Carrier is not Responsible for Cargo Loss Incurred before the Cargo Arrives at the Port of Destination

2015-08-12 16:02:18 BJT

Ni Xuewei/Fu Junyang[ Judge of Guangzhou Maritime Court.]

On 9th May 2009, Jiangxi Rare Earth & Rare Metals Tungsten Group (¡°Rare Earth¡±) entered into a sales contract with Amaxus International. LLC. (¡°Amaxus¡±) under which Rare Earth agreed to buy 500 tons of no.2 scrape copper from Amaxus. Ocean Honour International Limited (¡°Ocean Honour¡±) was assigned as the export agent for Amaxus. At the port of loading, SGS, CCIC and other peer survey institutes issued pre-shipment survey reports and conformations of quantity/quality of the scrape copper to be shipped to China. From June 2nd to 6th, 19 containers, which were affixed with the seal of RCL Feeder Pte., Ltd (¡°RCL Feeder¡±) but without the seal of CCIC PHILIPPINES.INC (¡°CCIC Phils¡±), were carried to Manila. On 9th June, RCL Feeders Phils., INC (¡°RCL Phils¡±) issued the bill of lading and provided the attached documents on behalf of RCL Feeder, which indicated: SHIPPER Ocean Honour, C/O Goldsphere Metal Marketing, CONSIGNEE and NOTIFY PARTY Rare Earth, CARRIER ¡°OTANA BHUM¡±, PORT OF LOADING Port of Mania, PORT OF DISCHARGE Pingzhou Wharf, Nanhai of Guangdong; the 19 40 TEU containers were packed, tallied and sealed by SHIPPER; shipper described the cargo as 503.46 tons of NO.2 SCRAPE RED COPPER; the column of Container no./Seal no. recorded the container numbers of the 19 containers and the seal number of the shipping company; the bill also indicated that a full set of container information, including container number, seal of shipping liner, seal of CCIC Phils and the weight of each container, could refer to the B/L annex.

 ¡°OTANA BHUM¡± arrived at Hong Kong on 9th June 2009. During transshipment, container REGU4999571 got damaged and the inside cargo was transshipped into container REGU4213152 which was then affixed with a CCIC seal 075153. But in its survey report, Standard Maritime & Cargo Survey described the cargo being transshipped as something like ¡°soil and stones¡±. On 12th July, the 19 containers were shipped from Hong Kong to Pingzhou, Nanhai of Guangdong Province. The Claimant, CCIC Phils and representative of RCL Feeder carried a joint survey of the cargo. Findings included: each container bore an RCL seal and container REGU4213152 even bore an extra CCIC seal 075153; all the containers were in good appearance and with proper sealing, and the structure and opening of the containers were in good condition; the cargo inside was a mixture of soil, stones, rusted iron chunks and waste iron, far away from the scrape copper as indicated on the bill of lading.

On 19th May 2009, CCB Nanchang Hongdu Branch, upon the instruction of the Claimant, made out an irrevocable Letter of Credit, against which the bank required the Claimant to provide a full set of clean on board B/L (marking freight payable at destination, vessel¡¯s name, and the notify party and consignee as the Claimant), signed commercial invoice, signed packing list, quality/quantity certificates at loading port by SGS, CCIC or other peer survey institutes, and CCIC pre-shipment survey report. On 20th June, the Claimant paid the cargo payment to the bank against which it became the holder of original bill of lading.

On 14th August 2009, RCL Phils requested Philippine National Bureau of Investigation (NBI) to investigate into the containers involved. On 8th February 2010, NBI released its investigation report, concluding that Rare Earth was caught in a fraud jointly contrived by several sides: SHIPPER Goldensphere took the first step to entrust CCIC Phils to survey the 500 tons of scrap copper and the copper was packed into containers at the survey scene but the containers were affixed with unnamed seal rather than the RCL seal and then the CCIC seal; after that, the containers were carried to other place rather than be directly carried to Manila terminal, during which the seals of CCIC Phils and the counterfeited seal were destroyed so as to replace the scrape copper cargo with equal weight of other substances. The containers had been affixed with the RCL seal before they arrived at Manila terminal.

On 3rd August 2009, Rare Earth made a complaint to Guangzhou Maritime Court: the seal number recorded in the bill of lading issued by RCL Phils B/L was false, which resulted in wrongly remittance of the cargo payment upon the maturity of the letter of Credit. The carrier RCL Feeder and the actual carrier Regional Container Lines Pte., Ltd (¡°RCL¡±), whose failure in exercising due diligence to attend to the cargo had resulted in the loss of CCIC Phils seals, shall undertake relevant tortuous liabilities.

The Defendants RCL Feeder, RCL Phils, and RCL made defense: the cargo loss was caused by trade fraud. The cargo had been replaced before they arrived at the storage yard of the destination port, namely, the cargo loss did not occur during the period of the carrier¡¯s responsibility. The ship¡¯s seals at the destination port remained the same with that at the loading port, which means the Defendant had fulfilled the obligation of delivery. The Defendants were not obligated to deliver the cargo as per the terms and conditions set forth in the B/L annex.

On hearing the case, Guangzhou Maritime Court held that: this was a case on dispute over liability for property lost at sea. The Claimant might raise a default lawsuit or a tort lawsuit as the B/L holder, but the court would hear the case as a tort lawsuit according to the Claimant¡¯s orientation of complaint.

Investigation revealed that the cargo concerned had been replaced before being consigned to the carrier at the port of departure. During the consignment, the containers were not affixed with the seal of CCIC Phils and the Defendants denied taking any infringement acts to destroy the seals. In the condition that the RCL seals were absent on the containers but RCL Phils still issued the B/L and recorded such information on the B/L, it could be concluded that RCL Phils wrongly issued the bill of lading. The L/C which was used to effect the payment only required the B/L to be a full set of clean on board B/L (marking freight payable at the destination port, vessel¡¯s name, and notify party and consignee as the Claimant) rather than require the B/L to record the number of CCIC Phils seals. That means whether the B/L bore the seal number or not would not affect the effectiveness of the L/C payment. To put differently, RCL¡¯s mistake in issuing the bill of lading had no causal relations with the L/C payment. Therefore, the court overruled Rare Earth¡¯s request against the three Defendants for tortuous liabilities since such requests were not based on factual or legal grounds.

Rare Earth was not satisfied with the first-instance verdict and lodged an appeal to the Higher People¡¯s Court of Guangdong Province. On hearing the case, the Higher People¡¯s Court of Guangdong Province held that RCL Feeder only put the cargo descriptions and particulars of containers on the B/L as instructed by the shipper. RCL Feeder also marked on the B/L annex of the seal numbers but did not indicate that the seal belonged to CCIC Phils. And in the terms of FCL delivery, RCL Feeder was only responsible for the condition of the full container. Now that the containers had been delivered in good appearance and condition and with proper seals, it shall be admitted that RCL Feeder had completed the delivery obligation as set forth in the bill of lading. Therefore, the court upheld the original ruling and rejected Rare Earth¡¯s appeal against RCL for tort upon the ownership of cargo since such appeal were not based on factual or legal grounds.

 

 







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