Both to Blame Compensation Liability for Cargo Loss

2015-08-12 16:01:24 BJT

Ni Xuewei[ Judge of Guangzhou Maritime Court.]

On 15th April 2004, Guangdong Fuhong Edible Oil Co., Ltd (hereinafter ¡°Fuhong¡±) purchased 55,000 tons of Brazil soybean from Louis Dreyfus Asia Pte., Ltd at a C&F price of 369.26 USD per ton. On 23rd August, Fuhong made the cargo payment via a letter of credit in the sum of 177,884,911.77 CNY plus interest (currency hereinafter refers to CNY if no special instructions are given). On 27th April, Fuhong insured the cargo concerned against All Risks for 22874197.50 USD with Ping An Insurance Shenzhen Branch (hereinafter ¡°Ping An Shenzhen¡±).

From 4th May to 7th May 2004 at Santos, Brazil, the soybean involved was loaded onto the Korea-registered vessel ¡°Hanjin Tacoma¡± which was owned by Hanjin Shipping Co., Ltd. On 7th May, the ship¡¯s agent Transatlantic Carriers (Agenciamentos) Ltd issued the original order bill of lading in triplicate. With shipper¡¯s endorsement, the Bs/L were held by Fuhong.

At 0400hrs of 16th June 2004, ¡°Hanjin Tacoma¡± arrived at Zhanjiang, China and dropped her anchor awaiting berthing. On 18th June, Fuhong eventually obtained the ¡°Approval on Review of Agricultural Genetically Modified Organism Marks¡± and the ¡°Safety Certificate for Agricultural Genetically Modified Organism (Import)¡± which were required of soybean cargo by the Ministry of Agriculture of China. At 1024hrs of 19th June, the Master submitted the Notice of Readiness to advice that the ship was ready for discharge. But it was not until 27th July that Fuhong was granted the AQSIQ ¡°Approval on Quarantine Inspection of Imported Animals and Plants¡± for the cargo concerned. On 1st August, ¡°Hanjin Tacoma¡± began to discharge the cargo and finished discharge on the third day of September.

At 1600hrs of 1st August 2004, Fuhong and other surveyors, when carrying sample survey of the cargo concern, found the soybean in moldy and damaged condition. In the next day, Fuhong sent a Notice of Loss to Ping An Shenzhen.

During 2nd August to 10th September 2004, CCIC Guangdong Branch carried out a survey of the soybean concerned at the Port of Zhanjiang. The survey report came out at 11th October with the conclusions as follows: altogether 5868.428 tons of cargo got damaged, which was mainly caused by no ventilation or poor ventilation in the cargo holds. For this reason, the cargo was seriously sweaty during the 86-day voyage and the days waiting for berthing.

In Civil Ruling (2005) GHFCZ No.211 rendered by Guangzhou Maritime Court concerning the action between Fuhong and Ping An Shenzhen for dispute over marine insurance contract, it was concluded that: the presence of heat and sweat resulting from poor ventilation in the cargo holds of ¡°Hanjin Tacoma¡± was the major cause of damage to the cargo being insured; the loss to the 5868.428 tons of cargo shall be compensated in the sum of 17422973.76 CNY(with 0.3% deductible) and the survey of cargo damage charged 345966.72 CNY. Therefore, the court adjudged Ping An Shenzhen to pay a total sum of 17768940.48 CNY plus interest to Fuhong.

After the said ruling came into effect, Ping An Shenzhen paid a total amount of 19245818 CNY of insurance compensation plus interest to Fuhong on 1st June 2006. After that, Ping An Shenzhen filed the subject case, requesting Hanjin Shipping to compensate 19245818 CNY plus interest calculated till 1st June 2006.

On hearing the case, Guangzhou Maritime Court held that: the subject case concerned the dispute over contract of carriage of goods by sea filed by Ping An Shenzhen who had became subrogated to the right of the insured. Fuhong was the lawful holder of the bill of lading and the lawful party to take delivery of the soybean cargo. The Defendant Hanjing Shipping and Fuhong were bounded by a contract of carriage of goods by sea, which was testified by the bill of lading.

Hanjin Shipping, as the carrier, shall be responsible for the soybean on board from the period of 4th May 2004 to 3rd September 2004. Although the Master submitted the Notice of Readiness early on 19th June, owing to which the time of discharge should have been counted from 0800hrs of the next working day following the submission of the notice, the cargo was not discharged within the time prescribed. Therefore, the submission of the notice did not constitute the end of Hanjin Shipping¡¯s liability for the storage and custody of the cargo on board. Rather, Hanjin Shipping shall be liable for the cargo until the date when the cargo was actually discharged rather than when the vessel became ready for discharge.

¡°Hanjin Tacoma¡± sailed from Santos, Brazil, crossed the equator, and arrived at Zhanjiang, China. This was a journey from winter to summer that crossed a wide range of temperatures. When sailing on a scheduled route within a specific period of time, the vessel should have properly controlled the temperature and ventilation of the cargo holds. Failure in temperature control would increase the moisture content of the soybean cargo and damage the cargo because humidity in warm air would condense into liquid when the vessel was sailing from cold waters to tropical seas. But Hanjin Shipping did not take any steps to control the temperature or humidity of the holds and all the air vents were kept closed during the journey from 8th May to 16th June. It was hard to say Hanjin Shipping had exercised due diligence to attend to the cargo.

The Master delivered the Notice of Readiness at 1024hrs of 19th June 2004, notifying that the vessel was well prepared for discharge. So the discharge should have started at 0800hrs of 20th June according to agreements in the sales contract. However, the soybean cargo was a genetically modified product, which was required of special approval by Chinese authorities and Fuhong failed to obtain the AQSIQ ¡°Approval on Quarantine Inspection of imported Animals and Plants¡± before 20th June. It was not until 27th July that Fuhong got the approval to met the requirements of laws and was able to discharge the cargo. A 38-day delay in the import approval formalities for transgenic soybean directly caused the delay of cargo on board up to 38 days. The increased portion of loss shall be undertaken by Fuhong.

Although Hanjing Shipping was to blame for not exercising due obligation for cargo custody, it had submitted the Notice of Readiness and had made good preparation for discharge. If the cargo could have been discharged in time, the losses to cargo would be less. But since the cargo had been damaged, it was even more crucial to take effective measures to stop the loss. In the event that extra measures were not necessary, the party that had the obligation to take due measures to stop the loss should be more proactive in taking such measures rather than let the loss go unchecked and become heavier. Therefore, according to Article 119 of the Contract Law of the People¡¯s Republic of China, the consignee Fuhong should have made discharge arrangements in time. But Fuhong only obtained the import approval after 38 days of the sending of the Notice of Readiness. As such, Fuhong could not avoid the liability for the increased losses occurred. Both of the parties were to blame for the cargo loss in the subject case. Considering Hanjin Shipping¡¯s failure in cargo custody and Fuhong¡¯s failure to take effective measures to stop loss from increasing, Hanjing Shipping shall be 70% liable for the loss and Fuhong shall be 30% liable for the loss.

Guangzhou Maritime Court adjusted: the Defendant Hanjin Shipping paid 13472072.60 CNY for the cargo loss plus interest to the Claimant Ping An Insurance Shenzhen Branch; the court overrule other claims made by the Claimant.

Neither of the parties was satisfied with the verdict, so they made appeal to the Higher People¡¯s Court of Guangdong Province. In the second-instance hearing, the parties concerned reached an accord under which Hanjin Shipping agreed to compensate 3105000 USD to Ping An Shenzhen before 15th January 2012 as the full and final settlement of the subject case.


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