PREFACE

PREFACE China and Japan are neighboring countries separated only by a narrow stretch of ocean and have shared a long history of economic relations and trade. In the 1950's and 1960's, Sino-Japanese trade relations were mainly promoted by the trading firms and corporations of the two countries on the basis of friendship and mutual benefit. Since that time, trade relations have further developed in a desired direction and the volume of trade has increased rapidly since the normalization of diplomatic relations between China and Japan in 1972.

In order to promote the development of bilateral trade and to facilitate the sale of goods between the two countries, the Sino-Japanese Commercial Contract Terms Committee and the Japan-China Trade Contract Terms Study Committee were respectively established with the task of preparing Model Terms of Contracts for Sale of Goods (hereinafter referred to as the "Model Terms"). The Model Terms are intended to be used by Chinese and Japanese trading firms and corporations in formulating their own standard contracts. After two years' efforts devoted by the two committees, the Model Terms were completed before the end of February, 1992.

The Model Terms are based on the current effective laws of, and the international treaties acceded by, the two countries, as well as the international trade practices.

In order to have the proper use of the Model Terms, the instructions are given as follows: 1. The Model Terms are intended to be used for drafting of contracts for the sale of goods between the two countries.

2. Some of the Model Terms are provided for one or more alternatives to accommodate different kinds of transactions or different categories of goods.

3. The Model Terms, as such, are not intended to constitute a particular contract. The trading firms and corporations should select the most suitable terms from the Model Terms and formulate their own standard contracts.

4. When preparing contracts, each trading firm and corporation may modify the provisions of the Model Terms and incorporate new provisions into their contracts according to the nature of the transaction or goods.

5. The Model Terms provides for maritime transportation, however, if other means of transportation are to be employed, the relevant provisions in the Model Terms should be modified and new provisions should be incorporated into the contracts.

We hope that Chinese and Japanese trading firms and corporations are willing to use the Model Terms, and we look forward to receiving opinions and proposals so as to make further improvement to the Model Terms in the future.

MODEL TERMS OF CONTRACTS FOR SALE OF GOODS Sino-Japanese Commercial Japan-China Trade Contract Contract Terms Committee Terms Study Committee By: By: MODEL TERMS OF CONTRACTS FOR SALE OF GOODS For Sales Through Maritime Transportation Between Japanese and Chinese Firms and Corporations Contract Number: Date of Execution of Contract: Place of Execution of Contract: Seller: Address: Country of Incorporation: Telex: Fax: Cable: Buyer: Address: Country of Incorporation: Telex: Fax: Cable: The Buyer and the Seller, through friendly negotiation, have executed this Contract on a basis of [ ] FOB, or [ ]CFR, or [ ] CIF and agreed to the terms and conditions stipulated below.

1. Name of Commodity: 2. Specifications/Quality: 3. Units: 4. Quantity: [with ( ) % more or less both in amount and quantity allowed at [ ] the Seller's, or [ ] the Buyer's option] 5. Unit Price FOB/CFR/CIF: 6. Total Amount: 7. Country of Origin and Country of Manufacture: 8. Shipping Mark: 9. Shipment 9.1 Time of Shipment: 9.2 Port of Shipment: 9.3 Port of Unloading: 9.4 "On-deck" shipment [ ] is, or [ ] is not allowed.

9.5 Transshipment [ ] is, or [ ] is not allowed.

9.6 Partial shipment [ ] is, or [ ] is not allowed.

10. Terms of Payment 10.1 Method of Payment {*Select one of the following from section 10.1.1 (Sight Letter of Credit), 10.1.2 (Letter of Credit with Usance), 10.1.3 (D/P), 10.1.4 (D/A), or 10.1.5 (Remittance)} [ ] 10.1.1 Sight Letter of Credit The Buyer shall, [ ] ( )days prior to the first day of the time of shipment specified in this Contract, [ ] within ( ) days after the execution of this Contract, establish in favor of the Seller an irrevocable letter of credit (L/C) payable at sight issued by [ ] (bank name) , [ ] an international first class bank by [ ] telex, or [ ] cable, or [ ]SWIFT, or [ ] mail, the contents of which shall be in conformity with the terms of this Contract.

The letter of credit shall not expire until ( ) days after the last day of the time of shipment specified in this Contract.

The statement "this credit is subject to Uniform Customs and Practice for Documentary Credits, 1983 Revision, International Chamber of Commerce Publication No. 400" shall be contained in the letter of credit.

[ ] 10.1.2 Letter of Credit with Usance The Buyer shall, [ ] ( ) days prior to the first day of the time of shipment specified in this Contract, [ ] within ( ) days after the execution of this Contract, establish in favor of the Seller an irrevocable letter of credit (L/C) payable ( ) days after , issued by [ ] (bank name) , [ ] an international first class bank by [ ] telex, or [ ] cable, or [ ] SWIFT, or [ ] mail, the contents of which shall be in conformity with the terms of this Contract.

The letter of credit shall not expire until ( ) days after the last day of the time of shipment specified in this Contract.

The statement "this credit is subject to Uniform Customs and Practice for Documentary Credits, 1983 Revision, International Chamber of Commerce Publication No. 400" shall be contained in the letter of credit.

[ ] 10.1.3 Document Against Payment (D/P) After shipment, the Seller shall deliver a sight bill (s) of exchange drawn on the Buyer together with the required documents to the Buyer through a bank. The Buyer shall effect the payment immediately upon the first presentation of the bill (s) of exchange and the required documents, i.e. D/P.

[ ] 10.1.4 Document Against Acceptance (D/A) After shipment, the Seller shall deliver bill (s) of exchange drawn on the Buyer, payable ( ) days after , together with the required documents to the Buyer through a bank for acceptance. The Buyer shall accept the bill (s) of exchange immediately upon the first presentation of the bill (s) of exchange and the required documents and shall effect the payment on the maturity date of the bill (s) of exchange, i.e. D/A.

[ ] 10.1.5 Remittance The Buyer shall, [ ] within ( ) days after the receipt of the required documents specified in section 10.2 below, [ ] within ( )days after the date of the Bills of Lading, pay the invoice value of the goods to the Seller's account with a bank, designated by the Seller by means of [ ] T/T (Telegraph Transfer), or [ ] M/T (Mail Transfer), or [ ] D/D (Demand Draft).

10.2 Documents Required The following documents shall be prepared by the Seller and submitted to the Buyer: (1) Commercial Invoice in copy (ies).

(2) Full set of clean on board ocean Bills of Lading made out to [ ] , or [ ] to order and blank endorsed marked freight [ ] prepaid, or [ ] to collect, notifying consignee or .

(3) Insurance Policy/Insurance Certificate (4) Quality Inspection Certificate/Inspection Report/ Analysis Certificate (5) Certificate of Origin/FORM A (6) Packing List/Weight List/Quantity List (7) Notice of Shipment/Shipping Advice (8) The following other Documents: 10.3 Banking Charges Depending upon the method of payment selected pursuant to Clause 10.1 above, the Buyer shall bear all banking charges incurred in the country of [ ] L/C issuing bank (in case of payment by L/C), [ ] Collecting Bank (in case of payment by D/P or D/A), [ ] Remitting bank (in case of payment by remittance), and the seller shall bear all banking charges incurred outside such country.

10.4 Overdue Interest If the Buyer fails to pay any amount when due, the Buyer shall be liable to pay to the Seller overdue interest on such unpaid amount from the due date until the actual date of payment at the rate of ( )percent per annum.

Such overdue interest shall be paid upon demand of the Seller.

11. Terms of Delivery 11.1 Packaging All goods shall be packaged to prevent damage from dampness, rust, moisture, erosion and shock, and shall be suitable for [ ] ocean transportation, [ ] multiple carrier transportation.

The Seller shall be liable for any damage and loss of the goods attributable to inadequate or improper packaging.

The measurement, gross weight, net weight of each package and any necessary cautions such as "Do not Stack Upside Down", "Keep Away From Moisture", "Handle With Care" shall be stenciled on the surface of each package with fadeless pigment, whenever necessary.

11.2 Terms of Shipment 11.2.1 If shipment is made under the terms of CFR or CIF, the Seller shall, not later than ( ) days before the time of shipment, inform the Buyer by Telex, Fax or Cable of the name, nationality, age and other details of the carrying vessel as well as the contract number for each shipment. The shipment shall not be effected without the confirmation from the Buyer with respect to the acceptability of the vessel; provided that, the Buyer shall not unreasonably withhold such confirmation. The Buyer shall confirm the vessel within [ ] 3, [ ] 5 working days, otherwise the vessel shall be regarded as confirmed.

11.2.2 (This Paragraph shall be [ ] maintained or [ ] deleted.) Upon written request of the Buyer and if and to the extent that such information is available, the Seller shall also inform the Buyer by Telex, Fax or Cable, not later than ( ) days before the time of shipment, of the name of the commodity, the estimated quantity, the estimated total amount, the package numbers, the estimated total weight and volume, and the estimated date of arrival of the vessel at the port of shipment.

11.2.3 If shipment is made under the term of FOB, the Buyer shall book shipping space in accordance with the time of shipment stipulated in this Contract. The Seller shall, at least ( ) days before the date of shipment stipulated in this Contract, advise the Buyer by Telex, Fax or Cable of the contract number, the name of the commodity, the quantity, the total amount, the package numbers, the total weight and volume and the date when the goods should be ready for shipment at the port of shipment. The Buyer shall, at least ( ) days before the estimated date of arrival of the vessel at the port of shipment, notify the Seller of the name of the vessel, the estimated date of loading and the contract number for the Seller to effect shipment. In case the carrying vessel or the date of arrival has to be changed, the Buyer or its shipping agent shall advise the Seller in time to make necessary arrangement. Should the vessel fail to arrive at the port of shipment within ( ) days after the arrival date advised by the Buyer, the Buyer shall bear all actual expenses, including, the storage expenses and interest charges, calculated from the ( ) day thereafter.

The Seller shall be liable for any dead freight or demurrage, should they fail to have the quantity of the goods ready for loading in time as stipulated, if the carrying vessel has arrived at the port of shipment as advised.

11.2.4 If shipment is made under the terms of FOB, CFR or CIF, the Seller shall, immediately upon the completion of the loading of the goods, provide the Buyer and the consignee appointed by the Buyer, with notice of shipment by Telex, Fax or Cable. The notice shall include the contract number, name of the commodity, quantity, net and gross weight, measurements, invoiced value, bills of lading number, sailing date and the estimated date of arrival at the port of unloading.

If the goods to be shipped include any flammable, hazardous or dangerous materials, the Seller shall indicate on the surface of each package appropriate cautions with respect to the special care for the transportation and handling thereof, as well as the identification numbers or other indications required under customary international practice and/or regulations applicable to such materials, if any.

If shipment is made under the term of FOB or CFR, should the Seller fail immediately to provide the shipping notice to the Buyer and/or the consignee appointed by the Buyer, and the Buyer can not procure the insurance in time, the Seller shall be responsible for any damage to and/or loss of the goods incurred in the course of transportation.

11.2.5 Upon completion of loading, the Seller shall send one duplicate copy of each of the following documents with the captain's care: (1) ocean bill of lading (2) commercial invoice (shipping lot No. to be indicated in case of partial shipment) (3) packing list (4) weight list/quantity list (5) certificate of origin (6) quality inspection certificate/inspection report/ analysis certificate.

11.2.6 Within ( ) working days after the date of actual shipment, the Seller shall airmail one copy of each of the documents mentioned in the preceding clause to the Buyer or the consignee appointed by the Buyer.

12.1 Insurance If shipment is made under the term of FOB or CFR, insurance shall be procured by the Buyer.

If shipment is made under the term of CIF, insurance shall be procured by the Seller for 110% of the invoice value against [ ] F.P.A, or [ ] W.P.A., or [ ] All Risks. Additional insurance shall include: 13. Warranty (*Select one or more of the following) [ ] 13.1 The Seller must deliver goods which are of the quality and description required by this Contract and which are contained or packed in the manner required by this Contract.

[ ] 13.2 The Seller shall warrant that all goods delivered by the Seller shall conform to the contract stipulations.

The warranty period shall remain in effect until the expiration of [ ] ( ) months after the date of shipment, [ ] ( ) months after the date of the completion of unloading of the goods at the port of unloading, [ ] ( ) months after the date of the arrival of the goods at the destination but in no circumstances exceeding ( ) months after the date of the completion of unloading of the goods at the port of unloading.

In the event that the goods are found to be in breach of the said warranty and so notified during the warranty period, the Seller on its own account shall, [ ] repair or replace the defective goods or the defective parts, [ ] repair of replace the defective goods or the defective parts and compensate the Buyer for damages, if any.

[ ] 13.3 The Seller shall warrant that the quality and specifications of the goods delivered pursuant to this Contract shall conform to the contract stipulations. The Seller shall make no warranty as to the fitness of the goods thereof for any particular purposes or environments, except as expressly stipulated in this Contract or as expressly or impliedly made known to the Seller.

The warranty period shall remain in effect until the expiration of [ ] ( ) months after the date of shipment, [ ] ( ) months after the date of the completion of unloading of the goods at the port of unloading, [ ] ( ) months after the date of the arrival of the goods at the destination but in no circumstance exceeding ( ) months after the date of the completion of unloading of the goods at the port of unloading.

In the event that the goods are found to be in breach of the said warranty and so notified during the term of the warranty and the cause of such breach is attributable to the Seller, the Seller shall promptly [ ] repair or replace such goods, [ ] repair or replace such goods and compensate the Buyer for damages, if any.

14. Inspection 14.1 Pre-Delivery Inspection (*Select one of the following) [ ] 14.1.1 The Seller shall, before the time of shipment, apply to the inspection organization for the inspection of the quality, specifications, quantity, weight, packaging and requirements for safety and sanitation/hygiene of the goods in accordance with [ ] the stipulations of this Contract, or [ ] standards.

The inspection certificate issued by the said inspection organization shall be an integral part of the documents to be presented for payment.

Inspection organization: In China; Import & Export Commodity Inspection Bureau of the People's Republic of China.

In Japan; of Japan.

[ ] 14.1.2 For inspection by manufacturer The Seller shall, before the time of shipment, provide the Buyer with the inspection reports signed by the manufacturers on the quality, specification, quantity, weight, packaging and requirements for safety and sanitation/ hygiene of the goods in accordance with [ ] the stipulations of this Contract, or [ ] standards.

The said inspection reports shall be an integral part of the documents to be presented for payment.

14.2 Re-Inspection For the purpose of warranty and other claims, the Buyer shall have the right to apply to the inspection organization for the inspection of the goods after the arrival of the goods [ ] at the final destination, or [ ] at the port of unloading.

Inspection organization: In China; Import & Export Commodity Inspection Bureau of the People's Republic of China.

In Japan; of Japan.

15. Force Majeure Neither party shall be held responsible for failure or delay to perform all or any part of this Contract due to flood, fire, earthquake, snowstorm, drought, hailstorm, hurricane, war, government prohibition, or any other events that are unforeseeable at the time of the execution of this Contract and could not be controlled, avoided or overcome by such party. However, the party who's performance is affected by the event of Force Majeure shall give a notice to the other party of its occurrence as soon as possible and a certificate or a document of the occurrence of the Force Majeure event issued by the relative authority or a neutral independent third party shall be sent to the other party not later than ( ) days after its occurrence.

If the event of Force Majeure event continues for more than ( ) days, both parties shall negotiate the performance or the termination of this Contract. If within ( ) months after the occurrence of the event of Force Majeure, both parties can not reach an agreement, either party has the right to terminate this Contract.

16. Penalty 16.1 Failure to Make Timely Delivery In the event the Seller for its own sake fails to make delivery of all or any part of the goods on time as stipulated in this Contract, the Seller shall pay a penalty to the Buyer. The penalty shall be charged at the rate of ( )% of the amount of the delayed goods for every ( ) days or delay in delivering the goods, however, the penalty shall not exceed ( ) % of the total value of goods involved in the late delivery. Any fractional days less than ( ) days shall be deemed to be ( ) days for the calculation of penalty.

16.2 Failure to Timely Open the Letter of Credit In the event the Buyer for its own sake fails to open the Letter of Credit on time as stipulated in this Contract, the Buyer shall pay a penalty to the Seller. The penalty shall be charged at the rate of ( )% of the amount of the Letter of Credit for every ( ) days of delay in opening the Letter of Credit, however, the penalty shall not exceed ( )% of the total value of the Letter of Credit which the Buyer should have opened. Any fractional days less than ( ) days shall be deemed to be ( ) days for the calculation of penalty.

16.3 The penalty provided for in Clause 16.1 and/or 16.2 shall be the sole compensation for the damages caused by such delay.

17. Claims 17.1 Except those claims for which a third party is liable, should the quality, specifications, quantity, weight, packing and requirements for safety or sanitation/hygiene of the goods be found not in conformity with the stipulations of this Contract, the Buyer shall give a notice of claims to the Seller and shall have the right to lodge claims against the Seller based on the inspection Certificate issued by the inspection organization provided in Clause 14.2 of this Contract within [ ] ( ) days from the date of the arrival of the goods at the final destination, provided that such date shall not exceed ( ) days from the date of the completion of unloading of the goods at the port of unloading, [ ] ( ) days from the date of the completion of unloading of the goods at the port of unloading.

In the event of non conformity, the Seller shall promptly [ ] repair or replace such goods or supply the quantity that is deficient, [ ] repair or replace such goods or supply the quantity that is deficient and compensate the Buyer for damages, if any.

In the event that the Buyer does not make such claim within the above-mentioned time-limit, the Buyer shall forfeit its right to make a claim with respect to the quantity deficiency or the apparent quality defect.

17.2 The Seller shall reply to the Buyer's claim not later than ( ) days after receipt of the inspection certificate issued by the inspection organization provided in Clause 14.2 of this Contract and the claims shall be regarded as having been accepted, if the Seller fails to reply within the above-mentioned time-limit.

18. Termination 18.1 Except as provided elsewhere, this Contract may be terminated in either of the following cases: (1) Through mutual written agreement by both parties; or (2) If the other party fails to perform its obligations within the time limit agreed upon in this Contract, and fails to eliminate or remedy such breach within ( ) days following the receipt of the notice thereof from the non-breaching party. In such case the non-breaching party shall give a written notice to the other party to terminate this Contract.

19. INCOTERMS Unless otherwise stipulated in this Contract, the terms and conditions of this Contract shall be interpreted in accordance with the "International Rules for the Interpretation of Trade Terms" (INCOTERMS 1990) provided by International Chamber of Commerce, International Chamber of Commerce Publication No. 460.

20. Arbitration All disputes arising form the performance of this Contract, should be settled through friendly negotiation.

Should no settlement be reached through negotiation, the case shall then be submitted for arbitration in the country where the defendant resides. If the arbitration takes place in China, the case shall be submitted to China International Economic and Trade Arbitration Commission [ ] Beijing, or [ ] Shanghai, or [ ] Shenzhen and the arbitration rules of this Commission shall be applied. If the arbitration takes place in Japan, the case shall be submitted to the Japan Commercial Arbitration Association [ ] Tokyo, or [ ] Osaka and the arbitration rules of this arbitration organization shall be applied. The award of the arbitration shall be final and binding upon both parties. The arbitration fee shall be borne by the losing party unless otherwise awarded by the arbitration organization.

21. Notice Any notice to be given here under shall be in writing and shall be hand-delivered, transmitted by facsimile or telexed or sent by express airmail, and shall be deemed given when so hand-delivered, or if transmitted by facsimile or telexed, one day after the date of such facsimile or telex so transmitted, or if sent by mail when received, to the parties at the addresses specified at the head of this Contract.

The foregoing terms are agreed by both the Buyer and the Seller signing below.

Buyer: Date: , 19 By: Seller: Date: , 19 By: t shall be interpreted in accordance with the "International Rules for the Interpretation of Trade Terms" (INCOTERMS 1990) provided by International Chamber of Commerce, International Chamber of Commerce Publication No. 460.

20. Arbitration All disputes arising form the performance of this Contract, should be settled through friendly negotiation.

Should no settlement be reached through negotiation, the case shall then be submitted for arbitration in the country where the defendant resides. If the arbitration takes place in China, the case shall be submitted to China International Economic and Trade Arbitration Commission [ ] Beijing, or [ ] Shanghai, or [ ] Shenzhen and the arbitration rules of this Commission shall be applied. If the arbitration takes place in Japan, the case shall be submitted to the Japan Commercial Arbitration Association [ ] Tokyo, or [ ] Osaka and the arbitration rules of this arbitration organization shall be applied. The award of the arbitration shall be final and binding upon both parties. The arbitration fee shall be borne by the losing party unless otherwise awarded by the arbitration organization.

21. Notice Any notice to be given here under shall be in writing and shall be hand-delivered, transmitted by facsimile or telexed or sent by express airmail, and shall be deemed given when so hand-delivered, or if transmitted by facsimile or telexed, one day after the date of such facsimile or telex so transmitted, or if sent by mail when received, to the parties at the addresses specified at the head of this Contract.

The foregoing terms are agreed by both the Buyer and the Seller signing below.

Buyer: Date: , 19 By: Seller: Date: , 19 By: