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CISG CASE PRESENTATION

China 18 November 1996 CIETAC Arbitration proceeding (Steel channels case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961118c1.html]

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

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Case identification

DATE OF DECISION: 19961118 (18 November 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/53

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Macau (claimant)

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

GOODS INVOLVED: Steel channels


Classification of issues present

APPLICATION OF CISG: Yes, but tribunal regarded Portugal as a CISG Contracting State

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 30 ; 34 ; 80

Classification of issues using UNCITRAL classification code numbers:

30A [Seller's obligations: obligation to deliver the goods];

34A [Seller's obligation to hand over documents];

80A [Failure of performance caused by other party (party causing non-performance): loss of rights (partial loss in this case)]

Descriptors: Delivery ; Conformity of documents ; Failure of performance, other party

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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. 2108-2117

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.36, Nordic Journal of Commercial Law (2/2005); Fan Yang, The Application of the CISG in the Current PRC Law and CIETAC Arbitration Practice (December 2006) n. 99

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Case text (English translation)

Queen Mary Case Translation Programme

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

Steel channels case (18 November 1996)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

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

   -    The arbitration clause in Contract No. 93K-8801010RD signed by Claimant [Seller], Macao __ Trade Company and Respondent [Buyer], China Beihai City __ Trade Company on 19 March 1993; and
 
   -    The written arbitration application submitted by [Seller] on 22 March 1995.

According to Article 24 of the Arbitration Rules that became effective on 1 June 1994, the Director of the Arbitration Commission appointed Ms. P as the Presiding Arbitrator. Ms. P, Mr. A, the arbitrator appointed by the [Seller], and Mr. D, the arbitrator appointed by the [Buyer], formed the Arbitration Tribunal to hear this case.

On 22 June 1995, the [Buyer] filed an arbitration counterclaim within the time limit stipulated in the Arbitration Rules and paid the arbitration fee in advance. According to Article 18 of the Arbitration Rules, the Arbitration Commission accepted the [Buyer]'s counterclaim and decided to process the two claims together.

On 22 September 1995, a court session was held in Beijing. The [Seller] and the [Buyer] sent representatives to the court session. They made oral statements and answered the Arbitration Tribunal's questions. After the court session, both parties submitted supplementary documents.

After considering the court session and examining the written evidence submitted by the parties, the Arbitration Tribunal concluded that the case needed further investigation of the facts.

Following receipt of the agreement by the two parties, the Arbitration Tribunal sent the Presiding Arbitrator and officers of the Secretariat Office of the Arbitration Commission to related units in this case to conduct an on-the-spot investigation.

On 9 September 1996, on behalf of the Arbitration Tribunal, the Secretariat Office of the Arbitration Commission informed the parties of the result of the investigation, to which both parties made response and comments.

This case has been concluded and the Arbitration Tribunal handed down its award based on the written documents and the facts discovered through the investigation. The following are the facts, the Tribunal's opinion and award.

I. FACTS

POSITION OF THE PARTIES

A. [Seller]'s position

The [Seller] alleges that:

On 19 March 1993, the [Seller] and the [Buyer] signed Contract No. 93K-8801010RD. The contract stipulated:

Goods: Hot rolled steel channels made in Romania (note: the contract was written in English provided that only the English edition is the authentic and definite text);

Quantity: 10,000 metric tons: UPN 1,402,000 metric tons, UPN 1,605,000 metric tons, UPN 1,802,000 metric tons, UNP 2,401,000 metric tons.

Price: Unit price US $368.50/ton CFR FO Zhangjiagang or US $372.50/ton CFR FO through Beihai to Zhangjiagang. The total price is US $3,685,000 or US $3,725,000;

Delivery: The goods should be loaded before 30 June 1993.

Payment terms: [Buyer] shall pay 15% of the contract price as a deposit five days after the contract is signed. The remaining part shall be paid when [Buyer] receives the documents.

After signing the contract, the [Seller] received two deposits. One deposit of renminbi [RMB] 5,000,000 received at the end of March 1993 was from Jiangsu Province Taicang __ Construction Material Company (hereafter, "Taicang __ Company") by mail transfer; and the other deposit of RMB 3,800,000 received on 6 April 1993 was from Guilin __ Material Company (hereafter, "Guilin __ Company"), totaling RMB 8,800,000. The [Seller] exchanged the aforesaid RMB into US $800,000 with a remainder of RMB 316,800.

On 1 April 1993 and in June 1993, the [Seller] repeatedly sent letters to the [Buyer], asking it to confirm the modifications the [Seller] had made to the delivery date and to the goods. Later Mr. Li acting for the [Buyer] replied and agreed on the modifications the [Seller] had made, which were postponing the deadline for delivery and changing the specifications of the goods.

On 3 August 1993, the [Seller] sent a loading notice and the copy of the Bill of Lading (B/L) to Mr. Shen acting for the [Buyer], in which the quantity of the goods was 9,978.417 tons, the mark number was 93K-8801010RD, and the notice person was the [Seller].

At the end of August 1993, Mr. Shen acting for the [Buyer] asked the [Seller] to allow it to pay the price after receiving the goods and mentioned that the agent of the [Buyer] was Taicang __ Company.

On 7 September 1993, the [Seller] replied to Mr. Shen, allowing it to pay the price by the end of September and noticing the [Buyer] that the other 2,000 tons of goods was for Zhangjiagang Leyu __ Company, and that the [Buyer] shall take the responsibility to apply to customs for these goods.

On 29 August 1993, the ship Ljuben Karavelov approved by the two parties arrived at Zhangjiagang port. The 11,841.549 tons of goods delivered were to be applied to customs by the __ Zhangjiagang Trade Company (hereafter, Zhangjiagang __ Company), which was entrusted by Taicang __ Company. The aforesaid goods were subjected to "half customs" preferential treatment.

The 11,841.549 tons of goods included 9,941.449 tons of goods under this contract and 1,900.100 tons of goods the [Seller] imported for Zhangjiagang City Leyu __ Company (hereafter, "Leyu Company), however, due to Leyu Company's non-payment, the [Seller] modified the shipment into self-imported goods.

After the goods arrived at the designated port, the [Seller] and Mr. Shen were consistently negotiating the issues of taking delivery of the goods and making payment. On 29 December 1993, the [Buyer] and the [Seller] signed an agreement, which, among other things, stipulated that:

  1. [Buyer] should take the responsibility for applying to customs in Zhanjiagang and paying the customs and inspection fee and other fees;

  2. [Buyer] may take delivery of the goods after paying renminbi [RMB] 3,300/ton (calculated as US $368.50 8.8 = RMB 3,242.80). If the exchange rate changes, it should be calculated based on the rate of the Shanghai Foreign Exchange Swap Center;

  3. [Buyer] entrusts Beihai City __ Import & Export Company to perform this agreement jointly;

  4. [Buyer] shall pay US $1,660,000 to the [Seller] before 10 February 1994 and pay the remaining part before 30 March 1994 by mail transfer. The [Buyer] may take delivery of the goods after making the entire payment;

  5. [Buyer] shall pay [Seller] the interest for bank loan from 10 September 1993.

The agreement was signed by Mr. Shen with the [Buyer]'s appropriate contract seal.

The [Buyer] did not make the payment after signing the agreement, and on 9 December 1994, the [Seller] sent a fax to Mr. Shen, asking the president of the [Buyer] to sign the repayment agreement. However, Mr. Shen and the [Buyer]'s office did not reply to the payment problem raising an excuse that the president was on a business trip.

After the approximately 12,000 tons of goods arrived at Zhangjiagang port, Taicang __ Company took part of the delivered goods, but the [Buyer] and the [Seller] did not take the delivery of the goods.

In May 1995, Zhangjiagang customs detained the remaining 6,600 tons of goods asserting that the 12,000 tons of goods shipped by the Ljuben Karavelov were suspected of being smuggled.

The [Seller] argues that it has performed its obligation to deliver the goods, but the [Buyer] delayed payment, therefore, the [Seller] filed the arbitration application and asks the Arbitration Tribunal to rule that:

  1. [Buyer] shall pay the price of US $2,863,423.96;

  2. [Buyer] shall pay the [Seller]'s loss of interest on the aforesaid sum calculated from 10 September 1993 at loan interest rate of Macao bank;

  3. [Buyer] shall bear the attorneys' fee of RMB 200,000;

  4. [Buyer] shall bear the arbitration fee.

B. [Buyer]'s position

The [Buyer]'s defenses and counterclaims are:

(I) The [Seller] had never delivered the goods in the contract, and the [Buyer] was not obligated to apply to customs or to take delivery of the goods, which acts were performed by Beihai City __ Import & Export Company.

  1. The [Seller] never provided any goods or handed over any documents to the [Buyer]. The goods shipped by the Ljuben Karavelov were imported by Beihai City __ Import & Export Company from Romania as a barter trade with a contract number of 93RHQR-052021SB, a quantity of 11,841 tons in net weight, and a total price of US $3,670,880.19.

    The packing lists of the aforesaid goods were issued separately as one of 9,941.449 tons and the other of 1,900.100 tons. The B/L was also issued the same way, but the receipt was only one with a total price of US $3,670,880.19.

    It was noted on the packing list and the receipt provided by the [Seller] that the contract number was 93RHQR-052021SB and the mark numbers were 93K-8801010RD and 93K-8801010RD(A). The B/L the [Seller] sent to the [Buyer] on 3 August 1993 was only one of the aforesaid two B/Ls.

    The [Buyer] argues that the [Seller] pretended that goods of others were its own goods and that Beihai City __ Import & Export Company's performance of Contract 93RHQR-052021SB was its own contract performance.

  2. Beihai City __ Import & Export Company imported steel channels by barter trade and the goods were subjected to "half customs" preferential treatment by Beihai customs.

    On 6 August 1993, Beihai City __ Import & Export Company entrusted Taicang __ Company to take care of the importing procedure, and on 1 September 1993, Taicang __ Company signed an agreement with Zhangjiagang __ Company, by which Taicang __ Company entrusted Zhangjiagang __ Company to apply to customs, have the goods inspected, unload the goods, store the goods, and transfer the goods.

    On 16 September 1993, Beihai City __ Import & Export Company applied to Zhangjiagang customs. During the application, the customs asked two questions to the [Seller]: one was why the notice person on the B/L was the [Seller], who had no connection with the barter trade; and the other was why the mark numbers on the goods were different from the contract number.

    Beihai City __ Import & Export Company explained that at first, it was planning to entrust the [Seller] to take delivery of the goods and to apply to customs, but later it changed the plan to entrust Taicang __ Company to do the same work, however, it could not make it to change the notice person's name. Beihai City __ Import & Export Company also made explanation on the difference between the mark numbers on the goods and the contract number.

    Later, the customs released the goods, and Zhangjiagang __ Company took 11,885 tons of goods (net weight was 11,841 tons). The [Buyer] asserts that it was not involved in any process of applying to customs or receiving goods, and that the [Buyer] has never received the goods. [Buyer] alleges that the [Seller]'s non-delivery of the goods has constituted a contract violation, therefore, [Seller] should pay the liquidated damages to the [Buyer].

  3. [Buyer] never entrusted Taicang __ Company, and the fax Mr. Shen sent to the [Seller] at the end of August 1993 cannot be evidence of this because:

    First, Mr. Shen is not the person in charge of the contract (Mr. Li is), nor is he the legal representative of the [Buyer], therefore, his personal promise has no legal effect. All the contacts Mr. Shen made with the [Seller] were through the fax machine in his own house. The fax Mr. Shen sent to the [Seller] on 23 September 1993 and 15 October also expressly proved that he represented Beihai City __ Import & Export Company.

    Second, the [Buyer] never issued letter of authorization to Taicang __ Company, and never reached any agreement with it on issues of entrustment or related cost.

    The process of importing goods on one's behalf includes many details, such as: providing documents, receiving goods, applying to customs, inspection, and accepting goods, therefore, to designate an agent only by putting one sentence in a fax deviated from the customs and usages.

    Above all, the [Seller] has violated the contract by not handing over the goods and not providing the documents, therefore, the [Buyer] has the right to terminate the contract and to recover damages.

(II) The issue of applying to customs

The [Buyer] alleges that the [Seller] was involved in the 93RHQR-052021SB barter trade contract, planning to apply to customs as a barter trade contract to be the beneficiary of "half customs" preferential treatment.

  1. The documents Beihai City __ Import & Export Company provided for clearance of goods included the packing list, B/L, and receipt. From the fax record, it can be found that the packing list was sent by the [Seller] from its subsidiary known as Hong Kong, __ Company, therefore, the [Seller] was aware of the content of the packing list.

    On the heading of the packing list, it was noted "Beihai City __ Import & Export Company", and the contract number was 93RHQR-052021SB, which was inconsistent with the mark numbers on the goods. The weight of the goods was 12,000 tons.

    The above facts indicated that Beihai City __ Import & Export Company had connection with the [Seller], and the [Seller] was aware of and involved in the barter trade, otherwise, it had no reason to provide documents for Beihai City __ Import & Export Company.

  2. The goods that arrived at Zhangjiagang were approximately 12,000 tons. Excepting the10,000 tons for Beihai City __ Import & Export Company, there were 2,000 tons, which was planned to sell to Leyu Company. The 2,000 tons of goods were common trade, which should pay normal customs, however, the fact is that these goods received "half customs" treatment as goods of barter trade, which indicated that the [Seller] smuggled these goods to make profit.

(III) [Seller] exchanged RMB 8,800,000 to US $800,000, which was not reasonable. The exchange rate between US $ and RMB had never exceed 8.5: 1 before May 1993 at the Shanghai Foreign Exchange Swap Center, how could it be as high as 11:1?

(IV) [Buyer] argues that the items of evidence the [Seller] provided conflict with each other, and cannot support the [Seller]'s assertion. The [Buyer] also alleges that Mr. Shen was suspended for abusive use of his company's seal, therefore, the document signed by him has no legal effect.

Above all, the [Buyer] asserts that the [Seller] has violated the contract and counterclaims that:

  1. Contract 93K-8801010RD signed by the [Buyer] and the [Seller] on 19 March 1993 should be dissolved;

  2. [Seller] should return RMB 8,800,000 paid by the [Buyer] and should pay the interest on the aforesaid sum from 1 October 1993;

  3. [Seller] should pay the liquidated damages as determined in the contract, which is 3% of the total price, totaling US $110,000;

  4. [Seller] should pay the arbitration fee;

  5. [Seller] should pay the [Buyer]'s attorneys' fee and traveling fee.

[Seller]'s statement and defense

Regarding the [Buyer]'s defense and counterclaim, the [Seller] made the following statement and defense

(1) Statement on the [Seller]'s purchasing and selling 12,000 tons of goods

In order to perform the contract with the [Buyer], the [Seller] signed a sales contract with a German company, however, due to some problems that occurred when the German company was preparing the goods, the [Seller] asked the [Buyer] to modify the shipping date and the specifications of the goods. All of these modifications were accepted by the [Buyer].

In July 1993, the German company informed the [Seller] that it could deliver an extra 2,000 tons of goods. After negotiation, the [Seller] concluded a contract with Leyu Company, by which the [Seller] was going to deliver 2,000 tons of steel channels with a mark number of 93K-8801010RD (A) Zhangjiagang. Later, the quantity of the goods in the aforesaid contract was modified to 1,900 tons by agreement.

[Seller] purchased a total of 11,900 tons of goods from the German company, which consists of two groups, one was to be delivered to the [Buyer] with a mark number of 93K-8801010RD; the other was to be delivered to Leyu Company with a mark number of 93K-8801010RD(A) Zhangjiagang. The 11,900 tons of goods were all delivered by the ship Ljuben Karavelov, which arrived at Zhangjiagang port on 29 August 1993.

(2) Contacts between the two parties during the performance of applying to customs and receiving the goods

  1. [Seller] was contacting with Mr. Shen as instructed by a written document sent by Mr. Li acting for the [Buyer];

  2. The contract between the [Seller] and Leyu Company could not be performed because of the latter party's non-payment. The [Seller] asked the [Buyer] to apply to customs for the 1,900 tons of goods, and on 1 November 1993, the [Seller] paid RMB 1,000,000 as a commission to Taicang __ Company, who was the agent of the [Buyer];

  3. As requested by the [Buyer], the [Seller] provided two B/Ls to the Taicang __ Company, one was for 9,978.41 tons of goods and the other was for 1,906.89 tons of goods;

  4. The reason the packing list was sent from the [Seller]'s subsidiary in Hong Kong was that Mr. Chen of the [Seller], who was in charge of the contract was on a business trip in Hong Kong. The [Buyer] sent the packing list to Mr. Chen, and considering that it was the [Buyer]'s obligation to apply to the customs, and that the [Seller] should not and need not state any opinions, Mr. Chen sent the packing list back to the [Buyer] using the fax machine in the [Seller]'s Hong Kong office without raising any objections on the packing list, therefore, the fax number of [Seller]'s Hong Kong office appeared on the packing list;

  5. After applying to the customs, Zhangjiagang __ Company delivered 1,500 tons of goods to Taicang __ Company and detained 1,500 tons of goods. When the [Seller] asked to take the delivery of 1,906.89 tons of goods, which was planned to sell to Leyu Company, Zhangjiagang __ Company refused to release the goods and detained the document for the aforesaid goods, saying that there was no admission from Taicang __ Company.

  6. In order to settle the dispute, on 28 and 29 December 1993, the [Seller] and the [Buyer] signed agreements on the issues of applying to the customs for 1,906.89 tons goods and the payment and acceptance for 9,978.417 tons of goods under Contract 93K-8801010RD.

(3) Problem of one delivery, two contracts

The [Buyer] asserts that the goods delivered were not the goods under the instant contract, they were the goods under the barter trade contract performed by Beihai City __ Import & Export Company, however, the [Seller] finds after investigation that:

  1. Taicang __ Company has a long business relationship with the [Buyer]. The [Buyer] and Taicang __ Company were planning to import 10,000 tons of steel channels together, and Taicang __ Company would invest RMB 5,000,000 for importation. As asked by the [Buyer], Taicang __ Company sent RMB 5,000,000 to the [Seller], however, later the [Buyer] did not want to jointly import the goods because the market situtation for the goods was getting better, therefore, it modified the import plan to that the [Buyer] borrowed RMB 5,000,000 from Taicang __ Company and entrusted it to apply to the customs for the [Buyer].

    Taicang __ Company had done no business with Beihai City __ Import & Export Company, and it has no idea why Beihai City __ Import & Export Company's name was used to apply to the customs. During the process of applying to the customs, Taicang __ Company only forwarded the sealed official documents sent from the [Buyer] to Zhangjiagang __ Company, and those documents issued by Beihai customs could only be opened by Zhangjiagang customs.

    From the cooperative import agreement between the [Buyer] and Taicang __ Company, it can be found that the [Buyer] was the party to purchase the goods. Beihai City __ Import & Export Company's name appeared only because the [Buyer] was trying to pay less customs by using its name, which should be aware by the [Buyer].

  2. From Zhangjiagang __ Company, the [Seller] knew that Taicang __ Company has taken delivery of 3,000 tons of goods, and the remaining 8,906 tons of goods were detained by Zhangjiagang customs on 23 May 1995 because of the suspicion of smuggling.

    The B/L the [Seller] sent to Zhangjiagang __ Company on 15 December 1993 is void because on 16 December 1993, Taicang __ Company sent a fax to Zhangjiagang __ Company, saying that " the 11,841 tons of goods were imported by Beihai __ Trade Company [Buyer], and we invested some money. As the representative of the [Buyer], we have not received any written instruction to deliver goods to __ Company [Seller], and we do not know the relationship between Beihai __ Trade Company and __ Company, therefore, please do not deliver the goods yet."

From the above facts, the [Seller] concludes that:

  1. Taicang __ Company was entrusted by the [Buyer], but not Beihai City __ Import & Export Company to apply to the customs for 11,900 tons of steel channels as the [Buyer]'s agent;

  2. Taicang __ Company took delivery of 3,000 tons of the goods after the [Seller] provided the original B/L and after the title of the goods had transferred to the [Buyer];

  3. The fax sent from Taicang __ Company to Zhangjiagang __ Company on 16 December 1991 indicated that the [Seller] had no right to control or impound the goods including the 1,906.89 tons of goods, which the [Seller] asked the [Buyer] to apply to the customs on behalf of the [Seller]. However, except for the deposit, the [Buyer] has not paid the remaining part of the price. The aforesaid fax also indicated that Taicang __ Company was entrusted by the [Buyer].

Above all, the [Seller] asserts that the goods the [Buyer] applied to the customs at Zhangjiagang using the name of Beihai City __ Import & Export Company's name were the goods under Contract 93K-8801010RD, but not as the [Buyer] stated "one delivery, two contracts".

(4) [Seller]'s defense to the [Buyer]'s counterclaim

  1. [Seller] has delivered the goods and handed over the documents to the [Buyer]'s agent.

    [Seller] provided the B/L, which represented the title of the goods, to the [Buyer]'s agent, Taicang __ Company, and Taicang __ Company applied to the customs and took delivery of the goods by presenting the aforesaid document. [Seller] had the title of the goods before it was transferred to the [Buyer], therefore, the [Buyer]'s so-called "using another party's goods as its own goods" is not true.

  2. About the barter trade, the [Buyer] shall provide evidence to prove that the [Seller] was doing barter trade with Beihai City __ Import & Export Company, otherwise, it can only prove that the [Buyer] applied to the customs using the name of Beihai City __ Import & Export Company in order to pay less customs.

    The goods the [Seller] delivered were the goods under Contract 93K-8801010RD. Applying to the customs was a necessary procedure to accept the goods, and how the [Buyer] applies to the customs has nothing to do with the [Seller];

  3. The joint importation agreement between the [Buyer] and Taicang __ Company indicates that the [Buyer] is the sole buyer in this case, and Taicang __ Company is the [Buyer]'s agent;

  4. The signature of Mr. Shen on the agreement represents the [Buyer], but not Mr. Shen himself;

  5. Issues on exchanging the deposit. On 16 June 1993, the [Seller] informed the [Buyer] of the exchange issue, and the [Buyer] raised no objection. The [Buyer] argues that the exchange rate is too high, but with no evidence. After exchanging, on 14 August 1993, the [Seller] sent RMB 300,000 of the remaining RMB 316,800 to Guilin __ Company as told by Mr. Shen of the [Buyer].

Above all, the [Seller] asserts that the parties of the contract are the [Buyer] and the [Seller], which is clear and accurate. The [Seller] has performed its obligation under Contract 93K-8801010RD, however, the [Buyer] has not paid 85% of the price under the contract. The [Seller] is entitled to the price in arrears and the interest on it.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) Applicable law

The parties did not stipulate the applicable law in their contract. However, both China and Portugal ( the administrative state Macao belongs to) are Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, "the CISG"), and the parties did not exclude the application of the CISG, therefore, which are not stipulated or unclear in the contract should be governed by the CISG.

(2) Whether the [Seller] has performed its obligation to deliver the goods

The Arbitration Tribunal notes that the [Seller]'s arbitration claim and the [Buyer]'s counterclaim are based on the business dispute. The [Seller] argues that it has delivered the goods under the contract as instructed by the [Buyer], and asks the [Buyer] to pay the price. The [Buyer] counter argues that the goods that arrived at Zhangjiagang port by the ship Ljuben Karavelov on 29 August 1993 were imported from Romania by Beihai City __ Import & Export Company as a barter trade with a contract number of 93RHQR-052021SB, and that the [Buyer] was not obligated to apply to the customs and take delivery of the goods.

The [Buyer] alleges that the [Buyer] has never received any goods or documents under the contract, and that the [Seller] has fundamentally breached the contract, therefore, the [Buyer] asks to terminate the contract, and that the [Seller] shall compensate the [Buyer]'s loss and pay the liquidated damages.

Whereas the two parties have disputed over whether the [Seller] has delivered the goods, after investigation, the Arbitration Tribunal finds that:

1. Beihai City __ Import & Export Company did not export sugar for exchange of importation of steel channels by barter trade, and the [Buyer]'s assertion that the [Seller] imported steel channels as a barter trade cannot be accepted.

2. The 9,978.417 tons of the 11,885.307 tons of steel channels that arrived at Zhangjiagang port on 29 August 1993 were the goods to be delivered to the [Buyer] under Contract 93K-8801010RD, which was confirmed by the faxes sent by Mr. Shen of the [Buyer]. The 1,906.890 tons of goods delivered by the same ship were to be delivered to Leyu Company, which is beyond this case.

3. On the contract in this case, there was [Buyer]'s appropriate contract seal, which was signed by Mr. Li. Mr. Li was in charge of the contract, which was admitted by the [Buyer] in its counterclaim application.

On 28 July 1993, Mr. Li sent a fax to the [Seller], saying that "for issues concerning steel channel contract, please send fax to Gulin 0973__ Mr. Wu forward to Mr. Shen. No need to contact Beihai __ Trade Company. Please give the transportation documents directly to Mr. Shen face-to-face, and do not entrust bank to collect the documents". Mr. Shen was the Manager of the Importing Department of the [Buyer]'s company.

Mr. Shen entrusted Taicang __ Company to do the importing procedure, and signed a joint importation agreement with it.

During the performance of the contract, Taicang __ Company has already paid a deposit of RMB 5,000,000 to the [Seller] on behalf of the [Buyer]. After the goods arrived at Zhangjiagang port, Taicang __ Company took 1,500 tons of the goods, and Zhangjiagang __ Company took 1,500 tons.

Mr. Shen entrusted Beihai City __ Import & Export Company to do the procedure of applying to the customs. In order to pay just half customs, they used 93RHQR-052021SB barter trade contract. On 23 May 1995, the 6,600 tons of goods which had not been taken by the [Buyer] were detained by Zhangjiagang customs because of the suspicion of smuggling.

Above all, the Arbitration Tribunal comtemplates that 9,978.417 tons of the goods arrived at Zhangjiagang port by the ship Ljuben Karavelov were the goods under the contract in this case, which Mr. Shen acting for the [Buyer] never denied.

In the agreement signed by the two parties on 29 December 1993, it was stipulated that after the [Buyer] finished the importing procedure in China, the goods would be kept by the [Seller] on behalf of the [Buyer], and that the [Buyer] entrusted Beihai City __ Import & Export Company to cooperate to perform the agreement jointly.

According to Articles 30 and 34 of the CISG, the Arbitration Tribunal deems that the [Buyer]'s claiming that the [Seller] has not delivered the goods has no basis. About how to apply to the customs, according to the contract, it was the [Buyer]'s responsibility, therefore, it shall take the responsibility for all problems occurred during the performance of applying to the customs.

The Arbitration Tribunal also notes that the [Seller] has obviously made mistakes in delivering the goods and providing the documents, especially when the [Buyer] informed the [Seller] that the customs had questioned the goods twice. The [Seller] should have known there was a problem and should have taken prompt action to settle it.

In the supplementary statement submitted by the [Seller] on 22 October 1995, the packing list of Contract 93K-8801010RD that it provided to the [Buyer] was presented, in which the size of the goods, number of bunches, length, total weight, and net weight were as the same as those in Contract 93K-RHQR052021SB sent from the [Seller]'s Hong Kong subsidiary by Mr. Chen acting for the [Seller] to the [Buyer] on 31 July 1993, and the mark number was 93K-8801010RD.

On 16 May 1996, the [Seller] stated when it was answering the Arbitration Tribunal's question that the [Buyer] sent the document to Mr. Chen, who was on a business trip in Hong Kong, and later Mr. Chen forwarded the documents to Mr. Shen of the [Buyer] using the fax machine in the [Seller]'s Hong Kong Office. Considering that it was the [Buyer]'s responsibility to apply to the customs, the [Seller] did not pay attention to the content of the documents.

The Arbitration Tribunal deems that the [Seller]'s aforesaid explanation is not persuasive. For example, why would the person in charge of Contract 93K-8801010RD handle the documents of Contract 93RHQR-052021SB, which had nothing to do with the [Seller]? Why would the [Buyer] fax the documents of the so-called barter trade to the [Seller]'s office, who had no connection with that contract at all? And why, when the [Seller] saw the content of the document sent by the [Buyer] was completely the same as the content in the contract in this case including mark numbers, it made no response, but to send the document back to the [Buyer]?

The Arbitration Tribunal asked the [Seller] about the aforesaid questions, however, the [Seller] never answered them.

After investigation, the Arbitration Tribunal concludes that the so-called barter trade contract never existed. The [Seller]'s sending documents from its Hong Kong subsidiary, which were in conflict with the contract in this case, has made it difficult to perform Contract 93K-8801010RD, such as handing over the documents, applying to the customs, and receiving the payment, therefore, the [Seller] shall take the responsibility.

(3) Whether Mr. Shen's performance represented the [Buyer]

[Buyer] asserts in its counterclaim application that Mr. Shen was not the person in charge of the contract (Mr. Li was), nor was he the legal representative of the [Buyer]'s counterclaim, therefore, any promise he made related to this contract is void. The [Seller] argues that Mr. Shen is an employee of the [Buyer], and the [Seller] contacted with him to follow the written instruction sent by Mr. Li of the [Buyer] on 28 July 1993.

After examination, the Arbitration Tribunal deems that Mr. Li and Mr. Shen were performing the contract on behalf of the [Buyer], therefore, the agreement and promises they made during Mr. Shen's employment are effective. The [Buyer] cannot avoid taking responsibility raising that Mr. Shen and Mr. Li were fired afterwards because they were using their own fax machine for work, or they were suspected of abusive use of the company's seal. These are all the [Buyer]'s company's internal problems.

Therefore, the Arbitration Tribunal does not accept the [Buyer]'s claim that the [Seller]'s non-delivery of the goods and the documents has constituted a contract violation, and its claim of dissolving the contract and getting refund of the price it has paid is not acceptable either.

(4) Exchanging money

[Buyer] has paid a deposit of RMB 8,800,000 and as asked by the [Buyer], the [Seller] have it exchanged into US $800,000 with a remainder of RMB316, 800, of which the [Buyer] was informed and to which it raised no objection.

The [Buyer] argues that before March 1995, the exchange rate between US $ and RMB at the Shanghai Foreign Exchange Swap Center had never exceeded 8.5 : 1, however, the [Buyer] did not provide any evidence to support this assertion, therefore, it should not be accepted.

About the remaining RMB 316,800, the [Seller] proved that it had sent RMB 300,000 to Guilin __ Company as instructed by Mr. Shen of the [Buyer], and the [Buyer] raised no objection to this fact. The Arbitration Tribunal deems that the [Seller] has already sent RMB 300,000 to the [Buyer], it shall also send the remaining RMB 16,800 to the [Seller].

The two parties' claims

1. The [Seller] asks the Arbitration Tribunal to rule that the [Buyer] shall pay the price and the interest on it. The Arbitration Tribunal deems that the [Seller] shall bear 30% of the entire price and the [Buyer] shall bear 70% without the interest, and that the title of the goods belongs to the [Buyer].

The [Seller] has delivered 9,978.417 tons of goods, for which the invoice value totals US $3,663,423.96; The [Seller] shall pay US $1,099,027.19, and the [Buyer] shall pay US $2,564,396.77. The [Buyer] has paid RMB 8,800,000, which is US $800,000, and the [Buyer] has returned RMB 30,000 of the remaining RMB 316,800. The unreturned RMB 16,800 is US $2,024 calculated at 1: 8.3. Therefore, the price the [Buyer] shall pay to the [Seller] is: US $2,564,396.97 - 800,000 - 2,024 = $1,762,372.77.

2. The Arbitration Tribunal does not accept the [Buyer]'s first claim of dissolving the contract;

3. The Arbitration Tribunal does not accept the [Buyer]'s second claim of getting a refund of the deposit of RMB 800,000;

4. The Arbitration Tribunal does not accept the [Buyer]'s third claim of asking the [Seller] to pay the liquidated damages;

5. The two parties shall bear the attorneys' fee on their own;

6. [Seller] shall bear 30% of the arbitration fee and the cost for investigation, and the [Buyer] shall bear 70%. [Buyer] shall bear the entire arbitration counterclaim fee.

III. THE AWARD

The Arbitration Tribunal rules that:

(1)      [Buyer] shall pay US $1,762,372.77;
(2) The [Seller]'s other claims are dismissed;
(3) The [Buyer]'s entire counterclaim is dismissed;
(4) The arbitration fee of this case is ___; [Seller] shall bear 30%, which is ___ and the [Buyer] shall bear 70%, which is ___. [Seller] has paid ___ in advance, therefore, [Buyer] shall pay back ___ to the [Seller].

The [Buyer] shall bear the entire counterclaim fee, which has been paid by the [Buyer] in advance.

The cost for the Arbitration Tribunal to conduct its on-the-spot investigation is RMB 40,000, of which the [Seller] shall bear 30%, totaling RMB 12,000 and the [Buyer] shall bear 70%, totaling RMB 28,000. Both the [Seller] and the [Buyer] have each paid RMB 20,000 in advance, therefore, the [Buyer] shall pay back RMB 8,000 to the [Seller].

The aforesaid (1) and (4) total US $1,779,176.27 and RMB 8,000, which shall be paid by the [Buyer] within 45 days after this award takes effect. Otherwise, annual interest shall be added at a 7% rate on the US dollar amount and a 9% annual rate on the RMB amount.

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 Macao is referred to as [Seller] and Respondent of the People's Republic of China is referred to as [Buyer]. 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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Pace Law School Institute of International Commercial Law - Last updated January 23, 2007
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