Sale by Grade refers to a method of trading in international commerce where the buyer and seller conduct transactions based on agreed grade standards for goods. The seller delivers goods according to the grade specified in the contract, and the buyer pays based on that grade. This term applies to goods whose quality specifications have been standardized and graded, such as agricultural products (wheat, cotton, coffee), mineral products, timber, etc. Usage scenarios: When goods are difficult to describe with specific specifications, or when the industry already has recognized grade standards, using Sale by Grade can simplify the transaction process. Precautions: 1) Grade standards must be clearly defined (e.g., international standards, industry standards, or mutually agreed upon); 2) The seller must ensure the delivered grade matches the contract, otherwise it constitutes a breach; 3) Grade standards may differ between countries, so they must be specified in the contract. Differences from other terms: Sale by Grade differs from Sale by Specification, as the former is based on grades while the latter is based on specific indicators; it is similar to Sale by Standard, but Sale by Standard usually refers to official or international standards, whereas Sale by Grade can be based on industry customs.
📝 Examples
1. The cotton under this contract is sold on the basis of the medium grade standard published by the International Cotton Advisory Committee (ICAC), and the goods delivered by the seller must meet that grade. (Note: Clarifies the source of grade standards to avoid disputes.)
2. We concluded the transaction on the basis of the industry-recognized Grade 1 soybean standard. If inspection upon arrival reveals a grade mismatch, the buyer has the right to claim. (Note: Emphasizes remedies for grade non-conformity.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
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