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Lawyers, other representatives, expert(s), tribunal’s secretary

Arbitration Award

Arbitration Order

1.
The respondent (the petitioner in the countermotion) shall pay the petitioner (the respondent in the countermotion) 1,482,971,408 won, as well as the amount equivalent to 6% per annum on 1,150,038,201 won thereof and the remaining 332,933,207 won for the period from June 30, 2012 and February 23, 2013, respectively, until April 10, 2014 and the amount equivalent to 20% per annum on said amount for the period from the day after said dates until the full payoff.
2.
The remaining claims by the petitioner (the respondent in the countermotion) and the countermotion by the respondent (the petitioner in the countermotion) shall be dismissed.
3.
As for the arbitration expense, those incurred in connection with this petition shall be paid by the petitioner (the respondent in the countermotion), whereas those incurred in connection with the counter-petition shall be paid by the respondent (the petitioner in the countermotion.)

Purpose of the Petition

1.
The respondent shall pay the petitioner 3,968,747,345 won as well as an amount equivalent to 6% per annum on said amount for the period from June 30, 2012 until delivery of a copy of the Arbitration Petition and 20% per annum on said amount for the period from the day after said dates until the full payoff.
2.
The arbitration expense shall be paid by the respondent.

Purpose of the Counter-Petition

1.
The petitioner (the respondent in the countermotion) shall pay the respondent (the petitioner in the countermotion) shall pay the respondent (the petitioner in the countermotion) 1,477,536,542 won as well as an amount equivalent to 20% per annum on said amount for the period from the day after delivery of the Application of Amendment of the Purpose and the Cause of the Countermotion until the full payoff.
2.
The arbitration expense shall be paid by the petitioner (the respondent in the countermotion).

Basis for the Award

1. Basic Facts

[1].
The following facts are either not disputed between the parties or admitted based on the evidences submitted by the parties and the overall gist of the pleading:

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.

2. Judgment on the Petition Filed by the Petitioner

A. The Petitioner’s Claims

[2].
(1) The petitioner supplied goods to the respondent and therefore, the respondent is liable to pay the proceeds of the goods to the petitioner. The value of the goods the petitioner supplied to the respondent is 2,055,722.93 US dollars for Type 1 Transactions and 2,743,511.69 US dollars for Type 2 Transactions. The balance after deducting d) the amount corresponding to the Markup ratio of 11% to be received by the respondent from the proceeds for Type 1 Transactions; and deducting or netting off 2 the amount the respondent claims to have either paid to the petitioner or received directly by the petitioner through the ESCROW account, which is 1,535,433.69 US dollars and & 681,650,217 US dollars corresponding to 90% of 757,389.13 US dollars from the proceeds for Type 2 Transactions that was deposited into the ESCROW account is 2,356,021,183 US dollars. Therefore, the respondent is liable to pay the outstanding proceeds in the amount of 2,356,021,183 US dollars as well as late penalty thereon from June 30, 2012 to the petitioner.
[3].
(2) The petitioner is producing the mold necessary to manufacture the goods to be delivered to general Motors Corporation (hereinafter referred to as "GM") either directly or through outsourced contractors. According to the agreement executed between the petitioner and GM, the molds produced by the petitioner on behalf of GM become GM’s properties and GM becomes liable to pay the cost of the molds to the petitioner. However, the respondent received the cost of the mold receivable by the petitioner from GM without proper authority and is not forwarding the money to the petitioner. Therefore, the respondent is liable to pay the cost of molds received from GM in the amount of 1,173,322.73 US dollars and 6,000,000 to the petitioner won as well as late penalty on said amounts from June 30, 2012.

B. The Respondent’s Claims

[4].
(1) On May 13, 2011, the petitioner and the respondent reached an agreement promising to settle the receivables and payables incurred to each other to cease the existence of all payables incurred until March 31, 2011, set the petitioner’s deficit covering amount at US$ 749,615.00 and cover this amount through new businesses ordered and increase in product rice (hereinafter referred to as the "receivables and payables settlement agreement"). Therefore, the portion incurred before March 31, 2011 among the price of goods and the die cost claimed by the petitioner has ceased to exist through the receivables and payables settlement agreement described above.
[5].
(2) Since the Type 1 transactions among the price of goods claimed by the petitioner includes □ the products which have been delivered without the respondent’s involvement whatsoever, □ the products for which the petitioner has received the payment for the sale of products directly from GM, □ the products which has been subject to the receivables and payables settlement agreement, □ the products for which the collection into the escrow account has been completed, and □ the products for which the payment at the prior price has been requested even though the sale prices of the products were decreased according to the basis document for the claim submitted by the petitioner, the total price of sale for the Type 1 transaction products to be paid to the petitioner by the respondent is US$ 13,821.49 when they are excluded.
[6].
(3) Since the Type 2 transactions among the price of goods claimed by the petitioner includes □ the products which have been delivered without the respondent’s involvement whatsoever, □ the products for which the petitioner has received the payment for the sale of products directly from GM, □ the products which has been subject to the receivables and payables settlement agreement, □ the products for which the collection into the escrow account has been completed, and □ the products for which the payment at the prior price has been requested even though the sale prices of the products were decreased according to the basis document for the claim submitted by the petitioner, □ the products of which the sale price has been completely paid to the petitioner by the respondent (before July 2010), □ the products of which the price has been recorded incorrectly, □ the products of which the sale price has been agreed to be offset by the purchase cost of pins which were purchased by the respondent on behalf of the petitioner, □ the products which belong to the Type 2 transactions but have been agreed to allow the respondent’s markup as an exception, □ the products provided to GM by the petitioner as samples, and □ the products which have been claimed redundantly in other petitioner’s exhibit, the total price of sale for the Type 2 transaction products to be paid to the petitioner by the respondent is US$ 801,324.32 when they are excluded.
[7].
(4) Since the die cost claimed by the petitioner includes □ the products which have been delivered without the respondent’s involvement whatsoever, □ the products for which the petitioner has received the die cost directly from GM, □ the products which has been subject to the receivables and payables settlement agreement, □ the products for which the die cost amount has been recorded incorrectly, □ the products of which the die cost has been agreed to be offset by the purchase cost of pins which were purchased by the respondent on behalf of the petitioner, and □ the products which have been claimed redundantly in other petitioner’s exhibit according to the basis document for the claim submitted by the petitioner, the die cost to be paid to the petitioner by the respondent is US$ 43,611.00 when they are excluded.
[8].
(5) Since the unsettled markup earning which has not been paid to the respondent even though the petitioner received the payment for the sale of products directly is US$ 444.78 in case of the Type 1 transactions and US$ 1,404.64 in case of the Type 2 transactions, and the die cost difference to be paid to the respondent by the petitioner is US$ 200,596,96, the above amount should be deducted from the price of goods and the die cost claimed by the petitioner, and since the respondent has paid US$ 716,421.13 in total to the petitioner through account transfers since July 2010, this portion should be deducted as well.

C. Judgment

(1) Existence or inexistence of the receivables and payables settlement agreement

[9].
When comprehensively considering the following facts and circumstances recognized through the contents of the petitioner’s Exhibit Nos. 7 and 9 and the respondent’s Exhibit Nos. 1, 2, 3, 6, 7, 19, 21, 43, 44, and 72 and the overall intent of the trial, i.e. □ the fact that the petitioner and the respondent had a dispute as they didn’t agree with each other in relation to the payment of the price of goods and the existence or inexistence of the business support expenses and their scope during the course of the supply of goods and the performance of a sales representative’s business according to the agreement of this case, □ the fact that the petitioner and the respondent exchanged e-mails expressing the need to settle the receivables and payables, and determine the outstanding amount and the method of paying the debt in around February or March 2011 due to this, □ the fact that the persons concerned of the petitioner and the respondent held a meeting on May 13, 2011 to settle the receivables and payables of both companies and Yoon Hee Kim, who attended the above meeting as the Senior Manager of the petitioner’s Sales Sector, sent an e-mail to the petitioner’s officers and employees on May 14, 2011 saying that "the outstanding amount agreed and determined between the companies is US$ 749,615. If you have a different opinion on the amount, please send it to me," □ the fact that a sales settlement file, which includes all receivables and payables between the petitioner and the respondent such as the price of goods, die cost and business support experiences as the objects of settlement, was attached to the above e-mail, and □ the fact that in the e-mails exchanged between the petitioner and the respondent thereafter, the petitioner refers to the method of settling the above mount, etc. under the assumption that the agreement described above is effective, the petitioner and the respondent are recognized to have reached a receivables and payables settlement agreement to settle all receivables and payables of the petitioner and the respondent incurred in relation to the agreement of this case until March 31, 2011 and determine the petitioner’s outstanding amount as US$ 749,615 (However, the respondent recognizes the fact that the die cost of US$ 23,157 which was not included in the receivables and payables settlement agreement, is outstanding and the respondent is liable for the payment of this amount to the petitioner, but this portion shall be discussed in the following die cost claim section).
[10].
Upon contemplating whether there was an agreement between the petitioner and the respondent that the above outstanding amount of US$ 749,615 was determined as the petitioner’s deficit covering amount and the amount was to be covered through new businesses ordered and increase in product rice, though □ the fact that the minutes of the meeting between the petitioner and the respondent held on March 1, 2012 states the petitioner’s deficit covering amount of US$ 749,615 will be covered through new businesses ordered and increase in product rice and □ the fact that the respondent sent an e-mail to the petitioner on June 16, 2012 expressing its intension to cover the deficit covering amount with the price increase for GMT610 extrusion products in the amount of US$ 415,842,16 can be recognized on the basis of the respondent’s Exhibit Nos. 2 and 8, but in view of the following facts recognized through the contents of the respondent’s Exhibit Nos. 2, 8 and 44 and the overall intent of the trial, i.e. □ the fact that the minutes of the meeting held on March 1, 2012 states that the specific plan and various matters related to the "deficit covering amount of both companies" will be finally discussed and determined at the meeting to be held in Korea between the representatives of both companies, □ the fact that in response to the e-mail sent by the respondent on June 16, 2012 expressing its intent to use the price increase of US$ 415,842.16 to cover the deficit covering amount, the concerned person of the petitioner sent an e-mail stating that this is not acceptable, □ the fact that Jong Sook Kim, the petitioner’s vice president, is asking for the fast payment of about US$ 750,000 "which your company said to pay to our company in the e-mail dated July 4, 2012 sent by her, □ the fact that it is highly unlikely in view of empirical law that the petitioner, who had not been paid at all for the price of goods supplied for a long time until 2011 since the first agreement of this case was concluded in about 2006, would agree to get covered for the outstanding amount not by direct payment but by new businesses ordered and increase in product rice while determining the outstanding amount to be paid to the petitioner by the respondent, it is difficult to believe as argued by the respondent that it was agreed to cover the finalized outstanding amount of US$749,615 through the new businesses ordered and increase in product rice.
[11].
Therefore, the respondent is liable for the payment of US$ 749,615, which is the petitioner’s outstanding amount of payables incurred until March 31, 2011 through the agreement of this case, to the petitioner in accordance with the receivables and payables settlement agreement dated May 13, 2011.

(2) Existence or inexistence of the petitioner’s receivables for the price of goods according to Type 1 transactions since April 1, 2011

[12].
In case of the receivables for the price of goods according to Type 1 transactions to be paid to the petitioner by the respondent, since the receivables for the price of goods incurred until March 31, 2011 was settled by the receivables and payables settlement agreement on May 13, 2011, the existence or inexistence of the receivables for the price of goods according to Type 1 transactions incurred since April 1, 2011 is examined below.
[13].
It can be recognized as a fact based on the contents of the petitioner’s Exhibit Nos, 4, 18, 20 and21 (including each branching number) that the petitioner continued export products to the customers including GM after the above receivables and payables settlement agreement, but in view of the following facts recognized through each evidence described above, the contents of the petitioner’s Exhibit No. 2 and the respondent’s Exhibit Nos. 6 and 7 and the overall intent of the trial, i.e. □ the fact that the petitioner is the party which entered into a product supply agreement directly with the customer in case of Type 1 transactions, □ the fact that the customers including GM are listed as the purchaser of the relevant export items or the overseas customer on the export invoice provided as the evidence of the petitioner’s receivables for the price of goods of Type 1 transactions incurred by the respondent and the other party of the invoice is also the same, and □ the fact that Article 9 of the second agreement of this case states that the petitioner and the respondent "should pay the quoted price received by the Korean corporation directly from the customer and submitted to the U.S. corporation and the difference excluding the ACR related amount as the price of sale to the account designated by the U.S. corporation," and it was agreed. through the markup agreement and the escrow agreement that the price of goods sold to the customer will be paid to the escrow account from May 3, 2011, the point that the respondent has received the payment for the goods sold directly from the customer must be proved in spite of the contents of the agreement of this case described above in order that the petitioner’s claim against the respondent can be recognized.
[14].
However, the evidences submitted by the petitioner alone are not sufficient to recognize that the respondent has received the payment for the goods sold of Type 1 transactions from the customer and no other evidence proves this either.
[15].
However, since the respondent recognize that the respondent has received US$ 13,821.49 directly from the customer as part of the payment for the goods sold of Type 1 transactions and has to pay this to the petitioner, the petitioner’s claim for the payment of the goods sold of Type 1 transactions has grounds within the scope of US$ 13,821.49.

(3) Existence or inexistence of the petitioner’s receivables for the price of goods according to Type 2 transactions since April 1, 2011

[16].
Now, the existence or inexistence of the receivables for the price of goods according to Type 2 transactions incurred since April 1, 2011 shall be examined.
[17].
According to the contents of the petitioner’s Exhibit Nos. 2, 3, and 22 - 24 (including each branching number), it is recognized that the petitioner continued to export products to the respondent after the receivables and payables settlement agreement described above, and Article 10 of the second agreement of this case states that "the above section 2-9 is applicable only to the finished automobile manufacturers, and in case of companies, the U.S. corporation will take orders as the contracting party and the U.S. corporation shall pay the sales proceeds to the Korean corporation.
[18].
However, in view of the following facts recognized through each evidence described above, the contents of the petitioner’s Exhibit No. 34 and the respondent’s Exhibit Nos. 6 and 7 and the overall intent of the trial, i.e. □ Clause 1 of Article 1 of the Markup agreement specifies that "the items subject to the combined collection of payments and the sales markup shall be all products for which DMTS Inc. receives orders from customers. However, the products delivered to Korea and China on the basis of the location of the relevant customer and the plant shall be excluded from the objects of application but other regions will be included in the application," the petitioner and the respondent seem to have agreed to apply the combined collection of payments and the sales markup to all products for which the respondent receives orders from the customers in principle regardless of the type of transaction except that the petitioner and the respondent excluded only certain regions through the markup agreement, □ the fact that the petitioner also recognizes that a substantial portion of the payment for the goods sold as Type 2 transactions was received into the escrow account, and □ the fact that Type 1 transaction customers and Type 2 transaction customers are overlapped significantly and in view of the point that the customers which sent the payment for the goods sold as Type 2 transactions to the escrow account include GM, which is one of the major customers of Type 1 transactions, and a substantial number of its subsidiaries, and thus it is difficult to use a different method of paying the price of the goods sold depending on the type of transaction for the same customer, it is believed that the payment of the price of the goods sold has been agreed to be sent to the escrow account in case of Type 2 transactions as well in accordance with the markup agreement and the escrow account in principle.
[19].
If so, the petitioner has a duty to contend and prove in detail in which transactions among Type 2 transactions the payment for the goods sold are not to be sent to the escrow account but the respondent shall receive the payment for the goods sold directly from the customers. However, the contents of petitioner’s Exhibit Nos. 2, 3, and 22 - 24 (including each branching number) alone are not sufficient to recognize this and no other evidence proves this either.
[20].
However, since the respondent recognizes that the respondent has received US$ 801,324.32 directly from the customers as the payment for the goods sold of Type 2 transactions and has a duty to pay this to the petitioner, the petitioner’s claim for the payment of the goods sold of Type 2 transactions has grounds within the above scope (The petitioner is seeking the compensation for the loss incurred by delay from June 30, 2012 for the outstanding amount of the price of the goods sold as Type 2 transactions but the outstanding price of the goods sold as Type 2 transactions claimed by the petitioner include the payment for the products exported from June 30, 2012 to February 22, 2013, and the amount of the payables for the goods sold recognized by the respondent as being liable to the petitioner among them is US$289,255.61.
[21].
Since the respondent doesn’t seem to recognize the compensation for the loss incurred by delay from June 30, 2012 for the above amount of US$ 289,255.61, and the payment due date for the price of the products exported from June 30, 2012 to February 22, 2013 has not been claimed or proved expressly, only the loss incurred by delay from February 23, 2013 will be recognized for the above amount of US$ 289,255.61).

(4) Existence or inexistence of the petitioner’s die cost receivables

[22].
Now, the die cost claimed by the petitioner will be examined. The petitioner claims that it needs to receive the die cost from GM but the respondent has received the die cost, which should have been received by the petitioner, from GM without any authorization and didn’t pass this to the petitioner. However, any content about the die cost couldn’t be found at all in the first and second agreements of this case, the markup agreement and the escrow account, and the petitioner’s Exhibit Nos, 25 to 27 are not sufficient to prove that □ the petitioner and GM entered into an agreement stating that if the petitioner makes and supplies dies, GM will pay the die cost to the petitioner, □ the petitioner made and supplied dies to GM in accordance with the above agreement, but □ the respondent received from GM the die cost which should have been received by the petitioner, and there are no other evidences which prove that the respondent has a duty to pay the die cost to the petitioner.
[23].
However, since the respondent admits that it received from GM US$ 23,157, which is the die cost incurred before March 31, 2011 but was not included in the receivables and payables settlement agreement and US$ 20,454 among the die cost incurred since April 1, 2011, US$ 43,611.00 in total, and it has a duty to pay this to the petitioner, the petitioner’s claim for die cost have grounds within the scope of US$ 43,611.00 which has been recognized by the respondent.

(5) Regarding the deduction argument of the respondent

[24].
First, let us examine whether there is any unsettled markup profit not paid to the respondent despite of the fact that the respondent asserts above that the applicant directly received the sales proceeds (444.78 dollars in the case of the first transaction type, 1,404,64 dollars in the case of the second transaction type). The markup profit that the respondent claims is mostly either for the cases in which the applicant directly received the sales proceeds prior to March 31, 2011 or for the cases after entering into the escrow agreement of May 3, 2011, Therefore, the respondent’s right to claim markup against the applicant remains, or there must be proof regarding the special circumstance that the applicant directly received sales proceeds despite of the markup agreement and escrow agreement. However, since there is no evidence to prove the above, the respondent’s deduction argument in this area is groundless.
[25].
Next, let’s examine whether the difference in the mold cost in the amount of 200,596.96 dollars as asserted by the respondent exists. The information contained in evidence Eul 79, 82, 86, 107, 108, 120 and 121 are not sufficient to acknowledge that there is any difference in the mold cost that the respondent should be paid by the applicant and there are no other evidential matters to conclude other-wise. Therefore, the respondent’s deduction argument in this area is groundless.
[26].
Lastly, let’s examine the assertion of the respondent that since the respondent paid the applicant USD 716,421.13 dollars for products by bank transfer after July 2010, this amount should be deducted. According to the information contained in evidence Eul 95, it can be acknowledged that the respondent paid the applicant USD 716,421.13 dollars after July 2010. However, the amount paid prior to March 31, 2011 had already been settled through the settlement agreement, so this amount cannot be subject to deduction. Rather, it is appropriate that out of the above amount of USD 716,421.13 dollars, the deduction should be made from the amount of USD 230,990.07 dollars paid to the applicant after April 1, 2011.
[27].
Then, the amount of the applicant’s remaining claim against the respondent related to the products supplied is USD 584,155.74 (13,821.49 dollars + 801,324.32 dollars = 815,145.81 dollars - 230,990.07 dollars).

D. Conclusion

[28].
Therefore, the respondent has the obligation to pay the applicant settlement amount of USD 749,615 in accordance with the settlement agreement, the amount of USD 584,155.74 for the products supplied after April 1, 2011 and the amount of USD 43,611.00 for the unpaid mold cost for the total payment of USD 1,377,381.74 dollars.

3. Decision regarding the respondent’s counter claim

A. respondent’s assertion

[29].
(1) The respondent spent USD 785,312.32 after the settlement agreement in order to provide engineering, quality support and related services after the placement of the product order. Therefore, the applicant has the obligation to pay the respondent the above amount incurred for providing services in accordance with the second agreement in this case.
[30].
(2) In accordance with the markup agreement and escrow agreement, the applicant has the obligation to pay the respondent the markup profit corresponding to 11 % of the product sales proceeds. Also, since the amount deposited into the escrow account after June 16, 2011 to May 30, 2013 for products supplied is USD 8,896,175.91, the applicant should pay 11% of the amount or USD 978,579.35 to the respondent as the markup profit. However, since the respondent was paid only USD 481,982.53 dollars out of the above markup profit due to the provisional seizure of the escrow account by the applicant, the applicant has the obligation to pay the respondent the remaining markup profit in the amount of USD 496,596.82. (Although the respondent asserts through the respondent’s preparatory document dated December 13, 2013 that the respondent should receive the markup profit generated during the period between June 2013 and July 2013, the respondent stated clearly through the preparatory document dated July 29, 2013 that the respondent would not claim this amount, so the claim of the respondent regarding this area will not be accepted.)

B. Decision

(1) Whether the respondent’s claim against the applicant for support services expenses incurred

[31].
The respondent asserts that it was agreed through the second agreement in this case that the applicant would bear the expenses incurred by the respondent in the process of providing the support services, and that the applicant has the obligation to pay the respondent for the expenses related to the support services since the respondent carried out not only sales activities to receive product orders, which the respondent has the obligation to perform, but also support services, which the applicant has the obligation to perform.
[32].
First, let’s examine the details of the second agreement in this case: ① Article 6 and Article 9 of the second agreement in this case recognize the markup profit of the respondent, thereby stipulating compensation for the respondent’s performance of the services; and ② Under Article 6,b, which the respondent cites as the basis for the claim that the respondent should be paid for the support services, it is stated that "if necessary" the US subsidiary may support the process and that the Korean subsidiary shall bear the expenses. When considering these provisions, it seems that the applicant and the respondent agreed through the second agreement that the respondent’s performance of sales dealership activities would be paid as markup profit, in principle. However, it seems that for situations requiring support services of the respondent after receiving orders, the parties agreed that the applicant would bear the expenses through discussions within the reasonable range.
[33].
Also, the following can be acknowledged based on the information contained in evidence Gap 7, evidence Gap 9 and evidence Eul 1, 3, 26, 36, 37, 38, 69 and 70 (including subcategories) and based on the comprehensive examination: ① In light of the fact that right after entering into the second agreement in this case, the employees of the applicant and the employees of the respondent who visited the customers including GM mentioned about how to process expenses related to the engineering work of the respondent, it seems that there was no full agreement between the applicant and the respondent regarding the range of service expenses to be borne at the time the second agreement was entered; ② Afterwards, the respondent demanded the applicant to pay for the service expenses, but the applicant requested adjustment by citing that the amount of service expenses was excessive; and ③ Although the respondent and the applicant settled the expenses related to support services incurred up to May 31, 2011 through the settlement agreement, even after the settlement agreement, the parties still disputed the range of support service expenses. When considering these facts, it cannot be determined that there was an agreement reached between the applicant and the respondent that the respondent would incur support service expenses at its own discretion and that the applicant would bear these expenses.
[34].
Therefore, evidence Eul 48, evidence 55 and evidence 59, which are the support service bills that the respondent sent to the applicant are not sufficient to acknowledge that the applicant has the obligation to pay the support service expenses to the respondent, and there is no evidence to conclude otherwise.

(2) Whether the respondent has a claim against the applicant for markup profit

[35].
Next, let’s examine whether the respondent has a claim against the applicant regarding the payment for the products deposited into the escrow account. According to the information contained in evidence 6 and evidence 7, the applicant has the obligation to pay the markup profit to the respondent. There is no dispute that the markup rate of the respondent is 11% of the proceeds for products, According to the information contained in evidence 13, it can be acknowledged that on August 29, 2012 the applicant applied at the Seoul Central District Court for provisional seizure on the sales markup payment claim that the respondent has against Korea Foreign Exchange Bank with the claim of "sales proceeds of automobile rubber parts payable" against the respondent as the claim (claim in the amount of 600 million won), and the provisional seizure application was accepted by the above court on September 7, 2012 (2012Ka no. 3571).
[36].
However, according to the information contained in evidence Eul 7, it can be acknowledged that the parties agreed on the following: ① Korea Foreign Exchange Bank is to withdrew the sales markup amount equal to 10% of the amount deposited into the escrow account jointly held by the applicant and the respondent by automatic transfer without issuing any separate application and then to send the amount to the respondent’s account; ② The amount deposited into the escrow account less the above sales markup amount and related fees to be withdrawn by automatic transfer without issuing any separate application and to be sent to the applicant’s account; and ③ the applicant and the respondent would present a payment agreement jointly signed by the applicant and the respondent in the event that the payment is to be made differently. According to the above acknowledged facts, once the proceeds for products are deposited into the escrow account, unless a payment agreement jointly signed by the applicant and the respondent is presented, 10% of the proceeds for products is to be immediately sent to the respondent’s account. Therefore, the applicant doesn’t have any authority to dispose of the proceeds for products, and the markup profit equal to 10% of the proceeds for products is in effect directly deposited into the respondent’s account.
[37].
Then, it is appropriate to deem that once the proceeds for products are deposited into the escrow account, the amount equal to 10% of the sales proceeds have been paid to the respondent. Also, even if the applicant provisionally seized the claim for sales markup proceeds that the "respondent has against Korea Foreign Exchange Bank" (claim for 10% of the amount deposited into the escrow account), this is merely a case of provisional seizure triggered by a different reason for the amount the payment of which was completed. Furthermore, it is difficult to deem that the above case is different from the case in which a third party provisionally seized the claim the respondent has against Korea Foreign Exchange Bank. Therefore, it is difficult to deem that the applicant didn’t pay the respondent the markup profit that should be paid to the respondent.
[38].
However, since the markup profit that the respondent is to be paid through the escrow account is 10% of the sales proceeds, so the remaining 1% should be paid directly by the applicant to the respondent. Therefore, the respondent’s markup profit claim is reasonable up to the amount equal to 1% of the sales proceeds deposited into the escrow account.
[39].
Therefore, the applicant has the obligation to pay the respondent USD 88,961.75, which is 1% of the sales proceeds in the amount of USD 8,896,175.91 (rounded to the nearest cent) deposited into the escrow account after June 16, 2011 up to May 30, 2013.

C. Conclusion

[40].
Therefore, in accordance with the assertion made by the respondent, the applicant has the obligation to pay the markup profit of USD 88,961.75, which is equal to 1% of the sales proceeds, and the late penalty accrued on the day following the day on which the respondent’s reasons for counter claim and application to modify reasons for claim dated June 26, 2013 were delivered.

4. Decision on the offset argument

[41].
Although the respondent expressed through its response that in the event that it is determined that there is no settlement agreement, it would offset the respondent’s claim on support service expenses and the applicant’s claim on sales proceeds, after the submission of the respondent’s reasons for counter claim and application to modify the reason for claim on June 26, 2013, the respondent has not explicitly asserted its intention to offset these amounts.
[42].
However, when considering the fact that the fundamental purpose of the respondent to preliminarily make the offset argument is to express its intention to offset the difference in the event that the amount of the respondent’s claim is less than the amount of the applicant’s claim, the fact that the above offset argument has never explicitly been withdrawn, and the fact that the goal of the applicant and of the respondent is to settle the rights and obligations under the agreement in this case, the claim of the applicant and the claim of the respondent are to be offset up to the equal amount.
[43].
Also, in the case of offset date, by considering the fact that it is difficult to confirm the applicant’s payment due date and the respondent’s payment due date and the fact that the payment due dates of the claims were set on different dates after 2011 up to 2013, it shall be deemed that the payment due date of the applicant and the payment due date of the respondent arrived on June 29, 2012, which is one day before the day the applicant asserts as the starting point for calculating the late penalty.
[44].
Then, since it should be concluded that the respondent’s claim against the applicant was extinguished on June 29, 2012, which is the offset date, up to the amount equal to the applicant’s claim against the respondent, the amount of the applicant’s claim against the respondent is USD 1,288,419.99 (1,377,381.74 dollars - 88,961.75 dollars) and the related late penalty. However, as mentioned previously, out of the applicant’s claim on sales proceeds, for the amount of USD 289,255.61, since only the late penalty that accrued starting on February 23, 2013 is acknowledged, eventually the respondent has the obligation to pay the applicant USD 1,288,419.99, a late penalty accruing starting June 30, 2012 for USD 999,164.38 out of the above amount and a late penalty accruing starting February 23, 2013 for USD 289,255.61 until these amounts are paid in full.
[45].
Also, the Supreme Court deems that in the case a claim denominated in a foreign currency is to be converted to our country’s currency, the translation date should be the point at which the fact-finding proceedings arguments end (Supreme Court’s judgment dated October 25, 2012 2009Da77754 decision). If the final exchange rate of 1,151.00 won per dollar posted by Korea Foreign Exchange Bank on July 8, 2013, which is the final date of trial of this case, is applied to the above claim in accordance with the above decision, the amount of claim of the applicant against the respondent is equal to 1,482,971,408 won (rounded to the nearest won) and the related late penalty.

5. Decision on whether the agreement has been cancelled or not

[46].
Although the applicant added the purpose of claim seeking through the purpose of claim dated May 28, 2013 and through the reasons for claim modification application to confirm that the contractual relationship between the parties formed in accordance with the first agreement and second agreement have been terminated, on the purpose of claim and reasons for claim modification application dated August 2, 2013, the applicant removed this area from the purpose of claim without providing any specific reasons. However, whether the contractual relationship in this case exists by considering the following facts: ① The parties disputed on whether the contractual relationship in this case exists, and sufficient assertions and evidences regarding this have been submitted; and ② Although on the purpose of claim and reasons for claim modification application dated August 2, 2013, the applicant removed the purpose of claim of confirming the existence of the contractual relationship in accordance with the agreement in this case, the applicant didn’t explicitly disclose the intention of excluding the above from the list of applications.
[47].
Since the applicant notified the respondent on October 30, 2012 its intention to cancel the agreement in this case by citing that the respondent didn’t pay the sales proceeds, it is appropriate to deem that the agreement in this case was cancelled appropriately by the cancellation notification of the applicant made on October 30, 2012 due to the nonperformance of the respondent’s obligation to pay the sales proceeds when considering the following facts: ① The fact that even according to the assertion of the respondent, the sales proceeds for both the 1st transaction type and 2nd transaction type should be deposited into the escrow account; ② The fact that despite of the above, the respondent didn’t pay the sales proceeds for the 2nd transaction type by citing such issues as the settlement of the expenses for support services; and ② The fact that as we examined previously it is difficult to acknowledge the support service expense claim asserted by the respondent.
[48].
However, the Article 5th of the second agreement of this case provides that the business secured and the opportunities under progress through quotation and negotiation before the expiration of agreement, should be promoted while the delivery is under way in the same estimate method and conditions as before the expiration of the agreement even if the agreement has been expired" and thus, with regard to the markup earning, the respondent’s markup earning corresponding to 11 % of the price of goods must be kept recognized while the goods generated by the respondent are delivered.

6. Conclusion

[49].
Then, the respondent has the obligation to pay the applicant 1,482,971,408 won as well as a late penalty for 1,150,038,201 won from June 30, 2012 and a late penalty for the remaining 332,933,207 from February 23, 2013 to April 10, 2014, which is the arbitration decision date for this case, during which the respondent disputed on the existence of the obligation to perform its obligations and the scope of obligations, at the rate of 6% per annum as stipulated by the commercial law. After April 11, 2014, the late penalty rate of 20% per annual in accordance with the exemption law on the facilitation of litigations will apply. The applicant’s above claim is to be accepted because the claim is reasonable. However, the remaining claims of the applicant and the respondent’s counter claim are to be rejected because they are unreasonable. Regarding the payment of arbitration cost, the arbitration board unanimously decided that the applicant shall bear the expense related to this petition and the respondent shall bear the expense related to the counter claim as stated in the text at it applies Clause 2 of Article 61 of the Arbitration Rules to this case.
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