International Business Transactions Cases

United States v. Liebo, United States Court of Appeals, Eight Circuit, 1991, 923 F.2d 1308.: Liebo, a vice-president of NAPCO, was trying to become the prime contractor on a maintenance contract of C-130s with Niger. Liebo told Tiemogo, the chief of maintenance for the Niger Air Force, that he would "make gestures." Liebo paid money into an account held by Barke's (Tiemogo's cousin) girlfriend and paid for the flight of their honeymoon on his NAPCO Diner's Club account. Payments were made to other "commission agents" who really siphoned money back to Tiemogo and Barke. The jury acquited Liebo of all charges except those relating to the honeymoon flight. Liebo appealed. Was there sufficient evidence that the purchased flight was "given to obtain or retain business?" Held Yes, a jury could conclude that this was part of the "gestures" promised to get the contract. Was there evidence that Liebo acted "corruptly?" Held Yes, the fact that the payment was done just before being awarded the contract, along with its classification as a "commission payment," would allow a jury to decide the payment was for persuasion rather than a gift. Does the discovery of a new memorandum in which a NAPCO employee approved the airline tickets warrant a new trial? Held Yes, because the jury acquitted Liebo on all the other counts, and questions during deliberation make it likely that the jury's decision hinged on whether Liebo was acting under his supervisor's approval.
Nakata, Filanto, S.P.A. v. Chilewich Int'l Corp., 7 Transnat'l Law 141 (1994).: Chilewich, a New York corporation, made a deal with Filanto, an Italian shoe manufacturer. Chilewich sent Filanto a copy of a contract its agent Byerly Johnson, Ltd. had made in the UK with Raznoexport, the Soviet Foreign Economic Association. Chilewich sent a contract saying that arbitration would be done in Russia, and Filanto sent it back signed but with a cover letter saying that it didn't except the arbitration clause. Chilewich opened a line of credit to Filanto and purchased some shoes. Chilewich sent a letter to Filanto saying it wouldn't open a second line of credit until it signed the contract without excluding the arbitration clause, but Filanto didn't do so. Chilewich didn't buy the rest of the shoes, and Filanto sued Chilewich. Does the CISG apply? Held Yes, the CISG trumps local law when there is a contract between parties with places of business in different nations. Is the arbitration requirement in the contract under the CISG? Held Yes, because Filanto didn't object in a timely fashion. CISG article 18(1) says that a statement or other conduct by the offeree indicating an assent to an offer is acceptance, and under CISG article 8(3) because of the extensive dealings between the parties Filanto was obligated to reply in a timely manner. Filanto's silence is therefore "other conduct" that would indicate assent.
Delchi Carrier SpA v. Rotorex Corporation, United States Court of Appeals, Second Circuit, 1995: Retorex, in New York, sent a compressor model and specifications to Delchi Carrier in Italy which wanted to produce air conditioners. Delchi accepted but while the second shipment was in route Delchi discovered that the first shipment didn't match the demo and specs, and canceled the contract. Is Retorex liable? Held Yes, CISG Article 36 says that the seller is liable for conformity if a shipment doesn't match the model, and there's no question here that the goods didn't match the model. Is the breach fundamental under CISG Article 49, allowing Delchi to seek damages? Held Yes, CISG Article 25 says that a breach is fundamental if one party didn't receive what that party was entitled to expect. Is Delchi entitled to lost profits even though the total air conditioners in inventory during the entire season exceeded sales? Held Yes, because the total inventory doesn't account for not having enough inventory, for example, in the spring to meet the demands then, regardless of the amount of inventory acquired later. Should Delchi's fixed costs be subtracted from its lost profits? Held No. Although the CISG doesn't specifically resolve this, most courts don't subtract from profits costs that would have been incurred anyway. Should the incidental damages relating to Delchi's trying to resolve this problem be subtracted from damages? Held No, otherwise that would eat into the damages they receive for lost profits.
MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino, United States Court of Appeals, Eleventh Circuit, 1998: MCC, a Florida company, contracted with D'Agostino, an Italian company, to buy certain quantities of tile. The contract was signed on D'Agostino's standard pre-printed Italian forms, yet MCC couldn't speak Italian and had to use a translator. MCC sued D'Agostino for not fulfilling orders, and D'Agostino said that the printed agreement allowed them to cancel if MCC didn't give timely payment. MCC had disputed the quality of a shipment, but again D'Agostino said that the terms on the form required MCC to submit the claims in writing within 10 days. MCC said that both parties had an understanding that the printed terms would not be followed, and a D'Agostino representative supported this. As non of terms of the printed form would allow the suit, should summary judgment be entered against MCC? Held No, CISG Article 8(3), unlike English law, allows analysis of the parties' subjective intent. Does the parol evidence rule exclude evidence of pre-contract negotations? Held No, CISG Article 8(3), by allowing investigation of subjective intent, essentially does away with the parol evidence rule.
Calzaturificio Claudia s.n.c. v. Olivieri Footwear LTD., No. 96 Civ. 8052(HB)(THK), 1998: Claudia, an Italian manufacturer, sued Olivieri, a New York company, for failure to pay on a contract. Claudia claimed it shipped shoes to Oliviera, as it had before and for which it had been paid, with invoices marked Merce Resa Ex Factory, indicating that the goods leave the responsibility of the party when they are picked up by the shipper at the factory. Olivieri claims that it never received the shoes and that that there was no agreement; and produced several faxes in which it objected to the use of the term ex factory on the invoices, and in which it objected to the use of the shipper in question. Claudia claims the faxes are fake and seeks summary judgment. Held Summary judgment is not appropriate, mostly because the court can't really figure out exactly what's going on (even though the defendant's claims are "highly dubious" and there is a "strong suggestion" that the faxes were contrived), making a trial necessary because there is a genuine dispute of fact. Although US court cases have held that the terms of an invoice are binding, the CISG doesn't require a contract to be in writing and allows extraneous evidence as to contract terms to be introduced. Plaintiff hasn't produced evidence of the multiple claimed prior transactions, and some of its evidence is contradictory. The court can't determined whether the shipper was an agent of the defendant and whether delivery actually occurred because of conflicting stories and documents.
Berisford Metals Corp. v. S/S Salvador, United States Court of Appeals, Second Circuit, 1985, 779 F.2d 841: Plaintiff Berisford ordered 50 metric tons of tin ingots from Paranapanema in Brazil for $13,000 per metric ton, F.O.B. vessel at Santos, Brazil. Paranapanema delivered 100 bundles, each weight araound 1,000 pounds, to an agent, who put the bundles into four 20-foot containers, locking and sealing them. The agent, acting on behalf of the Master of the S/S Salvador, later placed the containers on the S/S Salvador and issued a clean bill of lading. The ship arrived but the containers only contained 30 bundles. Berisford paid Paranapanema as required, and sued the S/S Salvador. Is the shipper's liability under COGSA limited to only $500 per bundle—$35,000—because of a misstatement on the bill of lading because the shipper did not make the misstatement intentially or fraudulently? Held No, the shipper is liable for the entire price of shipment. The lowered liability after only a rudimentary inspection is present to relieve the shipper of needing experts to verify the actual goods being shipped, and impose a higher liability only if the shipper knew or could readily see that the packages were not in good condition. Here, however, it is the shipper's own conduct that created the liability, as the shipper's agent placed the items in the containers. The shipper could have opened the containers or even weighed them at the time they were loaded onto the ship to verify that the itmes were still present. A shipper cannot escape full liability throught COGSA when it misstates its own conduct on a bill of lading.
JH Rayner and Company, LTD. v. Hambros Bank LTD, Court of Appeal, [1943] 1 K.B. 37: A company in Denmark asked defendant Hambros Bank to open a line of credit to JH Rayner "against invoice full set straight clean bills of lading" for "Coromandel groundnuts." Plaintiff JH Rayner brought and invoice and three bills of lading describing "machine-shelled groundnut kernels…. Country of origin, British India." The margin contained the words, "O.T.C. C.R.S. Aarhus." The bank refused to pay because the invoice did not match the letter of credit. Plaintiff claimed that "machineshelled groundnut kernels" are the same as "Coromandel groundnuts," and that "C.R.S." is short for "Coros" or "Coromandels," and everybody in the trade understands that to be so. Held The bank doesn't have to honor the invoice and bill of lading, as they differ from the letter of credit. The bank can only claim indemnity if it accepts documents that conform to the letter of credit, and it puts itself at risk if it accepts anything else. The bank is not in the groundnut business, and may not have knowledge of the terms of that business.
Hanil Bank v. Pt. Bank Negara Indonesia (Persero), United States District Court for the Southern District of New York, 2000, 41 U.C.C. Rep. Serv. 2d 618: PT. Kodeco Electronics Indonesia asked defendant BNI (Indonesia, with a branch in New York) to issue a letter of credit for the benefit of "Sung Jun Electronics Co., Ltd.". BNI did so, but misspelled the name as "Sung Jin Electronics Co. Ltd." Sung Jun did not object. Sung Jun negotiated the letter of credit to plaintiff Hanil Bank (Korea, with a branch in New York), who paid for it and submitted the appropriate documents to BNI, but the documents correctly identified Sung Jun as "Sung Jun." BNI refused the documents because they did not match the letter of credit, after Kodeco refused to waive the discrepancy. May an issuing bank reject documents that contain a single incorrect letter in the name of the beneficiary? Held Yes. The bank deals with the documents, not the underlying commercial transaction, and here the plaintiff does not claim that "Sung Jin" is an obvious misspelling in Korea of "Sung Jun." Did BNI breach a duty of good faith by acting on the advice of Kodeco to reject the documents? Held No, the UCP allows the issuing bank to ask for a waiver from the payer of credit (here Kodeco), but is under no obligation to get approval of the beneficiary, as the deal turns on the documents, not the underlying transaction.
Better Home Plastics Corp. v. United States, United States Court of International Trade, 1996, 916 F.Supp. 1265: Better Home sells a shower curtain that, besides the curtain rings, consists of two parts: an inexpensive plastic liner that prevents water from escaping the shower and cuts down on mildew; and an outer decorative textile curtain. Defendant United States Custom Service classified the curtain under HTSUS 6303.92, curtains, of synthetic fibers, with a 12.8% duty. Plaintiff Better Home claims the curtain should be classified under HTSUS 3924.90.1010, toiletware of plastic, curtains. Does the General Rules of Interpretation (GRI) 3(a) Rule of Relative Specificity apply? Held No. GRI 3(a) would hold that the most specific rule apply, except (1) if both headings are equally specific, or (2) two or more competing headings refer only to part of items within a set. Here the headings each refer to parts of a curtain that consists of two items in a set, not a mixture or composite good. Does GRI 3(b) apply, in that the item should be classified under the component which gives the curtain its essential character? Held Yes. Of the two parts of the curtain, the inner liner is indispensable, becuase without it the shower would not function. The outer curtain is only decorative, and its lesser replacement cost is unpersuasive. The classification is therefore correctly HTSUS 3924.90.1010, as the defendant asserted. Does GRI 1, preventing application in conflict with HTSUS chapter notes, prevent categorization in Chapter 39 because Note 2(1) states that it does not cover textiles? Held No, this limitation only applies when the addition of another material would deprive the goods of the character mentioned in the heading, as might be the case with a chemical compound that makes a completely new mixture. Here the item is a set, and adding a decorative textile outer curtain doesn't deprive the inner plastic curtain of its nature or function.
Amoco Oil Company v. The United States, United States Court of Appeals, Federal Circuit, 1984, 749 F.2d 1576: Amoco shipped from Canada a mixture of compounds consisting of "center-cut" natural gas liquids (NGL) and over 50% by weight of propane. Customs classified the mixture as TSUS 430.00, mixtures of two or more organic compounds, with a 5% duty. Amoco says that the item should be classified under 475.15, natural gas or propane mixtures without a weight of over 50% of any one hydrocarbon compound, or under 475.70, in other liquid form, either of which are free. Alternatively, Amoco says that the rate should be assessed according to TSUS General Headnote 7, which says that if items are so commingled so that each class cannot be ascertained by customs, the commingled articles will be assessed the highest rate—which here is free. Should the product be classified according to its contained components? Held No. Rather than being two commingled items, propane and NGL, the NGL under the express language of the statute does not have a distinct characteristic because another ingredient, propane, exceeds 50%; NGL therefore just becomes part of the mixture, and mixtures are appropriately categorized under TSUS 430.00. (Headnote 7, moreover, only applies to two headings that have different rates of duty; here the two headings in question, that of NGL and that of propane, both are duty free.) Where articles are determined to be a mixture, commingling does not apply.
Superior Wire, A Div. of Superior Products Co. v. United States, United States Court of International Trade, 1987, 669 F.Supp. 472: Superior Wire's related company Big Point Steel in Canada purchased wire rod from Spain, cold-pulled it into wire, and sold it to Superior Wire in the United States. Defendant United States Customs Service excluded the wire because it didn't have certificates that would allow its entry under a Voluntary Restraint Agreement (VRA) with Spain covering wire and wire rod. Producing the wire rod in Spain costs hundreds of millions of dollars. Converting the wire rod to wire in Canada costs only a few tens or hundreds of thousands of dollars for a plant. The value added is about 15%. Is Customs restricted from making a change in position under 19 C.F.R. § 177.10(c)(2) (1986)? Held No, a "position" is more than just a series of ruling letters or assurances by Customs officials. Here Superior Wire relied on "a cryptic letter [from Customs] directed to another" regarding wire-making in Mexico, and did not obtain its own letter ruling. Similarly, previous acquiescence from Customs didn't constitute a position. Was there a substantial transformation of the wire rod in Canada to make it a Canadian product rather than a Spanish one? Held No. Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556, 562, 28 S.Ct. 204, 206, 52 L.Ed. 336 (1908) established that a manufactured product is one that results in a transformation into a new and different article "having a distinctive name, character or use." "Wire" has a different name from "wire rod," but the name alone is not dispositive. Value added of 15% is not persuasive either way. The expense of turning wire rod into wire is really low, and wire rod is produced mostly only for producing wire—wire rod is "destined" to become wire. "No transformation from producers' to consumers' goods took place; no change from a product suitable for many uses to one with more limited uses took place; no complicated or expensive processing occurred, and only relatively small value was added. Overall, the court views the transformation from wire rod to wire to be minor rather than substantial."
Nissho Iwai American Corp v. United States, United States Court of Appeal, Federal Circuit, 1992, 982 F.2d 505: The Metropolitan Transportation Authority of New York City (MTA) negotiated with middleman Nissho Iwai Corporation (NIC) in Japan for 325 rapid transit passenger cars. NIC dealt with the manufacturer, Kawasaki Heavy Industries Ltd. (KHI). MTA signed a deal with Nissho Iwai American Corporation (NIAC), a wholly-owned U.S. subsidiary of NIC, and NIAC assigned all its rights and obligations to NIC. Customs assessed duties on the cars on the basis of the "transaction value." For the first 120 cars, Customs used the KIH-NIC sales price, but for the last 205 cars, Customs used the price paid by MTA to NIC/NIAC as a basis for assessing duties. Should the middleman price be used for determining the transaction value for assessing duties? Held Yes. "The transaction value of imported merchandise is defined in Section 402(b)(l) of the Tariff Act of 1930, as amended by section 201 of the Trade Agreements Act of 1979, codified at 19 U.S.C. § 1401a(b)(l), as the 'price actually paid or payable for the merchandise when sold for exportation to the United States,' subject to certain additions and deductions as noted earlier. The court in McAfee used the middleman price. This should not be a hard-and-fast rule— every case must be dealt with separately. However, in this case the goods were specifically destined to the United States, and NIC and KHI dealt at arms-length—there was no collusion for an artificially low price.

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