A. The petitioner (the respondent in the countermotion; hereinafter simply referred to as "the petitioner") is a corporation of Republic of Korea that produces automotive rubber parts, etc., whereas respondent (the petitioner in the countermotion; hereinafter simply referred to as "the respondent") is a corporation established under the laws of the United States of America to perform the tasks specified in the Marketing Agency Agreement executed with the petitioner whose head office is located in the United States of America.
B. On June 1, 2006, the petitioner and the respondent executed the Marketing Agency Agreement, under which the parties agreed that the respondent will engage in sales and promotion activities pertinent to the rubber related products produced by the petitioner in the United States of America and Canada (hereinafter referred to as "the 1st Agreement in question.") The important terms and conditions of the 1st Agreement in question are as follows;
Article 2 [Purpose]
1. The purpose of the Agreement is to define the rights and obligations pertinent to "B"’s exclusive sales and promotion activities of "A"’s "Products" and "Exclusive Products" to be conducted in "Marketing Area."
Article 3[Agreement Period]
1. The agreement period of the Agreement shall be three years (36 months) from the Agreement’s execution date.
Article 4 [Rights]
1. "B" shall hold exclusive rights to sale of Products and Exclusive Products in Marketing Area during the agreement period.
2. "B" may use "A’"s trade name and brand within the scope necessary for the sale and promotion activities defined in the Agreement through due consultation with "A."
3. "B" may seek business/technical support from "A." "A" shall accommodate such requests unless there is a special circumstance preventing it.
Article 7 [B’s Obligations]
1. "B" shall provide its best possible efforts in sale and promotion activities of "A"’s products in Marketing Area.
Article 8 [A’s Obligations]
1. "A" shall provide its best possible support for all marketing activities intended for "B"’s sale or promotion in Marketing Area.
2. "A" shall support "B" with the technology related to the products and conduct training when necessary.
3. "A" shall pay the marketing support fee defined in Article 9.
Article 9 [Payment of Marketing Fee]
1. "A" shall transfer the amount defined in Paragraph 2 as the marketing fee on the 15th of each month (Korea time) to the bank account of "B"’s designation to enable "B" to conduct smooth marketing activities in Marketing Area.
2. The marketing fee shall be four thousand US dollars (USD 4,000-) per month.
3. The marketing fee defined in Paragraph 1 and Paragraph 2 shall be paid only until the earlier of two years (24 months) from the Agreement's execution date or the time "B"’s orders for Products and Exclusive Products defined in Paragraph 2 and Paragraph 3 of Article 1 reach five million US dollars (USD 5,000,000-) (the time said orders arrive to "A.")
Article 11 [Due Date for B’s Payment of Proceeds]
1. "B" shall remit the sales proceeds to "A" within five days of receiving the funds from a buyer.
2. Immediately upon completing a remittance, "B" shall notify "A" of the details of the remittance via FAX.
Article 12 [Deciding the Sale Price of the Products]
"B" shall always consult "A" before suggesting the price of "Products" to a buyer.
C. After the 1st Agreement in question, the petitioner and the respondent executed an Amendment Agreement on May 16, 2008 that provided amendment of the terms and conditions of the Agreement and retroactive application of the amendment (hereinafter referred to as the 2nd Agreement in question, and the agreements executed between the petitioner and the respondent in connection with the Marketing Agency Agreement for the rubber products produced by the petitioner shall collectively be referred to as "the Agreement in question.") The important terms and conditions of the 2nd Agreement in question are as follows:
1. General Provision
As a rule, the main body of marketing is the Korean corporation and in order to ensure the status, the Korean corporation shall be the legal main body of marketing activities and the party of the agreements executed during such marketing activities, while guaranteeing the following terms to enable the U.S. corporation as a marketing agent to engage in marketing activity with security of mind during the agreement period:
2. Marketing Right of the U.S. Corporation
a. The U.S. corporation shall handle tasks as the marketing contact point (Contact Point.)
b. Marketing Area and subjects of the U.S. corporation shall not be governed by any restriction and shall be determined through due consultation with the Korean corporation.
c. The Korean corporation shall proactively support the marketing activities of the U.S. corporation.
4. Agreement Period
The agreement period shall be until May 31, 2017. The agreement’s extension shall be discussed one year prior to the end of the agreement, in which case the agreement extension shall occur in four-year units.
5. Orders Confirmed Prior to the Agreement’s Expiration
Orders confirmed, quotes ongoing and business opportunities in negotiations prior to the Agreement’s expiration shall be processed in the same quote manner as those applicable prior to the Agreement’s expiration even if the Agreement expires in the process for as long as deliveries [of goods] continues.
6. Quote submission
a. The final quote shall be submitted to the U.S. corporation from the Korean corporation according to the ex-factory price determined through due advance consultation between the two companies, and the U.S. corporation shall submit quotes to buyer companies by adding a Mark Up to the ex-factory price,
b. However, the U.S. corporation’s Mark Up shall not be admitted on the quotes to the factories of the buyer companies in Korea and China for which the Korean corporation is already delivering the products as of June 1, 2008, and all other issues shall be subject to the conventional commercial practice of Korea.
c. The U.S, corporation shall submit a quote to a buyer company after consulting the Korean corporation. In the event there is no Mark Up of the U.S. corporation in the final order price or the level thereof is inappropriate, the Korean corporation shall consider the interest of the U.S. corporation in other methods.
7. Product Delivery Period
a. The period for which the U.S. corporation’s Mark Up is admitted shall be the period defined through the terms and conditions of the buyer company’s quote, provided that the issues related to future extension of the delivery period shall be subject to mutual consultation.
b. ACR (Annual Cost Reduction) shall be borne by the Korean corporation and the U.S. corporation according to each party’s price ratio in the final delivery price.
8. Scope of Work
a. The U.S. corporation shall handle the processes from initial quote receipt up to the step before the order placement, and shall continue to oversee the tasks related to the price of the ordered product in question.
b. All processes after order placement shall be handled by the Korean corporation regardless of the place of marketing. When necessary, the U.S. corporation may support the process and the Korean corporation shall be responsible for the relevant expenses.
9. Collection of the Sales Proceeds
Process of a sale shall be received directly by the Korean corporation from buyer companies, and the difference after deducting the quote price submitted to the U.S. corporation and the amounts related to ACR shall be remitted to the account of the U.S. corporation’s designation.
10. Items 2 through 9 above shall apply only to finished automobile businesses. For all other businesses, the U.S. corporation shall receive the order and become the party to the agreements, receive the proceeds from sales and pay the proceeds to the Korean corporation.
11. Governing Law and Dispute Resolution Procedure
The Agreement shall be governed by the laws of Korea. All disputes arising in connection with performance of the Agreement shall be resolved through arbitration in Korean language in accordance with the arbitration regulation of The Korean Commercial Arbitration Board, and the parties may pursue the process in question by designating a legal agent.
D. Pursuant to the 1st Agreement and the 2nd Agreement in question described above, the respondent performed the role of the marketing agent that enabled delivery of the petitioner’s rubber related products to buyer companies such as General Motors Corporation, ZF Steering Systems LLC, etc. located in the United States, Brazil, Mexico, Canada, etc.
E. The types of transactions established between the petitioner, the respondent and the buyer companies can be classified largely into two types: ① The petitioner is the party to the product supply agreement with the buyer company, under which the buyer company sends a purchase order to the petitioner and the respondent sends a separate purchase order to the petitioner in accordance with the transaction schedule established with the buyer company and the petitioner supplies the products to the respondent in accordance therewith and the respondent delivers the products supplied by the petitioner to the customer company (hereinafter referred to as "the Type 1 Transactions") and ② The respondent is the party to the product supply agreement under which the respondent sends a purchase order for the subject product to the petitioner, the petitioner supplies the aforesaid product to the respondent and the respondent delivers them to the buyer company (hereinafter referred to as the Type 2 Transactions".)
F. On April 29, 2011 petitioner and the respondent drafted Sales Markup Agreement (hereinafter referred to as "the Markup Agreement") with regard to receipt of the proceeds of goods delivered and payment of Sales Markup, and the important terms and conditions of the Agreement are as follows:
1. Dongmyung Tongsan (Ltd.) guarantees to pay DMTS Inc.’s Sales Markup as follows:
1) The items subject to joint collection and Sales Markup shall be all products for which DMTS Inc. obtained orders from buyers, However, when products are delivered to Korea or China in the aspect of the location of the factory of the corresponding buyer company, [the products] shall be excluded from the application [of the collection and Markup] whereas all other areas shall be subject to application [of the collection and Markup].
2) Sales Markup payment ratio shall be 10% of all incoming deposits for the time being, and it shall be paid in advance to the account of the two companies’ designation from the joint account as provided in the Escrow Agreement.
3) The Markup ratio determined tentatively in Paragraph 2) shall be subject to adjustments ascribed to the Markup rate applicable to newly received orders and the contracted ACR with the buyer company, etc., and therefore, the two companies shall consult each other in April of each other to determine the average Markup rate and to revise the Markup rate specified in the Escrow Agreement in mutual accord.
4) For verification of differences in deposit amounts arising from the individual Markup ratio applicable to each export item and the settlement thereof, the two companies shall voluntarily disclose all materials pertinent to collections without limitation. Any excess or shortage in deposits found through the month-end settlements between the two companies shall be remitted to the two company’s passbook account designated in the Escrow Agreement by the 20th of next month.
G. The average Markup rate to be received by the respondent is 11% of the sales proceeds.
H. In connection with the Sales Markup Agreement, the petitioner and the respondent executed the ESCROW Transaction Agreement with Korea Exchange Bank (Ltd.) on May 3, 2011 (hereinafter referred to as "ESCROW Agreement.") Under the aforesaid ESCROW Agreement, Korea Exchange Bank (Ltd.) withdraws the amount equivalent to 10% of the amount deposited into the joint ESCROW account of the petitioner and the respondent via automatic transfer without requiring a separate invoice and remits the amount into the respondent’s account and withdraws the remaining balance of the deposit in the ESCROW account net of the aforesaid Sales Markup amount and various fees via automatic transfer without requiring a separate invoice and remits the amount into the petitioner’s account. The Agreement also provides that a payment consent form signed by both the petitioner and the respondent in order to process a payment in any other manner.