Yu-Lai Jin August 12 2015 Burden of proof in cases involving delivery of goods without original bills of lading KaiRong Law Firm | Shipping & Transport - China Yu-Lai Jin Shipping & Transport FactsIssuesOutcomeCommentFactsIn 2011 the plaintiff company contracted with a Spanish company to sell light-emitting diode panels and other electronic products worth a total of $670,087.60. The first defendant, as the agent of the second defendant, issued bills of lading on its behalf under free on board (FOB) trade terms. The plaintiff was the shipper and the second defendant was the carrier according to the bills of lading. The vessel departed on December 18 2011 and arrived at the destination port on January 13 2012. However, the plaintiff claimed that it never received the remaining payment of the goods (amounting to $603,078.84). In June 2013 the plaintiff filed suit before the Guangzhou Maritime Court against the defendants on the grounds that they had delivered the goods without the original bills of lading. The plaintiff requested that the court order the defendants to:compensate the plaintiff for Rmb3,841,612 ($603,078.84);compensate for the corresponding interest accrued from January 1 2012 to the date of the court's judgment, with the interest rate set at the People's Bank of China one-year lending rate; andbear the court fees.IssuesWas the first defendant liable?The plaintiff pursued the defendants for joint and several liability. The defendants refuted this allegation, contending that there had been neither a contract of carriage of goods by sea nor a contract of forwarding service between the plaintiff and the first defendant. The defendants based their contention on the following grounds:The bills of lading indicated that the carrier was not the first defendant, but rather the second defendant; the first defendant had acted as the second defendant's agent in this case. The second defendant had filed its bill of lading with the Ministry of Transport and employed the second defendant to issue bills of lading on its behalf.The plaintiff had no evidence to show that the first defendant was the plaintiff's forwarder. In this case, the trade terms were FOB, so the consignee arranged the transport. The first defendant's role was based not on the plaintiff's instruction, but rather that of the consignee.The invoice submitted by the plaintiff was for document, handling and customs clearance fees – not for freight. Thus, the invoice could not evidence a contract of carriage. The plaintiff was not the party on the commercial invoice and thus could not sue the first defendant.Had the goods been delivered without the original bills of lading?The plaintiff submitted to the court a report of the transition of the involved containers, which had been generated on the actual carrier's website, to prove that the second defendant had delivered the goods without the original bills of lading. The defendants scrutinised the report and found it incomplete and vague, contending that it did not prove that the second defendant had delivered the goods without original bills of lading.What was the amount of the plaintiff's loss?The plaintiff submitted the commercial invoice and the customs declaration to prove its loss. The defendants held that this evidence was insufficient, contending as follows:The plaintiff's loss could not be confirmed because the plaintiff did not submit the sales contract, evidence of its attempt to collect payment or a collection report to prove the existence and extent of its loss.The claim of $603,078.84 was inconsistent with the amounts noted on the customs declaration and the commercial invoices.The plaintiff's domicile was not in mainland China and the agreed currency of the payment was US dollars. Therefore, the plaintiff could not claim its loss in renminbi.Had the limitation period expired?Article 257 of the Maritime Code stipulates:"The limitation period of claims against the carrier with regard to the carriage of goods by sea is one year, counting from the day on which the goods were delivered or should have been delivered by the carrier."According to the bills of lading, the cargoes were shipped on board on December 18 2011 and the date of delivery should have been about a month later. As the plaintiff filed the case in June 2013, the limitation period had already expired.OutcomeFollowing mediation at the Guangzhou Maritime Court, the parties settled. The settlement agreement provided for the following terms:The second defendant was to pay $460,000 as settlement.The plaintiff was to cede to the second defendant all of its rights and claims under the bills of lading and those relating to this case.The first defendant bore no liability. The settlement paid by the second defendant was not to be deemed as acknowledgement of liability for delivery of goods without original bills of lading.The plaintiff would bear the court fees.The second defendant accordingly made recourse to the consignee.CommentArticle 2 of the Supreme People's Court Provisions on Certain Issues Concerning the Application of Law to the Trial of Cases Involving Delivery of Goods Without Original Bills of Lading states:"Where a carrier, in violation of laws, delivers goods without the original bill of lading (B/L), thus injuring the original B/L holder's rights under the B/L, the original B/L holder may request the carrier to bear the civil liability for the resultant loss."Article 4 stipulates that "[w]here a carrier bears any civil liability for delivery of goods without the original B/L, the provisions of Article 56 of the Maritime Code relevant to limited compensation liability shall not apply".As a result, it is easier for the original bill of lading holder to recover most of its losses in cases involving delivery of goods without the original bill of lading. However, the original bill of lading holder must still prove that it could not receive the goods at the discharge port with the original bill of lading, or that the carrier delivered the goods without the original bill of lading. Its losses must also be proved.In this case, the plaintiff submitted the original bills of lading and other evidence to shift the burden of proof to the defendants; the defendants could not refute the plaintiff's allegations, because the necessary evidence could not be located on account of the time that had passed. In such cases, it is important for the shipper to preserve original bills of lading, customs declarations, commercial invoices, sales contracts, evidence of its attempt to collect payment and collection reports, so that it may prove that it has suffered loss because of the carrier's delivery without the original bills of lading.Meanwhile, carriers must collect and preserve evidence that:the original bill of lading holder allowed the carrier to deliver the goods without the original bill of lading;the carrier had to deliver the goods at the port of discharge to the local customs or port authority in accordance with the laws governing the port of discharge, as stated in the bill of lading; orthe carrier delivered the goods according to the shipper's instructions if the shipper did not take delivery of them at the port of discharge.For further information on this topic please contact Jin Yu-Lai at Shanghai Kai-Rong Law Firm by telephone (+86 21 5396 1065) or email ([email protected]). The Shanghai Kai-Rong Law Firm website can be accessed at www.skrlf.com.