Disclaimer: This article is general practical information, not legal or customs advice. Cases and statutes are cited to show how the rules work, not to predict any particular dispute; consult a lawyer and a licensed customs broker (관세사) before rejecting goods, settling a claim or filing for a refund.
Picture this. The lot arrives, the powder looks right, and half of it goes into the kiln. Later the fired parts crack, the in-house lab finds an impurity over specification, and purchasing sends the mill a WeChat message saying the quality is bad. The mill asks for a report, which takes ten more days. By the time a proper claim goes out the window has closed, the rest has been mixed with the previous lot, and the seller says the goods were accepted.
The claim can fail even when the lab result is correct, because it is decided less by the chemistry than by what the buyer does in the first days: when it examines, when and how it tells the seller, what it says, and what it does with the material.
If a lot is already off-spec: stop using it and segregate it. Send the seller a written notice naming the lot and the symptom, inside the contract's claim window and within days, not weeks; a WeChat message alone is not enough, and the lab report can follow. If the packaging is damaged, give the carrier written notice within three days. Do not process the material. Expect a price reduction or damages rather than rejection, unless the breach is fundamental. To get the duty back on a return, the goods must be in a bonded area within one year.
This post starts where the goods arrive. Earlier steps: supplier checks and payment staging in our due diligence checklist, retained samples and the umpire clause in our sample evaluation protocol, cargo cover and the rejection route in FOB, CIF or DDP.
Which law decides the claim
Korea has been a Contracting State to the UN Convention on Contracts for the International Sale of Goods (CISG) since 1 March 2005, and China since 1 January 1988. A sale between a Korean buyer and a seller in mainland China therefore falls under the CISG (Article 1(1)(a)) unless the parties exclude it, which Article 6 allows. Choosing a national law is not excluding it. In Guiding Case No. 107 (2019), China's Supreme People's Court held that where both parties' states are Contracting States the Convention applies first and the chosen law only fills gaps; that contract chose New York law. We found no Korean Supreme Court decision on a bare "Korean law" clause; in 2021다269388 (13 January 2022) it held that the CISG takes priority over the 민법 and 상법, in a case with no choice-of-law clause. For Hong Kong sellers the CISG has applied since 1 December 2022.
So do not rely on a "Korean law" clause to keep the CISG out. National rules apply where the CISG is excluded and to what it does not cover, such as limitation periods.
Why claims fail: four clocks, four triggers
A buyer with a bad lot usually watches one deadline. There are at least four.
The contract window usually closes first
A Chinese-English export contract template from a Chinese law-firm site gives 30 days for quality claims and 15 for quantity, from arrival at the port of destination, not receipt at your plant. A model contract on a CIETAC sub-commission's site leaves the number blank but requires a quality claim to be accompanied by an international surveyor's inspection certificate, at the buyer's cost (clause 11), and treats a claim as accepted if the seller fails to reply within the number of days the parties fill in (clause 13).
Under the CISG an agreed window replaces Article 39's "reasonable time": the Opinion No. 2 case annex reports a 1994 Vienna arbitral award on metal sheets and a 1991 Baden-Baden decision on tiles, both lost on notice outside the agreed period. Under 民法典 第621条 (PRC Civil Code, Art. 621), missing an agreed inspection period means the goods are deemed to conform. 第622条 offers one valve: a period too short for full inspection counts only for objecting to visible defects. We found no case on whether 30 days is too short for a powder needing laboratory analysis, so do not plan on that argument.
The CISG clock runs in days and weeks
Article 38 requires examination "within as short a period as is practicable", deferrable to arrival at destination. Article 39(1) requires notice "specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it". Article 39(2)'s two years from handing over is an absolute cap, not the working deadline; it matters only for defects that could not have been found sooner. CISG Advisory Council Opinion No. 2 (7 June 2004) says that skipping the examination does not stop the clock, which runs from when the buyer ought to have discovered the defect, and that no fixed period, "whether 14 days, one month or otherwise", is reasonable in the abstract; sometimes notice is due the same day. Article 44 preserves price reduction and damages, though not lost profit, for a buyer with a reasonable excuse for late notice; avoidance and replacement are not saved.
The Opinion records the Austrian Supreme Court suggesting 14 days, a Swiss cantonal court one month, and the German Federal Court of Justice (BGH) in 1999 four weeks, after separate time for an expert. The appellate court in the 2004 paprika case below treated two weeks as usual. Cases on materials point short:
- ICC award No. 8247 (1996), chemicals: inspection three weeks after arrival and notice about 23 days after delivery were too late.
- OLG Köln, 21 August 1997, aluminium hydroxide: notice was needed immediately, before the deliveries were mixed.
- BGH, 30 June 2004, paprika powder (VIII ZR 321/03): the buyer had the test report on 22 January and complained on 26 March; over two months was too long.
Our reading, as a planning rule, not a legal one: for a powder that can be tested on arrival, plan on one to two weeks from arrival at your site, and less if the material will be blended or used. It rests on the shortest periods tribunals have used; the wider range in the sources is about a month.
The carrier clock is three days, in writing
Under 상법 제804조 the receiver must send the carrier written notice without delay, or within three days of receipt for damage not immediately discoverable; without it, undamaged delivery is presumed. Under 제814조 the carrier's liability ends unless suit is brought within one year from delivery, extendable by agreement.
Why rejection and replacement are usually off the table
Under the CISG, substitute goods (Article 46(2)) and avoidance (Article 49) require a fundamental breach: one that substantially deprives the buyer of what it was entitled to expect (Article 25). For bulk materials courts have set that bar high. In a 1996 decision on cobalt sulphate (VIII ZR 51/95), the BGH refused avoidance where the buyer had not shown it could not resell the goods. In Guiding Case No. 107, on petroleum coke with a grindability index of 32 against a contractual 36–46, the Supreme People's Court held that defective goods are not a fundamental breach if the buyer can, with reasonable effort, use or resell them; it reversed avoidance and awarded damages.
For an off-spec lot you can still use or resell at a discount, the legal default is price reduction or damages. A free replacement is negotiated or written into the contract.
Article 82(1) then removes avoidance and substitute goods if the buyer cannot return the goods "substantially in the condition in which he received them". The exceptions in Article 82(2)(b) and (c) cover deterioration from the Article 38 examination, and goods transformed in normal use before the defect was or ought to have been discovered. Material fired after the problem was visible falls outside them, as does powder blended and sold, as in the paprika case. Article 86(1) requires a buyer that intends to reject to preserve the goods; Article 87 lets it warehouse them at the seller's expense if reasonable.
What the notice has to say
Opinion No. 2 says a notice describing the symptoms is enough; the buyer need not know the cause. What fails is the generic complaint: the case annex lists a Belgian court treating "bad quality" (1996) and a Munich court treating "the goods are rancid" (1995) as not specific.
The notice does not need the full lab report. It needs the lot, the observed symptom or preliminary result, and a reservation of rights; the report can follow.
An oral notice can count under the CISG, and under Article 27 a notice that goes astray in transit does not cost you the claim. But the case annex lists several German buyers who lost because they could not prove a telephone notice. A WeChat voice message is the modern telephone call. Put the notice in writing, to the contractual address, and keep the delivery record.
Quality claim or transit claim?
An intact, sealed drum of off-spec powder is a claim against the seller. Cargo insurance will not help: the Institute Cargo Clauses (A) 1/1/09 exclude inherent vice (clause 4.4) and ordinary loss in weight or volume (4.2). A wet drum or broken seal is a claim against the carrier and possibly the insurer, subject to the 3-day written notice; clause 16.2 requires the insured to preserve rights against carriers. The template above excludes the seller's liability for anything the insurer or carrier answers for, so a wet drum reported only to the seller gets that clause in reply. When unsure, notify all three.
The first 72 hours
The order below is our recommendation.
- Stop. Quarantine the lot; nothing more into production or blending. Drums used after the defect was visible weaken Article 82 and the "unchanged condition" the customs refund needs.
- Read the contract. Note the claim window, what starts it, and the notice address.
- Identify. Record which drums belong to which lot and which were used. In Chicago Prime Packers v. Northam Food Trading (7th Cir. 2005), as summarised in case databases, the buyer lost partly because it could not show the goods inspected were the goods bought.
- Seal and photograph the container seal number, lot labels and packaging, with time stamps. If anything is damaged or a seal is broken, send the carrier written notice now; the deadline is three days from receipt.
- Send the written notice inside the contract window: lot number, the property out of specification, the observation or preliminary result, a reservation of rights. A WeChat message alone is not enough; send it by the contractual route. If you want a replacement, ask in the same notice (Art. 46(2)).
- Test by the agreed method, using the nominated laboratory and the third sealed portion if the contract has an umpire clause like the one in our sample evaluation protocol. We found no CISG case weighing an in-house result against a third-party report, so treat yours as a reason to notify, not as evidence.
- Commission the survey if the contract makes a certificate a condition of the claim.
- Do not process or ship anything back until the remedy is chosen; the customs paperwork depends on it.
The remedies, and what each costs at Korean customs
Without a clause, price reduction or damages is the default (see above), and return, replacement or destruction are things you negotiate; the customs steps below are what each costs once the seller agrees.
Return: the rule. 관세법 제106조제1항제1호 refunds the duty on goods that differ from the contract and whose nature or form at import has not changed, if they are brought into a bonded area (보세구역) or another customs-designated place within one year of the import declaration's acceptance and then exported; part of a lot can go back with approval (제2항). Under 시행령 제121조 the export declaration carries a statement of reasons, the documents evidencing the contract terms and the import declaration certificate; the refund is the duty paid on what is exported. The refund right lapses five years after the export declaration's acceptance (관세법 제22조제2항).
Return: the paperwork. The seller's written acknowledgement is not on the statutory list; it is the natural evidence of the contract terms and of the reason for export, but we could not confirm customs requires it. A long-standing 관세청 instruction, re-issued as 예규 제310호 from 8 October 2026, tells customs offices not to refuse the return (반송) or export declaration because a replacement has not arrived or payment has not been recovered. A 관세청 consultation case adds that the shipment should be declared as a non-conformity export (위약수출); once loaded, re-classifying the declaration is allowed only exceptionally.
Free replacement. It is dutiable. 관세법 시행령 제17조 excludes goods arriving free of charge from transaction value, so the replacement is valued under the fallback methods in 관세법 제31조 to 제35조. The re-importation exemption in 제99조 covers Korean exports coming back, not replacements. Unless the bad lot is re-exported and refunded, duty is paid on both; agree who bears it.
Price reduction. CISG Article 50 reduces the price in proportion to the value the delivered goods had, against the value conforming goods would have had, both taken at delivery. A 경정청구 (request for correction) can be filed within five years of the original tax declaration (납세신고) (관세법 제38조의3제2항), but we found no Korean rule allowing a post-import, defect-based price reduction to lower the customs value. Do not assume a discount brings duty back; ask your 관세사 before agreeing whether it is a credit note, refund or discount on the next order.
Destruction. Under 관세법 제106조제3항, where destruction instead of export is unavoidable, the duty is refunded if the goods enter a bonded area within one year and are destroyed with customs' prior approval; duty on any residue is deducted (시행령 제122조).
Damages. CISG Article 74 covers the foreseeable loss, including lost profit; Article 77 cuts it by what the buyer could reasonably have avoided.
If the CISG is excluded
Read this only if your contract excludes the CISG. National rules are no softer. 상법 제69조 requires a merchant buyer to examine without delay and notify immediately, or lose rescission, price reduction and damages. Its six months is often misread: it is the period within which a latent defect must be discovered; notice must still be immediate. Under 민법 제582조, defect rights must be exercised within six months of learning of the defect. We found no two-year notice rule in Korean sales law.
Under 民法典 第621条, with no agreed period, notice is due within a reasonable time and at most two years from receipt, unless a quality guarantee period applies; a seller that knew or should have known of the defect cannot rely on these limits. 第623条 presumes patent defects were inspected once a delivery note is signed. The Supreme People's Court's sales interpretation (法释〔2012〕8号) makes the two years a fixed outer limit (第12条), says using the goods is not by itself a waiver of a timely objection (第13条), and bars a seller that voluntarily accepted liability from later pleading expiry (第14条).
When negotiation fails
The leverage that works is commercial: the tranche not yet paid and the order not yet placed. The staged structure in our due diligence checklist exists for this moment; a letter of credit does not provide it, because, as our payment terms post sets out, banks deal with documents, not goods. Get any settlement in writing; that also makes the 第14条 rule above usable.
The Korean Commercial Arbitration Board (KCAB) and CIETAC publish fee schedules; we could not extract figures we trust, so we quote none. An award against a mill with assets in China is enforced in China, which has applied the New York Convention since 1987, with reciprocity and commercial reservations.
Under the Supreme People's Court's 2017 provisions on reporting arbitration review cases (法释〔2017〕21号, in force 1 January 2018), a court that intends to refuse recognition or enforcement of a foreign award in a foreign-related case must report the case up through the high court to the Supreme People's Court and may rule only on its opinion. A local court cannot refuse on its own.
What to write down
- The claim window and its trigger. Days, and what starts them: arrival at port, receipt at site, or completion of incoming inspection. For materials needing lab work, negotiate the latter.
- Notice form and address. Written, to a named address; symptom-level notice within the window preserves the claim.
- Method, laboratory and umpire. As in our sample evaluation protocol; if a surveyor's certificate is a condition, name the surveyor type and who pays. The RFQ specification builder puts the particle-size method on the specification.
- The retained tranche, released at the end of the claim window, not at shipment.
- Governing law. State expressly whether the CISG applies, and if not, what replaces it.
- Remedies and duty. Who pays duty on a replacement; whether a reduction is settled by credit note, refund or deduction; the seller's cooperation with export documents within the one-year period.
- Transit damage. Who notifies the carrier and insurer, in writing within three days, and that the seller's carve-out for insured or carrier-covered loss does not reach defects in sealed, undamaged packaging.
- Keeping the goods. Our suggestion, not law: the buyer may hold disputed goods at the seller's cost while the claim is open.
Frequently Asked Questions
The CISG gives us two years to complain, doesn't it?
No. Two years is only the outer cap for defects that could not have been found earlier. The working deadline is a "reasonable time" after the defect was or ought to have been discovered, and a tribunal treated about three weeks as too late for chemicals testable on arrival. A contract window, typically from arrival at port, applies instead where there is one.
Can we send the goods back and get the duty refunded?
Often yes, if the goods differ from the contract, are unchanged, and enter a bonded area within one year of the import declaration; the export must be declared as a non-conformity export, and the return also depends on the seller agreeing to take them back under the contract. Decide before processing anything, and ask your 관세사 before shipping.
Does a free replacement come in duty-free?
No. It has no transaction value under 관세법 시행령 제17조 and is valued under the fallback methods in 관세법 제31조 to 제35조; 제99조 does not cover it. Duty on the original lot comes back only if re-exported or destroyed under 제106조 within one year.
Is a WeChat message valid notice?
It can be under the CISG, if you can prove it and it names the defect. German buyers have lost on unprovable telephone notices, and "bad quality" has been held too vague. Follow it with written notice to the contractual address. For transit damage, 상법 제804조 requires writing.
References (Public Sources)
- UN Convention on Contracts for the International Sale of Goods (1980), UNCITRAL official text; UNCITRAL status tables for the CISG and the New York Convention (1958); UN release UNIS/L/327 (6 May 2022) on Hong Kong.
- CISG Advisory Council, Opinion No. 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39 (7 June 2004), and its case-law annex, the source for OLG Köln (21 August 1997), the Vienna award SCH-4318 (15 June 1994), LG Baden-Baden (14 August 1991), and the specificity and telephone-notice cases.
- ICC award No. 8247 (June 1996), Unilex abstract. BGH, VIII ZR 51/95 (3 April 1996), CISG-online No. 135. BGH, 30 June 2004, VIII ZR 321/03 (paprika powder), CISG-online No. 847 (English translation). Chicago Prime Packers v. Northam Food Trading, 408 F.3d 894 (7th Cir. 2005), from case summaries.
- Supreme People's Court of the PRC, Guiding Case No. 107 (2019), on judgment (2013)民四终字第35号 (30 June 2014); 法释〔2012〕8号 (amended 2020), 第12–14条; press explanation of 29 December 2017 on 法释〔2017〕21号. 民法典 第621–623条.
- 대법원 2021다269388 (2022. 1. 13.). 상법 제69조, 제804조, 제814조; 민법 제582조; 관세법 제22조, 제31–35조, 제38조의3, 제99조, 제106조; 관세법 시행령 제17조, 제121조, 제122조 (국가법령정보센터).
- 관세청 예규 제310호 (issued 6 October 2026, in force 8 October 2026; re-enactment under sunset review); 관세청 고시 제2025-37호, 가격신고서(B); 관세청 consultation-case collection on non-conformity exports.
- Institute Cargo Clauses (A), 1/1/09, clauses 4 and 16.
- A Chinese-English export contract template from a Chinese law-firm site (clause 8); CIETAC Zhejiang Sub-Commission, model 货物销售合同（三）, posted 2 March 2018 (clauses 11–13).
- KCAB and CIETAC fee pages, consulted, not quoted.
We found no Korean rule on whether a post-import price reduction for defects lowers customs value, and no published standard for the contents of a surveyor's report; neither appears above as fact.
Nami Tech Solutions (NTS) works project by project, not from standing inventory, and does not give legal or customs advice. On a lot we arranged, we take the claim to the mill in Chinese with the lot data attached, and the order is set up so that payment follows inspection of the material at a designated address in China, so a non-conforming lot can be refused before it moves rather than argued about after it lands.
