materials for export purposes;

Two, even if the goods were for processing materials for export purposes, [Buyer] did not go through the registration process for exporting processed material under the required legal procedure. Article 4 and Article 15 of the Regulatory Measures for Import/Export of Processing Materials of the PRC Customs Office require that the processing of imported material must be approved by the customs authorities; and contracts as such must be recorded at the Customs Office. The evidence produced by [Buyer] was insufficient to establish that it had recorded the Contract as such with the Customs Office, or that the customs authorities had approved the import of the material for processing.

[Buyer]'s contention that the Contract goods were for export which may be objectively exempted from taxes is not based on facts, nor is it legally plausible, and therefore, cannot be sustained by this Tribunal. The loss of expected profit for [Buyer] should be based on the difference between the Contract price and the price under the sales contract for industrial and mineral products. The amount of loss of expected profit, however, should be the contract price for domestic sales contract - (the Contract price + customs duties + gains taxes), or RMB 1,840,000 - (RMB 1,377,800 + RMB 206,670 + RMB 234,226) = RMB 21,304. [Seller]'s contention that the calculation should also deduct the Shanghai-Ningbo transportation fee of RMB 30,000, however, should not be sustained for lack of evidence.

Accordingly, the Tribunal determines that [Seller] should compensate [Buyer] for loss of expected profit in the amount of RMB 21,304.

     3. Attorneys' fees and arbitration cost

Because [Seller] is liable for damages, and part of [Buyer]'s claims are unsustainable; this Tribunal determines that [Buyer] should share 30%, [Seller] 70%, of the arbitration cost. And [Seller] should compensate [Buyer] for a reasonable portion of the attorneys' fees in this case, in the amount of RMB 30,000.

III. AWARD

1.  [Seller] shall compensate [Buyer] for economic losses in the sum of RMB 280,886.48;

2.  [Seller] shall compensate [Buyer] for loss of expected profit in the sum of RMB 21,304;

3.  [Seller] shall compensate [Buyer] for part of the attorneys' fees in the sum of RMB 30,000;

4.  [Buyer] bears 30% of the arbitration fee of this case, and [Seller] bears 70%. As [Buyer] has prepaid RMB ___, which covers the entire arbitration cost, [Seller] shall compensate [Buyer] RMB ___ for arbitration cost.

5.  [Buyer]'s other claims are rejected by this Tribunal;

6.  The total amount of the above payment items 1, 2, 3, and 4 that [Seller] owes to [Buyer] shall be paid before 25 November 1996, with a late payment at the annual interest of 12%;

7.  The Tribunal shall return to [Buyer] the amount of RMB 8,000 paid by [Buyer] to appoint Mr. A as arbitrator.

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 of the Republic of Korea 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].

** Bin Hu. LL.B., Beijing Foreign Studies University, China; LL.M. Candidate, New York University.

*** 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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