Comparison of international sale of goods laws
China is the seventh largest economy in the world and has one of the fastest rates of growth. Its GDP for the past 5 years grew in average of 9 percent each year. Its goods and service export during 2004 amounted to 640 $ billion . The rapid growth of Chinese economic and industrial advancement has said to alter the face of international trade. Since its commitment to reformation pledged, 400 million people have been lifted out of poverty. The reformation in the country that has 1. 3 million people has pushed the standard of living into a new level. A few of their achievement over the past decade are: ? The world’s 7th largest economy?
The world’s 4th largest trader ? The world’s fastest growing economy ? The worlds largest Wheat market (1/6 global consumption) ? Average GDP growth of 8,2% in the past decade ? Economic reforms driving urbanization and diversification of industries . Some of the challenges can be identified from this country is their ongoing activities of financial reformation. The country’s economy is weighed down by its State Owned Enterprises (SOE), which over the few years displayed a horrible liquidity performance. However, due to its capacity as sources of jobs and taxes in many areas, the enterprises cannot be sold, merged or bankrupted.
The situation causes banks to lend money to the SOE’s, creating more bad loans . The country seems to have problems is increasing their production capacity also. One of the most obvious is their limited production of electricity, which damped their infrastructure development . II. 2. 1 China Foreign Trade Law China has known to open its doors to foreign business in the late 1970’s, where China’s National Legislature of an Equity Joint Venture Law was designed to offer foreign firms and individuals legal path for direct investment project. The rules and regulation in the early 1980’s describe an atmosphere of welcome to foreign trader.
However, according to Professor Potter, a full array of more detailed and binding laws and regulation is now in place. In 1985, China produced detailed regulations regarding trade between Chinese and foreign business enterprises . The most important from them is the Foreign Economic Contract Law (FECL). It has to be underlined that joint ventures is considered to be Chinese legal enterprise, so the FECL would not be applied, for example, for transactions between a Chinese enterprise and Chinese-French enterprise, because the Chinese-French are not considered a foreign enterprise.
FECL itself is subordinate to the United Nations Convention on the International Sale of Goods (CIGS), so in 1985, China has been committed to pursue international uniformity of Sale of Goods Laws . China has shown its good intention of promoting international law uniformity in its earlier years. In 1984, China is a party in the Paris Convention for the Protection of Industrial Property. In 1987, China attended the New York convention of The Recognition and Enforcement of Foreign Arbitral Awards.
In 1991, China joined the Vienna Convention on Contracts for International Sale of Goods and the Hague Convention on the Service of Documents Abroad. In 1992, China was a party at the Berne Convention on Protection of Literary and Artistic Works. China also entered numerous bilateral agreements promoting international trade . As stated before, the laws are turned to be somewhat more complicated as the years passes. In 1994, a new Comprehensive Trade Law was enacted; posing a few striking features of China’s foreign trade laws.
One of them is the regulation which allows only Chinese enterprises with special permits to be involved in a transaction with foreign enterprises. Any foreign companies entering a deal with an unauthorized entity are considered not being under the protection of Chinese Laws, therefore, in case of legal issues, the foreign entity has no legal powers in China. Another important aspect to be paid attention to is the decentralization in Chinese corporations. Previously stronger enterprises responsible for company branches and subsidiaries around the country, is now referred to as a separate legal entity according to the new Chinese laws.
The new condition caused less guaranteed safety when dealing with a relatively small provisional branch of a Chinese corporation . The issues receiving an amount of international ‘attention’ are not only the ones stated in the books of Chinese laws and regulation, but also the practice of Chinese law’s application regarding to foreign traders. There is a high level of difficulty for foreign enterprises to gain sufficient information regarding to business and legal data of its transaction partners in China.
It is hard for foreign companies to be sure that the companies in China (the ones we propose the deal to) are in a good business and legal status. Foreign companies also complained about the lack socialization of the exact standard applied by the Commodity Inspection Bureau. There is no solid ground for the foreigners to stand in an attempt of challenging the bureau’ decision . An impression is also made that there are parties involved in the inspections, other than the bureau and its officers. The important issues in the Foreign Trade Law of the People’s Republic of China are summarized below. II. 2. 1.
1. Foreign Trade Dealers In chapter II of The Foreign Trade Law of The People’s Republic of China, The Chinese government describes the requirements of foreign business to enter the country. It explained the obligations of foreign enterprises in applying for permits, providing adequate information about the business and its influencing environments, and to deliver periodic financial report to the authorized state council . II. 2. 1. 2 Import and Export of Goods, service and Technology In chapter III and IV, the reasons of restriction towards exporting certain goods and services to China are expressed.
The article displayed similar intense attention towards the safeguarding of China’s national safety, from economic and health point of view. II. 2. 1. 3 Foreign Trade Order Chapter V describes the socialist side of the country’s economy. It states government’s protections towards local industry by limiting the amount of merchandise imported to the extent where local industry is not injured or threaten. Article 29 implies that the government is allowed to take safeguard measures in order that an increased quantity in certain import products is directly causing injury to domestic producer .
Article 30 stated the government may also take safeguard measures when a product is imported less than the normal value of the product and cause or threatens to cause material injury towards local traders and producers. Article 31 implies that similar measures are allowed to be taken if the product imported is subsidized by the country which the product coming from, which also causes material injury to local producers . III. Connections between the two countries China and Australia have been connected trough business transactions for a considerable amount of time.
China is Australia’s 3rd largest trading partner and 2nd largest merchandise import and export market. Australia’s export to China amounted to $11 billion and import is $17. 9 billion. Australia is exporting iron ore, wool, crude petroleum, coal and other ores to China, while China exports clothing, computer, toys, games, sporting goods, telecommunication equipments and furniture . Both country currently are on a joint FTA feasibility studies, an effort to open an even wider range of business opportunities.
The joint study does not indicate that both country shall provide an open market for each other, but rather as a statement of will, that both countries will consider to take opportunities and overcome challenges in order to form a stronger and more beneficial economic relationship between them. IV. Comparison of International Trade Laws and Regulation. IV. 1 General From previous statements we can conclude that the International trade of goods laws between China and Australia is not having an immense contradiction.
Both are parties in international conventions promoting international trade. In its early years of open economy, China has displayed a steady commitment in producing a uniform legal rules and regulations globally. Its foreign trade laws are subordinate to the CISG. But in its later years, China has shown less commitment in permitting a fair atmosphere of global trading then the Australian. Australia was a party at the Vienna Convention, and it is now actively promoting the uniform laws of international trading.
Australia’s export and import laws applying detailed regulation for the safety of domestic business, but it also applied a standard for export goods, assuring that every export commodities meet their international standards. Australia believes that international relationships (export and import) are important means for the survival of the nation’s economy and the increase in living standards, therefore, a fair export and import law is maintained as an important merit. China in the other hand, has received a few critics relating to its laws and application of international trade laws.
Chinese legal system is to date described as “Instrumentalism and formalism”. Instrumentalism means that rules are applied without considering long term affect to the society, while formalism means that a law is considered sacred and to change or revise it, is very undesirable for the government . From the summary of Chinese Foreign Trade Law stated above, there is also a certain amount of protection toward local business. A foreign business must submit to limitation of export quantities when it is decided by the Chinese governments.
IV. 2 Insurance Law Historically, insurance applied to any losses happened at sea that tend to experience the risk of hazards such as fire, storm, collision, piracy, and explosions. However, currently, insurance covers all any kind of occurrence that may result in loss. Its purpose is to provide compensation for those who suffer from loss or damage. The new Insurance Law of the People’s Republic of China (PRC) was ratified in 1995 with respect to the discipline of the contractual aspects of the business.
The new law is known as a codification of internationally recognized insurance principles such as: uberrima fides (utmost good faith), insurable interest, subrogation, double insurance benefits, interpretatio contra proferentem (interpretation against the drafter) and the killer beneficiary exclusion . Similarly, Australian insurance law is also influenced by the changing in the global business coupled with the maturity in information technology. Over 170 Australian and multinational companies actively compete for domestic and international business within the insurance market.
Currently, with over two hundred years of experience, Australia has been able to develop a mature, diversified and highly competitive insurance industry . Therefore, in terms of insurance law, the two countries have adopted similar issues since both countries are members of multinational trade agreement that demands similar treatment. IV. 2 Law of Carriage As we witness in the previous section, international law of trade usually takes places in the form of concerted agreement between several countries and regional organizations.
This situation also applies to law of carriage in which, as we will elaborate, it also comes from concerted agreements. In Australia, according to Carriage of Goods by Sea Act 1991, the country’s law of carriage takes into account previous agreement such as amended Hague Rules, Brussels Convention, and Hamburg Convention . In addition, Chinese Maritime Code previously adopts one-year limitation with regard to carriage of goods by sea based on Hague Rules. However, this rules remained in effect until Hamburg Rules in effect in 1978, in which limitation of time is changed from one year into two years.
V. Conclusion Before globalization takes place, we witness that there is no international laws and regulations since individual country set up its own law while protecting domestic industries. However, since each country poses particular competitive advantage, the trade between countries start taking place suggesting the needs of international law and trade. Under such circumstances, within the following decades, cross-national, cross regional and multinational transaction occur each and every day, posing an inadequacy to the previous method of selecting laws and regulations applied.
China and Australia are both among the fastest growing economy in the world. Despite their difference of economical origins, both countries have managed to strike its influence in international business immensely. In this paper, we have shown that there is a tangible difference between China and Australia in terms of international trade of goods laws. This is due to each country evolve from different trading culture. China, for example, has evolved from a steady commitment in producing a uniform legal rules and regulations into one that promote less commitment in permitting a fair atmosphere of global trading.
In contrast, we also witness that Australia has promoted the use of international laws of trading since the country actively encourage the implementation of Vienna Convention The situation drives the country to encourage international relationships (export and import) since they believe the relationship is important means for the survival of the nation’s economy and the increase in living standards, therefore, a fair export and import law is maintained as important merits.
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