The undersigned would like to introduce a leading case made by the Supreme Court before the enforcement of Maritime Code of the P.R.C, in which the Supreme Court established the principles that the disputes arising from delivery of cargo without surrendering the bill of lading is attributed to the disputes of contract of carriage of goods by sea and applied to 1 year time bar counting from the day on which the claimant knew or should have known that his right has been infringed. 

 I. Parties involved:

Applicant (Appellant of original trial): IFB International Freight Bridge (China) Ltd. (hereinafter referred to as IFB)

Respondent (Appellee of original trial): Zhejiang Tuhsu Import and Export Co. (hereinafter referred to as Tuhsu)

Consignee: Phoenicia Import and Export Co. (hereinafter referred to as Phoenicia)

Shipowner of Second Voyage: Mutis Liners

II.  Main facts of this case

Tuhsu established a sales contract with Phoenicia at Miami on December 4th, 1989, to provide Phoenicia with carpet at CIF price by payment of D/P 90 days. Tuhsu then delivered the cargo to IFB. Penavico Ningbo issued the through Bill of Lading on behalf of IFB, on which Tuhsu was recorded as Shipper, Consignee as To Order and Phoenicia as Notify Party. The concerned cargo was carried to Hong Kong by M.V. Zhe Peng owned by Zhejiang COSCO and was transshipped for United States by M.V. “Henry Hardson Bridge” owned by Mutis Liners. The master of “Henry Hardson Bridge” issued bill of lading providing the port of loading as Hong Kong and port of destination as Brassware. On April 29 of the same year, the cargo was carried to port of Long Bench, United States and transported to Brassware by truck. 

Upon arrival of cargo for Brassware on May 7th 1990, Mutis Liners accepted the Letter of Undertaking provided by Phoenicia and delivered the cargo without withdrawal of the original bill of lading. The LOU stated that the consignee enjoyed the right of ownership over the cargo and provided explicitly that the shipowner of the second voyage agreed to deliver the cargo without return of the original bill lading, which was the evidence to prove that the consignee was the owner of the cargo; the consignee guaranteed to compensate any losses suffered by the ship, agent or operator arising from such delivery. Then, Tuhsu demanded the whole set of trading document including original bill of lading in triplet from the Citybank and received forgoing documents until March 16th 1992. The bill of lading issued by Penavico Ningbo stated that the agreement proved or contained by the bill of lading was subject to the law of Hong Kong, any claim or disputes arising from the bill of lading should be referred to the court at Hong Kong. Tuhsu filed a complaint against IFB to Shanghai Maritime Court, alleging the tort in delivering the cargo without producing the original bill of lading and claim for the loss of payment for cargo and the interests thereto.

III. The original judgment of the case:

Original final judgment decides that there exists not only the relationship of carriage of goods by sea but also the relationship of storage of property between IFB and Tuhsu. IFB, acting as the custodian of the cargo under shipment, shall deliver the cargo to the holder who possesses the original bill of lading in accordance with the practice. IFB has infringed the legal right of the owner when he, without the authorization from the owner, delivered the cargo to other person who produced LOU only. Because the result of tort took place within the territory of the P.R.C, relevant Chinese law shall be applied in this case. There are no fundamental differences between so-called D/P and D/P 90 days as means of payment provided in sales contract. The IFB’s argument that the Seller permits the Buyer to exercise the payment in 90 days is lack of legal foundation as reason for delivering the cargo without producing bill of lading. The cargo under the dispute was actually picked up by American company by producing the LOU and no fact concerning the loss of cargo is ascertained. Therefore, the argument of IFB that losses of cargo shall belong to the dispute of bill of lading and apply 1-year-time bar is not sufficient. Tuhsu did not break the time bar because he filed the complaint within 2 years even since he knew the infringement of the right. The court made a judgment ordering IFM to compensate Tuhsu the loss of cargo and interest thereof according to General Principles of Civil Law of the P.R.C. 

IV. How is the leading case made:

IFB refused to accept above final judgment and apply for retrial with the Supreme Court. The main argument of IFB is: the claim of Tuhsu is claim for right of cargo under bill of lading, which provides that the applicable law is Hong Kong Law i.e. Carriage of Goods Act 1971 that had incorporated Hague-Visby Rules. Thus, the original judgment applied the wrong law in deciding the case; The time bar had began when Tuhsu should have known that his rights were infringed even if the General Principle of Civil Law of P.R.C. is applicable. Tuhsu failed to take the burden of proof in proving he did not know the infringement of right when the cargo arrived at destination, so that the litigation has exceeded 2-year-time bar as required by General Principles; the regulations of Carriage of Goods by Sea Act 1971 shall be applied in solving the concerned disputes, precisely speaking, unless the litigation is filed within 1 year since the cargo is delivered or should have been delivered, under any circumstance, the carrier or the ship shall be exempted from any liability towards the cargo. The Applicant therefore pleads the Supreme Court to reject the claim of Tuhsu in accordance with the law. 

Tuhsu contended that: this case is the dispute arising from delivering the cargo without producing the bill of lading during the carriage of goods by sea. There is no agreement in applying Hong Kong law in the contract, whereas, as evidence of which, the bill of lading provides the applicable law as Hong Kong law. However, the complete period for oceanic transportation as stimulated by 1971 COGSA excludes the delivery of cargo without producing bill of lading that occurred after the discharge. Referring to the laws of UK, delivery of cargo without producing bill of lading would result the termination of contract for transportation. Any dispute brought after the termination of contract shall not apply 1-year time bar as stipulated by 1971 COGSA. Instead, 6 years time bar of common law shall be applied. The Respondent therefore pleads to maintain the original judgment. 

The Supreme Court found that the facts are clearly ascertained but the laws and regulations are incorrectly applied in original judgment. Judicial Committee of the Supreme Court decided through discussion that: the case is a dispute arising from delivery of cargo without producing the bill of lading that is claimed by shipper against the carrier and is attributed to disputes of carriage of goods by sea. Penavico Ningbo issued a through bill of lading from Ningbo to Brassware on behalf of IFB, on the basis of which relationship of transportation contract are established between IFB and Tuhsu. Both parties shall perform respective responsibility according to the contract. Bill of lading is the evidence of contract of carriage of goods by sea, under which the carrier shall undertake to carry the goods safely and deliver the goods in good condition. But the shipowner of the second voyage delivered the cargo only upon surrendering of LOU. Therefore, the carrier shall be liable for such act in breach of contract.  

The concerned bill of lading provides explicitly that contract proved or contained by this bill of lading shall subject to Hong Kong Law. Therefore, the disputes shall apply to Hong Kong Law. When the case happened, British Law concerning carriage of goods by sea, say 1981 COGSA was applied in Hong Kong. The concerned bill of lading also states that relevant bill of lading, no matter the name of vessel is listed or not, shall apply for Hague Rules or any laws enforcing Hague Rules or Hague-Visby Rules. Thus, Hague-Visby Rules has constituted a part of bill of lading and shall be deemed as the applicable law of this case. According to the regulations of Hague-Visby Rules, unless the litigation is filed within 1 year since the cargo is delivered or should have been delivered, under any circumstances, the carrier or the ship shall be exempted from any liability for losses of or damages to the cargo. The scenario that Tuhsu failed to receive the refund of original bill of lading from Citybank could not be justified as reason to suspend the time bar of this case. The agent of IFM issued through bill of lading on March 31, 1990 and the cargo were carried to the port of destination on May 7th of the same year. The condition for the carrier to deliver the cargo has satisfied and shall be deemed as the start point to count the time bar. In fact, Phoenicia had picked up foregoing cargo by surrendering the LOU on May 7th. Tuhsu filed a complaint with the court till May 11, 1992 and had exceeded 1-year-time bar. Therefore, the right of Tuhsu would not been protected by the law. The argument of Tuhsu that English Common Law shall be applied in this case, which provides 6-year-time bar, is not sufficient and shall be rejected by this court. 

Based upon Article 184 of Civil Procedure Law of P.R.C, the Supreme Court made a final judgment as follows: set aside  (1992) Hu Hai Fa Shang Chu Zi No. 49 civil judgment issued by Shanghai Maritime Court; set aside (1994) Hu Gao Jing Zhong Zi No. 108 civil judgment issued by Shanghai Higher People’s Court; Reject the claim of Tuhsu; the court fee for first and second trial shall be paid by Tuhsu.

V. Summary:

　１.Delivery of cargo without surrendering the original bill of lading constitutes breach of contract of carriage of goods by sea;

　２.The time bar for claim for such breach of contract is one year counting from the cargo concerned is delivered or should have been delivered by the carrier;

　３.Whether the shipper actually acquires the original bill of lading is not the precondition condition to start the counting of the time bar.

　４.Through the enforcement of Maritime Code of P.R.C, the regulations adjusting time bar for delivery of cargo without surrendering the bill of lading has been unified with international conventions and laws of main marine counties.