China maritime court ruling on bulk cargo shortages at loading ports

Group Clubs have reported a 2020 civil judgment handed down by the Guangzhou Maritime Court which  has ruled that shipowners can be liable for shortages of less than 0.5% of the quantity stated on the bill of lading (B/L).

American Club said that the judgment of the Court gave rise to concerns regarding similar types of claims in future.

American Club Managers SCB recommended that:

  1. For shipments of bulk cargo destined for the PRC, it should be ensured that 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, especially a draft survey report arranged by the shipowner or conducted by crew members themselves.
  2. Masters and crew members should be made aware that there was little prospect for carriers to defend shortage claim in the PRC by arguing short loading at the loading port. On the contrary, it might create liability for the shipowner. 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. It was suggested By American Club that the draft survey be named “Preliminary Information Advice” other than “draft survey report” if the bulk cargo carried was bound for the PRC. It was also suggested to include the following remarks on such document: “This [Preliminary Information Advice] [draft survey report] is not a certificate and is not intended for negotiation nor does it have any commercial value in any respect whatsoever.”
  4. Caution should be exercised regarding demands for a letter of indemnity from the shippers for shortage at the loading port since it might be considered as evidence of the shipowner’s negligence in issuing the B/L by a PRC court.
  5. It was advisable that Members consider commencing settlement negotiation before the claimants take any legal action. To this end, it was recommended that Members contact the Managers at the earliest opportunity so that timely assistance could be provided. American Club’s Managers recommended that Members take note of this information and be guided accordingly.

UK Club also cited Huatai Marine Correspondents. UK Club said that it dealt with several similar cases from last year. It also noted that the judgement had been appealed and the second trial judgement had yet to be made.

Wang Shumei, Deputy Chief Judge of the Fourth Civil Division of the Supreme People’s Court, gave the summary speech at the National Maritime Trial Practice Symposium on June 16th 2017. In terms of “the Carrier’s liability for shortage of bulk cargo”, one of her points is “the Carriers are allowed to raise a defence of exemption of liability of trade allowance within 0.5% of the draft survey on the premises that the Carriers do not have any faults of non-prudential obligation on the care of cargo obligation. If there is evidence to the contrary that the Carriers are at fault (eg, bill of lading is issued against the Shippers’ declaration and the LOI when cargo is short loaded at the port of loading), the Carriers’ defence of 0.5% trade allowance shall in principle not be sustained, even if the deficiency is less than 0.5%.”

A law firm in Guangdong, on behalf of a corn import company, filed a series of such claims in 2020, trying to rely on the Supreme Court’s opinion to get compensation.

The above judgement of the Guangzhou Maritime Court was issued for one of the claims, “which undoubtedly encouraged the Receivers to pursue the other claims”, said UK Club, adding that it therefore anticipated that there might be more similar types of claims in future.

In a similar case handled by UK Club’s Guangdong office, owners in Germany rejected the claim in the first instance. However, a summons was later served by the Chinese Court in Germany. With the assistance of the UK Club Guangdong Office, the claim was settled at an acceptable level to both sides.—bulk-cargo-shortage-at-loading-port/