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CISG CASE PRESENTATION

China 17 December 1996 CIETAC Arbitration proceeding (Hot-rolled steel plates case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961217c1.html]

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

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Case identification

DATE OF DECISION: 19961217 (17 December 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/55

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Austria (claimant)

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

GOODS INVOLVED: Hot-rolled steel plates


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 9 ; 78

Classification of issues using UNCITRAL classification code numbers:

9B [Implied agreement on international usages];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Usages and practices ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): 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. 2206-2210

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

Hot-rolled steel plates case (17 December 1996)

Translation [*] by Meihua Xu [**]

Edited by Li Ke [***]

China International Economic and Trade Arbitration Commission (the original name was Foreign Trade Arbitration Committee of China Council for the Promotion of International Trade, later changed to Foreign Economic and Trade Arbitration Commission, then changed to current name. Hereinafter called "the Arbitration Commission") accepted the case according to:

   -    The arbitration clause in Sales Contract No. 2NRZW400181CO signed by Claimant [Seller], Austria __ International Trade Company, and Respondent [Buyer], China __ Import & Export Company, on 10 December 1992; and
 
   -    The written arbitration application submitted by [Seller] on 11 July 1995.

Because the parties failed to jointly appoint or ask the Chairman of the Arbitration Tribunal to appoint the Presiding Arbitrator, pursuant to the Arbitration Rules (effective 1 October 1995), the Chairman of the Arbitration Commission appointed Mr. P as the Presiding Arbitrator. Mr. P, Ms. A, the arbitrator appointed by the [Seller], and Mr. D, the arbitrator appointed by the [Buyer] formed the Arbitration Tribunal on 27 November 1995 to hear this case.

The Arbitration Tribunal examined the [Seller]'s arbitration application, the [Buyer]'s arbitration defense, and the evidence submitted respectively and held a hearing in Beijing on 9 February 1996. Both the [Buyer] and the [Seller]'s arbitration agents attended the hearing. They made oral statements and arguments and answered the Arbitration Tribunal's questions. After the hearing, both parties submitted supplementary documents.

Due to the complexity of this case, the Arbitration Commission accepted the request of the Arbitration Tribunal to postpone the deadline for handing down an award in this case for three months, from 27 August 1996 to 27 November 1996. Later, the Arbitration Commission granted another postponement, from 27 November 1996 to 27 February 1997.

This case has been concluded. The Arbitration Tribunal handed down this award by consent based on the written materials submitted by the parties and the hearing.

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

I. FACTS

On 10 December 1992, the [Buyer] and the [Seller] signed Contract No. 2NRZW400181CO (hereinafter called the "Contract"), by which the [Buyer] was to purchase 2,500 tons of hot-rolled steel plates made in Russia at a unit price of US $277/ton (CNF FO CQD FANG CHENG), totaling US $692,500; the loading port was Nachodka; and shipping period was between December 1992 and January 1993. Later, the parties agreed to postpone the delivery time, and the [Buyer] issued a L/C in favor of the [Seller] on 1 April 1993. On 7 April 1993, the L/C was modified to state that the shipping period should be no later than 30 April 1993.

Disputes arose during the performance of the contract that could not be settled through negotiation. Therefore, the [Seller] filed an arbitration application with the Arbitration Commission on 11 July 1995.

[POSITION OF THE PARTIES]

[Seller]'s position

The [Seller] alleges that:

On 16 April 1993, the [Seller] appointed the ship "C. BLANCO" to load the goods from 18 April 1993 to 25 April 1993. The demurrage charge was US $4,000 (note: the demurrage and dispatch money rate was US $4,000/US $2,000). The [Buyer] accepted the appointment of the ship on the same day (including express acceptance of the demurrage charges), and sent a fax on 7 May 1993, confirming the rate of demurrage. The goods were loaded onto the ship "C. BLANCO", and the B/L was issued on 29 April 1993.

On 3 May 1993, the [Seller] informed the [Buyer] of the ship's estimated arrival time three days prior to arrival, and at 7:15 of 6 May 1993, sent an unloading notice to the [Buyer]. However, the [Seller] was informed by the carrier that the [Buyer] did not take any action to take the delivery until 11 May 1993, with the result, a ten day, eighteen hour, and twenty-four minute demurrage charge was incurred. According to the agreement by the two parties, the demurrage rate was US $4,000/day, totaling US $43,066.67. On 30 June 1993, the [Seller] was asked for compensation. The [Seller] has urged the [Buyer] to make payment, but the [Buyer has not done so.

The [Seller] asks the Arbitration Tribunal to direct the [Buyer] to pay the US $43,066.67 demurrage charge and the interest on it calculated from 1 July 1993 to the day of actual payment at an 11.5% annual interest rate, and the entire arbitration fee.

[Buyer]'s defense

The [Buyer] counter argues that:

1. The demurrage charge was not caused by the [Buyer], and the [Buyer] is not liable; therefore, the [Seller] is not entitled to file an arbitration claim against the [Buyer] for this charge.

The ship arrived at Guangxi Fangcheng port on 6 May 1993 and the [Buyer]'s client arrived at the port on 5 May, arranging unloading with __ Company. However, on 6 May 1993, the shipping company sent a fax to __ Company, indicating that it could not unload the goods "until the [Buyer] provided the original B/L or with the permission by our company." The [Buyer]'s client did not receive the aforesaid B/L until 24 May 1993; therefore, even though the ship had arrived and the receiver had prepared to unload the goods, because __ Company strictly followed the instruction from the carrier, the [Buyer] was unable to unload the goods. It was not until 11 May 1993 that the [Buyer] received notice to unload the goods, and the [Buyer]'s client completed the unloading procedure with __ Company in Fangcheng on 13 May 1993.

It should be mentioned that the Russian Far East port is near the Guangxi Fangcheng port; therefore, it is common that a ship would arrive at the destination port earlier than the original B/L. Under this circumstance, and according to shipping usages, the carrier should not have insisted on unloading the goods upon the original B/L. The [Buyer]'s client failed to unload the goods in time due to the carrier's instruction and the [Seller]'s failure to send the original B/L to the [Buyer]'s client's bank on time. Therefore, the [Buyer] and its client should not bear the demurrage charge thereby incurred.

2. According to the related laws and trade usages, the carrier's insisting on unloading the goods upon the original B/L lacks legal basis. The carrier should bear the demurrage charge thus incurred, and it should have nothing to do with the [Buyer]. Pursuant to Article 3(2) of the Hague Rules, "the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried." Obviously, the carrier's unloading obligation is unconditional, and it should not have insisted on only unloading the goods upon the original B/L. In addition, normally the terms on the back of the B/L include the following content (Article 8(2) of the B/L of China Ocean Shipping Company):

"The carrier may unload the goods without giving advance notice if the receiver does not take delivery of the goods from the ship promptly or refuses to take delivery of the goods, or nobody claims the goods; the carrier has the right to unload the goods to shore or to anywhere, and the client shall bear all the risks and costs. The carrier shall be deemed to have performed its obligation to deliver the goods."

Therefore, the carrier's insistence on unloading the goods based on the original B/L lacks legal basis.

Under the condition that the receiver was unable to provide the original B/L, which was not caused by the receiver itself, the carrier should have unloaded the goods based on the aforesaid stipulations. However, in this case, the carrier "C. BLANCO" did not unload the goods, but ignored the occurrence of the demurrage. As a client, the [Buyer] should not make compensation for this cost. Since the [Seller] has compensated the carrier, it should bear the cost itself, and should not shift it to the [Buyer] and the [Buyer]'s client.

3. The evidence the [Seller] adduced to claim the demurrage charge from the [Buyer] is insufficient; therefore, even though the [Seller] has paid the demurrage charge to the carrier, it was not entitled to claim it from the [Buyer] or the [Buyer]'s client.

[Seller]'s response

The [Seller] responds:

1. According to INCOTERMS, under the term CNF FO, the [Buyer] shall arrange for unloading and pay the entire cost. Since the [Buyer]'s failure to perform the aforesaid obligations constitutes a contract violation, [Buyer] should bear the entire losses and costs.

2. The issue of shipping had not been decided when signing the contract since the [Buyer] and the [Seller] usually discuss the demurrage after confirming the ship. The correspondence between the two parties indicates that they had reached an agreement on demurrage and the demurrage rate in written form, and it could be regarded as their written agreement on the demurrage.

3. Based on the certificate provided by the [Seller] on 6 May 1993, the [Seller] agreed to deliver the goods to the [Buyer] by receiving bank guarantee letter, and from the confirmation made by shipping company to the shipping agent, it could also be concluded that the [Seller] had agreed to deliver the goods based on the bank guarantee letter.

4. All the facts and evidence prove that the [Buyer] was not well prepared to accept the goods in time. The [Buyer] should bear the losses and costs thus incurred by the [Seller], including the demurrage charge.

5. The calculation for demurrage:

   -    The preparation notice was sent at 7:15 of 6 May 1993;
   -    The [Buyer] had about seven hours to prepare before unloading;
   -    The demurrage was calculated from 14:00 of 6 May 1993;

It could be found from the unloading record of the carrier that unloading did not start before 13 May 1993;

On 2 June 1993, the carrier sent a letter, asking for a demurrage charge of US $43,063.89.

The [Seller] deducted commissions it should pay to the two shipping agents based on an agreement between the [Seller] and the shipping company which had no effect on the [Buyer]; therefore, the [Buyer] should pay the entire demurrage charge.

The [Seller] again asks the [Buyer] to pay US $43,066.67 and the interest on it calculated from 1 July 1993 to the day of actual payment at an 11.5% annual interest rate, and the entire arbitration fee.

[Buyer]'s supplementary defense

The [Buyer] submitted the following supplementary defense:

1. The [Buyer] and its client committed no fault in receiving the goods; therefore, the [Seller]'s compensation claim has no legal basis and is not rational;

2. The demurrage was incurred because the carrier insisted on unloading the goods upon the original B/L;

3. Even though the [Buyer] did not perform its obligation to take delivery of the goods, it should not bear the demurrage charge since it was caused by the carrier's failure to exercise the unloading rights;

4. The [Seller]'s calculation method of adding the time before the ship entering the berth violated shipping usages. This is an unfair calculation method.

Based on the unloading record provided by the [Seller], the ship arrived at Fangcheng port at 7:15 of 6 May 1993; however, it was waiting to be berthed until 9 May 1993. At 16:30 of 10 May 1993, the procedure for lying at anchor was completed, and the unloading process started at 10:00 of 13 May 1993.

According to Fangcheng port's practices, the unloading process does not start until the ship lies at anchor and the goods on the first hook are lifted up; therefore, the unloading time started at 10:00 on 3 May 1993. From that time, if the goods were unloaded at a speed of more than 1,000tons/day, the carrier should not ask for demurrage from the [Buyer]'s client; on the contrary, it should pay dispatch money to the [Buyer]'s client. Otherwise, the [Buyer]'s client should bear the demurrage charge based on the percentage that the 2,500 tons of goods took of the entire shipping space.

The demurrage charge should be calculated as: the aforesaid percentage the number of days exceeding the days allowed for unloading the entire goods on the ship (which was caused by an unloading speed of less than 1,000 tons/day) demurrage rate. When calculating the demurrage fee, the [Seller] neither accords to the shipping usages, nor considers the fact that the goods only occupied 1/6 of the entire shipping space. Therefore, under this circumstance, even though the [Seller] [Translator's note; Although "[Seller]" is stated here, considering the context, it appears likely that "[Buyer]" was intended.] should pay the demurrage charge to the carrier. The [Seller] may perhaps have the right to ask the [Buyer] to pay 1/6 of the correctly calculated demurrage charge, not the entire demurrage charge.

5. Even if the [Seller] had the right to ask for the demurrage charge from the [Buyer]; its compensation claim cannot be established due to lack of evidence;

Based on the aforesaid, the [Buyer] asks the Arbitration Tribunal to dismiss the [Seller]'s entire arbitration claim, and to direct the [Seller] to bear the entire arbitration fee.

II. OPINION OF THE ARBITRATION TRIBUNAL

      (1) Both parties' places of business are in Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereinafter called the "CISG"), and the two parties did not exclude the application of the CISG; therefore, the CISG should be applied;

      (2) The contract was signed by the representatives authorized by the two parties. It has legal effect, and the parties should be bound by it and should abide by the stipulations of the contract;

      (3) The dispute in this case focuses on the liability for the demurrage. According to the stipulations in Contract 2NRZW400181CO, the Arbitration Tribunal concludes as follows:

            1. Whether the [Seller] has the right to claim demurrage from the [Buyer]

            The Contract sets forth the term CNF FO CQD. After the goods arrived at the destination port, the [Buyer] had the obligation to accept the goods at the destination port according to the contract, and to pay the unloading fee. The issues as to the liability for the demurrage due to port congestion, which caused the ship to be unable to lie at anchor, and the calculation of unloading time should be based on the shipping contract and the sales contract. Since the contract was under the term CNF FO CQD, the [Seller] was obligated to charter the ship and sign the shipping contract. On 16 April 1993, the [Seller] informed the [Buyer] of the appointment of the ship "C. BLANCO" and the demurrage and dispatch money rate, which was 4,000/2,000. On the same day, the [Buyer] accepted the aforesaid terms. The Arbitration Tribunal holds that the parties had an agreement on the liability for the demurrage. If the [Buyer] is liable for the demurrage and the carrier has the right to ask for the demurrage from the [Seller], then the [Seller] may claim it from the [Buyer].

            2. The time for calculation of the demurrage

            The parties have no dispute on the fact that ship "C. BLANCO" arrived at Fangcheng port on 6 May 1993, and the [Buyer] admitted that the [Seller] sent the notice of the anticipated arrival time to the [Buyer] on 3 May 1993. However, the parties had no agreement on the situation in which the goods arrive before the B/L is received, or the methods of unloading and accepting the goods. After the ship "C. BLANCO" arrived at the port, the carrier asked the [Buyer] to provide the original B/L to take delivery of the goods, but the [Buyer] had not received the original B/L at that time. The Arbitration Tribunal holds that the [Buyer] is not liable for the carrier's not releasing the goods. The Arbitration Tribunal does not accept the [Seller]'s method of calculating the demurrage charge from 6 May 1993.

Since the two parties had no agreement on when to start calculating the unloading time, according to international trade usages and the Chinese ports' practices, the unloading time shall start from a reasonable time after the submission of unloading notice and the completion of inspection. Based on the [Seller]'s unloading time record, the inspection on the ship was finished at 16:30 on 10 May 1993; therefore, the Arbitration Tribunal deems that the unloading time started from 17:30 on 10 May 1993, when the ship was prepared to be unloaded.

From the corresponding faxes between the [Buyer] and the [Seller], the two parties confirmed that the unloading rate was 1,000 tons per sunny day. Based on this, unloading time allowed is: 2,504.798 1,000tons/sunny days = two days, twelve hours, seven minutes, deducting raining time on 11 and 12 May, the unloading time was from 17:30 on 10 May 1993 to 9:17 on 13 May 1993, and then the calculation of demurrage started.

            3. The [Seller]'s unloading record recorded to 24:00 of 15 May 1993, and there is no complete record proving that the carrier did not finish unloading until 21 May 1993; therefore, the Arbitration Tribunal deems that the demurrage should be calculated to 24:00 of 15 May 1993, i.e., the demurrage should be calculated from 9:17 of 13 May 1993 to 24:00 of 15 May 1993 (2.61319 days) US $4,000/day = US $10,452.76. Thus, the [Buyer] shall compensate the demurrage charge of US $10,452.76 to the [Seller]. The evidence provided by the [Seller] showed that the [Seller] paid the aforesaid sum to the carrier from 9 July to 13 July 1993; therefore, the Arbitration Tribunal deems that the interest on it shall be calculated from 10 July 1993;

            4. The [Seller] shall bear 40% of the arbitration fee and the [Buyer] shall bear 60%.

III. THE AWARD

The Arbitration Tribunal rules that:

      (1) [Buyer] shall pay the demurrage charge of US $10,452.76 to the [Seller] and the interest on it calculated from 10 July 1993 to the day of the award at an 8% annual interest rate;

      (2) [Seller] shall bear 40% of the arbitration fee and the [Buyer] shall bear 60%. The [Seller] has paid US $__ in advance, which offsets the arbitration fee, therefore, the [Buyer] shall pay back US $__ to the [Seller];

      (3) [Buyer] shall pay the aforesaid sum within 45 days after this award; otherwise, a 10% annual interest shall be added.

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 Austria is referred to as [Seller] and Respondent of the Peoples' Republic of China is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $].

** 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 a 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.

*** Li Ke is in her fourth year in SHISU Law School (Shanghai International Studies University). Her major is International Economic Law and she also took a minor BA degree in International Trade. International Business Transactions is her field of interest.

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