US Enterprise Secures Full Victory Against Baiqi Holdings in CISG Goods Sales Dispute

US Shaphar Group Wins Full Victory in International Glove Sales Contract Dispute Against Baiqi Holdings (China)

A US enterprise registered in Delaware, Shaphar Group LLC (hereinafter referred to as Shaphar), signed a cross-border sales contract for medical nitrile gloves with Beijing-based Baiqi Holdings (China) Co., Ltd. During the COVID-19 pandemic, Shaphar purchased medical gloves to supply medical institutions across the United States. The first container of goods delivered by the Chinese side was tested to be inferior PVC gloves; more than half of the products tore easily and could not be used for medical purposes. In addition, the delivery of the remaining two containers was delayed indefinitely. After multiple rounds of video negotiations and written reminders, the Chinese party still delayed the refund. Shaphar then filed a foreign-related international trade lawsuit with the No.4 Intermediate People’s Court of Beijing.

The case involved three core legal disputes. First, the applicable laws for foreign-related trade cases. Both China and the United States are contracting states of the CISG. Since neither party excluded the application of the Convention, the court ruled that the CISG shall prevail in this case, and the Civil Code of the People’s Republic of China shall apply to matters not covered by the Convention. Second, the criteria for fundamental breach of contract. The goods delivered by the Chinese side failed to match the contracted material, over half of the products suffered severe quality defects, and the remaining goods were undelivered for a long time. This directly deprived the US side of its expected trading profits, constituting a fundamental breach of contract under the CISG. Third, the effective rule for contract termination notices. The CISG adopts the “postal rule” for termination notices, rather than the “receipt rule”. The court confirmed that the sales contract was deemed avoided on May 20, 2021, the date when Shaphar issued the lawyer’s letter.

After a full court hearing, Baiqi Holdings failed to appear before the court without justifiable reasons after being summoned via public notice. The court conducted trial by default and fully upheld all claims filed by Shaphar Group: the Glove Sales Contract was declared avoided effective May 20, 2021; Baiqi Holdings was ordered to refund USD 945,000 in payment, and pay interest on the principal calculated at the LPR starting from May 20, 2021; compensate the US side for actual losses including product testing fees, ocean freight, customs clearance and inland transportation totaling USD 18,882.12; all litigation fees and public notice fees arising from this case shall be borne by the Chinese enterprise. After the judgment took effect, this case was selected as a Model Case on the Application of International Treaties in Foreign-related Civil and Commercial Cases issued by the Supreme People’s Court, serving as a landmark precedent for cross-border quality disputes over medical supplies trade.