This paper addresses the case of Voest-Alpine Trading USA Corp v. Bank of China, case number 167F.Supp.2d 940(2000). The case deals with issues in international business transactions as it is between Voest-Alpine Trading USA Corp, an American-based company and Jiangyin Foreign Trade Corporation, a Chinese-based company. The relationship between the plaintiff (Voest-Alpine Trading USA Corp) and Jiangyin Foreign Trade Corporation emerges from a contractual agreement dated June 23, 1995. Voest-Alpine was to supply or sell 1000 metric tons of styrene monomer at total of price of $ 1.2 million. The defendant Bank of China entered the picture when JFTC applied for a letter of credit to it in order to fund the transaction with the plaintiff upon delivery to Zhangjiagang. After a series of delays and miscommunication, the Bank of China did not honor the letter of credit presented by the plaintiff. However, the court ruled the case in favor of the plaintiff Voest-Alpine after assessing the list of discrepancies presented by the Bank of China.
The companies involved in the case include Voest-Alpine Trading USA Corp, the Jiangyin Foreign Trade Corporation, the Bank of China and the Texas Commerce Bank. The Voest Alpine Trade Corporation deals in technology and capital goods. The company supplies steel and other metals to companies in the aerospace, automotive and consumer goods market. The Jiangyin Foreign Trade Corporation deals in imports and exports of products within the light industry and thus sourcing of the 1000 metric tons of styrene monomer was for the purpose of production. The Bank of China which is the defendant in the case is a large commercial bank in China owned by the government and deals in financial services. The bank’s headquarters is in Beijing, China. It was tasked with allocating payment to Voest-Alpine Trading USA Corp upon end of transaction by honoring the letter of credit applied by Jiangyin Foreign Trade Corporation. The case took root, when JFTC asked for a price concession after the significant drop in the market price of styrene monomer; however, Voest Alpine Trade USA Corp declined and instead shipped the styrene monomer on July 18 1995. The Texas Commerce bank had the role of assessing the letter of credit and documents presented by Voest –Alpine but identified some discrepancies. Even so, Voest-Alpine ordered the bank to forward the documents and letter of credit to the Bank of China. However, the Bank of China declined to pay the letter of credit and highlighted to the Texas Bank, “informing them of seven alleged discrepancies between the letter of credit and the documents Voest-Alpine presented, six of which are the subject of this action”(DiMatteo & Dhooge, 2006, pg.377).
FACTS: Voest-Alpine agreed to ship 1000 metric tons of styrene monomer to JFTC valued at $ 1.2 million after negotiations. JFTC applied for a letter of credit to the Bank of China which would be honored upon the shipment of goods to Zhangjiagang, China and that Voest-Alpine would have presented the required paperwork to Bank of China. Before shipment, JFTC applied for a price concession after the price of styrene monomer had drastically dropped in the market but Voest-Alpine declined the request and shipped the monomer on July 18, 1995. On August 1, 1995, Vest-Alpine presented documents specified in the letter of credit to the Texas Commerce Bank. The Texas Commerce Bank, instead, identified discrepancies between the documents presented and the letter of credit and notified Voest –Alpine. However, Voest-Alpine did not believe that discrepancies would disqualify the payment. On August 3, 1995, the Texas Commerce Bank sent the documents to the Bank of China. The Voest-Alpine exceeded the fifteen days of the shipping dates it was required by the letter of credit. The required date was August 2, 1995.On August 11. 1995, the Bank of China declined to honor the letter of credit based on identification of seven discrepancies between the letter of credit and the documents. The reasons given were: a) the name of the beneficiary was not similar to the name listed on the letter of credit. b) Voest-Alpine failed to submit bills indicated original and instead they were marked as duplicate and triplicate. c) The invoice, packing list and certificate of origin were not indicated as original. d) The dates between the survey report and bill of lading did not match. e) The number indicated in the letter of credit did not match the date on the beneficiary’s certified copy of fax. f) The name of the destination was misspelled in the certificate of origin and the beneficiary’s certificate.
The case highlights the rules and policies followed when international companies engage in international business deals. It illuminates on whether a court has jurisdiction over a foreign company similar to how the district court compelled the Bank of China to honor the letter of credit to Voest-Alpine despite the discrepancies. According to Frostestad (2000) under the sovereign immunity framework, federal courts have jurisdiction over foreign sates on any actions of commercial activity outside the territories of the United States as long as the activity has a direct effect on the United States. Furthermore, the case signifies the importance of clear communication f terms and agreements between foreign companies to ensure they do not violate their respective laws in commercial activity. Trading partners should be keen on the laws and regulations that regulate international trade ( Azimuddin Law Associates, 2018).
FACTS: Voest-Alpine agreed to ship 1000 metric tons of styrene monomer to JFTC valued at $ 1.2 million after negotiations. Before shipment, JFTC applied for a price concession after the price of styrene monomer had drastically dropped in the market but Voest-Alpine declined the request and shipped the monomer on July 18, 1995. On August 3, 1995, the Texas Commerce Bank sent the documents to the Bank of China. On August 11, 1995, the Bank of China declined to honor the letter of credit based on identification of seven discrepancies between the letter of credit and the documents.
ISSUE: The bank of China failed to notify that it will not honor the presentation documents within seven banking days of receiving the documents
REASONS: The bank of China failed to present the notice of refusal within seven banking days from receiving the documents. b) In the notice, the Bank of China did not indicate that it was rejecting the documents or would not honor the letter of credit. c) The Bank of China’s telex sent on August 11, 1995 did not contain the list of discrepancies and the disposition of the documents. d) the Bank of China seemed to indicate acceptance when it notified the plaintiff they would contact them to determine whether to waive the discrepancies.
CONCLUSION: The court ruled that the telex sent exceeded the required date of August 18, 1995 and was instead sent on August 19, 1995 as per the UCP 500 Article 14(d). Secondly, the Bank of China did not forward a notice of refusal within seven banking days upon receiving the documents as per UCP 500 Article 14(d). In conclusion, the court ruled the case in favor of the plaintiff.