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Arbitration in international marketing

No matter what line of business you're in, you can't escape sex. That may have been one conclusion drawn by an American exporter of meat products after a dispute with a German customer over a shipment of pork livers. Here's how the disagreement came about. The American exporter was contracted to ship "30,000 lbs. of freshly frozen U.S. pork livers, customary merchantable quality, first rate brands." The shipment had been prepared to meet the exacting standards of the American market, so the exporter expected the transaction to be completed without any problem. But when the livers arrived in Germany, the purchaser raised an objection: "We ordered pork livers of customary merchantable qualityĆ¢?"what you sent us consisted of 40 percent sow livers." "Who cares about the sex of the pig the liver came from?" the exporter asked. "We do," the German replied. "Here in Germany we don't pass off spongy sow livers as the firmer livers of male pigs. This shipment wasn't merchantable at the price we expected to charge. The only way we were able to dispose of the meat without a total loss was to reduce the price. You owe us a price allowance of $1,000." The American refused to reduce the price. The determined resistance may have been partly in reaction to the implied insult to the taste of the American consumer. "If pork livers, whatever the sex of the animal, are palatable to Americans, they ought to be good enough for anyone," the American thought. It looked as if the buyer and seller could never agree on eating habits.

Task: Predict how the arbitrator will rule in the case. On what grounds do you think the ruling will be based? What determining factors do you think are most relevant in the case.

Solution Preview

The arbitrator will rule in favor of the US supplier.
- The ruling of the arbitrator will be based on the terms of the contract. The terms are to ship: "30,000 lbs. of freshly frozen U.S. pork livers, customary merchantable quality, first rate brands". There is no mention in the contract that the livers should be of male pigs. In ...

Solution Summary

Arbitration in international marketing is explained in a structured manner in this response. The answer includes references used.