International Trade

Zhejiang Normal University

Chapter 4 Quality of Commodity
The main points of this chapter

1 Methods of Stipulating 2 Quality Latitude &

Quality of Commodity Quality Tolerance

3How to express the quality

terms in the contract
 Introduction

The quality of goods are indispensable to

international trade. Whether it is visible trade
or invisible trade, the goods sold have their own
qualities, and the quality of a certain kind of
goods determines, to a great degree, its market
and price. Therefore, the quality of the goods is
among the main terms upon which a sales
contract is based and constructed.
The seller must deliver the goods that are of
quality required by the contract, the failure
of which will result in the disputes between
the seller and the buyer. Thus, due
consideration should be given to the
matters of quality of the commodity
transacted.
Section One Methods of Stipulating
Quality of Commodity

 The methods of stipulating quality of

commodity depend on the quality, character
and the customary usage in practice. Usually,
the contents of the quality terms include: the
name, specification and brand. In
international trade, there are two ways to
indicate the quality of the goods either by
description or by sample.
 Sale by Description（凭文字说明买卖）
(1) Sale by specification, grade or standard（凭规格、等级、标
准买卖）
Quality of Commodity

(2) Sale by brand name or trade mark（凭牌号或商标买卖）

(3) Sale by name of origin（凭产地名卖）

(4) Sale by description and illustration（凭说明书 和图样买卖）

3) Sale by the counter sample（凭对等样品买卖）

2) Sale by the buyer’s sample（凭买方样品买卖）

1) Sale by the seller’s sample（凭卖方样品买卖）

Sale by Sample（凭样品买卖）
1.Sale by Description（凭文字说明买卖）

In the international trade, mostly the goods are

sold by the method of sale by specification, grade or
standard except some special cases.

(1) Sale by specification, grade or standard（凭规格、

等级、标准买卖）
 Standard

Standard specifications of the goods refers to

the standardization, which should be stipulated
by the world standard organizations,
governments, authorities, business associations
and commodity exchange houses(商品交易所).

代表中国的组织为中国国家标准化管理委员会
（Standardization Administration of China，简称SAC）
Each country has its own standards, such as

UK: BS(British Standard)

USA：ANSI (American National Standards Institute

美国国家标准学会)

Germany：DIN（ Deutsche Industrie Normen) 德国

工业标）

France：NF（ Norme Francaise法国标准）

Japan：JIS（ Japanese Industrial Standards 日本工

业规格）
 In addition, there are many international
standards, such as International Standard
Organization (ISO)（国际标准化组织）, the
International Electro-technical Commission
(IEC)（国际电工委员会）

 In today’s international business, it will be

good and easy to sell out those goods which
have obtained the certificates from ISO 9000
and ISO 14000 or IEC or other organizations.
 ISO 9000
 In order to meet the rapid development of
international trade/business, the International
Standardization Organization makes out this
standard for guaranteeing the quality of the
export goods. When the manufacturers obtain
the certificates given by the ISO 9000, it means
that the goods are of high quality.
 So nowadays, many enterprises would try
their best to have their goods pass the strict
standards.
 IEC
 The International Electro-technical
Commission （IEC） was established in
London in 1906. Since then it has been now
more than 90 years of history. It was the first
establishment of the international organization
for standardization. It is responsible for the
international standards of electrical
engineering and electronic engineering.
 Now more than 50% goods in the world adhere
to the standards of IEC
 It is worthy of note that the standard of a
commodity is subject to change or amendment
and a new standard often takes place of the old
one. So, in case of sales by standard, it is
important and necessary to mention in the
terms also the name of the publication, in
which the standard of the commodity appears.
 e.g.: Tetracycline HCL Tablets (Sugar Coated)
250mg. B.P. 1973
B.P. = British Pharmacopoeia
如：四环素糖衣片，250毫克，1973年英国药典
More Examples
凭规格买卖的品质规定

品质：饲料蚕豆，水份[最高]15%，杂质[最高]2%。
Quality: Feeding Broad-bean，Moisture [max]15%，
Admixture[max]2%.

Chinese Tungshen Grade 1（中国一级钨砂）

MAXAM Brand Dental Cream (美加净牌牙膏）

Cloth Doll: Quality as per Seller’s Sample No. XXX dated

XXX. Quality to be equal to the Sample
布娃娃品质按X年X月X日卖方第X样品，品质与样品一致
More Examples
1 China rice broken grains 30% (max.) moisture 13% (max.)
admixture 1%(max.)
中国大米，碎粒30%（最高），水分13% （最高），杂质
1% （最高）
2 Sodium Citrate, specification: in conformity with B. O.
1993
柠檬酸钠，规格：符合1993年英国药典标准

3 Grey duck feather: down content 18% allowing 1% more or

less
灰鸭毛，含绒量18%，允许上下浮动1%
 In the international agricultural and by-product
market, there is a commonly adopted standard, i.e.,
fair average quality (FAQ). According to the
explanation of some countries, FAQ refers to the
average quality level of the export commodity within
a certain period of time. This kind of standard is
quite ambiguous. In fact, it does not represent any
fixed, accurate specification.
For example （P90）,
 Chinese Groundnut, 2009 crop, FAQ
 Moisture (max.) 13%
 Admixture (max.) 5%
 Oil content (min. ) 44%
 For the trading of wood and aquatic products,
GMQ (goods merchantable quality)(凭上好可
销品质) is employed to indicate the quality.
GMQ means the goods is free from defects and
is good enough for use or consumption. GMQ
is usually not supplement with specifications
and when disputes arise because of the quality
of the goods, exporters will have to be invited
to make the arbitration.
(2) Sale by brand name or trade mark
（凭牌号或商标买卖）

(3) Sale by name of origin（凭产地

名卖）

(4) Sale by description and

illustration（凭说明书和图样买卖）
More Examples

 品名：东北大豆
 Name of Commodity: Northeast Soybean
 品名：中国桐油
 Name of Commodity: Chinese Tong Oil
 2.Sale by Sample（凭样品买卖）

 The sample refers to the article which can

be used to represent the quality of the
whole lot.
 Sale by sample includes 3 cases, i.e., sale by
the seller’s sample, sale by the buyer’s
sample and the counter sample.
 （1）Sale by the seller’s sample
（凭卖方样品买卖）

Seller’s sample are the samples which are

usually sent by the seller to the buyer. We also
called original sample.
 （2）Sale by the buyer’s sample
（凭买方样品买卖）
 (1) In this case, the seller shall first take into
consideration the availability of the new material and
the possibility of providing the processing technology.
 (2) In order to take the initiative, the seller may
reproduce the buyer’s sample, i.e., counter sample,
and send it back to the buyer as a type sample. After
the buyer confirms the counter sample, sale by the
buyer’s sample is changed into sale by the seller’s
counter sample.
 (3) The two parties shall stipulate that in case the
buyer’s sample results in any disputes of
infringement of industrial property, the seller will
have nothing to do with it.
3) Sale by the counter sample（凭对等样
品买卖）

 Samples can be also provided by the buyer.

They are given as the quality standard for
the goods to be produced and delivered by
the seller. Under such circumstances, to
avoid future disputes over the quality of the
goods, the seller usually first duplicates the
samples and then sends the duplicate to the
buyer for confirmation. This sample is
called counter sample.
 In international trade practice, if sale by
samples adopted, the followings should be paid
attention to:

(1) We should try to do the business by “sale by

the seller”.

(2) When the seller sends out the sample, it is

better that the seller will keep the “original”
or “duplicate” sample so as to make it
convenient for verification when handling
quality disputes or future transactions.
(3) If the transaction is done by “sale by the
buyer”, we should pay attention to the fact
that whether the sample of the buyer has
something to do with the problems of
politics, society and religion, such as color,
patter and design. We should also take into
consideration the availability of the new
material and the possibility of providing the
processing technology in order to avoid the
unnecessary trouble in delivery.
(4) When we get the sample of the buyer, it is
better to make it as counter sample.

(5) Whether it is sale by buyer’s sample or by

seller’s sample, if it is necessary, sometimes
sealed sample can be adopted.
(6) Whether it is sale by buyer’s sample or by
seller’s sample, if it is difficult to keep the goods
contracted in strict accordance with the sample,
the seller should write some flexible terms in the
sales contract as follows:

* Shipment shall be similar to the sample;

* Quality to be about equal to the sample;

* Quality to be nearly same as the sample.

DEFINITION:

Quality of Goods
 outwards appearance: shape, structure, color,
flavor, luster and etc.
 inner features: composition, physical and
mechanical property, chemical, biological
feature, etc.

The definition of grade, standard and

specification
Methods of Stipulating Quality of Goods:
 By description  By sample
*by *by the seller’s
Specification sample
*by Grade *by the buyer’s
*by Standard sample
*by Brand name *by counter
or Trade Mark sample
*by Name of
Origin
*by Instruction
 Case Study
 One Chinese company exported a contract of Grade B
Peanuts to a foreign country importer. When the seller
was working on the delivery of the goods, he found that
the Grade B Peanuts were out of stock. Without prior
consent of the buyer, the seller delivered the Grade A
Peanuts instead of Grade B Peanuts and stated on the
invoice “Grade A Peanuts, price is the same”, while the
buyer refused the consignment.
 Question:
 In this situation, does the buyer hold the repudiation
rights? Why?
Answer

 The buyer has the right to refuse to pay.

This is because both sides confirmed the
Grade B Peanuts when signing the contract,
which holds a legal effect. If the seller gets
the buyer’s consent, he can change the
peanuts grade. So the buyer has the power
to refuse to pay.
 One Chinese company exported a contract of
agricultural products to a German company. The
contract stipulates that moisture not exceeds 15%,
impurity not more than 3%. Before the deal closing,
the seller sent the buyer the samples and after the
contracting the seller immediately faxed the buyer
that the consignment was similar to the sample. After
the shipment arrived at Germany the buyer had the
goods inspected. Later, the buyer showed the
inspection certificate, saying that the quality of the
goods was inferior to the samples’, and then he put
forward a claim for compensation of ￡6 000, finally
the Chinese company paid the compensation.
 Question:
 Please analyze the case.
 Answer
 The transaction belongs to the sample trading. In
international trade, in order to avoid the situation
that the seller’s delivery quality is inconsistent with
the requirement of the buyer, which leads to the
buyer’s claim, the seller may ask the buyer for a
sample in advance and the seller shall provide a
tailored sample according to the sample from the
buyer for confirmation; this is called “confirming
sample”. When the sample is confirmed by the buyer,
all the quality of the goods must be the same as the
sample’s. In the contract, it’s beneficial for the seller
to issue the quarantine inspection and quarantine
certificates.
 A China’s export company made a transaction of
apples with a foreign company. It’s stipulated
“second-class apple” in the quality terms on the
contract of sales and letter of credit. However, they
found the second-class apple had been all sold out
when they began to arrange the shipment. As a result,
the company switched to the delivery of “first-class
apples”, and the invoice stated that: “the price of the
first-class apples is the same as that of the second-
class”. Finally, the importer refused to accept and to
pay due to the inconsistency with the quality
contract terms.
 Question:
 What do you think of this case?
 Answer
 Under normal circumstances, the practice of
substituting the superior goods for the inferior
ones will be quite acceptable. However, if the
market price of the goods is nose-diving or
some other abnormal things happen, the
importer sometimes will avail of the
opportunity to refuse the goods or claim with
the excuse of quality inconsistency with the
contract. Therefore, the quality provisions of
the contract formation and performance are a
loaded matter of great significance.