商务英语case_study

case study【Case 1】CIF or Not?An import and export company H in China signed with a British company D a contract on CIF basis, whereby company H exported some light industrial products to company D. There were two special clauses in the contract: (1). “Th e goods must be shipped to a port in Britain from Shanghai in October 1996; the relevant L/C opened by company D should reach company H by the end of August; company H must guarantee that the loaded vessel arrive at the destination not later than December 1.(2) should the loaded vessel arrive at the port of destination later than December 1, company D is entitled to cancel the contract. If the payment has been made at the time, it must be returned to company D exactly the amount.” After that, in the course of clearing up contract files, a controversy arose in company H about the nature of this CIF contract. Some people held the opinion that the contract was on CIF basis in spite of the two particular terms, giving following reasons: firstly, the contract was signed under the trade term of CIF, which indicated the nature of the contract; secondly, company D made such special requirements only to protect their benefits; thirdly, the contract provided payment by L/C, which was in accordance with CIF term’s char acteristic of payment against documents. Others believed that according to INCOTERMS 2000, the seller’s delivery obligations are fulfilled as long as the seller has completed shipment of goods at the appointed point and handed over to the buyer documents stipulated in the contract and so the seller is not required to guarantee the arrival of goods at the destination. Therefore, this contract was a false CIF contract, as it changed the nature of CIF term by taking physical delivery as a condition of fulfillment. The contract must be renegotiated. Finally, company H reached a common perception and got the two special clauses amended through negotiation with company D. The contract was carried out smoothly.Analysis:Although the contract was concluded on CIF basis, it was not a genuine CIF contract. This case indicates the significance of CIF term’s sphere of application. The two special clauses in the original contract not only contradicted with the nature of CIF term, but also disagreed with the practices of international justice and arbitration.First, the original contract not only set a limit to the date of arrival, but also stipulated that the buyer was entitled to cancel the contract or demand back the payment that had already been made. Evidently, the restrictive date of arrival served not as the date of payment, but as a condition of payment. Therefore, legally the contract was not a genuine CIF contract as it made physical delivery a condition of payment.Second, under CIF terms, the risk of loss of or damage to the goods passes from the seller to the buyer when the goods have passed the ship’s rail at the port of shipment. A contract that expands the buyer’s risk from the port of shipment to the port of destination is not a CIF contract. According to the provision in the original contract, company H was obligated to refund the payment in case of natural calamities or accidents during the course of delivering the goods, which evidenced that the seller assumed all the risks during the transport.Third, under CIF terms, the buyer must make payment against documents rather than against the arrival of the goods at the port of destination, provided that the seller has fulfilled his delivery obligations and presented the required documents. As per the original contract, whether company H could receive the payment for goods or not depended on buyer’s receiving on schedule. Although the seller might receive the payment by means of L/C, the payment would be taken back by the buyer if the goods could not duly arrive at the port of destination. Besides, company D could take advantage of relevant L/C clauses that are in accordance with those in the contract to deny the seller the payment for goods. Company H could hardly make a claim for his rights under a normal CIF contract since this contract was the one “in name but not in reality”.【Case 2】CFR & Shipping NoticeAn import and export company in China signed an export contract with an importer in Marseilles, France on drawnwork tablecloth with an amount of USD80, 000, payment by D/P at sight.On the morning of January 8, 1997, the goods were all loaded onto the named vessel. The export salesperson in charge of this contract got so busy that he did not remember to send the buyer the shipping advice until the next morning. Unexpectedly, when the French importer went to the local insurance company to insure the goods, the latter had already learned that the ship suffered a wreck on January 9 and refused to underwrite the goods. The French importer immediately sent a telex saying, “owing to your delayed shipping advice, we are unable to insu re the goods because the vessel has been destroyed in a wreck. The loss of goods should be for your account. At the same time, you should compensate our profit and expense losses which amount to USD8, 000.” Soon all the shipping documents sent through the collecting bank were returned to the export company, for the reason that the importer refused to take up the documents. Being a regular client of the exporter’s, the French importer did not insist on claiming for compensation after the exporter explained his difficult situation and apologized for the whole thing. However, the exporter should learn his lesson from this experience.Analysis:1. Under CFR terms, all the risks, duties and expenses after goods’ passing ship’s rail are normally borne by the buye r. However, Incoterms 2000 provides that “the seller must give the buyer sufficient notice……”. Here the word “sufficient” refers to both “sufficient” content and “sufficient” time. The latter means the seller must give the shipping notice in a timely manner to allow sufficient time for the buyer to effect insurance of the goods. The later the seller sends the shipping notice, the less time the buyer has to insure the goods. In this case, the buyer’s failure to send the “sufficient notice” led to his loss of both goods and money. On the other hand, if the seller had informed the buyer immediately after shipping the goods, the buyer would have insured the goods in time at the local insurance company. In that case, the insurance company would have assumed its liability for compensation even if the accident had happened prior to the buyer’s effecting insurance as both the buyer and the insurance company were ignorant of the accident. Thus, it can be seen how important it is to send the shipping advice to the buyer in time under CFR terms.That is why shipping advice is often referred to as “insurance notice” in trade practices.2. When CFR terms or FOB terms are used in combination with payment by collection, the buyer may cover the goods against “seller’s interest risk” before exporting the goods to counteract the buyer’s failure to effect insurance or the buyer’s refusal to retire the documents. Had the seller in this case covered the shipment against the said risk, the loss would have been somewhat mitigated.【Case 3】CFR & Goods QualityA French company imported a batch of wheat on CFR basis. The contract provided that the landing quality of the goods should be taken as final. However, when the goods arrived at the destination, the import quarantine bureau detained the goods as they had found that the goods contained a great deal of bacterium forbidden to enter the country. Unfortunately, the goods were consumed by a fire while in detainment. A dispute broke out between the buyer and the seller.AnalysisUnder CFR terms, the buyer should bear all the risks after the goods have passed the ship’s rail and been loaded on board. However, should the seller be held responsible for any default before that point?In this case, it was the seller who should assume the risks. The reason is that although this was a CFR contract, the seller breached it by delivering the goods which failed to meet the quality standard provided in the contract. This fundamental default has caused the detainment and then the loss of the goods. Therefore, while the risks had been transferred to the buyer, the seller’s default returned the risks to the seller.Of course, under CFR contract, when the seller’s default is not fundamental, the buyer should bear all the risks for any loss of the goods at the port of destination. Meanwhile, the seller should make due compensation to the buyer as per the contract and relevant laws.【Case 4】The buyer delays the sending of the vessel under FOB.Company A in China signed a contract on FOB basis to export wheat to Company B in Africa. It was contracted that shipment should be made in four lots. The shipping clause ran as follows: “the vessel nominated by the buyer should reach the port of shipment within eight days before the date of shipment. Otherwise, any of the seller’s loss or damage thus incurred shall be borne by the buyer.” The contract also specified, “The buyer must give the seller a notice of vessel name and the estimated date of arrival by telecommunication five days before the vessel arrives at th e port of shipment.” During the course of fulfillment, the first three lots were shipped smoothly according to the contract. However, the buyer was slow to send the vessel for the last shipment. In reply to Company A’s repeated urges, company B said that they were unable to book shipping space because of shipping company’s busy schedule and asked for postponing delivery for two months. Company A replied as follows: “according to the contract, you are bound to send the vessel to pick up the goods. In case of any difficulties in this aspect, we may allow you to delay the shipment on condition that you make a compensation whichamounts to USD200, 000.” Finally, the bargain of compensation was settled atUSD150, 000 and company B was allowed to delay vessel sending for two months.Analysis:Under FOB terms, it is the buyer’s obligation to arrange for delivering the goods. With reference to INCOTERMS 2000, “the buyer must contract at his own expense for the carriage of the goods from the named port of shipment.” It also provides that “the buyer must give the seller sufficient notice of the vessel name, loading point and required delivery time”. If the buyer’s vessel fails to arrive at the port of shipment duly, or fails to accept the goods, or stops loading ahead of the schedule specified in the contract, all the risks and loss of and damage to the goods are to be borne by the buyer as of the appointed date for delivering the goods or the expiry date of the time limit.It was learned later that during the implementation of the last shipment, the international market price of wheat dropped drastically, which greatly influenced the sales of company B who then attempted to cancel the delivery of the last shipment by hanging it up. However, company A made good use of INCOTERMS explanation for FOB terms and protected its own interests through proper means.【Case 5】A Chinese international trade company exported a batch of walnut to England on the basis of CIF London.As it was a seasonal commodity,it was stipulated in the contract that the covering L/C should reach the seller before the end of September.The seller guaranteed that the vessel would reach the port of destination not latter than December 2.If the vessel reached the port of destination later than that day,the buyer was entitled to cancel the contract.In case the payment had been made,the seller should return the payment to the buyer .Then,where do you think the crux lies in this case?Analysis:The Chinese should be responsible for the loss. As per the clause of CFR term,the exporter is responsible for notifying the shipping details ASAP and the importer can arrange the insurance in time.If the notify delayed and cause the loss without insurance covering,the expoeter must bear the loss.In this case, the crux lies is the date of reaching the destination.Because it is normal for vessel delay on sea shipment.The seller cannot control the shipping times on the sea.So the L/C should amend for the reach time,instead of the departure time.【Case 6】A Chinese export company has carried on business relations in printed cotton piece goods with a West African client for many years. In the course of transactions, the client often supplies samples of designs and assortments, in accordance with which the export company produces the printed cotton piece goods. In early 1991, the export company unexpectedly received a letter from a French firm, which thought certain designs of the export printed cotton piece goods fell under his patent, and thus the c ompany had infringed upon the French firm’s right of patent.The French firm asked the company in question for damages. Do you think the demand of the French firm was reasonable? Why?AnalysisItem 1of Article 42 of the CISG state that “the seller must del iver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware,…” and Item 2 of the same Article continues that “The obligation of the seller under the preceding paragraph does not extend to cases where:①at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or ②the right or claim results from the seller’s compliance with the technical drawings, designs, formulae or other such specifications furn ished by the buyer.”In this case the Chinese company had not known anything about the patent at the conclusion of the contract; therefore it is not responsible for any claims for infringement of the intellectual rights.【Case 7】Company W receives an irrevocable sight L/C from abroad. When preparing to ship the goods according to the stipulations of the letter of credit, Company W suddenly gets a notice from the Opening Bank saying that the Applicant has become bankrupt. Then how will Company W deal with this case? Why?AnalysisCompany W can insist on the Issuing Bank’s effecting payment in correspondence with the relevant international business customs and practice. Article 9 of the 《UCP600》says, “An irrevocable Credit constitutes undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and conditions of the Credit are complied with…”This Article clearly indica tes that the Issuing Bank bears the first responsibility for payment if the documents presented are in compliance with L/C stipulations. In this case the Issuing Bank cannot escape its liability for payment on excuse of the Buyer’s bankruptcy.【Case 8】A ship started on its voyage after loading, but in the course of the journey a fire broke out during transit in Hold A, which had been loaded with stationary and tea. The caption ordered his crew to pour water on the fire. It was found out, after the fire was extinguished, that part of the stationery had been burned, the remainder and all the tea had been soaked through. Then, what were the natures of the respective losses? What risk would you have covered if you had wanted to be compensated for the losses?AnalysisThe loss to the stationary pertained to particular average, while the loss to the tea was a partial one…The insurance company will have compensatedfor the losses if the goods had been insured against FPA【Case 9】The ABC Company exported a consignment of silk. As the shipping marks in the relevant L/C were not clear, the person in charge thought that the L/C did not stipulate the shipping marks and those stated in the L/C. The buyers therefore, refused to pay for the documents. However, after negotiation, the buyers agreed to pay only when the ABC Company had reduced the original prices by 10 percent. What lesson can we learn from this case?AnalysisThe most important lesson we can learn is that, it is essential for the exporter to present document in accordance with the stipulations of the revelant L/C. In this case, finding the shipping marks illegible on the L/C, the export salesman in the ABC Company, instead of asking the buyer for clarification, decided the shipping marks himself. This constituted discrepancy between the documents and the L/C. Article 14 of the《UCP500》clearly indicates,“When the Issuing Bank authorizes another bank to pay, incur a deferred payment undertaking, accept draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credi t…” It is clear that the documents presented must be in conformity with the stipulations in the L/C.【Case 10】A certain Shanghai export company offered to sell certain commodities to an American company on August 10.The buyer replied on August 6 that he had accepted the offer, but asked the Shanghai Company to take 2% off each of the prices of the offer. On August 7, the Shanghai Company cabled no reduction. On August 8, the American Company sent back a cable including complete acceptance of the offer of August 1. Because the prices of commodities in question were rising on the international market, the Shanghai Company did not cable any reply. Then was there any contract made between the sellers and buyers? Why?AnalysisNo, no contract is concluded because an offer becomes null and void after its being counter-offered.【Case11】In 1990, a certain export company of China sent a group of businessmen to the United States for purchase of equipment. In New York both parties reached an oral agreement on such items as specifications, unit price, and quantity. Upon leaving, the group indicated to the other party that, when they got back to Beijing, they would draw a contract, which would become effective after being signed by both parties. After going back to Beijing, the group found that the clients withdraw their import of the equipment, and thus the contract was not signed and the L/C was not opened, either. The US side urged the Chinese side to perform the contract; otherwise they would lodge a claim with the Chinese side in the US. Please analyzethe case and give an opinion on how the Chinese export company was to deal with this case and why?AnalysisAccording to Article 11 of CISG:“A contract of sale need not be concluded in, or evidenced by, writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.” Though China and the US are both member countries of the CISG, China declared that it would not be bound by Article and its related articles. That is to say, any kind of contracts in China must be evidencing by writing. In this case, though both companies agreed orally as to the main terms of the sales contract, according to Chinese law, is not effective.【Case 12】A Chinese export company sent on June 1 an offer to a businessman living in Italy, stipulating for the reply to reach them before June 10. The Italian businessman cabled his acceptance of the offer on June 8.Because of the delay by the post office, the acceptance did not reach the Chinese company was informed that the price of the said products were rising rapidly. What do you think is the best way for the Chinese company to deal with this case? Why?AnalysisAccording to Item 2 of Article 21 of CISG;“If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect. In this case, in order to avoid unnecessary loss, the Chinese company should telephone or dispatch immediately a notice that acceptance is ineffective as it is late.”【Case13】Mr. Smith, an American businessman, sold a batch of IBM computers to a Hong Kong importer, Mr. Chen. The sales contract was concluded in the United States of American on the terms of CIF Hong Kong. During execution of this contract, disputes arose between the seller and the buyer on the form and interpretation of the contract. In such a case, did the law of the USA or the law of Hong Kong apply to the disputes? Why?AnalysisThe law of the USA applies to this contract because①this was a CIF contract;②the place of conclusion of the contract was in the USA; ③the place of theexecution of the contract was also in the USA . The seller completed hisresponsibilities after he delivered the goods at the port of the USA.【Case 14】A Chinese export company sold 25 metric tons of Donkey Meat to a Japanese client. As stipulated in the contract, the goods were to be packed in 1500 boxes with a net weight of 16.6 kilos per box. If the goods were packed according to stipulations, the total weight was 24.9 metric tons, the remaining 100 kilos might not be delivered. When the goods arrived at Japanese port, the Japanese Customs Officers checked them and found that each box contained to 20 kilos, not 16.6 kilos,. Therefore, this shipment amounted to 30 metric tons. However, the goods totaled 24.9M/T in weight on all the documents and the payment was also effected against 24.9M/T. Thus 5100 kilos of Donkey Meat were free of charge. Worst of all, because of the discrepancy between the net weight on the documents and the actual weight, Japanese Customs thought the export company helped its client to evade duties. Then how can we deal with this issue? What lessons can we draw from this case?AnalysisIt seems that the seller delivered the goods more than what was stipulated in the contract; therefore, according to Article 52 of the CISG, the buyer may refuse to take delivery of the excess quantity delivered. However, in this case because of the ignorance of the concerned, difference occurred between the actual goods delivered and the quantity specified in documents. What’s sunny is that the weight indicated on the documents was the same as that stated in the contract. As a result, the buyer might obtain more without paying anything. However, the Japanese Customs House delivered the difference between the documents and the actual goods delivered, which cause embarrassment to the Chinese company. The only way of solving the problem, perhaps, was to explain what happened in the factory to the Japanese Customs House.Although the problem might have been solved, we still have a lot to learn from this case: ①Strengthen the connection between the ales people and the factory;②the export salesman should make the mode of packing clear to the processing factory; ③the Chinese Customs House must also check the weight of goods against the document; and ④we should see that there is agreement not only between the documents presented, but also between the documents and the goods.【Case 15】A Chinese trading company E concluded a transaction in steel with a Hong Kong company W on the basis of FOB China Port. Company W immediately resold the steel to Company H in the Libya on the terms of CFR Liberia. The L/C from W required the price terms to be FOB China Port and the goods to be directly delivered to Liberia. The L /C also required “Freight Prepaid” to be indicated on t he B/L. Why did Company W perform so? What should we do about it?AnalysisIn this case the contract was concluded between Company E and Company W on FOB terms, according to which the seller ended his responsibilities when he delivered the goods on board the ship at the port of shipment. He did not need to pay for transportation of the goods or the insurance premium. Therefore, it was not right for W to ask E to pay the freight and indicate “Freight Prepaid” on the B/L. Thereason why W asked E to do that might be that he wanted to transfer the freight charges to E.However, in practical dealings, foreign trade companies often come across such situations, especially when a contract is concluded with an agent, who wants to resells the goods. In this case, E m ight comply with W’S requests, but he had to indicate that the freight should be borne by W.【Case1 6】A merchant in South America placed an order with a Chinese export company for a certain commodity on CFR Asuncion terms. With a view to developing new markets, the export company immediately made an offer abroad on the basis of CFR Asuncion, and the transaction was soon concluded. When shipping the goods, however, this company came to realize that Asuncion is an inland city. As was the case, if the company had the goods transported to Asuncion, it had to, first of all, have the goods transported by sea to a seaport in Argentina or some other South American neighboring country. After that, the goods might be transport to Asuncion through river transportation or inland transportation. As a result, this company had to pay a considerable sum of freight charges. What can we learn from this case?AnalysisIn this case the loss was caused simply because of the ignorance on the part of the export businessman. What we can learn from this case is that, when offering abroad, we must make exact calculations of the total freight and other relevant charges. Most importantly, it is very beneficial for every businessman to learn geography.【Case 17】Missing address in documentary collection An agricultural products import and export company (company A) in China sold a batch of Hempseeds worth USD985, 000. It was written in the contract that “payment by the seller’s draft 20 days after sight to be accepted by the buyer upon presentation. Documents are to be delivered to the buyer against acceptance. Payment is to be made on the date of maturity.” Company A shipped the goods according to the contract on time and presented the documents on March 15 to its remitting bank for collection. The remitting bank appointed Bank D.K. as the collecting bank and mailed the documents to it.On April 25, a message was received from company B, the buyer:“Re xxxxx tons of Hempseeds under Contract No. xxxxx, as per your shipping notice on March 14, we have contacted the shipping agency. The goods have arrived for a long time, but presently we still have not received the documents covering the goods. Please check with your bank about it.”Company A replied on April 28:“Thank you for your fax of April 25. Re xxxxx tons of Hempseeds under Contract No. xxxxx, we have checked and hereby confirm that we entrusted the handling ofD/A 20 days to Bank C on March 15. Bank C sent the documents to you on March 16. Please che ck.”On April 30, company B sent another message:“Thank you for your fax of April 28. We have inquired our correspondent bank W repeatedly but found nothing related to this collection. Please find it out with the collecting bank D. K. through your remitti ng bank. Look forward to your reply.”Upon receiving the message, company A contacted the remitting bank who at the same time received a message from the collecting bank D. K.:“We acknowledge documents No.xxxxx and the collection instruction. Because the drawee’s address on the documents and the collection order is not in detail (only contains the name of the city, no road name and house number), we have tried hard to find it out but in vain. Please tell us immediately what to do.”Checking with the file copies, company A found that what the collecting bank said was indeed the case. The person who dealt with this business missed out the drawee’s address when filling out relevant instructions to the documentation department. Company A also realized that it should have chosen Bank W, the correspondent bank of the payer, as the collecting bank. In fact, as company A did not appoint collecting bank, the remitting bank chose Bank D. K., which had no business relations with the payer, to do the job.After study, the remitting bank immediately sent the detailed address of the payer to Bank D. K. so that Bank D. K. could make presentment for acceptance.However, a protest note was received from the collecting bank. Because of the delayed documents, the buyer could not pick up the goods in time. As a result, the goods were first damaged by rain and then were stored in the customs warehouse with high expenses. Therefore, the buyer refused to make acceptance.Company A negotiated with the buyer but could not reach agreement. Finally, company A had to commit the goods to an institution stationed in the buyer’s country for disposal and sustained a big loss.Analysis:In accordance with URC522 Article 4. b. iii, a collecting instruction should include “details of the drawe e including full name, postal address, or the domicile at which presentation is to be made and if applicable telex, telephone and facsimile numbers.” It is also provided in Article 4. c that “collection instructions should bear the complete address of the drawee or of the domicile at which the presentation is to be made. If the address is incomplete or incorrect, the collecting bank may, without any liability and responsibility on its parts, endeavor to ascertain the proper address. The collecting bank will not be liable or responsible for any ensuring delay as a result of an incomplete/incorrect address being provided.”Obviously, in this case, the collecting bank was not responsible for the loss incurred because company A did not provide detailed address of the drawee on the collection instruction.33. Article 4 & 10.Article 4Collection instructions should bear the complete address of the drawee or of the domicile at which the presentation is to be made. If the address is incomplete or。