Carriage of goods by sea and bills of lading
International conventions
Are the Hague Rules, Hague-Visby Rules, Hamburg Rules or some variation in force and have they been ratified or implemented without ratification? Has your state ratified, accepted, approved or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea? When does carriage at sea begin and end for the purpose of application of such rules?
China has not ratified or acceded to the Hague Rules, Hague-Visby Rules or Hamburg Rules. However, the related provisions of the Hague-Visby Rules regarding the carrier’s responsibilities, exemptions and limitation of liability, and those of the Hamburg Rules regarding, inter alia, the shipper’s responsibilities and actual carrier and transport documents, are adopted in the Maritime Code.
China has not ratified or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules).
Under the Maritime Code, the responsibilities of the carrier with regard to the containerised goods start from the time the goods are taken over at the port of loading and end when the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerised goods starts from the time of loading the goods onto the ship and ends when the goods are discharged. In respect of non-containerised goods, the carrier and the shipper are free to reach agreement on the responsibility and liability of the carrier for the goods before loading and after discharge.
Multimodal carriage
Are there Conventions or domestic laws in force in respect of road, rail or air transport that apply to stages of the transport other than by sea under a combined transport or multimodal bill of lading?
The network liability system is adopted by Chinese law in respect of multimodal transport by two or more different transport modes. The multimodal transport operator may enter into separate contracts with the carriers of the different modes but shall remain responsible for the entire transport.
If loss of or damage to the goods has occurred in an ascertained stage of transport, the provisions of the relevant applicable international treaty or law governing that specific stage of the multimodal transport shall be applicable to matters concerning the liability of the multimodal transport operator and the limitation thereof. If the stage of transport in which the loss of or damage to the goods occurred cannot be ascertained, the multimodal transport operator can by far invoke the liability exemption and limitation as provided in the Maritime Code, if sea carriage mode is involved in the entire transportation.
It is noted that China is not a party to the Convention on the Contract for the International Carriage of Goods by Road. Road transport is subject to the Contract Law, which does not have any carrier’s liability limitation.
China is a party to the Agreement Concerning International Carriage of Goods by Rail, and rail cargo transport is also subject to the Railroad Law of China. However, it is generally believed that the carrier’s liability limitation as provided in these rules will only be applicable if the claims were directly against the Chinese national carriers (ie, China Rail or its subsidiaries). In other words, the freight forwarder might have difficulties to limit its liability for any damage occurring during the rail cargo transportation.
China is a party to the Unification of Certain Rules for the International Air Transport Convention and the Hague Protocol. Air transport is also subject to the Civil Aviation Law of China. In the case of any conflicts between an international treaty and domestic law, the international treaty shall prevail.
Title to sue
Who has title to sue on a bill of lading?
The party who lawfully holds a bill of lading is entitled to sue the carrier, whether it is a named bill of lading, an order bill of lading or a bearer bill of lading.
The person by whom or in whose name or on whose behalf the goods are delivered to the carrier is also defined as the shipper in the Maritime Code. As such, so far as a party can prove that it holds the bill of lading lawfully (because of the delivery of the goods to the carriers), it will have the title to sue even if its name is not specified in the bill of lading.
Charter parties
To what extent can the terms in a charter party be incorporated into the bill of lading? Is a jurisdiction or arbitration clause in a charter party, the terms of which are incorporated in the bill, binding on a third-party holder or endorsee of the bill?
While article 95 of the Maritime Code in principle confirms that the terms in a charter party explicitly incorporated in the bill of lading shall bind a third-party holder or endorsee of the bill, and in the meantime there are still many cases wherein the carriers argued before the Chinese courts that the jurisdiction or arbitration clause in a charter party have been validly incorporated into the bill of lading, in reality the Chinese courts tend to negate the validity of the incorporation for various reasons.
That said, carriers cannot expect to successfully challenge the Chinese maritime court’s jurisdiction relying on the jurisdiction or arbitration clause provided in a charter party and incorporated into the bill of lading.
Demise and identity of carrier clauses
Is the ‘demise’ clause or identity of carrier clause recognised and binding?
The demise clause or identity of carrier clause contradicts the definition of the carrier as provided in the Maritime Code and therefore is null and void in China. The maritime courts usually negate the validity of the ‘demise’ clause because it goes against article 44 of the Maritime Code, which provides that the carrier shall not alleviate its obligation as provided by in the law.
Shipowner liability and defences
Are shipowners liable for cargo damage where they are not the contractual carrier and what defences can they raise against such liability? In particular, can they rely on the terms of the bill of lading even though they are not contractual carriers?
If shipowners were not the contractual carrier but were accused of liability for cargo damage, the shipowners will usually invoke the provisions in the Maritime Code in defence.
In practice shipowners have difficulties in relying on the terms of the bill of lading in defending claims. The reasons are that the shipowners are not a party to the bill of lading and, according to article 44 of the Maritime Code, any provisions carried in a bill of lading that derogate from the provision of carriers’ liability as provided in the Maritime Code, shall be null and void.
Deviation from route
What is the effect of deviation from a vessel’s route on contractual defences?
According to article 49 of the Maritime Code, unless the carriers have some justified reasons (eg, for saving or attempting to save life or property at sea), the goods shall be transported to the discharge port on the agreed or customary or geographically direct route. However, the law does not clarify the remedies allowed to the cargo interests if unreasonable deviation happens.
Under the Contract Law of the PRC, the innocent contractual party can claim for damage caused by the other party’s default conduct. That said, the carriers shall undertake the indemnity liability if the causation between the deviation and the damage to the cargo interests can be justified.
It will be a controversial issue on whether the carriers can invoke the liability defence as provided in the Maritime Code if the claim is made relying on the unreasonable deviation. Generally, if the unreasonable deviation constitutes an act or omission of the carrier or actual carrier performed with the intent to cause such loss, damage or delay, or recklessly and with knowledge that such loss, damage or delay would probably result, the liability limitation defence shall be unavailable. The burden of proof shall rest upon those with the cargo interests.
Liens
What liens can be exercised?
The following possessory liens are provided for in the Maritime Code:
- under a contract of international carriage of goods by sea, if the freight, contribution in general average, demurrage to be paid to the carrier by the shipper or the consignee and other necessary charges paid by the carrier on behalf of the owner of the goods, as well as other charges to be paid to the carrier have not been paid in full, nor has appropriate security been given, the carrier may have a lien, to a reasonable extent, on the goods belonging to the debtor;
- under a time-charter party, if the charterer fails to pay the hire or other sums of money as agreed upon in the charter, the owner shall have a lien on the charterer’s goods or other property on board or the earnings from a sub-charter;
- under a towage contract, where the towed party fails to pay the towage price or other reasonable expenses as agreed, the tug owner shall have a lien on the object towed; and
- under a shipbuilding or ship repair contract, the shipbuilder or ship repairer shall have a lien on the vessel constructed or repaired where the other party fails to pay the shipbuilding or repair price.
As a matter of Chinese law only the cargo owned by the debtors are subject to lien by the carriers. In other words, in scenarios (i) and (ii), although the carriers are in theory entitled to exercise lien over the cargo for the unpaid costs, if the ownership of the cargo has already been transferred to an innocent party who (as determined by the maritime court) is not personally liable for the payment of the costs, then the carriers cannot exercise lien over the cargo.
Delivery without bill of lading
What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?
Where a carrier delivers goods without the original bill of lading, the lawful holder of the original bill of lading may require the carrier to bear contractual or tort liability for the loss calculated on the basis of the value of the goods at the time of shipment plus freight and insurance (ie, the cost, insurance and freight price of the goods). The carrier cannot invoke limitation of liability for such loss.
The possible defence available to the carrier might be that it has no faults in releasing the cargo without production of the original bill of lading. For instance, the carrier had to deliver the goods to the customs or port authority as required by the law in the port of discharge.
Shipper responsibilities and liabilities
What are the responsibilities and liabilities of the shipper?
The Maritime Code has specific provision on the responsibilities and liabilities of the shipper in articles 66 to 70, as follows:
- the shipper shall have the goods properly packed and shall guarantee the accuracy of the description, mark, number of packages or pieces, and weight or quantity of the goods at the time of shipment, and shall indemnify the carrier against any loss resulting from the inadequacy of packing or inaccuracies in the above information;
- the shipper shall perform all necessary procedures at the port, customs, quarantine, inspection or other competent authorities with respect to the shipment of the goods and shall furnish to the carrier all relevant documents concerning the procedures the shipper has gone through. The shipper shall be liable for any damage to the interest of the carrier resulting from the inadequacy, inaccuracy or delay in delivery of such documents;
- at the time of shipment of dangerous goods, the shipper shall, in compliance with the regulations governing the carriage of such goods, have them properly packed, and distinctly marked and labelled, and shall notify the carrier in writing of their proper description, nature and the precautions to be taken. Where the shipper fails to notify the carrier, or notified him or her inaccurately, the shipper shall be liable to the carrier for any loss, damage or expense resulting from such shipment; and
- the shipper shall pay the freight to the carrier as agreed, unless the shipper and the carrier have reached an agreement that the freight shall be paid by the consignee and such an agreement has been noted in the transport documents.
