School of International Economics Chapter 2: Quality of Goods

School of International Economics Quality of Goods Refers to the outward appearance and the essential quality of the goods, such as shape, structure, colour, flavour as well as chemical composition, physical and mechanical property, biological feature, etc.

School of International Economics Quality of Goods Importance of Quality of Goods Value in use Price of the goods Sales of the goods Credit standing of the manufacturer

School of International Economics A. Methods of Stipulating Quality of the Goods 2 Ways: Sale by description Sale by sample

School of International Economics A. Methods of Stipulating Quality of the Goods 1.Sale by description ( ) Sale by specification, Grade or Standard Sale by F.A.Q. Sale by brand name or trade mark Sale by name of origin Sale by description

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by specification, Grade or Standard (, ) The specification of the goods refers to certain main indicators which indicate the quality of the goods, such as composition, content, purity, size, length, etc. Example: Lithophone Zns content 28% min.

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by specification, Grade or Standard The grade of the goods refers to the classifications of the commodity of one kind which is indicated by words, numbers or symbols. The classifications are usually decided by different qualities, weights, compositions, appearances, properties, etc. Example: three-ply ( ), first class

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by specification, Grade or Standard The standard refers to the specifications or grades which are stipulated and announced by the government or the chamber of commerce, etc. Example: ISO9000 DIN

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by F.A.Q. (Fair Average Quality) ( ) F.A.Q. refers to the average quality level of the export commodity within a certain period of time. Used in agricultural and by-product market ( ) Stipulate the main specification indexes Example: Chinese Groundnut, 1994 crop, F.A.Q., Moisture (max.) 13% Admixture (max.) 5% Oil content (min.) 44%

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by brand name or trade mark (, ) As to the goods whose quality is stable, reputation is sound and with which the customers are quite familiar, we may sell it by brand name or trade mark. Example: Coca-Cola Nike

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by name of origin( ) There are some agriculture products and by-products whose origins are well known all over the world. As to these products, the origins may well indicate their qualities. Example: Longkou Vermicelli

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by description ( ) The quality of some commodities can not be simply indicated by quality indexes It is necessary to explain in detail the structure, material, performance as well as method of operation. If necessary, picture, photos, etc. must also be provided. Example: such as technological instruments, electric machines, etc.

School of International Economics A. Methods of Stipulating Quality of the Goods 2. Sale by Sample ( ) The sample refers to the article which can be used to represent the quality of the whole lot. Sale by the seller s sample Sale by the buyer s sample Examples: handcraft articles, clothes or native products etc.

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by the seller s sample ( ) The seller shall supply a representative sample which will possess the moderate quality among a large quantity of the physical goods At the same time keep a duplicate sample, which shall be in quality as or on the whole as the same as the standard sample.

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by the buyer s sample( ) Take into consideration the availability of the new material and the possibility of providing the processing technology. Reproduce the buyer s sample, i.e. counter sample, and send it back to the buyer as a type sample. sale by the buyer s sample sale by the seller s counter sample.

School of International Economics A. Methods of Stipulating Quality of the Goods Sale by the buyer s sample( ) The two parties shall stipulate that in case the buyer s sample results in any disputes of infringement of industrial property, the seller will have nothing to do with it.

School of International Economics B. Quality Clause in the Sales Contract The quality clause usually includes the specification, grade, standard or brand, etc. of the goods. In the case of sale by sample, it is necessary to indicate the number of the sample and the date of despatch. Example: Sample No. 612 Cloth Doll

School of International Economics B. Quality Clause in the Sales Contract As to the goods whose specifications and properties or performances are complicated, we shall adopt the following clauses: Quality as per sample No … and the technical features indicated in the illustrations ( ) submitted by the seller. Quality and technical data as per the seller s catalogue No … Quality and technical data to be in conformity with the attached technical agreement which forms an integral part of the contract.

School of International Economics B. Quality Clause in the Sales Contract In many cases, the quality indexes shall be stipulated flexibly and scientifically. Quality latitude: means the quality indexes of the goods delivered by the seller may be controlled flexibly within a certain latitude.

School of International Economics B. Quality Clause in the Sales Contract 3 ways to stipulate the quality latitude: To stipulate a certain scope: the width of the cotton cloth is 47/48 inches To stipulate more or less clause: duck s down content 18% (1% more or less) To stipulate max or min : White Rice, Long- shaped, Broken Grains (max.) 25% Admixture (max.) 1% Moisture (max.) 15%

School of International Economics B. Quality Clause in the Sales Contract Quality Tolerance: The quality tolerance is used in the trade of industrial products, which means that the quality of the goods delivered by the seller is allowed to have certain differences within a certain range since such differences are usually unavoidable and commonly accepted as the usage of the same special trade. Example: Length 100mm±2%, means 102mm and 98mm are all allowed in quality tolerance

School of International Economics C. Importance of Quality Importance of Quality (6 points) It involves the fundamental rights and obligations of both parties. It determines the prices value of the goods. It is the most important one of the many factors that exerts a tremendous influence over the sales and prestige of the goods.

School of International Economics C. Importance of Quality Importance of Quality (6 points) The fine-quality goods always find themselves in an advantageous position in the intense competition. The well-known goods of high quality are always welcomed by the end-users or consumers. If the quality of the goods is not in conformity with the contractual description, it is regarded as a breach of the contract and thus leads to disputes.