This case concerned the extent to which a CIF seller was, under the terms of the relevant contract, liable for the duties on the import of biodiesel into Romania.

Facts

The buyer, OMV, appealed against a decision limiting the amount it could recover from the seller, Vector, under a CIF sale contract for biodiesel. The contract contained a term that the diesel should be of Canadian origin. The price clause in the contract provided:

‘All fees such as but not limited to customs duties and penalties incurred by non EU origin… will be deducted from invoice value. Buyer will notify seller of such fees and send supporting documents latest by the first business day after vessel’s completion of discharge and seller will issue the final invoice within five business days from such notification.’

Based on the certificate of origin provided by sellers, buyers made a declaration to Romanian customs that the diesel was of Canadian origin. The diesel was cleared on that basis. Buyers notified sellers that they had paid import duties of US$58,910.79. Sellers issued an invoice for US$862,695.43 being the price of the diesel less US$58,910.79.

Two years later, OLAF was investigating the origin of the diesel. OLAF reported to the Romanian customs that it was in fact of US origin. Goods of US origin attracted anti-dumping and countervailing duties of US$1,029,811.19. Customs sought payment of the duties plus interest and penalties.

Buyers paid the amounts and sought to recover them from sellers under the contract.

Legal arguments

Sellers argued that to recover customs duties, buyers would have had to have notified sellers of such fees and sent supporting documents by the first business day after the completion of discharge. Buyers submitted that the clause made it clear that all customs and duties for non EU cargo were to be paid by sellers. Buyers claimed that they were entitled to recover the full amount of the duties i.e. US$1,029,811.19. They argued that sellers’ liability was not limited because the clause referred to a deduction from the invoice price. A deduction in this context which produces a negative figure signified that sellers must pay the excess.

Judgment

The court held that the parties could not have agreed that buyers’ entitlement to recover fees was dependent on them having notified sellers of the fees and provided supporting documents no later than the first business day after completion of discharge. The combination of a very short time limit and a drastic consequence in the event of non-compliance lacked any commercial sense. The parties had not used language making it clear that timely compliance was a condition precedent to liability. The court held that a construction that left no room for the correction of an error, particularly an error consistent with a certificate of origin provided by sellers, would make little commercial sense.

On the issue of the excess, the court held that buyers were entitled to recover the amount of fees which were to be deducted from the price. They were entitled to recover US$862,695.43. They were not entitled to recover any more.

The court rejected buyers’ argument that sellers were to pay the fees however much they were even if they exceeded the price. If the parties had intended that, they should have used clear language to that effect. In a contract of sale, the price is what the buyer pays the seller and to require the reverse would need very clear wording.