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CISG CASE PRESENTATION

China 23 December 1996 CIETAC Arbitration proceeding (Carbazole case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961223c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19961223 (23 December 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/57

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (claimant)

GOODS INVOLVED: Carbazole


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 9 ; 25 ; 45 ; 74 ; 77 ; 78 ; 84

Classification of issues using UNCITRAL classification code numbers:

9C [Practices established by the parties];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

45A [Buyer's remedies for breach of contract by seller];

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

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

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

84A [Seller bound to refund price must pay interest]

Descriptors: Usages and practices ; Waiver ; Fundamental breach ; Damages ; Mitigation of loss ; 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. 2260-2267

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.43, 90, 103, 187, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

Queen Mary Case Translation Programme

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

Carbazole case (23 December 1996)

Translation [*] by Ning Zhao [**]

Translation edited by Meihua Xu [***]

On 6 March 1996, the China International Economic & Trade Arbitration Commission (hereinafter referred as the Arbitration Commission) accepted this case on the basis of:

   -    The arbitration clauses in Contracts 94G0010, 94G0011, 94G0012, concluded by Claimant American ___ Company (hereinafter referred as [Buyer]) and Respondent China Petroleum & Chemical Corporation Jiang Su Province Yan Cheng ___ Company (hereinafter referred as [Seller]); and
 
   -    The written arbitration application in regard to the quality of carbazole submitted to the Arbitration Commission by Claimant [Buyer] on 29 February 1996.

In response to [Buyer]'s arbitration application, [Seller], on 20 April 1996, submitted its defense. Meanwhile, [Seller] points out that the 24 MT carbazole, the non-conforming goods complained of by [Buyer], are not the goods delivered by [Seller] to fulfil contract obligations in relation to Contracts 94G0010, 94G0011, 94G0012. In fact, the majority of that carbazole delivered is subject to Contract SNY9400186 between [Seller] and [Buyer] and that no dispute arisen from Contracts 94G0010, 94G0011, 94G0012 between [Buyer] and [Seller].

On 17 June 1996, [Buyer] submitted its supplementary documents and clarified the contracts involved.

   -    In regard to the relation between [Buyer]'s application and the involved contract, [Buyer] asserts that the claim in the Arbitration Application is raised on the basis of the actual delivery of four batches of goods, i.e., 24 MT carbazole, which does not mean these four batches of goods are under Contracts 94G0010, 94G0011, 94G0012.
 
   -    [Buyer] also clarifies the relation between these four batches of carbazole (24 MT carbazole) and the related contracts:

  • 6 MT carbazole each were delivered by [Seller] in Order No.WG8841 and Order No.WG8961 under Contract SNY9400186;

  • 6 MT carbazole were delivered by [Seller] in Order No. 8736 under Contract SNY9400159; and

  • 6 MT carbazole were delivered by [Seller] in Order No.WG9207 under Contract 94G0012.

With respect to [Buyer]'s statement, which explains the relation between the disputed goods and the involved contracts, [Seller] does not argue again in its subsequent defense.

Contracts SNY9400186 and SNY9400159 state that the Arbitration Commission will hear disputes arisen therefrom.

In the current case, [Buyer] entrusted the Chairman of the Arbitration Commission to appoint its arbitrator. Arbitrator A was appointed by the Chairman of the Arbitration Commission, Arbitrator B was appointed by [Seller]. Since both parties failed to either appoint a Presiding Arbitrator together, or to entrust the Chairman of the Arbitration Commission to appoint a Presiding Arbitrator within the fixed time, in accordance with the Arbitration Rules the Chairman of the Arbitration Commission appointed Arbitrator P as the Presiding Arbitrator. On 11 April 1996, the three arbitrators formed the Tribunal. Due to the death of Arbitrator A, the Chairman of the Arbitration Commission appointed replacement Arbitrator Z.

[Buyer] submitted its Arbitration Application over a quality dispute arising from the sale of goods under Contract SNY9400186, Contract SNY9400159 and Contract 94G0012, [Seller] handed in its defense responding to the Arbitration Application. The Tribunal hears the case based on both parties' submissions; neither party contested the jurisdiction of the Tribunal.

On 21 June 1996, the Tribunal commenced a hearing in Beijing. Representatives of and agents of [Buyer], and agents of [Seller] were present. Both parties made presentations and answered questions of the Tribunal.

After the hearing, the parties submitted supplementary documents, which were transferred to the counter-party by the Arbitration Commission. The case has been concluded. The Tribunal handed down its award by consent.

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

[FACTS]

[Buyer]'s position

[Buyer] states:

   -    [Seller] delivered 6 MT carbazole to [Buyer] according to Contract SNY9400159 (Order No.WG9736) on 29 August 1994;
 
   -    [Seller] delivered 6 MT carbazole to [Buyer] according to Contract SNY 9400186 (Order No.WG8841) on 30 September 1994;
 
   -    [Seller] delivered 6 MT carbazole to [Buyer] according to Contract SNY9400186 (Order No.WG8961) on 7 November 1994;
 
   -    [Seller] delivered another 6 MT carbazole to [Buyer] according to Contract 94G0012 (Order No.WG9207) on 15 December 1994.

These four batches of goods were delivered to [Buyer]'s warehouse in New York on 19 October 1994, 23 November 1994, 28 December 1994 and 8 February 1995, respectively.

The goods were for [Buyer]'s supply of Sandoz Company. Sandoz Company cannot deal with bag-packed goods, and always requires [Buyer] to change the bag packing to 150 kg of barrel packing. Therefore, after the 6 MT carbazole under Order No.WG8736 arrived at [Buyer]'s American Select Warehouse, [Buyer] assigned personnel to repack the goods into 40 barrels, 150 kg each. The original 25 kg packing bags were repacked into 20 barrels, 150 kg each, and the original 50 kg packing bags were repacked into 20 barrels, 150 kg each: in total 40 barrels.

On 10 January 1995, [Buyer] sent these 40 barrels of carbazole to Sandoz Company. After receiving the goods, Sandoz Company did sampling tests on 16, 20 and 26 January 1995. [Buyer] alleges that the result of the sampling tests showed that the percentage of carbazole was about 60%, much lower than the 90% stated in the Quality Certificate and Guarantee Letter for Contract SNY9400159. On 13 February 1995, those 40 barrels of carbazole were returned to [Buyer] and stored in the [Buyer]'s warehouse. Afterward, Sandoz Company inspected another three batches of goods and again proved that the percentage of carbazole was lower than the contract standard of 90%.

[Buyer] states:

After discovering the quality problem of the delivered goods, [Buyer] notified [Seller] immediately. To resolve the quality dispute between the parties, the CEO, Mr. Gao, Mr. Li and the Manager of the carbazole factory, representing the [Seller], came to the United States to check out the goods on 8-9 May 1995. During their stay, the parties agreed that:

   -    [Seller] will take samples, and the samples will be sent to China ___ Trading Company United States Branch, located in New York, for inspection.
 
   -    American SGS, approved by both parties as the authorized inspection bureau, will commence inspection of these four batches of goods.
 
   -    The inspection report produced by SGS will be the basis for the parties to resolve the dispute. If there is no quality problem, [Buyer] will not claim damages; if the goods are not in conformity with the contractual standard (percentage shall be above 90%), [Seller] will bear all the responsibilities.

In accordance with this agreement, the representatives of [Seller], Mr. Gao and the Manager of the carbazole factory, and the representatives of [Buyer], Mr. K, Mr. Richard M and Ms. S.Yu went to American Select Warehouse together. Mr. Gao took six samples from these four batches of goods, which included the original bag packing goods under Orders No.WG8841, No.WG8961 and No.WG9207, and the repacked goods under Order No.WG8736, and sent the samples to China ___ Trading Company United States Branch directly. After two months, Mr. S. Wu, a representative of China ___ Trading Company United States Branch, informed [Buyer] that the results from US SGS prove that the purity of the goods was similar to the previous result determined by Sandoz Company, around 60%. However, Mr. S. Wu sent the original copy of the inspection report to Mr. Gao, representative of [Seller], as the inspection report shall be [Seller]'s property, and therefore, refused to provide a copy of the inspection report to [Buyer].

After receiving the SGS inspection report, [Seller] did not perform its oral agreement made with [Buyer] in New York, did not provide the inspection report to [Buyer], and did not compensate [Buyer].

To clarify the facts, [Buyer] requested US SGS to inspect these four batches of goods again in June 1996. The result proves that the percentage of carbazole under Order No.WG8841, WG8961, and WG9207 is lower than the contract standards (above 90%). US SGS lost the sample under Order No. 8736 and the goods thereof were not inspected. However, in comparison with the inspection done by Sandoz Company in 16 January 1995 and the one done by US SGS in May 1995, it could be confirmed that the quality of the goods is lower than the contractual standard (above 90%).

[Buyer] states:

On 13 July 1995, [Buyer] informed [Seller] that [Buyer] is inclined to return the goods and require [Seller] to refund the payment and bear all costs incurred. [Seller], however, did not respond to [Buyer]. On 11 October 1995, [Seller] denied all liability. Afterward, to mitigate the damages, [Buyer] discounted 8 MT of non-conforming goods. Due to the poor quality of the remaining 16 MT, it could not be sold and was stored in the warehouse to be returned to [Seller].

On 29 February 1996, [Buyer] submitted its arbitration application. [Buyer] requests that:

   -    [Seller] compensate the damages suffered by [Buyer], in total US $286,325.44; and that
 
   -    [Seller] should bear the cost of returning the 16 MT carbazole.

The details of the damages suffered by [Buyer] are:

1. In regard to the goods under Order No.WG9207, [Buyer] made the payment and other costs of US $56,521.33, and paid the bank interest of US $7,300.67 from 19 January 1995 to 30 June 1996, and the loss of anticipatory profit is US $11,304.27. The total damages under this order are US $75,126.27.

2. In regard to the goods under Order No.WG8961, [Buyer] made the payment and other costs of US $55,355.11, and paid the bank interest of US $8,533.90 from 12 November 1994 to 30 June 1996, and the loss of anticipatory profit is US $11,071.02. The total damages under this order are US $74,960.03.

3. In regard to the goods under Order No.WG8736, [Buyer] made the payment and other costs of US $57,327.34, and paid the bank interest of US $10,032.28 from 6 October 1994 to 30 June 1996, and the loss of anticipatory profit is US $11,465.40. The total damages under this order are US $78,824.34.

4. In regard to the goods under Order No.WG8841, [Buyer] made the payment and other costs of US $57,038.86, and paid the bank interest of US $9,506.48 from 25 October 1994 to 30 June 1996, and the loss of anticipatory profit is US $11,407.77. The total damages under this order are US $77,953.11.

5. The traveling cost is US $15,750.

6. The arbitration cost and attorneys' fee is US $22,031.

[Buyer] requests the Tribunal to grant damages of US $286,325.44, which is the total amount of the above mentioned damages minus the discounted 8 MT carbazole of US $58,320.

[Buyer] elaborated on the reasons for its arbitration application:

[Buyer] believes that [Seller] waived its right to restrict 30 days in claiming damages as stated in the contract. The reasons are:

   -    [Buyer] has a long term trading relationship with [Seller]. Due to the peculiarity of the chemical inspection, both parties, in order to easily inspect [Seller]'s goods, agreed that Sandoz Company will be the inspection bureau when the goods arrive. Since both parties understand the lengthy inspection on chemicals, there was no restriction on the inspection time, which became the general trade custom between the parties. The general practice for the inspection is that [Buyer] does not request Sandoz to inspect goods directly after the good's arrival, instead Sandoz investigates the goods after receiving them from [Buyer]. Generally, it always takes more than 30 days when the goods first arrive at [Buyer]'s warehouse and are then transferred to Sandoz for inspection. Nevertheless, [Seller] accepts the Sandoz's inspection report even though it is produced after the limitation of 30 days.
 
   -    In respect of the current disputes, [Buyer] raised the problem with the quality of the goods under Order No.WG9836 on 26 January 1995, [Seller] did not oppose [Buyer] by arguing that [Buyer] exceeded the limitation for filing claims as stated in the contract. To the contrary, [Seller] iterated in its faxes to [Buyer] that [Seller] will be responsible if the liabilities of [Seller] could be confirmed. For example:

  • On 3 February 1995, [Seller] faxed [Buyer]: "Please take 200 grams samples from the goods and sent them to us, in order to check to which factory those goods belong. Since 25 kg bag-packing goods and 50 kg bag-packing goods were produced by different factories, it would be convenient for us to know in which packing the dispute goods are. Meanwhile, we will change the goods if you could confirm our liabilities."

  • On 17 February 1995, [Seller] faxed [Buyer]: "The samples were received. We are going to confirm whether these goods were produced by our factory, if so confirmed, we will deliver another 6 MT of goods to you."

It is clear that [Seller], first, approved Sandoz as an inspection bureau and accepts its inspection result, and second, [Seller] waived its right to restrict 30 days in claiming damages as stated in the contract.

   -    In April and May 1995, [Buyer] raised the quality problem again in regard to the goods under Order Nos. WG8841, WG8961 and WG9207 by showing the corresponding inspection reports produced by Sandoz. [Seller] did not contest the qualification of Sandoz for inspection, nor did [Seller] raise the limitation of 30 days. It is obvious that [Seller], by its conduct, waived its right to restrict damage claims to 30 days.
 
   -    During [Seller]'s stay in United States on 8-9 May 1995, both parties agreed that "these four batches of goods will be re-inspected, and in the event that the goods are not in conformity with the contract standards, [Seller] will be held liable for damages occurred". This proves again that [Seller] waived its right to restrict 30 days in claiming damages.
 
   -    In accordance with Article 9(1) of CISG,

"The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves."

Agreement by both parties of Sandoz as an inspection bureau, and that [Seller] waived its right to restrict 30 days in claiming damages are the practices the parties have established, which have binding force on [Seller].

[Buyer] also states that [Seller] issued guarantee letters with these four batches of goods. The guarantee letter states: "This is to guarantee that the minimum carbazole content of the goods is above 90%." So, apart from the contracts, [Seller] promised to provide goods under Contracts SNY9400159, SNY9400186 and 94G0012 with the minimum carbazole content of 90% in a way of the written guarantee letter. Therefore, pursuant to the guarantee letter, [Seller] is liable if the purity of the goods does not reach the contract standards. Since the percentage of the carbazole content of the goods is much lower than 90%, [Seller] should honor the guarantee obligations written in its guarantee letters accordingly.

[Buyer] alleges that, in accordance with Article 25 CISG:

"A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result."

[Seller] fundamentally breached the contract; in accordance with Article 45 CISG:

"If the seller fails to perform any of his obligations under the contract or this Convention, the buyer may: (b) claim damages as provided in Articles 74-77."

Article 74 CISG states:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach ..."

All in all, [Buyer] has the right to claim damages from [Seller], who delivered a poor quality of carbazole.

[Seller]'s position

[Seller] argues:

[Seller] never established any practice with [Buyer] in respect of Sandoz's inspection, nor did [Seller] accept its inspection results. [Seller] alleged that it is not necessary for [Seller] to know to whom [Buyer] will sell the goods, since in the current transactions, [Seller] only needs to send carbazole to [Buyer]. [Seller] never appointed Sandoz Company as an inspection bureau to check its goods, so that is in no way established as a trade practice between the parties. The contracts concluded by the parties state that an inspection report produced by a notary bureau shall be the basis for claiming damages. Sandoz Company, as a customer of [Buyer], is not qualified as an inspection bureau to produce an inspection report with the purpose of claiming damages, so its inspection reports cannot be accepted. The faxes sent to [Buyer] on 3 February and 17 February 1995 do not mean that [Seller] accepted Sandoz's inspection results.

Since [Buyer] did not inspect the goods within the time fixed by the contracts, [Buyer] lost the right to claim damages occurred thereof.

   -    The contracts explicitly state that claims against the quality of the goods shall be raised within 30 days after the goods arrive at the destination port, with inspection results made by a seller recognized notary bureau. In accordance with this provision, [Buyer] shall, in regard to the dispute goods, have raised the claim, by showing an inspection report issued by a notary bureau, within 30 days after the goods arrived at New York Port. In fact, [Buyer] did not do so within the time limit. [Buyer] itself listed the dates when these four batches of goods were transferred into the warehouse:

  • The goods under Order No. WG8736 on 19 October 1994;
  • The goods under Order No. WG8841 on 23 November 1994;
  • The goods under Order No. WG8961 on 28 December 1994;
  • The goods under Order No. WG9207 on 8 February 1994.

The documents provided by [Buyer] also show that the disputed goods could be inspected in about seven days. It is obvious that [Buyer] had enough time to excise its inspection right within the time limit, however, it did not do so.

  • It was not until 26 January 1995 that [Buyer] raised the quality issue on the goods under Order No.WG8736;
  • It was during the period April to May 1995 that [Buyer] raised the quality issue on the goods under Order No.WG8841;
  • And it was on 13 July 1995 that [Buyer] raised the quality issue on the goods under Order Nos.WG8961 and WG9207.

[Buyer] had the possibility to inspect the goods within the shortest possible time after receiving them, [Buyer] did not do that, which leads to no inspection and no dispute claims within 30 days after the goods' arrival. [Buyer]'s conducts meant that it waived its right to claim damages.
 

   -    From 26 January 1995, when [Buyer] raised the quality issue under Order No.WG8736, to now, [Seller] did not accept any claim, nor did [Seller] waive the right to restrict damage claims to 30 days as written in the contracts; and [Seller] did not reach any agreement with [Buyer] in regard to the quality dispute. With respect to [Buyer]'s allegation that both parties made an agreement in United States subject to the inspection of the goods, [Seller] believed that it is [Buyer]'s unilateral wish, since [Seller] did not agree on and did not sign any document thereafter.
 
   -    To sum up, [Seller] believes [Buyer]'s allegation that [Seller] waived its right to restrict 30 days for claiming damages written in the contract cannot be established.

In respect of the guarantee obligations, [Seller] alleges that this guarantee cannot be considered independently of the contracts. Since [Buyer] did not raise any claim within the 30 days after the arrival of the goods, it should be presumed that the goods are qualified; therefore [Seller]'s guarantee obligation was released.

Additionally, [Seller] argued that there is not enough evidence to prove the 6 MT of barrel packing carbazole are the goods delivered by [Seller]. Since the goods supplied by [Seller] are bag-packed at 25kg and 50 kg, in regard to the required repacking by [Buyer]'s customer, [Seller] did not know and was not informed of that. Even though assuming that the repacked goods are the goods under Order No.WG8736, [Seller] is not obliged to be responsible for the quality of the goods, as the goods were repacked and such repacking has huge influences on the goods.

For the above reasons, [Seller] requests the Tribunal to:

1.     Reject [Buyer]'s arbitration claims;
2. Rule that [Buyer] shall bear all the attorneys' fee and other costs incurred; and
3. Rule that [Buyer] shall bear the arbitration cost.

[THE TRIBUNAL'S OPINION]

1. Applicable law

The parties registered places of business and central places of business are in P.R. China and United States of America, respectively. China and United States are parties to the United Nations Convention on Contracts for the International Sale of Goods (1980). The parties did not preclude the application of CISG in their contracts. Therefore, CISG applies to the current dispute.

2. Whether [Seller] waived its right to restrict 30 days for claiming damages as stated in the contracts

The Tribunal noted that:

   -    The quality claims raised by [Buyer] in regard to the 24 MT carbazole under Contracts SNY9400159, SNY9400186 and 94G0012 (Order Nos. WG8736, WG8841, WG8961 and WG9207), exceeded the contractual period for raising a claim "within 30 days after the goods arrive at the destination port";
 
   -    The supporting evidence for [Buyer]'s claim is the inspection reports made by a customer of [Buyer]'s, Sandoz Company, who is the purchaser of the goods from the [Buyer], but a Sandoz inspection report is not, in accordance with the contracts, "an inspection report made by a seller-recognized notary bureau";
 
   -    [Buyer] cannot sufficiently prove that having the goods inspected by Sandoz Company is a practice established between [Buyer] and [Seller], to which the inspection results produced thereof shall bind both parties.

However, the Tribunal noted that:

   -    [Seller] did not refuse [Buyer]'s claim for the reason that the time at which [Buyer] raised the claim exceeded the contractual period of 30 days, nor did [Seller] refuse [Buyer]'s claim for the reason of non-conforming inspection reports.
 
   -    Moreover, in its faxes to [Buyer], [Seller] stated that if the goods have quality problems, [Seller] will be responsible for them.

[Buyer] alleges in its documents and at the hearing:

   -    In order to resolve the quality disputes, the CEO Mr. Su, Mr. Gao, Mr. Li and the Manager of the carbazole producing factory, who representing [Seller], went to the United States to check out the goods during 8-9 May 1995. Both parties, at that moment, did not sign any written document, but had an oral agreement that [Seller] and the representative of factory would go and make samples in American Select Warehouse, and that those samples would be sent by China ___ Trading Company United States Branch to US SGS company, which is recognized by both parties, and that both parties will accept the inspection results provided by US SGS company.
 
   -    Afterward, Mr. Gao and the Manager of the factory, representing [Seller], and Mr. K, Mr. Richard M. and Ms. S. Yu, representing [Buyer] went to American Select Warehouse. Mr. Gao took six pieces of samples from both original packing goods under Order Nos.WG8841, WG8961 and WG9207 and repacked barrel packing goods under Order No.WG8736, and sent them to China ___ Trading Company United States Branch.
 
   -    Ms. S. Yu, an employee of [Buyer]'s, verified the above statement presented by [Buyer]. [Buyer]'s evidence also include the testimony of Mr. Charles T., the CEO of American Select Warehouse. Additionally, [Buyer] provided the address of Mr. S. Wu, who was in charge of the inspection at China ___ Trading Company United States Branch, and Mr. Tim K., who is with the US SGS Company.
 
   -    The arbitration agent Mr. Cha attended the hearing on behalf of [Seller], Ms. Su and other people, who witnessed the above circumstance, were not present the hearing, and therefore, cannot provide testimony, and being questioned, Mr. Cha stated that both parties, in regard to the quality disputes, did not reach an agreement and [Seller] did not make any promise to [Buyer]. However, with respect to the statements that [Seller] came to the United States to check the disputed goods and that Mr. Gao took six pieces of samples from four batches of goods, which were sent to China ___ Trading Company United States Branch, Mr. Cha did not deny that. During the hearing, the Tribunal reminded [Seller] that it could comment on the above statement in its supplementary documents, however, [Seller] did not deny that in those documents.

Therefore, the Tribunal believes that it is a fact that [Seller] came to the United States to check the disputing goods, and that Mr. Gao, representing [Seller], took six pieces of samples from those four batches of carbazole, which were sent to China ___ Trading Company United States Branch in order to be inspected by US SGS. Therefore, the Tribunal believes that [Seller]'s conduct indicates that it waived the right of restricting [Buyer]'s claim raising period, and that it accepted the inspection result produced by US SGS.

3. In regard to the quality of the goods delivered by [Seller]

[Buyer] alleged that:

   -    Mr. S. Wu, the representative of China ___ Trading Company United States Branch, did not hand over the inspection report issued by US SGS to [Buyer] after receiving it, instead handed it over to [Seller].
 
   -    As the inspection report proves the poor quality of these four batches of goods, [Seller] refused to provide the report to [Buyer].

During the hearing, the Tribunal required [Seller] to submit the inspection report and warned [Seller] that a negative presumption will be considered if no inspection report is submitted. However, [Seller] neither denied the existence of the inspection report, nor submitted it to the Tribunal. Therefore, the Tribunal presumed that the inspection result proves the existence of non-conforming goods, i.e., that the percentage of carbazole is lower than 90%.

Since the samples were taken by [Seller] from these four batches of carbazole, the inspection result has the binding force on these four batches of carbazole, which means the goods delivered under Order Nos.WG8736, WG8841, WG8961 and WG9207.

4. In regard to [Buyer]'s right to damages

The Tribunal believes that the goods delivered by [Seller] are not in conformity with the contract standards, so [Seller] breached the contracts. In accordance with the CISG, [Seller] shall compensate [Buyer] the damages which resulted from [Seller]'s breach of the contracts.

Since [Buyer] did not provide the evidence to prove its anticipated profit, the Tribunal does not support this claim. The Tribunal also noted that the interest rate mentioned by [Buyer] is 10%, which is too high; it shall be reduced to 6%. And [Buyer] did not provide bills to prove traveling cost of US $15,750, which is considered relatively too much; the Tribunal reduced it to US $5,000.

To sum up, the Tribunal holds that [Seller] shall compensate [Buyer] as follows:

  1. The payment for the goods under Order No.WG9207 and other costs US $56,521.33, the loss of interest US $4,380;

  2. The payment for the goods under Order No.WG8961 and other costs US $55,355.11, the loss of interest US $5,120;

  3. The payment for the goods under Order No.WG8736 and other costs US $57,327.34, the loss of interest US $6,019;

  4. The payment for the goods under Order No.WG8841 and other costs US $57,038.86, the loss of interest US $5,704;

  5. The traveling costs and attorneys' fee, in total US $19,500;

  6. Since the Tribunal did not support all of [Buyer]'s requests, [Buyer] shall bear 25% of the arbitration cost and [Seller] shall bear 75% of the arbitration cost.

From the compensation to be paid to [Buyer] shall be deducted US $58,320, the amount of payment received for the discounted 8 MT carbazole.

After paying the compensation, [Seller] has the title to 16 MT carbazole, which can be dealt with at [Seller]'s discretion. The cost incurred thereafter shall be borne by [Seller]. Meanwhile, it is not necessary for [Seller] to bring the 16 MT carbazole back to China, as this can be handled by other means. Therefore, the Tribunal does not support [Buyer]'s request to have "[Seller] bear the cost incurred when returning 16 MT carbazole."

[THE AWARD]

The Tribunal holds that:

  1. [Seller] shall pay [Buyer] US $189,145.64, which is the amount of compensation for damages caused by [Seller]'s breach of contracts minus the discounted goods.

  2. [Seller] shall pay [Buyer] the attorneys' fee and travelling cost incurred in the current case US $19,500.

  3. [Seller] shall bear 75% of the arbitration cost, [Buyer] shall bear 25% of the arbitration cost. Since [Buyer] has paid deposit to the Arbitration Commission, [Seller] shall pay [Buyer] US $___.

  4. In total, [Seller] shall pay [Buyer] US $216,725.39. [Seller] shall make the payment to [Buyer] within 45 days after the date of this award, for late payment, 8% annual interest will be added.

  5. [Buyer]'s other requests are rejected.

This award is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of United States is referred to as [Buyer] and Respondent of the People's Republic of China is referred to as [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $].

** Ning Zhao, LL.M. (cum laude) Groningen University, the Netherlands; LL.B., Nan Kai University, Tianjin, P.R. China.

*** 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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Pace Law School Institute of International Commercial Law - Last updated April 12, 2006
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