In May 2008 Jiangsu Saintek Co Ltd signed a contract with an overseas buyer, Toyco-D Ltd, to supply a large number of electronic toys. The terms of payment were 100% telegraphic transfer after shipping. Thereafter, Jiangsu Saintek - through its freight forwarding company, Runhang Co Ltd - commissioned Hi-Lander Logistics (Shanghai) Co Ltd to ship the goods in question.
Between July 2008 and August 2008 Shanghai Hi-Lander issued six sets of original bills of lading concerning the goods to the plaintiff, all of which indicated South China Logistics as the carrier and were stamped by International Jifu. The text printed on the front of the bills of lading showed that International Jifu was acting as the agent of the carrier. The bills specified:
- Jiangsu Saintek as the shipper;
- Igrodrom Ltd as the consignee and the notify party;
- MSC Susanna VS833R as the vessel;
- Shanghai as the port of loading; and
- Kotka, in Finland, as the place of delivery.
The bills also showed that the goods were loaded in six high, cubic containers, which were to be delivered on "container yard/free out" terms. The freight was to be paid for at the destination.
However, when the goods arrived at the destination, Shanghai Hi-Lander released the goods to the overseas consignee without the original bills of lading or the plaintiff's permission, which led directly to Jiangsu Saintek's failure of verification. Jiangsu Saintek sought to recover the related payment for the goods. Its case was that Shanghai Hi-Lander had acted as the contract carrier and should be liable for compensation arising as a result of the delivery of goods without original bills of lading. Moreover, Qingdao Hi-Lander should bear joint and several liability as the parent company. Jiangsu Saintek brought an action before the Shanghai Maritime Court, claiming damages with interest and its corresponding loss of a tax refund of nearly $170,000. It also applied for property preservation and successfully froze Shanghai Hi-Lander's account.
Identifying responsibilities among various defendants
Shanghai Hi-Lander argued that after accepting the commission, it had entrusted a third party to book the shipping space - it had merely transmitted the bills of lading between various parties. However, the court held that no evidence had been submitted to support this argument. On the contrary, the relevant sea waybills and manifest information retrieved from the actual carrier, Mediterranean Shipping Company, and the shipping agency showed that Shanghai Hi-Lander had entrusted Mediterranean Shipping Company to book the shipping space and was listed as shipper on the sea waybills. Thus, Qingdao Hi-Lander and Shanghai Hi-Lander had actually been non-vessel carriers.
Qingdao Hi-Lander was qualified to engage in non-vessel carriage operations in China. As its branch, Shanghai Hi-Lander was bound to use bills of lading registered by its parent company. However, in this case, although engaging in non-vessel carriage operations, the two companies used the non-registered bills of lading of South China Logistics instead of their own and later submitted those bills of lading to Jiangsu Saintek through Runhang. In so doing, they had acted wrongly.
On the basis of the evidence submitted by all of the parties, Qingdao Hi-Lander and Shanghai Hi-Lander should be considered to have engaged in non-vessel carriage operations. In this context, although the bills of lading in question indicated South China Logistics as the carrier and International Jifu as the signing agent, there was no evidence that these two companies had participated in the transportation operations; therefore, they did not bear compensation liability in this case.
Losses caused by delivery of goods without original bills of lading
The court held that the losses suffered as a result of the delivery of the goods without original bills of lading should be calculated by reference to the price in the customs declaration (approximately $170,000). However, based on relevant judicial interpretations, in the event of losses suffered as a result of the delivery of goods without original bills of lading, the loss of a tax refund does not necessarily fall within the scope of compensation, and there was no necessary causal link between the delivery of goods without the original bills of lading and the loss of the tax refund. Hence, the court dismissed Jiangsu Saintek's claim in relation to the loss of the tax refund.
The court decided that Shanghai Hi-Lander had fully compensated Jiangsu Saintek within 10 days of the judgment coming into effect, and that Qingdao Hi-Lander assumed the supplementary compensation liability with regard to the above-mentioned losses.
In international trade, bills of lading issued by carriers may relate to multiple subjects. As a result, it can be difficult to determine the legal relations that underlie the operations merely by the information on the bills of lading. In cases like these, companies shown on the bills, such as South China Logistics and International Jifu, may not even exist. If a party with a potential claim relies solely on the contents of the bills of lading, it may never track down the correct parties against which to claim for recovery.
Finding the correct party may involve applying to the court for an investigation order and obtaining export cargo manifests and sea waybills, as well as detailed container tracking records. In this case, such an approach ultimately proved that Shanghai Hi-Lander had booked the shipping space in its own name in respect of the shipment of the goods in question and had assumed the obligation of a non-vessel carrier.
The court found that Shanghai Hi-Lander bore full responsibility for compensation in terms of the delivery of goods without original bills of lading.
Shanghai Hi-Lander was a branch of Qingdao Hi-Lander, with limited solvency. In such cases, it may be advisable to identify a parent company as a co-defendant. A claimant is in a stronger position if it can apply for property preservation in respect of both companies in a timely manner, and submit conclusive evidence that both companies were closely related at the relevant time. In this case, the court found that Qingdao Hi-Lander had assumed supplementary compensation liability.
For further information on this topic please contact Jin Yu-Lai at Shanghai Kai-Rong Law Firm by telephone (+86 21 5396 1065), fax (+86 21 5396 1204) or email ([email protected]).