Unit 2 Description of Commodities.docx

1、Unit 2 Description of CommoditiesUnit 2 Description of Commodities An American company A purchased 200 dozen of toy cars from an export company B in Dalian. In reality, B shipped 198 dozen. B thought that according to the stipulations in UCP 600, 5% more or less of the shipment was allowed. But A re

2、fused to accept the products because of shortage of commodities. Did A have the right to refuse the toy cars? Why?To avoid possible disputes, every effort should be made to describe the goods in the sales contract exactly as the seller and the buyer intend them to be. The description of commodity co

3、nsists of name of commodity, quantity of commodity, quality of commodity and packing. In international trade, as different countries may have different interpretations about the same name, quality, quantity or packing, careful stipulation in the sales contract is very important.Description of Commod

4、itiesName of CommodityUsually, the parties to the contract just specify the name of the product under the subject “Name of Commodity”. As the basis of a transaction, name of commodity concerns the rights and obligations of both the seller and the buyer. If the goods delivered by the seller are not i

5、n accordance with the agreed name of commodity, the buyer has the right to lodge a claim, refuse the goods or even cancel the contract. Therefore, as a main condition of sale, the name of commodity should be clearly stipulated.Quality of CommodityThe quality of commodity refers to the outward appear

6、ance and the essential quality of the goods, such as shape, structure, color, flavors as well as chemical composition, physical and mechanical property, biological feature, etc. In international transactions, there are different ways of showing quality.Sale by sampleA sample is a product, often take

7、n out from a whole lot of consignment or speciallydesigned and processed. Samples could be offered by the seller, i.e., sale by sellers sample. In this case, the seller shall supply a representative sample and at the same time keep a duplicate sample which shall be in the same quality as or on the w

8、hole as the standard sample. The sample dispatched and the duplicate sample kept shall have the same article number so as to make it convenient for delivery and verification when handling quality disputes or future transactions. Samples could also be offered by the buyer, i.e., sale by buyers sample

9、.There is another sample called “counter sample”. When the sample is offered by the buyer, the seller may not be very sure whether he could supply the goods in conformity with it or not. In order to take the initiative, the seller may reproduce the buyers sample, and send it back to the buyer as a t

10、ype sample. After the buyer confirms this sample, sale by buyers sample is changed into sale by the sellers counter sample.It should be noted that sometimes the seller may send a sample to the potential buyer before the contract is concluded. This kind of sample is the reference sample and often lab

11、eled “for reference only”. Such a sample is not the basis of delivery by the seller. However, the parties may agree to deliver the goods in conformity with it in the contract, and then it will be the basis of delivery.Sale by actual qualityIn this case, the buyer or his agent examines the goods at s

12、eller s place at first. After they conclude a deal, the seller shall deliver the goods according to the goods examined.Sale by descriptionIt mainly includes the following types.(1) Sale by specificationsThe specification refers to certain main indicators which indicate the quality of the goods, such

13、 as composition, content, purity, size, length, etc. It is often expressed by indexes. For example, the specification of iron ore may be expressed as “the content of iron 80%”.(2) Sale by gradeThe grade refers to the classifications of the goods and is indicated by words, numbers or symbols. For exa

14、mple, the fresh eggs weighed 55-60g are classified into Grade A, 50-55g Grade B, 45- 50g Grade C. However, the grade of the same product may be different in different countries. It is necessary to make sure that the grade of the commodity is understood identically by the parties if they want to sell

15、 by grade.(3) Sale by standardThe standard refers to the specifications or grades which are stipulated and announced by government or the chambers of commerce, etc. Quality of commodity can be described in the contract by the international standard like ISO, or the national standard either of the ex

16、porters or the importers country which is agreed upon by both parties.In the trade of agricultural products, FAQ (Fair Average Quality) is often employed. FAQ means a quantity of a product that is offered not on a particular quality specification but on the basis that is equal to the average quality

17、 of the current group or recent shipment. When using this way to indicate the quality, specifications are still necessary unless the transaction is done between regular trading partners.For the trading of wood and aquatic products, GMQ (Good Merchantable Quality) is employed to indicate the quality.

18、 GMQ refers to the sound quality that is free from defects and is good enough to satisfy the purpose for which the buyer intends to use the goods or for which the seller intends that they should be used. GMQ is usually not supplemented with specifications and when disputes on quality arise, the sell

19、ers will have to be invited to make the arbitration.(4) Sale by brand or trade markBrand is the name, term, symbol, design or a combination of these to identify a product,while trade mark includes all those words, symbols, or marks that are legally registered for use by a single company. Some produc

20、ts may have been sold in the global market for many years and enjoy high reputation, and their quality could be represented by their brand names or trade marks, for example, Coca-Cola.(5) Sale by name of originSome countries and places are famous for certain products and the quality of these product

21、s may be described by their origin countries or places, for example, Chinese porcelain, Jinhua bam, etc. However, in order to avoid possible disputes, it is advisable for the parties to use the specifications together with brand name and other ways in the contract.(6) Sale by description and illustr

22、ationThe quality of some commodities such as technological instruments, electric machines, etc. can not be simply indicated by quality indexes, instead it is quite necessary to explain in detail the structure, material, performance as well as method of operation. If necessary, pictures, photos, etc.

23、 must also be provided.Sometimes, it is important to add a “Quality Tolerance” or “Quality Latitude” clause in the contract. Tolerance means the permissible range within which the quality supplied by the seller may be either superior or inferior to the quality stipulated in the contract. Quality tol

24、erance may be that agreed upon between the seller and the buyer beforehand, or that generally recognized by trade associations. It is usually used in the trade of agricultural products, industrial raw materials or some light industrial products.Quality latitude means that the quality indexes of the

25、goods delivered by the seller may be controlled flexibly within certain latitude. There are three ways to stipulate quality latitude.(1) To stipulate a certain scope, for example, the width of the cotton cloth is 47/48 inches.(2) To stipulate more or less clause, for example, as to grey duck s down,

26、 we maystipulate duck s down content 18% (1% more or less).(3) To stipulate“ max” or “min”, for example, moisture (max.) 15%.Quantity of CommodityAs different products have different characteristics, different ways of measurement may be used. Ways of measurement include weight, length, area, volume

27、and capacity.Units of measurementWeight Units: kilogram, ton, metric ton, gram, pound, ounce, long ton, short ton, etc.Length Units: meter, kilometer, centimeter, yard, foot, mile, etc.Area Units: square meter, square yard, square foot, square inch, etc.Volume Units: cubic meter, cubic yards, cubic

28、foot, cubic inch, etc.Capacity Units: liter, gallon, bushel, etc.Number Units: piece, package, pair, set, dozen, gross, ream, roll, head, case, bale, barrel, bag, etc.More or less clauseIt is very difficult to measure accurately some agricultural and mineral products like corn, wheat, coal, etc., th

29、en a “more or less clause”, also called “plus or minus clause”, may be used to allow some tolerance in the quantity. The wording of such a clause might be“500 M/T, 5% more or less at sellers option” which means that the seller may choose to deliver between 475 to 525 M/T.According to Uniform Customs

30、 and Practice for Documentary Credit, if there is any word like “about”, “approximately” in the quantity clause in the letter of credit, it should be interpreted that 10% more or less in quantity is allowed; and unless there is a stipulation that the quantity of the goods must not be exceeded or red

31、uced, or the goods are to be calculated by number of package, 5% more or less of the goods in quantity should be accepted.PackingFactors influencing packingPacking should be designed according to the need of the cargo. Bulk cargoes require little packing. General merchandises require adequate packin

32、g of various types. Factors in relation to transport such as the nature of transit, loading and unloading facilities and transport unit should be considered. The dimension and the weight limit may also influence the shape, size and weight of the cargo packing. Packing should comply with customs or statutory requirements. For example, in some countries, straw is an unacceptable form of packing due to the risk of insects. Packing must meet insurance acceptance conditions, and make the handling as easy as possible. It should also