Quality objection must be raised within the claim period

In July 2016, Chinese company A and company B of the United States entered into a sales contract for complete sets of machine tools. The contract adopts CIF Dalian, China, and it is agreed that after the machine tools arrive, the seller will install and debug them free of charge. In case of any discrepancy between the quality and the contract, the buyer shall have the right to return the goods or claim compensation according to the inspection certificate issued by the Chinese commodity inspection authority within 90 days after the arrival of the goods at the destination, in addition to the responsibility of the ship owner and the insurance company.

In January 2017, after the goods arrived in Dalian, they were transported by land to Taiyuan, Shanxi Province, where the buyer’s user is located on March 5. On April 21, at the request of company a, Shanxi commodity inspection authority, the buyer and the seller and the end user conducted unpacking inspection and determined that the appearance was intact, but the main engine and accessories in the box were damaged and deformed due to improper packaging and loading and could not be repaired. In this regard, the representatives of the buyer and the seller and the user jointly sign a written unpacking acceptance record. On April 24, company B called company a to replace another new machine and asked company a to contact the insurance company for compensation.

On May 3, the Chinese commodity inspection authority issued an inspection certificate confirming the above inspection results. The next day, company a called company B and asked to replace one equipment according to the inspection certificate. Company B replied that the equipment had been fully insured during transportation and asked company a to contact the insurance company. After the insurance company confirmed the loss, company B will replace the new equipment and ship it as soon as possible.

After that, company a contacted the insurance company, but the insurance company refused to settle the claim on the grounds of improper packaging. Therefore, company a requires company B to contact the insurance company directly. Company B called company a on June 20 and asked to ship the broken machine back to Hong Kong. On June 26, company a shipped the broken machine back to Hong Kong. On September 25, company B shipped the broken machine back to Taiyuan again on the ground that the insurance company refused to compensate, resulting in a dispute.

In the arbitration, company B claimed that it should not bear all the losses claimed by company a on the grounds that the quality objection of company a had exceeded the claim period, and both parties did not reach a replacement agreement and had no obligation to replace the goods.

In this case, the damage was caused by the improper loading of the seller’s packing box, so the performance of company B has constituted a breach of contract. As the buyer, the validity of company a’s quality objection to company B within 90 days according to the certificate of China’s commodity inspection authority depends on the identification of the “destination of goods” agreed in the contract. Company a believes that the destination of the goods is Taiyuan, Shanxi, while company B believes that it is Dalian, China.

According to the contract and the actual performance of the goods, the destination of the goods in this case should be identified as Dalian. First of all, the price used in the contract is CIF Dalian, which shows that the port of destination is Dalian, China. Although the contract does not use the concept of “destination”, there is no place in the contract to mention that the destination of the goods is Taiyuan, Shanxi. Secondly, although the provisions on installation and commissioning in the contract mention that the goods need to be shipped to the location of the end user after arriving at the port of destination, this provision is not enough to constitute the basis for confirming that the destination of the goods is Taiyuan, Shanxi.

In this case, after the goods arrived in Taiyuan, Shanxi Province, company a carried out commodity inspection and filed a claim. The time for raising quality objection has been 100 days from the arrival of the goods at the destination port of Dalian, exceeding the provisions of the contract that “quality objection can be raised within 90 days after the arrival of the goods at the destination”. Therefore, the quality objection of company a does not meet the conditions agreed in the contract. According to Article 38 of the United Nations Convention on Contracts for the international sale of goods, company a loses the right to claim that the goods are not in conformity with the contract and no longer has the right to claim.