An American buyer (Plaintiff) and a Chinese seller (Defendant) entered into a contract for the sale of frozen shrimps. The agreement expressly provided that if the goods were denied entry through customs by the U.S. Food and Drug Administration (FDA), the seller would have to return the price and bear the costs for shipping the goods back to the seller.
Upon arrival at the port of Long Beach, the goods were seized by the U.S. authorities and, after an inspection by a non-official professional laboratory, they were found to be decayed, and thus, illegal. The buyer then faxed the seller that the FDA had denied entry and ordered the goods to be shipped back to China. After extensive negotiations between the parties, the goods were loaded and sealed under the supervision of U.S. custom's officials. However, upon arrival in China a new dispute arose, as the seller affirmed not to be provided with the original set of bill of ladings, by which it would be possible to collect the goods. When, one month later, the buyer notified the seller to have obtained the necessary documents, the latter refused to pay for them. The buyer then brought an action against the seller. Meanwhile, as the containers' fee were exceeded and left unpaid, the Chinese authorities ordered the goods to be resold.
The Court based its decision on the Law of the People's Republic of China on Economic Contracts Involving Foreign Interests and CISG. In applying CISG, the Court held the buyer entitled to return the goods and recover the price paid, plus interest, and foreseeable profits (CISG Arts. 84(1) and 74). While the seller had reason to request the original documents providing for inspection and denial of entry into the United States, nonetheless it had to be considered liable since it did not pay for the documents and did not take appropriate steps to avoid losses to the goods (CISG Art. 77). However, the buyer, though entitled to retain the goods, had at the same time the obligation to preserve them (CISG Arts. 86(1) and 88). Since no reasonable measures were adopted to this effect and the goods were held so long that their value was nearly extinguished, the Court found the buyer responsible for the loss incurred after the return of the goods to China.
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