ID#108: Supply of fake product. Case 3

Claim amount: 557,700.00 USD

Status: Case closed


According to the terms and conditions of the Contract the Seller (ХХХ, CHINA) has accepted the obligation to supply Dioctylphtalate in the quantity of 330.00 tons on CIF, ХХХ, Russia for the total amount of USD 557,700.00.

According to the terms and conditions of the Contract the Seller accepted the obligation to guarantee the compliance of the goods´ quality with the quality specifications as stated in the Additional Agreement No. 1 (Addendum) to the Contract and by a confirmed certificate of analysis issued by the manufacturer.

Based on the Seller´s Pro-forma invoice the Buyer paid, as stipulated by the Contract, full amount of USD 557,700.00 which corresponds to 100% (One hundred percent) of the contract value.

The product from the first 5 containers (110.00 tons) was checked for the quality in the presence of representatives of the Chamber of Commerce and Industry of the Russian Federation. According to the CCI Expert’s Opinion: "7/8 of the total volume of the liquid supplied by ХХХ, CHINA under the Contract is frozen. The upper layer of the liquid is not frozen. Test samples taken from the upper (not frozen layer) prove to be Dioctylphtalate mixed with water."

Quality check of the remaining containers will be performed by the Buyer as soon as possible.

After the visual examination and consideration of the CCI Expert’s Opinion the Buyer considers the Seller´s actions as a possible attempt of intentional (willful) fraud because of the following:

  1. Chemical characteristics (properties) of Dioctylphtalate exclude any presence of water content.
  2. Chemical characteristics (properties) of Dioctylphtalate exclude any possibility of freezing of Dioctylphtalate in the normal ambient winter temperature below zero Celsius degrees.
  3. Chemical characteristics (properties) of Dioctylphtalate exclude a possibility of dissolution of Dioctylphtalate in water.
  4. The Seller obviously is not familiar with chemical characteristics (properties) of Dioctylphtalate, and therefore thought it would be possible to supply water to the Buyer mixed with a small quantity of Dioctylphtalate.

On 31.12.10 the Buyer notified the Seller of discovery of the incompliance of the quality of goods supplied and requested to send the Seller’s representative to Russia to conduct a joint inspection of the goods.

The Seller did not send a representative to Russia and did not provide the Buyer with any official explanations regarding the quality of the goods.

On 14.01.11 the Buyer requested the Seller to return the paid money and reexport the goods supplied.

The Seller replied that they were "shocked" by the pictures of "frozen goods" and informed us that the manufacturer should return the money for the supplied product. In reply to this the Buyer stated that it should be the Seller to return the money but not the partner-producer.

In the nearest future the Buyer intends to send an official Claim to the Seller and in the meantime is considering to notify the governmental and administrative organisations of the People’s Republic of China of bad faith of the Seller and their employees.

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