Contract, Project and Claim Management as well as Supply Chain Management
in the Mechanical Engineering Industry


Contract Management China

Product Equipment for hardening steel plates.
Volume About 12 million EUR plus 32 million CNY.
Buyer Importer in Shanghai/China.
Seller German exporter with Chinese daughter company.
Situation The buyer has inquired the equipment with 3 international competitors.
Requests (excerpt) As state owned company the buyer requests as follows:

  • Chinese law
  • Court in Shanghai
  • Collection of equipment by a Chinese shipping company
  • Term of delivery: FOB
  • Opening of letter of credit 2 months before delivery date
Analysis
  • Ordinary Chinese Court is unreliable
  • Buyer might omit to send ship for equipment collection
  • Buyer might not open LC. Effectively equipment is fully manufactured
  • In case of non-fulfilment of aforementioned 2 items by the buyer ultimately a law suit would become necessary
  • The private credit insurance marked offers cover on the buyer without bank security due to good creditability
Strategy
  • Chinese law will be accepted, because supplier friendly
  • As arbitration panel the China International Economic and Trade Arbitration Commission (CIETAC)‘ will be proposed. There are foreign judges among the arbitrators. This results in reliable judgements and enforceable sections
  • Counter proposal to term of delivery: CIF Shanghai. The establishment of shipping documents would be within the control of the exporter
  • Concession to resign from Letter of Credit due to export credit insurance cover. This advantage to be served during negotiation at proper time
  • Due to keen competitive situation negotiation defensively and step by step
Success The order has been placed to the German exporter on the following basis:

  • Chinese law
  • CIETAC Shanghai
  • Term of delivery: FOB Shanghai, but exporter has the right to deliver the equipment at own expenses, if the buyer does not send ship for collection within 13 weeks after advice of readiness for shipment
  • No Letter of Credit
Further information I gladly provide on request in a personal meeting.