Can FOB terms determine the court of jurisdiction?
During 2006, Shanghai company (the seller) exported stainless steel pipes to American B company (the buyer). The order stipulates: “price: FOB Shanghai (Incoterms 2000). After signing the order, Shanghai company loaded the goods in Shanghai Waigaoqiao port area, and then sent a full set of documents according to the order. However, American company B only paid a small part of the payment after receiving the documents and refused to pay the remaining more than US $1 million.
Since there was no arbitration clause in the order, and American company B had no property to be seized in China and no registered representative office, Shanghai company filed a lawsuit to Shanghai Intermediate People’s Court on the ground that “the place of performance of the contract is in Shanghai”. However, the court held that it had no jurisdiction over the case. The reason is: “the jurisdiction of the case can be determined according to the place of performance only if the parties clearly agree on the place of performance or delivery in the contract.”, In this case, FOB Shanghai is only agreement, and there is no agreement on the place of contract performance or delivery. Therefore, Shanghai cannot be used as the place of contract performance to govern this case.
If an intermediate people’s court in Shanghai does not accept the case, Shanghai company will face the situation that it has no way to sue in China and has to bear huge litigation costs to sue in the United States. Then, can the “FOB Shanghai” agreed by both parties in this case determine the court of jurisdiction?
2、 Case analysis
Incoterms 2000 is the formal rules of the International Chamber of Commerce for the interpretation of various trade terms. Its purpose is to facilitate international trade. Incoterms 2000 divides all terms into four groups, of which FOB belongs to group F. That is, FOB (port of shipment) means that when the goods cross the ship’s rail at the designated port of shipment, the seller will complete the delivery. This means that the buyer must bear all risks of loss of or damage to the goods from this point on. Among them, “a.4 delivery” clearly stipulates that the seller must deliver the goods to the vessel designated by the buyer at the designated port of shipment on the agreed date or within the agreed time limit and in the customary manner of the port.
FOB free on board (port of shipment), from the perspective of price composition, means that the price only includes land freight and does not include all expenses after shipment (freight and insurance premium); From the perspective of delivery, it refers to delivery on board the ship at the designated port of shipment, and the completion of delivery is marked by the goods crossing the ship’s rail. FOB Qingdao means that the goods are delivered across the ship’s rail at Qingdao port.
When the parties to international trade in goods agree that the price condition is FOB, what they essentially set is the agreement and division of delivery, risk and cost between the two parties. This condition is two-way, such as “FOB Shanghai”, which means that the buyer can only require the seller to ship and deliver goods in Shanghai and has the obligation to inform the seller of the ship and its berthing information, but can not require the seller to ship and deliver goods in Ningbo or Dalian. Any party’s change to the place of delivery will be deemed as a unilateral change to the contract. If it is not agreed by the other party, it will constitute a breach of contract.
In fact, expressions like “FOB Shanghai” are the most common provisions on the place of delivery in the practice of international trade contracts. FOB Shanghai is agreed in the contract, which clearly stipulates that the contract delivery place is Shanghai port. However, this statement also has some problems in determining the competent court, because is “Shanghai Port” Shanghai Baoshan, Shanghai Waigaoqiao or Yangshan Port in Shanghai Golden district? These different ports may not have an impact on international trade, but legally they correspond to different grass-roots courts and intermediate courts in Shanghai.
In 1996, the provisions of the Supreme People’s Court on how to determine the place of performance of purchase and sales contracts in determining the jurisdiction of economic dispute cases abolished the above two judicial interpretations, And stipulate “If the parties expressly agree on the place of performance in the contract, the agreed place of performance shall be the place of performance of the contract. If the parties do not clearly agree on the place of performance in the contract, the agreed place of delivery shall be the place of performance of the contract. The place of arrival, arrival, acceptance, installation and commissioning of the goods agreed in the contract shall not be regarded as the place of performance of the contract. If the parties do not agree or clearly agree on the place of performance and delivery in the contract, Or although there is an agreement but the goods are not actually delivered, and the domicile of both parties is not in the place of performance as agreed in the contract, as well as disputes over oral purchase and sales contracts, the jurisdiction of the case shall not be determined according to the place of performance “.
From the analysis of the above provisions, “FOB Shanghai” itself is difficult to be regarded as having a clear agreement on the place of contract performance and the place of delivery, and the “place of actual performance” in Shanghai Waigaoqiao cannot be used to determine the “place of contract performance” in the jurisdiction of litigation. Therefore, there is indeed a clear legal basis for a Shanghai Intermediate Court not to accept the case.