—— Chongqing Zhong Products Co., Ltd. v. Panama S Company

Key Word：Bill of lading “unknown clause”; Carrier’s duty of care; Log shortage and damage; Open-air storage; Allocation of liability 

Facts：

In May 2021, Chongqing Zhong Products Co., Ltd. (hereinafter “Zhong Company”) purchased over 36,000 tons of pine logs from abroad. The logs were loaded onto the M/V S owned by Panama S Company (hereinafter “S Company”) for transportation from the Port of Montevideo, Uruguay, to the Port of Taicang, China. The bills of lading indicated the consignee as “to order”, the notify party as Zhong Company, and stated “the aforementioned goods, apparent good order and condition, have been shipped on board at the port of loading to be transported to the port of discharge or a place near where the ship can safely reach, weight, measure, quality, quantity, condition, contents, and value unknown”. After the ship arrived at the port of discharge, Zhong Company, S Company, and the charterer made a joint sampling inspection and revealed issues such as decay, mold, and shortage of the logs. Zhong Company subsequently filed a lawsuit at the Court, requesting S Company to compensate for the loss and damage of the cargo.

Judgment：

The Court held that although the bills of lading contained the statement “weight, measure, quality, quantity, condition, contents, and value unknown”, the logs in question were shipped in bulk as whole logs, and the bills of lading also described the goods as in “apparent good order and condition” and specified the exact number of pieces. S Company was fully capable of counting the quantity. Upon arrival, the goods were found to have mold and breakage in appearance, and a count revealed a shortage in the number of pieces. In the absence of  evidence proving that any defects existed before loading, it should be presumed that the damage was caused by improper transportation by the carrier. Furthermore, after the ship departed, it returned to the port of origin for repairs due to rudder damage. The involved pine logs were unloaded and stored in the open air at a local yard for as long as six months, and the carrier did not provide special protective covering for the logs, therefore the carrier is liable for the damages that occurred during the period the they were under its care. The Court calculated the cargo loss using the depreciation rate method and, considering that part of the cargo was loaded on deck and should be at the shipper’s risk, held that S Company should bear 68.5% of the liability for the mold damage and shortage loss of the carried goods. After the first-instance judgment, neither party appealed. S Company voluntarily fulfilled the Court’s judgment within one month.

Typical Significance：

This case provides a good model for a better understanding and interpretation of “Unknown Clause” under the bills of lading in terms of carriage of logs at sea. The “Unknown Clause” is a special provision under the bills of lading by which carriers could exempt the liability of the loss and damage of cargo. Article 75 of the Maritime Code of the People’s Republic of China clearly stipulates that the carrier may make statements on the bills of lading if there is no appropriate means of checking the accuracy of the information of the cargo that has been provided. In light of this provision, the major premise for the application of “Unknown Clause” should be “having no appropriate means of checking”. In this case, the transported logs were shipped in bulk, and the bills of lading has recorded the number of pieces of the logs, therefore the carrier is able to count. The carrier failed to provide a reasonable explanation for the shortage of the cargo, and it was also found that during transport, the goods had been unloaded and left exposed in the open area for six months before being reloaded. The Court eventually held that the carrier was not entitled to exemption from liability by invoking the “Unknown Clause”. This case provides a guiding significance in promoting the order of the shipping market.