Guangzhou Maritime Court rules against the Carrier on cargo shortages

There are hundreds of shipments of grain cargoes shipped from South America to China yearly. It’s well-known practice in the chartering market, to insert the shore weight cargo figure in the Bill of Lading for shipments out of Brazil and some other South American ports.

 

Whilst, when discharging at Chinese ports, the CIQ (the local official body) measures the cargo quantity on arrival according to the vessel’s draft survey figure, which is usually less than the shore figure.

In practice, the difference between shore weight figure and draft survey figure could usually be reconciled to the extent of less than 0.5%, a recognized trade allowance that exonerates the Carrier from responsibility for shortage claims. However, the Club has noticed a trend that this is not always the case now.

Recently, a local Chinese regional maritime court in Guangzhou has handed down a judgment [perhaps include a foot note with the full name of the case] in favour of the cargo receiver, holding the Carrier liable for  cargo shortages of less than 0.5% of the Bill of Lading quantity. It is reported that the Receiver’s lawyer solicited a series of cases on the basis of the opinions of Deputy Chief Judge of the Fourth Civil Division of the Supreme People’s Court, which has the jurisdiction to hear  maritime cases.

It is the deputy chief judge’s opinion given at the National Maritime Trial Practice Symposium on June 16, 2017 that the 0.5% trade allowance defence is only available to the Carrier in circumstances where there has been no breach of,the  obligation to  take care of the cargo.; this essentially is a fault-based approach. If the evidence proves the Carrier was is at fault (e.g., the bill of lading is issued against the Shippers’ declaration and the LOI is issued when the Master knows the cargo is evidently short loaded at the port of loading), the Carrier will be deprived of this defence.

We have reviewed previous cases reported in respect of the trade allowance in other local maritime courts. There are conflicting judgments, but most of the reported cases favour the Carriers in respect of the trade allowance defence. One of the distinctions that can be drawn is that, in the present case, the Master when signing the Mate Receipt was aware of the fact that the Bill of Lading figure was higher than vessel’s draft survey figure, but he still confirmed the Shipper’s figure.

Therefore, the Carrier cannot avail itself of the defence that the difference is not his fault nor a “measurement error”, which is unaccountable if it is below the allowance of 0.5%, in the event that the innocent Receiver without any knowledge relies on the presentation of the Bill of Lading.

 

We note Owners’ Insurers have made some recommendations to their Members. Where Owners encounter similar issues for shipment to China, it is suggested:

  1. the draft survey report of either loading port or discharging port is not to be disclosed to the cargo interests, including shippers, consignees, and charterers;
  2. the draft report at the loading port should not be disclosed to anyone, including the cargo interest’s representative, the cargo interest’s surveyor, PRC customs authorities, PRC Maritime Safety Administration, port authorities, or shipping agents;
  3. the draft survey be named “Preliminary Information Advice” rather than “draft survey report.
  4. be cautious about demanding an LOI from the Shippers for a discrepancy at the loading port since it may be considered as evidence of the Carriers’ negligence in issuing a B/L by the Chinese courts.

However, we expect some practical difficulties for the Master and Owners to follow these suggestions. In practice, the situation may be  even more complicated. Master, shipper, Charterers, and other concerned parties may conduct their own draft surveys. The results of these surveys are often different.

Even if the Master could argue the cargo quantity stated in the Bills of Lading is furnished by the Shipper, the Carrier is still bound  to the Receiver who is the holder of that Bill of Lading in respect of that information. The Master may thereafter be asked to give explanations on what basis he finally decided to use the Shipper’s shore figure rather one of these draft survey figures.

Furthermore the Master may argue he is not obliged to state the cargo quantity in the Bill of Lading when he has reasonable grounds for suspecting that it does not accurately represent the goods actually received or  had no reasonable means of checking.

 

From Charterers’ perspective , we would note that:

  1. It is in Charterers’ interests to have an express warranty in the Charterparty that Owners and Master agree to enter the shipper’s shore figure in the Bills of the Lading.
  2. It would be better for Charterers to obtain an express warranty from the Sub-Charterers/Shipper that the shore figure they provided is correct or they have sufficient grounds to believe it is true.
  3. Without any provision to the contrary in the Charterparty, in the event of dispute concerning the cargo quantity at the loading port, Charterers shall make sure they have provided sufficient information and documents for the Master to decide the figure to be put in the Bills of Lading. Should the Master refuse to accept a reasonable figure, the time losses/delay would be for Owners’ account.
  4. Charterers or Shipper shall not purposely take any action to delay the departure of the vessel, e.g. instructions to the local agent not to issue the departure documents, and not to force the Master to sign the shore weigh figure.

 

Though China is not a case law country, the reasoning of this judgment might be persuasive and other regional maritime courts may take a  similar approach to this type of case. It is reported that the Carrier has appealed to the upper tier court, and the appeal judgment is not out yet. We will update once the judgment of the second trail is published.

 

(厦门建发物产有限公司与和平典范航运有限公司(PEACE PEARL SHIPPING SA)海上、通海水域货物运输合同纠纷的案件 (2020)粤72民初697号)

By Mengzhen Yu, Claims Executive, Shanghai Office