1. Chinese Foreign Trade Law Jiaxiang Hu Professor of KoGuan Law School, SJTU

2. Chapter Four Law Governing International Transactions of Goods I. Applicable International Conventions 1. UN Convention on Contracts for the International Sale of Goods (1980) (1)Qualified States a. States which are the contracting parties of the Convention; b. States which are not the contracting parties of the Convention may apply it on some conditions.

3. Chapter Four Law Governing International Transactions of Goods Article 1 of the UN Convention This Convention applies to contracts of sale of goods between parties whose places of business are in different States: This Convention applies to contracts of sale of goods between parties whose places of business are in different States: a. when the States are Contracting States; or b. when the rules of private international law lead to the application of the law of a Contracting State (China does not accept this provision).

4. Chapter Four Law Governing International Transactions of Goods (2)Applicable Types of Sales The Convention uses the negative list to exclude clearly those sales which may not apply it. Article 2 of the UN Convention This Convention does not apply to sales: This Convention does not apply to sales: a. of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract,

5. Chapter Four Law Governing International Transactions of Goods neither knew nor ought to have known that the goods were bought for any such use; neither knew nor ought to have known that the goods were bought for any such use; b. by auction; c. on execution or otherwise by authority of law; d. of stocks, shares, investment securities, negotiable instruments or money; e. of ships, vessels, hovercraft or aircraft; f. of electricity.

6. Chapter Four Law Governing International Transactions of Goods (3)Expressly Excluded Areas a. validity of the contract b. property rights of the goods c. liability for the injury caused by the goods

7. Chapter Four Law Governing International Transactions of Goods Article 4 of the UN Convention This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:

8. Chapter Four Law Governing International Transactions of Goods a. the validity of the contract or of any of its provisions or of any usage; b. the effect which the contract may have on the property in the goods sold. Article 5 of the UN Convention This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person. This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person.

9. Chapter Four Law Governing International Transactions of Goods 2. International Rules for the Interpretation of Trade Terms of 2010 (INCOTERMS 2010) Trade terms are the codification of customs. When they are used in the contract, they become binding on both parties. (1) E Group a. EXW or EX WORKS…named place

10. Chapter Four Law Governing International Transactions of Goods (2) F Group a. FCA---FREE CARRIER…named place b. FAS---FREE ALONGSIDE SHIP…named port of shipment c. FOB---FREE ON BOARD…named port of shipment

11. Chapter Four Law Governing International Transactions of Goods (3) C Group a. CFR---COST AND FREIGHT…named port of destination b. CIF---COST, INSURANCE AND FREIGHT…named port of destination c. CPT---CARRIAGE PAID TO…named place of destination d. CIP---CARRIAGE AND INSURANCE PAID TO…named place of destination

12. Chapter Four Law Governing International Transactions of Goods (4) D Group a. DAT---DELIVERED AT Terminal…named place of destination b. DAP---DELIVERED AT Place…named port of destination c. DDP---DELIVERED DUTY PAID……named place of destination

13. Chapter Four Law Governing International Transactions of Goods 3. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention 1958) (1)Popular International Arbitration Institutes a. China International Economic and Trade Arbitration Commission b. Hong Kong International Arbitration Centre

14. Chapter Four Law Governing International Transactions of Goods c. Singapore International Arbitration Center d. London Court of International Arbitration e. The Arbitration Institute of the Stockholm Chamber of Commerce f. ICC International Court of Arbitration

15. Chapter Four Law Governing International Transactions of Goods (2) Implementation of Arbitral Awards a. New York Convention (1958) b. Arbitration Law of China (1995) c. Civil Procedure Law of China (2013) Article 1 of the New York Convention This convention shall apply to recognition and enforcement of arbitral awards made in the This convention shall apply to recognition and enforcement of arbitral awards made in the

16. Chapter Four Law Governing International Transactions of Goods territory of a State other than the State where territory of a State other than the State where the recognition and enforcement of such the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought. awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.

17. Chapter Four Law Governing International Transactions of Goods Article 3 of the New York Convention Each contracting State shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles … Each contracting State shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles …

18. Chapter Four Law Governing International Transactions of Goods II. Relevant Domestic Laws 1. Contract Law of China (1) Qualified Parties to Apply a. natural persons b. legal persons c. other organizations

19. Chapter Four Law Governing International Transactions of Goods Article 2 of Contract Law Article 2 of Contract Law A contract in this Law refers to an agreement A contract in this Law refers to an agreement among natural persons, legal persons or other organizations as equal parties for the among natural persons, legal persons or other organizations as equal parties for the establishment, modification of a relationship involving the civil rights and obligations of such entities. Agreements concerning personal relationships such as marriage, adoption, guardianship, etc. shall be governed by the provisions in other laws. establishment, modification of a relationship involving the civil rights and obligations of such entities. Agreements concerning personal relationships such as marriage, adoption, guardianship, etc. shall be governed by the provisions in other laws.

20. Chapter Four Law Governing International Transactions of Goods (2) Performance of Obligations and Modification of the Contract a. based on agreement b. based on good faith

21. Chapter Four Law Governing International Transactions of Goods Article 60 of Contract Law Each party shall fully perform its own obligations as agreed upon. Each party shall fully perform its own obligations as agreed upon. The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality… The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality…

22. Chapter Four Law Governing International Transactions of Goods Article 77 of Contract Law A contract may be modified if the parties reach a consensus through consultation. A contract may be modified if the parties reach a consensus through consultation. If the laws or administrative regulations so provide, approval and registration procedures for such modification shall be gone through in accordance with such provisions. If the laws or administrative regulations so provide, approval and registration procedures for such modification shall be gone through in accordance with such provisions.

23. Chapter Four Law Governing International Transactions of Goods (3) Liabilities for the Breach of Contract Remedies for Breach of Contract Remedies for Breach of Contract a. continue to perform its obligations b. take remedial measures c. compensate for losses d. liquidated damages

24. Chapter Four Law Governing International Transactions of Goods Article 107 of Contract Law If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses. If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses.

25. Chapter Four Law Governing International Transactions of Goods Article 114 of Contract Law The parties may agree that if one party breaches the contract, it shall pay a certain sum of liquidated damages to the other party in light of the circumstances of the breach, and may also agree on a method for the calculation of the amount of compensation for the damages incurred as a result of the breach. The parties may agree that if one party breaches the contract, it shall pay a certain sum of liquidated damages to the other party in light of the circumstances of the breach, and may also agree on a method for the calculation of the amount of compensation for the damages incurred as a result of the breach.

26. Chapter Four Law Governing International Transactions of Goods Where the amount of liquidated damages agreed upon is lower than the damages incurred, a party may petition the People’s Court or an arbitration institution to make an increase; where the amount of liquidated damages agreed upon are significantly higher than the damages incurred, a party may petition the People’s Court or an arbitration institution to make an appropriate reduction. Where the amount of liquidated damages agreed upon is lower than the damages incurred, a party may petition the People’s Court or an arbitration institution to make an increase; where the amount of liquidated damages agreed upon are significantly higher than the damages incurred, a party may petition the People’s Court or an arbitration institution to make an appropriate reduction.

27. Chapter Four Law Governing International Transactions of Goods Special Provisions for Deposit Special Provisions for Deposit Article 115 of Contract Law The parties may agree that a party pay a deposit to the other party as a guaranty for the obligation in accordance with the Security Law. Upon that the obligor has performed its obligations, the deposit shall be offset against the price or refunded to the obligor. If the party The parties may agree that a party pay a deposit to the other party as a guaranty for the obligation in accordance with the Security Law. Upon that the obligor has performed its obligations, the deposit shall be offset against the price or refunded to the obligor. If the party

28. Chapter Four Law Governing International Transactions of Goods paying the deposit fails to perform its paying the deposit fails to perform its obligations under the contract, such party has no right to demand for the return of the deposit; where the party accepting the deposit fails to perform its obligations under the contract, such party shall refund twice the value of the deposit. obligations under the contract, such party has no right to demand for the return of the deposit; where the party accepting the deposit fails to perform its obligations under the contract, such party shall refund twice the value of the deposit.

29. Chapter Four Law Governing International Transactions of Goods (4) Specific Provisions to Foreign Trade Contracts Order of the Laws Applied a. the law selected by both parties b. the law of the country with the closest connection thereto c. Chinese law in some cases

30. Chapter Four Law Governing International Transactions of Goods Article 126 of Contract Law Parties to a foreign-related contract may select the applicable law for resolution of a contractual dispute, except as otherwise provided by law. Where parties to the foreign- related contract fail to select the applicable law, the contract shall be governed by the law of the country with the closest connection thereto. Parties to a foreign-related contract may select the applicable law for resolution of a contractual dispute, except as otherwise provided by law. Where parties to the foreign- related contract fail to select the applicable law, the contract shall be governed by the law of the country with the closest connection thereto.

31. Chapter Four Law Governing International Transactions of Goods For a Chinese-foreign equity joint venture contract, Chinese-foreign contractual joint venture contract, or a contract for Chinese- foreign joint exploration and development of natural resources which is performed within the territory of the People’s Republic of China, the law of the People’s Republic of China shall be applied. For a Chinese-foreign equity joint venture contract, Chinese-foreign contractual joint venture contract, or a contract for Chinese- foreign joint exploration and development of natural resources which is performed within the territory of the People’s Republic of China, the law of the People’s Republic of China shall be applied.

32. Chapter Four Law Governing International Transactions of Goods (5) Dispute Resolutions Alternatives for Resolution Alternatives for Resolution a. consultation b. mediation c. arbitration d. judicial means

33. Chapter Four Law Governing International Transactions of Goods Article 128 of Contract Law The parties may resolve a contractual dispute through settlement or mediation. The parties may resolve a contractual dispute through settlement or mediation. Where the parties do not wish to, or are unable to, resolve such dispute through settlement or mediation, the dispute may be submitted to the relevant arbitration institution … Where the parties do not wish to, or are unable to, resolve such dispute through settlement or mediation, the dispute may be submitted to the relevant arbitration institution …

34. Chapter Four Law Governing International Transactions of Goods Parties to a foreign-related contract may apply to a Chinese arbitration institution or another arbitration institution for arbitration. Where the Parties to a foreign-related contract may apply to a Chinese arbitration institution or another arbitration institution for arbitration. Where the parties did not conclude an arbitration agreement, or the arbitration agreement is invalid, either party may bring a suit to the People’s Court … parties did not conclude an arbitration agreement, or the arbitration agreement is invalid, either party may bring a suit to the People’s Court …

35. Chapter Four Law Governing International Transactions of Goods (6) Time Limit for Third-Party Resolution a. four years (foreign trade contract) b. decided by other laws

36. Chapter Four Law Governing International Transactions of Goods Article 129 of Contract Law For a dispute arising from a contract for the international sale of goods or a technology import or export contract, the time limit for bringing a suit or applying for arbitration is four years … For a dispute arising from any other type of contract, the time limit … shall be governed by the relevant law. For a dispute arising from a contract for the international sale of goods or a technology import or export contract, the time limit for bringing a suit or applying for arbitration is four years … For a dispute arising from any other type of contract, the time limit … shall be governed by the relevant law.

37. Chapter Four Law Governing International Transactions of Goods 2. Civil Procedure Law of China (1) Qualifications for Suits Article 5 of Civil Procedure Law Foreign nationals, Stateless persons, foreign enterprises and organizations that institute or respond to proceedings in the people's courts shall have the same litigation rights and obligations as citizens, legal persons and other organizations of China. Foreign nationals, Stateless persons, foreign enterprises and organizations that institute or respond to proceedings in the people's courts shall have the same litigation rights and obligations as citizens, legal persons and other organizations of China.

38. Chapter Four Law Governing International Transactions of Goods (2) Jurisdiction a. The Domicile or Habitual Residence of the Defendant Article 22 of Civil Procedure Law A civil lawsuit initiated against a citizen shall be under the jurisdiction of the people's court in the place where the defendant has his or her domicile; if the defendant's domicile is A civil lawsuit initiated against a citizen shall be under the jurisdiction of the people's court in the place where the defendant has his or her domicile; if the defendant's domicile is

39. Chapter Four Law Governing International Transactions of Goods different from his or her habitual residence, the lawsuit shall be under the jurisdiction of the people's court in the place of his or her habitual residence. different from his or her habitual residence, the lawsuit shall be under the jurisdiction of the people's court in the place of his or her habitual residence. A civil lawsuit initiated against a legal person or any other organization shall be under the jurisdiction of the people's court in the place where the defendant has its domicile. A civil lawsuit initiated against a legal person or any other organization shall be under the jurisdiction of the people's court in the place where the defendant has its domicile.

40. Chapter Four Law Governing International Transactions of Goods Where the domiciles or habitual residences of several defendants in the same lawsuit are in the areas under the jurisdiction of two or more people's courts, all of those people's courts shall have jurisdiction over the lawsuit. Where the domiciles or habitual residences of several defendants in the same lawsuit are in the areas under the jurisdiction of two or more people's courts, all of those people's courts shall have jurisdiction over the lawsuit.

41. Chapter Four Law Governing International Transactions of Goods b. Either the Domicile of the Defendant or the Place where the Contract is Performed Article 24 of Civil Procedure Law A lawsuit initiated over a contract dispute shall be under the jurisdiction of the people's court in the place where the defendant has his or her domicile or where the contract is performed. A lawsuit initiated over a contract dispute shall be under the jurisdiction of the people's court in the place where the defendant has his or her domicile or where the contract is performed.

42. Chapter Four Law Governing International Transactions of Goods c. Choice Made by Both Parties Article 25 of Civil Procedure Law The parties to a contract may choose through agreement stipulated in the written contract the people's court in the place where the defendant has his or her domicile, where the contract is performed, where the contract is signed, where The parties to a contract may choose through agreement stipulated in the written contract the people's court in the place where the defendant has his or her domicile, where the contract is performed, where the contract is signed, where

43. Chapter Four Law Governing International Transactions of Goods the plaintiff has his or her domicile or where the subject matter is located to have jurisdiction over the case, however, such an agreement may not violate the provisions of this law regarding jurisdiction by level and exclusive jurisdiction. the plaintiff has his or her domicile or where the subject matter is located to have jurisdiction over the case, however, such an agreement may not violate the provisions of this law regarding jurisdiction by level and exclusive jurisdiction.

44. Chapter Four Law Governing International Transactions of Goods 3. Ordinary Procedure of First Instance a. first instance---local court b. time limit---six months Article 135 of Civil Procedure Law A people's court shall, in handling a case to which ordinary procedure is applied, close it within six months from filing the case. Where A people's court shall, in handling a case to which ordinary procedure is applied, close it within six months from filing the case. Where

45. Chapter Four Law Governing International Transactions of Goods an extension is necessary for special an extension is necessary for special circumstances, a six-month extension may be given subject to the approval of the president of the said court; any further extension shall be reported to the people's court at a higher level for approval. circumstances, a six-month extension may be given subject to the approval of the president of the said court; any further extension shall be reported to the people's court at a higher level for approval.

46. Chapter Four Law Governing International Transactions of Goods 4. Procedure of Second Instance a. second instance(final)---intermediate court Article 147 of Civil Procedure Law If a party refuses to accept the judgment of first instance of a local people's court, the party shall have the right to file an appeal with the people's court at the next higher level within 15 days from the date on which the written judgment is served. If a party refuses to accept the judgment of first instance of a local people's court, the party shall have the right to file an appeal with the people's court at the next higher level within 15 days from the date on which the written judgment is served.

47. Chapter Four Law Governing International Transactions of Goods b. Time limit for second instance Article 159 of Civil Procedure Law In trying an appealed case against a judgment, the people's court shall make a final judgment within three months after the case was filed as one of second instance. Any extension of the term necessitated by special circumstances shall be subject to the approval of the president of the said court. In trying an appealed case against a judgment, the people's court shall make a final judgment within three months after the case was filed as one of second instance. Any extension of the term necessitated by special circumstances shall be subject to the approval of the president of the said court.

48. Chapter Four Law Governing International Transactions of Goods 5. Procedure for Trial Supervision a. alternatives for retrial Article 178 of Civil Procedure Law If a party considers that a legally effective judgment or order has some error, the party may apply to the people's court which originally tried the case or to a people's court at the next higher level for retrial, however, If a party considers that a legally effective judgment or order has some error, the party may apply to the people's court which originally tried the case or to a people's court at the next higher level for retrial, however,

49. Chapter Four Law Governing International Transactions of Goods execution of the judgment or order shall not be suspended. execution of the judgment or order shall not be suspended. b. time limit for retrial Article 182 of Civil Procedure Law Any application for a retrial by a party shall be made within two years after the judgment or order becomes legally effective. Any application for a retrial by a party shall be made within two years after the judgment or order becomes legally effective.

50. Chapter Four Law Governing International Transactions of Goods 6. Procedure for Implementation a. implementation in China Article 201 of Civil Procedure Law Legally effective civil judgments or orders as well as the parts of criminal judgments or orders that relate to property shall be executed by the people's court of first instance or the court of the same level where the concerned property is located. Legally effective civil judgments or orders as well as the parts of criminal judgments or orders that relate to property shall be executed by the people's court of first instance or the court of the same level where the concerned property is located.

51. Chapter Four Law Governing International Transactions of Goods b. implementation overseas Article 264 of Civil Procedure Law If a party applies for execution of a legally effective judgment or order made by a people's court and the party subject to execution or its property is not within the territory of the People's Republic of China, it may directly apply for recognition and enforcement to the foreign court which has jurisdiction over the If a party applies for execution of a legally effective judgment or order made by a people's court and the party subject to execution or its property is not within the territory of the People's Republic of China, it may directly apply for recognition and enforcement to the foreign court which has jurisdiction over the

52. Chapter Four Law Governing International Transactions of Goods case, or the people's court may, in accordance case, or the people's court may, in accordance with the relevant provisions of the international treaties concluded or acceded to by China, or on the principle of reciprocity, request recognition and enforcement by a foreign court. with the relevant provisions of the international treaties concluded or acceded to by China, or on the principle of reciprocity, request recognition and enforcement by a foreign court. If a party applies for execution of a legally effective arbitral award made by an arbitration If a party applies for execution of a legally effective arbitral award made by an arbitration

53. Chapter Four Law Governing International Transactions of Goods agency on foreign-related disputes of the People's Republic of China and the party subject to execution or its property is not within the territory of the People's Republic of China, it may directly apply for recognition and enforcement to the foreign court which has jurisdiction over the case. agency on foreign-related disputes of the People's Republic of China and the party subject to execution or its property is not within the territory of the People's Republic of China, it may directly apply for recognition and enforcement to the foreign court which has jurisdiction over the case.

54. Chapter Four Law Governing International Transactions of Goods c. implementation in China according to the judgments or arbitration awards made overseas Article 266 of Civil Procedure Law If a legally effective judgment or order made by a foreign court requires recognition and enforcement by a people's court of the People's Republic of China, the party concerned may directly apply to the intermediate people's If a legally effective judgment or order made by a foreign court requires recognition and enforcement by a people's court of the People's Republic of China, the party concerned may directly apply to the intermediate people's

55. Chapter Four Law Governing International Transactions of Goods court of the People's Republic of China which has jurisdiction over the case for recognition court of the People's Republic of China which has jurisdiction over the case for recognition and enforcement, or the foreign court may, in accordance with the provisions of the international treaties concluded or acceded to by the People's Republic of China or on the principle of reciprocity, request recognition and enforcement by a people's court. and enforcement, or the foreign court may, in accordance with the provisions of the international treaties concluded or acceded to by the People's Republic of China or on the principle of reciprocity, request recognition and enforcement by a people's court.

56. Chapter Four Law Governing International Transactions of Goods Article 267 of Civil Procedure Law If an award made by a foreign arbitration agency requires the recognition and enforcement by a people's court of the People's Republic of China, the party concerned shall directly apply to the intermediate people's court in the place where the party subject to execution has its domicile or where its If an award made by a foreign arbitration agency requires the recognition and enforcement by a people's court of the People's Republic of China, the party concerned shall directly apply to the intermediate people's court in the place where the party subject to execution has its domicile or where its

57. Chapter Four Law Governing International Transactions of Goods property is located. The people's court shall deal with the matter in accordance with the relevant provisions of the international treaties concluded or acceded to by the People's Republic of China or under the principle of reciprocity. property is located. The people's court shall deal with the matter in accordance with the relevant provisions of the international treaties concluded or acceded to by the People's Republic of China or under the principle of reciprocity.

58. Chapter Four Law Governing International Transactions of Goods Questions for Discussion Questions for Discussion Question One Question One Which States are qualified to apply UN Convention on Contracts for the International Sale of Goods? Which States are qualified to apply UN Convention on Contracts for the International Sale of Goods? Question Two Question Two What sales are excluded to apply the UN Convention on Contracts for the International Sale of Goods? What sales are excluded to apply the UN Convention on Contracts for the International Sale of Goods?

59. Chapter Four Law Governing International Transactions of Goods Question Three Question Three How do you understand the trade terms “EXW or EX WORKS…named place” and “DDP--- DELIVERED DUTY PAID……named place of destination”? How do you understand the trade terms “EXW or EX WORKS…named place” and “DDP--- DELIVERED DUTY PAID……named place of destination”? Question Four Question Four According Article 126 of Chinese Contract Law, what contracts performed in China should use Chinese laws as the governing law? According Article 126 of Chinese Contract Law, what contracts performed in China should use Chinese laws as the governing law?

60. Chapter Four Law Governing International Transactions of Goods Question Five Question Five What is the time limit for the application of a judicial settlement in a foreign trade dispute? What is the time limit for the application of a judicial settlement in a foreign trade dispute? Question Six Question Six Which court has the jurisdiction over a contract dispute? Which court has the jurisdiction over a contract dispute?

61. Chapter Four Law Governing International Transactions of Goods Question Seven Question Seven What is the time limit for the first-instance trial, second-instance trial in China? What is the time limit for the first-instance trial, second-instance trial in China? Question Eight Question Eight How to get the implementation of a judgment made by a foreign court or an arbitral award made by a foreign arbitration institute in China? How to get the implementation of a judgment made by a foreign court or an arbitral award made by a foreign arbitration institute in China?