What incoterm would you have reccomended to Dongbu in order to avoid the result in this case?

Cedar Petrochemicals, Inc. v. Dongbu Hannong Chemical Co. 2011 WL 4494602 (2011) (United States District Court for the Southern District of New York) BACKGROUND AND FACTS obligated to provide phenol that conformed to the spec- In May 2005, Cedar Petrochemicals, Inc., a New York- ifications at the time of delivery in Korea. based petrochemicals trader, entered into a contract with Dongbu Hannong Chemical Co., Ltd., a South TAYLOR SWAIN, DISTRICT COURT JUDGE Korean corporation, whereby the latter agreed to The CISG is an international convention that governs deliver a certain quantity of liquid phenol to a ship the formation of international sales contracts, as well called the Bow Flora in the port of Ulsan, South Korea, as the rights and obligations of the parties. The Conven- at which point Cedar would take possession. The terms tion "automatically applies to international sales con- and conditions of the contract provided that "Incoterms tracts between parties from different contracting states 2000 as amended to date" would govern and contained unless the parties agree to exclude [its] application." the delivery term "FOB Ulsan Anchorage, Korea." The Zhejiang Shaoxing Yongli Printing & Dyeing Co., Ltd. v. contract also provided that the phenol meet certain Microflock Textile Group Corp., No. 06-CV-22608(JJO), specifications with respect to color. 2008 WL 2098062, at *2 (S.D.Fla. May 19, 2008); CISG The phenol was subsequently loaded onto the Art. 6. Where parties wish to exercise their right to Green Pioneer, a ship chartered by Dongbu, in the derogate from the CISG, they must do so explicitly. port of Yosu, South Korea for shipment to Ulsan where See BP Oil Int'l, Ltd., v. Empresa Estatal Petroleos de it was transferred to Cedar's vessel, the Bow Flora. Ecuador, 332 F.3d 333, 337 (5th Cir.2003) (holding that Inspections in Ulsan determined that the phenol com- "if the parties decide to exclude the [CISG], it should plied with contract specifications and, as a result, Cedar be expressly excluded by language which states that it tendered payment to Dongbu. However, subsequent does not apply"); Asante Techs., Inc. v. PMC-Sierra, Inc., tests performed when the Bow Flora arrived in Rotter- 164 F.Supp.2d 1142, 1150 (N.D.Cal.2001) (holding that a dam, the Netherlands, In July 2005 revealed that the choice of law provision selecting British Columbia law phenol no longer conformed to contract specifications. did not "envince a clear intent to opt out of the CISG"). Retesting in South Korea discovered the presence of None of the terms Dongbu cites explicitly exclude or particulate matter in the Green Pioneer which may have otherwise express a clear intent to displace the CISG. tainted a portion of the phenol when it was transferred Dongbu's contention that the "F.O.B." term dis- to the Bow Flora. places Article 36 liability for hidden defects that only In May 2006, Cedar filed a lawsuit against Dongbu manifest after delivery is plainly incorrect. As provided alleging breach of two provisions of the CISG. specif- in the contract, the definition of "FO.B." is furnished ically, Article 35 (requiring goods be fit for ordinary by Incoterms (International Commercial Terms) 2000, usage or any particular purpose that is "expressly or a widely used glossary of trade terms published by impliedly made known to the seller") and Article 36 the International Chamber of Commerce. According to (providing that a seller is liable for defects present Incoterms 2000: before risk transfers to the buyer "even though the lack "Free on Board" means that the seller delivers when of conformity becomes apparent only after that time"). the goods pass the ship's rail at the named port of Dongbu claimed that the contractual term "F.O.B. Ulsan, shipment. This means that the buyer has to bear all Anchorage" displaced the provisions of the Conven- costs and risks of loss or damage to the goods from tion on Contracts for the International Sale of Goods that point. ("CISG") on which Cedar relied and that it was onlyIt is worth noting at the outset that the entire body to the Bow Flora, the FOB term will not shield Dongbu of Incoterms -"F.O.B" included-is incorporated into from liability. the CISG through Article 9(2) thereof. [citation omitted). For the foregoing reasons, Defendant's motion for Dongbu makes no attempt to explain how a term that summary judgment dismissing Plaintiff's complaint is is made part of the CISG could also derogate from it. denied in its entirety. More to the point, because the contract does not explica itly displace any provision of the CISG, Dongbu's argu- Decision. The court held that Incoterms are incor- ment depends on the errant assumption that Free on porated into the body of the CISG, and there was no Board is so fundamentally incompatible with Article 36 incompatibility between the CISG and the incoterm that the choice of the former necessarily implies a deci- "FO.B" The parties' contract failed to displace any pro- sion to exclude the latter. Free on Board means that, vision of the CISG, and consequently, the application of if the goods are injured before risk has passed to the Incoterms as well. buyer, the seller is liable; if the injury occurs afterward, the buyer is liable. Article 36 is wholly compatible with CASE QUESTIONS that division of risk; it merely affirms that the decisive question when assigning liability is who bore the risk of 1. What provisions could Dongbu have included in loss at the time the injury occurred, not when the injury the contract with Cedar if it intended to avoid the manifested. [citation omitted]. If Cedar succeeds in application of the CISG? showing that the phenol was damaged prior to delivery 2. What Incoterm would you have recommended to Dongbu in order to avoid the result in this case