China 6 September 1996 CIETAC Arbitration proceeding (Engines case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960906c1.html]
DATE OF DECISION:
DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/42
CASE HISTORY: Unavailable
SELLER'S COUNTRY: United States (respondent)
BUYER'S COUNTRY: People's Republic of China (claimant)
GOODS INVOLVED: Engines
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
8C [Interpretation in light of surrounding circumstances]; 12A [Declaration by State preserving domestic formal requirements: effect of reservation under article 96]; 52B [Excess quantity: buyer may take delivery of all or refuse the excess]; 67A [Risk when contract involves carriage of goods: risk passes on handing goods over to first carrier];
8C [Interpretation in light of surrounding circumstances];
12A [Declaration by State preserving domestic formal requirements: effect of reservation under article 96];
52B [Excess quantity: buyer may take delivery of all or refuse the excess];
67A [Risk when contract involves carriage of goods: risk passes on handing goods over to first carrier];
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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. 1791-1801
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Dong WU, CIETAC's Practice on the CISG, at nn.50, 83, 226, Nordic Journal of Commercial Law (2/2005)Go to Case Table of Contents
|Case text (English translation)|
Engine case (6 September 1996)
Translation [*] by Meihua Xu [**]
Edited by Li Ke [***]
China International Economic and Trade Arbitration Commission (original name: Foreign Trade Arbitration Committee of China Council for the Promotion of International Trade (hereinafter called "the Arbitration Commission") accepted and heard the case according to:
|-||The arbitration clause in Sales Confirmation No. 94JNIEC080 signed by Claimant [Buyer],
China Gansu __ Non-ferrous Metal Company, and Respondent [Seller], America __
Company; and |
|-||The written arbitration application submitted by [Buyer] on 25 December 1995.|
Because the amount in dispute in this case is less than renminbi [RMB] 500,000, according to Article 64 of the Arbitration Rules (which came into effect on 1 October 1995), the summary procedure shall apply.
According to Article 65 of the Arbitration Rules, on 22 April 1996, the Chairman of the Arbitration Commission appointed Mr. P as the sole arbitrator, forming the Arbitration Tribunal to hear this case.
The Arbitration Tribunal examined the written documents submitted by the two parties and on 7 June 1996, a hearing was held in Beijing. Both the [Seller] and the [Buyer] appointed representatives to participate in the hearing. Both parties made oral statements and answered the questions raised by the Tribunal. After the hearing, both parties submitted supplementary documents.
Due to the complexity of this case, the Arbitration Tribunal proposed an extension of the time limit for handing down the award. The Secretary-General of the Arbitration Commission agreed to extend the time limit to 7 September 1996 following Article 73 of the Arbitration Rules.
The case is now decided. The Arbitration Tribunal made this judgment based on the written documents and the hearing.
The facts, the Tribunal's opinion and award are as following:
On 28 September 1994, the [Seller] and the [Buyer] signed Contract 94JNIEC080 at the [Seller]'s place of business, Jinchang City, Gansu Province, China, by which the [Buyer] purchased thirteen engines of five different types with attachments, spare parts, etc. The contract price was US $333,872 FOB San Francisco by irrevocable L/C, and the time of shipment was within five months (but no later than six months) after the [Seller]'s receipt of the final order of confirmation.
According to the statements in the arbitration application submitted by the [Buyer] on 20 December 1995, the goods arrived at Tianjin port, China on 23 April 1995, and the [Buyer] paid the entire price of US $333,872 to the [Seller] on 25 April 1995.
However, many problems were discovered during the inspection conducted by the China Import & Export Commodity Inspection Bureau of Gansu Province (hereinafter called the "CCIB Gansu").
From 21 June to 29 June, the [Buyer] sent a representative to the [Seller]'s Beijing Office for negotiation. On 27 June, although the [Seller] made a two-page compensation list, the negotiations were unsuccessful; divergence still existed between the parties.
On 14 July 1995, the [Buyer] sent the Inspection Certificate issued on that day by the CCIB Gansu to the [Seller] to file a claim. The [Buyer] and the [Seller] contacted each other through correspondence during July and August. On 14 August, the [Seller] clearly stated its refusal to compensate the [Buyer].
Therefore, the [Buyer] submits its claim as follows:
On 5 March 1996, the [Seller] submitted a Defense written in English, in which the [Seller] alleged that on 12 June 1995, as soon as [Seller] got the information about the wrong delivery from its Beijing Office, the [Seller] contacted the manufacturer, Deutz's American distributor, and submitted the list of the missing parts as well as the picture for their examination.
The [Seller] asserts that after visiting the manufacturer and discussing with the distributor as well as the manufacture many times, they found that the problem was not wrong delivery, but the [Buyer]'s misunderstanding about the description of the Optional Subassemblies.
The [Seller] asserts that after receiving the series number of the machine, as well as the request for attachment list and the quotation for sub items, the manufacturer stated that it will take them two months to finish the detailed attachment list because the series number indicated that those machines were purchased ten years ago. However, due to the urgent need for the goods, the [Buyer] disagreed with the delivery date proposed by the [Seller]. The [Buyer] urged the [Seller] to deliver the goods as soon as possible.
Under these circumstances, the manufacturer provided an attachment list only for reference. When signing the contract, both parties thought that the series numbers were that of the machines purchased before, and the new engines would have new numbers. The attachment list for reference was attached to the contract, and the two parties knew that it was only for reference.
The [Seller] added that it provided another attachment list afterwards. The [Buyer] also admitted that the actual delivery conformed to that list. In fact, the goods actually delivered were even more than those on the list.
As for the rusted machine, the [Seller] stated that it sent the manufacturer six pictures provided by the [Buyer] for examination. The manufacturer said that the rust was because of the sea-shipment and because of the long-time storage in the warehouse, which would not affect the function of the machines. Since the [Buyer] failed to arrange the transportation and then turned to the [Seller], the delivery of the machines was held up, which caused the long-time storage in the warehouse.
As for the color of the engines, the [Seller] admitted that it should not be red.
The [Seller] refused to take the responsibility for delay in delivery.
On 17 June 1996, the [Seller] submitted its Defense written in Chinese, in which [Seller] especially stated the facts before the delivery. Since this contract was on an FOB term, on 24 February 1995, the [Seller] sent the address, telephone number, and manager's name of the carrier to the [Buyer]. However, the [Seller] could not reach the manager and other employees said they knew nothing about the contract. As a result, the [Buyer] failed to contact the carrier.
Later, though provided with the contact information of the American agent of the assigned carrier, the [Seller] still could contact them. The [Buyer] asked the [Seller] to help arrange the shipment because the [Buyer] was unable to do so. With the [Seller]'s efforts, the goods were delivered on 30 March 1995 (one month later than the original delivery date), which caused the rust of the engines. Thus, the [Seller] should not take responsibility for this.
The [Seller] also alleged in its Defense that:
(I) According to the contract, the CCIB Gansu was not entitled to issue the Inspection Certificate. What is more, there were several severe mistakes in the Certificate.
A. Comparison of the attachment and the Inspection Certificate revealed that the following parts were not listed in the attachment, but were identified in the Inspection Certificate as missing parts.
(1) F10L413FW 324 -- 3303 TWO -- SLAGE FILTER 2 pieces;
(2) F6L413FW 324 -- 3303 TWO -- SLAGE FILTER 2 pieces;
(3) F6L413FW324 -- 3356 SOCKET -- ADAPTER 8 pieces;
(4) F6L413FW324 -- 3356 HOSE 4 pieces
B. The following were contained in the [Seller]'s cargo list, which were also confirmed by the [Buyer] in written form, however, they were still listed in the Inspection Certificate as lacking parts
(1) F12L413FW ANGLE DRIVE FOR TACH/HOUR MERIER 2 pieces;
(2) F10L413FW FUEL LINES 2 pieces;
(3) F6L413FW FUEL LINES 6 pieces;
(4) F6L413FW CYL. HD. TEMP. GAUGES 24V 2X 4 pieces;
(5) F8L413FW HARDNESS FOR INTERNAL WIRING 2 pieces;
(6) F8L413FW FUEL LINES 4 pieces
C. The quantity of the following does not conform to the contract:
(1) OIL PRESSURE SWITCH WITH INDICATOR LIGHT 2 pieces
(2) CYL. HD. TEMP. GAUGES 24V 2X 2 pieces
(1) CYL. HD. TEMP. GAUGES 24V 2X 4 pieces
Based on the aforesaid facts, the [Seller] alleged that "we have reason to believe that the [Buyer] intentionally avoided using the inspection agency stipulated in the contract, bent the law for its own benefit, and practiced fraud by colluding with the CCIB Gansu. That an agency authorized by the Chinese government could issue such an irresponsible certificate is truly astonishing; much more as it is an incompetent agency to issue the Inspection Certificate."
(II) The non-conformity of the goods that were delivered pursuant to the contract
The [Seller] quoted Article 35(3) of the CISG, stating: "just the same as the [Buyer], we deem that the contract is our common basis, and both parties should follow the contract to perform their obligations. We have fulfilled our obligation under the contract. As for the lack of conformity of the delivered goods asserted by the [Buyer], the [Buyer] should take the responsibility itself.
(III) According to Article 52(2) of the CISG, the [Buyer] should return the unjust profit.
The [Seller] alleged, "Comparing the contract with the actual delivery list, one can find that an extra 401 pieces of goods have been delivered, totaling US $49,766. The [Buyer] should return the aforesaid goods or pay US $49,766."
The [Seller] requested the Arbitration Tribunal to rule that:
Regarding the above defense and the statement made by the [Seller] on 7 June 1996, the [Buyer] submitted its Statement on 29 July in response.
The [Buyer] emphasized in its statement that "the contract should be signed by both parties". The [Buyer] objected to the [Seller]'s assertion that the attachment list is only "for reference", and that the [Buyer] has confirmed "the [Seller]'s delivery list".
The [Buyer] alleges that "from the contract formation to contract performance and to the claim, both parties had performed based on the attachment, and that this cannot be denied by the [Seller]. The purpose of the [Seller]'s making a delivery list afterwards is obvious. We ask the Arbitration Tribunal to examine the evidence to see through the [Seller]'s fraudulent statement, and to make the proper judgment."
The [Buyer] also asserts that "it has relied on the [Seller]'s opinion on purchasing the goods, which was reasonable." There were five elements that the [Buyer] has relied on the [Seller]: "series number", "the entire equipment", "parts number", "altitude" and "origin". (The [Buyer] indicated six elements in its statement, however, the sixth element could not be found literally).
The [Buyer] alleges that the entire goods were listed in the contract attachment and that the attachment (parts) fit the main engine. The series number is the same as on the old one, and the goods were entirely manufactured by the German firm DEUTZ Company, as engines which could be operated at an altitude of 1,600m to 1,650m, and the engine power reached the standard for passing manufacture's inspection.
The [Buyer] argues that CCIB Gansu's inspection was legal in its statement, and submitted a defense to the [Seller]'s assertion on the Inspection Certificate.
(1) Four items, totaling sixteen pieces, were not listed in the contract, but were in the Inspection Certificate. The [Buyer] admits that the aforesaid items were not listed in the list of optional subassemblies; however, the aforesaid item's number, name, and quantity were in the DEUTZ Company's packing list, which was found in the wooden cases for shipping the engines. These items were also listed in the Inspection Certificate as missing parts.
(2) There were six items, totaling twenty pieces that were listed in both the delivery list and the Inspection Certificate. The [Buyer] asserts that it has never accepted the [Seller]'s delivery list, and the Inspection Certificate was issued by CCIB Gansu based on the missing parts list and pictures provided by the [Buyer].
(3) Three items, totaling eight pieces, were found not conforming to the contract. F10L413FW model and F8L413FW model are both arrayed in "V" shape with one piece in each line, and some are marked with 2X; therefore, each model should have two pieces."
The [Buyer] clearly rejects the [Seller]'s assertion that the [Seller] has delivered extra parts and that the [Buyer] has received an unjust enrichment, arguing that:
The [Buyer] asks the Arbitration Tribunal to support its allegation, and to make a supplementary modification to its Arbitration claim, which has been mentioned above.
On 14 August, the [Seller] submitted a Defense titled " Statement against the [Buyer]'s statement".
The [Seller] made a detailed statement, defense, and assertion on the problems of "the source of the series number and actual delivery list"; "as to the basis for performing contract obligation, the [Buyer] used double standard to pursue its own benefit": "origin", and "inspection". The [Seller] also argues that:
On 30 August, the [Buyer] submitted a supplementary opinion on the [Seller]'s "statement on statement" provided on 14 August 1996.
II. OPINION OF THE ARBITRATION TRIBUNAL
(1) Applicable law
The parties did not stipulate the applicable law in their contract. However, both the [Buyer] and the [Seller]'s places of business are in Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereinafter "CISG"), and both parties agreed to apply the CISG in the hearing held on 7 June 1996, therefore, the CISG should be applied.
(2) The contract
The Arbitration Tribunal examined the text of the contract submitted by the [Buyer] as the second attachment to its arbitration application. A sentence, "SEE THE ATTACHMENT (ten pages)" was clearly noted in Article 1 section (A) titled "name, specification and quantity of the goods ", which means that the name, specification, and quantity of the goods are stated in a ten-page attachment.
The following are included in the ten-page attachment:
Items 4 and 5 are the following two models of INJECTION PUMP
Nineteen items from item 9 to item 27 are spare parts, including 70.00 MM, MAINBEARINGM, etc. totaling 1046 pieces.
Prices for each item are listed, and the total price is US $343,904.20 FOB SAN FRANCISCO.
The Arbitration Tribunal examined the written statements and documents submitted by both parties, and based on the oral statements at the hearing, the Arbitration Tribunal finds that the two parties have no dispute on the contents of page 1 to page 4, but on the optional subassemblies list from page 5 to page 10.
The [Buyer] asserts that the list on page 9 to page 14 of the attachment with revision date of 15 April 1992 should be the basis (hereinafter called "the 92 revision"), however, the [Seller] argues that this list was only for reference; the list provided by the [Seller] on 22 July 1995 with a revision date of 26 October 1994 (hereinafter called "the 94 revision") should be the basis of the contract.
The Arbitration Tribunal notes that several days before signing the contract, which was on 22 September 1994, Mr. Dai of the [Seller] sent a letter to Mr. Yuan of the [Buyer], stating that "the list sent by the manufacturer on 10 August should be a complete attachment to the contract". During the hearing on 7 June 1996, the Arbitration Tribunal confirmed with the two parties, and both parties admitted that "the list sent by the manufacturer on 10 August" was the 92 revision attached to the contract.
Mr. Dai did not state that the list was only for reference and there were no words in the text of the contract or in the attachment to show that the list was only for reference.
In addition, from the time of signing the contract to the [Seller]'s delivery of the goods, no agreement had been reached on the issue of whether the list was for reference. Furthermore, the 94 revision was submitted by the [Seller] after the dispute arose, but the [Buyer] did not accept it as an agreement.
Recognizing that China has made a reservation on Article 96 of the CISG, therefore, except for a written agreement, other indications would be deemed invalid in this case.
Therefore, the Arbitration Tribunal holds that:
(3) The contract goods
The Arbitration Tribunal noted that on page 10 of the [Buyer]'s statement, it is stated that "the engine model, engine quantity, and the specification and quantity of the spare parts purchased separately in items 4, 5, 9 to 27 listed in the contract conformed with the contract. However, there were missing parts and rust on the surface of the basic engine." According to the statements of both parties, especially the [Buyer]'s arbitration application and its documents, the Arbitration Tribunal deems that the disputes between the two parties are focused on:
For the missing parts, the Arbitration Tribunal carefully examined the documents submitted by the two parties, especially the following documents:
The Arbitration Tribunal notes that according to the statement made by the [Buyer] and the packing list from Hamilton, the basic engines and the optional subassemblies were packed in thirteen cases. Therefore, since the [Buyer] stated that the packing lists were found from DEUTZ' packing cases, there should be thirteen of them, however, the [Buyer] only provided two to the Arbitration Tribunal.
Though the [Buyer] failed to submit all of the materials and documents it should provide and failed to inform the Arbitration Tribunal of the optional subassemblies it actually received, after examining the aforesaid seven documents, the Arbitration Tribunal finds that there are two problems on the optional subassemblies delivered by the [Seller]:
In addition, most of the item numbers in the 94 revision provided by the [Seller] as a delivery list is also inconsistent with the contract attachment. (On 7 August 1995, Mr. Qian of the [Buyer] sent a letter to Mr. Tom of the [Seller], saying that "we have compared the materials in your letter and the documents of Hamilton Engine [sic.] Sales, INC with a delivery list, and found that most goods on the delivery list have been delivered to us".)
The item numbers of the so-called "extra parts" delivered by the [Seller] are different from the numbers in the contract attachment. Therefore, the [Seller] has indeed delivered many parts that do not conform to the contract (hereinafter called the "wrongfully delivered parts")
As stated above, the contract is the only basis in this case, and it has binding effect on both parties. The [Seller] must deliver the goods in accordance with the contract.
The Arbitration Tribunal deems that the aforesaid two problems violate the contract, which should be deemed as the [Seller]'s breach of contract and the [Seller] should take effective and feasible measures as a remedy. In other words, the [Seller] should recall all of the wrongfully delivered parts without any loss or damages to the goods as soon as possible, and change or deliver the undelivered parts within a reasonable time for manufacturing.
For the detail of the wrongfully delivered parts or the undelivered parts, since the [Buyer] did not provide complete documents, therefore, the Arbitration Tribunal cannot make any decisions, and the two parties should negotiate the issue.
The Arbitration Tribunal deems that the 94 revision was an agreement for both parties. However, as Mr. Qian of the [Buyer] admitted that "we have received almost all of the goods on the delivery list", it could be deemed as the evidence of actual delivery. Together with the 92 revision, it should be a main document to figure out the wrongfully delivered parts and the undelivered parts.
The Arbitration Tribunal deems that the aforesaid two problems are indispensable parts of the [Seller]'s breach of the contract. In this case, the wrong delivery caused that some of the parts have been undelivered; therefore, no matter the wrongfully delivered parts or the undelivered parts, and no matter what reasons and explanations the two parties have, as long as disputes exist between them, the contract should be the basis for settlement.
The [Seller] certainly should deliver the undelivered parts, and the [Buyer] has no right to possess the wrongfully delivered parts. The [Seller] shall resort to the remedy considering the aforesaid two problems.
The [Buyer] has received the wrongfully delivered parts, but never informed the Arbitration Tribunal how it was going to dispose of them. If the [Buyer] does not want to return the wrongfully delivered parts in the same condition and quantity as they were delivered, the [Seller] need not deliver the undelivered parts.
(4) The inspection and the Inspection Certificate
According to Article 14 of the contract, the Arbitration Tribunal finds that the inspection and the Inspection Certificate are key points of the disputes in this case.
The [Seller] has challenged the validity of the inspection and the Inspection Certificate. Therefore, the Arbitration Tribunal deems that it was necessary to do investigate further, and to require the [Buyer] to ask the CCIB Gansu to provide relevant documents for investigation. However, on 20 July 1996, the [Buyer] informed the Arbitration Tribunal that the CCIB Gansu refused to provide any document saying that there was no such precedent before. The Arbitration Tribunal expresses regret about that.
Nevertheless, the Arbitration Tribunal read through documents relating to the inspection procedure, the inspection certificate, and the attached materials in the [Buyer]'s statement including the No. 5060161 Inspection Certificate issued by the CCIB Gansu, and concludes that:
The No. 5060161 Inspection Certificate was issued on 14 July 1995, which was four days after the [Buyer] asked the CCIB to issue it before the time for claiming compensation expired, and it was issued after "carefully examining the related documents".
In addition, the inspection memorandum was not issued according to the Import & Export Commodity Inspection Law of the People's Republic of China; therefore, it has no legal effect.
The Arbitration Tribunal deems that the basic engines in this case are not the kind of goods in the "category list". The [Buyer] should ask the inspection agency to issue an inspection certificate when discovering damage or quality problems of the goods.
According to Article 11 of the Import & Export Commodity Inspection Law of the People's Republic of China, under this circumstance, the CCIB should issue the Inspection Certificate after inspection. However, on page 6 of the [Buyer]'s statement, it was stated that "the CCIB Gansu issued the Inspection Certificate based on the missing parts list and the pictures provided by the [Buyer]".
The [Buyer] has not provided, and the Arbitration Tribunal has never found any legal basis to support that the inspection agency may issue an Inspection Certificate based on the [Buyer]'s missing parts list and pictures without inspection.
On page 11 of its statement, the [Buyer] mentioned that "the CCIB Gansu examined all the materials carefully". However, due to the CCIB's non- cooperation and the [Buyer]'s failure to provide evidence other than the aforesaid statement, the Arbitration Tribunal could not verify the fact. Therefore, the Inspection Certificate cannot be admitted.
From the fact mentioned above, it can be found that the Inspection Certificate issued by the CCIB Gansu needs to be rechecked to verify its accuracy in the following months. The engineer of the CCIB Gansu has only verified part of the entire goods, and other contents in the inspection certificate have not been checked.
The Arbitration Tribunal deems that the contents of the Inspection Certificate are uncertain and need to be confirmed. So the No. 5060161 Inspection Certificate cannot be deemed as an effective inspection certificate.
From the above analysis, the Arbitration Tribunal does not admit the No. 5060161 Inspection Certificate as evidence.
(5) The 94 revision and the compensation list provided by the [Seller] on 27 June 1995
The [Buyer] submitted a "94JNIEC080 contract missing parts list" of three-pages in its arbitration application as the basis for its first arbitration claim.
The Arbitration Tribunal examined the list and found that:
The [Buyer] asserts that the estimate prices in the list are reasonable, however, the [Buyer] did not provide any evidence to support its assertion; therefore, these estimate prices should not be admitted.
On these grounds, the Arbitration Tribunal holds that though the [Seller] should deliver the undelivered goods as a remedy for the contract, the 94JNIEC080 contract missing parts list cannot be admitted and only can be a reference for checking the undelivered parts.
In the arbitration application and the statement submitted by the [Buyer], there is a two-page list without title, signature, only with a subtitle, which the [Buyer] called "the [Seller]'s compensation list".
The Arbitration Tribunal deems that even though it was noted in the aforesaid document that "the fax was sent from our headquarters on 30 June, 1995", there is no [Seller]'s signature, nor any evidence to show the [Seller]'s approval, which shows it is not an agreement between the two parties.
In addition, the content of the list shows that the list was only a discussion during the negotiation and cannot be deemed as a promise made by the [Seller].
There is also a memorandum written in English without the two parties' signatures, therefore, it is not effective either.
(6) The rust on the surface of the engines and the color problem of two engines
The Arbitration Tribunal deems that the contract is on an FOB term, and the [Buyer] has breached the contract because of delayed delivery which caused the goods to be kept at the port of shipment for more than one month. No evidence has been found for the [Buyer] to argue that keeping goods in the warehouse for one month is reasonable. Therefore, the [Buyer] shall compensate the [Seller]'s losses. However, since the [Seller] did not submit the requirement for compensation, therefore, the Arbitration Tribunal does not adjudicate this issue.
Even though the [Buyer] has breached the contract as mentioned above, however, according to Article 85 of the CISG and the rule for risk passing, the [Seller] shall bear the liability. Therefore, therefore, if the rust occurred before the goods passed the ship's rail or even if it happened after the goods passed the ship's rail but before being unloaded at the destination port, as long as it can be proved that the rust had occurred before the goods passed the ship's rail, the [Seller] shall take the responsibility.
The Arbitration Tribunal examined the statement on the rust of the goods and found that there is no record in the memorandum made by the CCIB Gansu after the inspection on 15 May 1995. In CCIB Gansu's Inspection Certificate, only the two engines, F10L413FW (No. 9115140) and F8L413FW (No. 9115118) are reported to have rust on the surfaces.
Except the aforesaid two engines, the [Buyer] added that "F6L413FW and F12L413F's radiator ... and the entire parts ..." also had rust problems. In the statement sent by the [Buyer] on 20 July 1996, the [Buyer] generally stated the rust problems as "the rust on the delivered goods".
The above documents cannot be regarded as evidence but as the records for the rust problem, by which it can be found that the rust problems became severe and [Buyer]'s claims were also increasing. The [Seller] shall only take the responsibility for preservation of the goods, but not for that which occurred after the goods arrived at the destination port.
From the [Buyer]'s statement, it can be found that some of the rust occurred beyond the scope of [Seller]'s responsibility; therefore, both parties shall be responsible for the rust problem. The Arbitration Tribunal holds that:
For the repainting of the two engines, since the [Seller] has admitted that the color did not conform to the contract, therefore, the [Seller] shall bear the entire actual cost for material and labor which should be confirmed by both parties.
As for the [Buyer]'s estimated price of US $6,000, since [Buyer] did not submit any evidence, this claim shall not be supported.
(7) Wrongfully delivered goods and the [Buyer]'s unjust profit
Considering the fact that the Arbitration Tribunal has deemed that the 92 revision should be the basis of the contract, and that the [Buyer] has admitted receiving the goods in the [Seller]'s 94 revision, therefore, the optional subassemblies that did not conform to either the 94 revision, or 92 revision should be considered as wrongfully delivered goods, which should be clarified by the two parties.
The Arbitration Tribunal deems that the [Seller] shall recall the wrongfully delivered goods in the same condition and number as they were delivered. If the [Buyer] refuses to do so, it should pay the price.
The Arbitration Tribunal does not accept the [Seller]'s letter and list for the wrongfully delivered goods, however, they can be the reference for confirming the extra delivered goods.
(8) Penalty for delay in delivery
The Arbitration Tribunal has read Article 16 of the contract on penalty for delay in delivery. Since the contract was concluded on an FOB term and the [Buyer] did not raise objections on the date of shipment, therefore, there was no issue about delay in delivery, nor is there a penalty for it.
For the partial wrong delivery and undelivered parts, the [Seller] shall remedy and compensate the [Buyer] if the [Buyer] has suffered losses. The [Buyer] has the right to request compensation for actual losses. Because the [Buyer] did not claim for compensation, therefore, the Arbitration Tribunal shall not resolve this issue.
Therefore, the Arbitration Tribunal does not support the [Buyer]'s claim for a penalty of US $3,230 for delay in delivery.
(9) Arbitration fee
The Arbitration Tribunal deems that 49% of the Arbitration fee shall be borne by the [Buyer] and 51% of the Arbitration fee shall be borne by the [Seller].
(10) Other costs for arbitration
The Arbitration Tribunal deems that the two parties shall bear their own costs for arbitration.
III. THE AWARD
The Arbitration Tribunal hereby decides:
|(1)||[Seller] shall recall all of the wrongfully delivered parts including the extra delivered
parts in the same number and condition as they were delivered as soon as possible.
Taking manufacturing into consideration, the [Seller] shall deliver the undelivered parts
within a reasonable time. If the [Buyer] does not want the [Seller] to recall the
wrongfully delivered parts in the same number and condition as they were delivered,
the [Seller] need not deliver the undelivered parts.
As for the extra delivered parts in the wrongfully delivered parts, if the [Buyer] fails to let the [Seller] to recall them, then the [Buyer] shall pay the price.
|(2)||As for the derusting of the engines and the repainting for two engines, the [Seller] shall
provide necessary technical support to the [Buyer] and shall bear 50% of the costs
for materials and labor for derusting as well as the entire materials and labor costs for
|(3)||In order to perform the Item (1) and (2) of this Award, the [Buyer] and the [Seller]
shall send authorized representatives at the agreed place and time to make a schedule
|(4)||The [Buyer]'s claim for penalty for delay in delivery and other costs for arbitration
shall be dismissed;|
|(5)||The [Buyer] shall bear 49% of the arbitration fee and the [Seller] shall bear 51%. The
[Buyer] has paid RMB___ in advance, therefore, the [Seller] shall pay back RMB___
to the [Buyer] within 45 days after this award take effect, otherwise, 12% annual
interest shall be added.|
This award is final.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Buyer] and Respondent of the United States of America is referred to as [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].
** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.
*** 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.Go to Case Table of Contents