Chapter 3 Name and Quality of commodity

Chapter 3

~ Name and Quality of Commodity

The commodity in international trade is called the subject

matter in legal contract. As a subject matter, it should be

clearly expressed with detailed information, including the

name, the agreed quality and quantity, and required packing

condition.1 In contract, clauses regarding name and quality of

commodity are integral part of the description of the subject

matter. The delivery of goods is often based on this part.

Wrongly dispatched goods, which is not correspondent with that stipulated on the

contract or goods with poor quality are often refused, and the importer has the right to

claim compensation.2 This chapter would discuss the name and quality of commodity

and their relative clauses mentioned in sales contract.

Section 1

Name of Commodity

Name of commodity refers to a title or concept of a certain commodity that makes

this commodity differ from another one.3 The name of commodity is also called the

extent, represents the general quality a commodity possesses, so in contract wording, a

common name is suggested to be applied.4 In the contract, the specific name of

transacted commodity is listed under the heading of

any heading, for example,

follows the expressions like:

Sellers, whereby the Sellers agree to sell and the Buyers agree to buy the under

mentioned commodity according to the terms and conditions stated below5.

together with information of quality, quantity, price in the same clause as can be seen in

the following table:

r m Commodity Description Unit Quantity ?

Mr Unit Price Amount

To name a new product, the exporter is suggested to select an internationally-

recognized one, so as to facilitate the procedures for import and export clearance and

tariff reduction. There are many standard classifications of commodities that the

exporter may consult. In 1950s, UN Economic and Social Council published

international trade classification

Nomenclature ( CCCN) was agreed by major trading areas in Brussels, Belgium, so it is

also called Brussels Tariff Nomenclature (BTN). However, CCCN and SITC differ in the

classification of some commodities. In order to avoid the disputes of business

negotiation, duty levitation, and transportation resulting from the application of different

standards, Customs Cooperation Council organized the experts to draw up

Harmonized Commodity Description and Coding System

effect in January 1st, 1988, and it was adopted in China from January 1st. 1992. R &

was now widely used for Customs statistics and GSP treatment, etc. Therefore, the

exporter in our country should select the name of commodity, which is correspondent

with the R S. requirement.6

When naming a commodity, there are several ways to consider:

1) to name a commodity as per its main raw materials, for example, glass cup,

wool carpet, rattan chair, bamboo chopsticks, leather shoes.

2) to name a commodity as per its main ingredients, for example, deer antler

wine, ginseng capsule, ginseng royal jelly.

3) to name a commodity as per its main functions, for example, tourism shoes,

sports wear, sewing machine, skating shoes, insect killer, earth-moving machine,

racing car.

4) to name a commodity as per its outward appearance, for example, red date, bat

shirt, high heel shoes, round table.

5) to name a commodity as per its processing technique, for example, refined oil,

distilled water, man-made dumpling, genetically-modified soybean.

Section 2

The Concept of Quality of Commodity

Quality of commodity is the combination of inherent quality and outside form or

shape of the commodity, such as modeling, structure, color, luster, taste, chemical

composition, physical performance, biological features, etc. To improve the quality of

commodity is significant to the success of expert transaction, because whether the

quality is superior or not directly determines the use value and price value of the

commodity. In addition, quality advantage enables the exporter to attract new

customers, expand potential markets, promote sales volume, and gain sustainable

reputation in a more fierce competition.8 During the implementation of the contract,

quality control must be ensured in every link, including manufacturing, transportation

storage, delivery and sales.

Though the requirements on quality of commodity are subject to what Is written on

the contract, there are some basic attributes a good commodity possesses:

functionality, reliability, hygiene and safety.9 Functionality of commodity means the

commodity has one or more functions that would bring the customers benefits when it Is

used. Basic functions can ensure the usability of the commodity, while newly-developed

functions offer more benefits to customers and gain more market share. 10

Reliability refers to the capability of fulfilling the functions in a required time and

conditions. In general, reliability includes endurability and repairability. 11 To achieve

endurability, many manufacturers use equipments to monitor the production process

and conducts a long list of quality control tests. When there is trouble in functioning,

quick and sound repairability can guarantee the customers' continuous trust on the

product. 12 Hygiene and safety are great concern for both customers and manufacturers,

especially in the production and sales of food products. Hygiene of some products, like

food and medicine, is kept to ensure that the products are sale for human

consumption. Therefore, product safety is always a top priority, and manufacturers

have to keep its internal comprehensive safety standards and the governments' strict

requirements.

Since quality is such important in the sales of a product, to transfer the information

of quality in a right way to customers is vital. However, different products may require

different ways of expressing their quality. In general, there are three ways of expressing

the quality of commodity: sale by description, sale by actual quality and sale by

samples.

3.1 Sale by Description

Sale by description is the way of expressing quality with words and illustrations, and

it can be further divided into the following types ?

3. L 1 Sale by Specification

Specification refers to the main indicators of quality, for example, composition,

ingredients, purity, size, length, weight, etc.13 Different indicators will be applied to

different products, for instance, the quality of sesame and soybean is expressed by the

ingredients content, the quality of electric products is expressed by technical parameters

like rated voltage and current. Even for the same product, different uses and functions determine

different indicator*. For example, if soybean is used for pressing oil, the oil

content is an indispensable indicator to be expressed; if soybean is used for eating, oil

content is not essential, but protein mast be included. For its simplicity and easiness

sale by specification is the most widely used method of expressing quality in international

trade.

3.1.2 Sale by Grade

Grade of commodity refers to different levels of quality being classified according u>

the differences of specifications. 14 Each grade has a specified specification, thus in

contract stipulations of quality, it is better to offer specifications after a grade is given.

3.1.3 Sale by Standard

A standard is an established norm or requirement on the specification of a

commodity. It is usually a formal document that establishes uniform engineering or

technical criteria, methods, processes and practices.16 According to different publisher

of standards, they are generally divided in the following: 1) Corporate standards. It is

published by the corporate itself. 2) Industry standards. It is published by industry

association, for example, FZ/T published by China Textile General Association, HG/T

published by China Chemical Association. 3) National standards. It is published by

governmental organizations. For example, BS (Britain Standard), NF ( Norme

Francaise), JIS (Japanese Industrial Standards), ANS (American National Standards),

GB/T (Chinese National Standard). 4) Regional standards. It is published by regional

organizations. For example, a series of standards published by CEN ( Comite Europeen

de Normalisation). 5) International standards. It is published by international organizations. For

example, ISO9000 published by ISO (international standardized

organization).

In international agricultural and by-product market, there is a commonly adopted

standard, L e. fair average quality (F. A. Q. for short ).

According to the explanation of some countries, F. A. Q. refers to the average

quality level of export commodity within a certain period of time. F. A. Q. is rather

sweeping. From a technical point of view, it indicates the average quality of the current

crop. When adopting this kind of method, we should stipulate the main specifications

indexes as well in the sales contract.16

e. g. White Rice , Long-Shaped, 2009 Crop F. A. Q.

Broken Grains (max. ): 25%

Admixture (max. ) : 0. 25%

Moisture (max. ) - 15%

For the trading of wood and aquatic products, G

. M. Q. ( good merchantable

quality) is used to indicate the quality. G. M. Q. means that the commodities are free

from defects and are good enough for use or consumption.17 Actually, G. M. Q is even more

unclear than F. A. Q. Therefore, G

. ML Q. is not usually supplemented with

specifications and disputes arise due to the quality of the commodities, the seller may

have to be invited to make the arbitration.

3.1. 4 Sale by Brand Name or Trade Mark

Brand name is a name used to identify a product from a certain manufacturer. In the

marketplace, it is the image for the customers to distinguish the product from other

similar ones. A brand name can be used to one certain product or different types of

products from the same manufacturers. A successful brand name requires no introduction

and explanation, because it has created its customers' brand recognition.

Trade mark is a legal term, which includes all those words, symbols or marks that

are legally registered for use by a single company. It is a symbol or ornamental printed

on a commodity or its packing.

In international market, most products, especially the consumables, processed

food, and durables, are marked with brand name or trademark. Products with good

brand or trademark reputation usually enjoy special characteristics and stable excellent

quality. In an area with strong purchasing power, brand reputation is the lifeblood of the

manufacturers, thus they carry out a stringent quality control measures to maintain

sound brand image.19

3.1.5 Sale by Name of Origin

In international commodity trade, some products, owing to exclusive natural

conditions and traditional processing technique and workmanship, have special features

that other products do not possess.20 For this type of products, their quality is usually

expressed by indicating the name of origin, which had actually become the symbols of

high quality. For example, Shaoxin Hua Diao Chiew, Suizhou Mushroom, Liangzi Lake

Crab, Jing Spirit.

3.1. 6 Sale by Description and Illustration

Some products with complicated structure and various features of function are very

hard to be expressed with several simple indicators. The quality of these products is

usually expressed by description, pictures, sampling, chart, and technical data. This

way of quality expressing is called sale by description and illustration, with which the

seller must provide the goods according to the requirements of description or illustration.

In order to protect their benefits, some buyers without much technical knowledge about

the product often require the seller to include the quality assurance clauses and technical

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