Who is responsible for the cargo damage caused by sudden weather changes during customs inspection in China?

In March 2019, the third party, Manhulmoore Management Co., Ltd. (hereinafter referred to as Manhul Company), entrusted Danma Company to transport a 40-foot container from Eichbach, Germany to Shanghai, China. Danma Company issued a clean bill of lading, which stated that the shipper was Manhul Company, the consignee was Manhulmoore Management (Shanghai) Co., Ltd. (hereinafter referred to as Manhul Shanghai Company), and the goods were described as 65 boxes of car filters. The mode and condition of transportation were whole container cargo door-to-yard (DOOR/CY), and the freight was to be paid on arrival.

 

customs inspection

 

The container was unloaded at the third phase of Yangshan Port in Shanghai on April 5, 2019, and was transferred to the auxiliary area of Luchao Port on April 8. On April 9, the container was fully unpacked and inspected by the customs in the auxiliary area of Luchao Port, and the import declaration agent, Shanghai Yuan Cheng International Freight Forwarding Co., Ltd. (hereinafter referred to as Yuan Cheng Company), dispatched personnel to assist in the inspection. Due to the limitation of the site conditions, the goods in question were inspected in an open space. When the inspection was completed and the goods were being prepared for re-loading, a sudden rainstorm occurred, and the on-site personnel quickly covered the goods with rain cloth. However, some of the goods were soaked due to the strong wind and rain. Afterwards, Ganninghan Insurance Loss Adjusters (China) Co., Ltd. (hereinafter referred to as the adjuster) assessed the situation of the goods in question and determined that the amount of the claim for cargo damage was RMB 135,575.04. So, who should be responsible for the cargo damage caused by the sudden weather change during the inspection process?

 

The Shanghai Maritime Court, after hearing the case, held that the main dispute in this case is the determination of the carrier’s liability period and whether there are grounds for exemption.
Regarding the carrier’s liability period, the carrier’s responsibility for containerized goods should start from the time when the goods are received at the loading port and end when the goods are delivered at the unloading port, during the entire period when the goods are under the carrier’s control. The goods involved in this case were shipped in a full container and arrived at and were unloaded from the third phase of the Yangshan Port in Shanghai on April 5th, and were then transferred to the auxiliary area of the Luchao Port on April 8th, but were not delivered to the consignee until they were inspected and released by the customs at the auxiliary area on April 9th. Finally, on April 12th, the goods were transferred and delivered to the consignee after being reloaded and leaving the Luchao Port auxiliary area.

 

Therefore, it can be seen that the goods involved in this case were only transferred to the auxiliary area of the Luchao Port on April 8th, and were not delivered to the consignee until they were inspected and released by the customs, rather than leaving the port and being delivered to the consignee. Therefore, the carrier, Danma Company, is responsible for the goods until they were transferred and delivered to the consignee after being reloaded and leaving the Luchao Port auxiliary area on April 12th. During this period of responsibility, if the goods were lost or damaged, except for statutory grounds for exemption, Danma Company, as the carrier, should bear the compensation responsibility.

 

The Shanghai Maritime Court held that the main dispute in this case was the determination of the carrier’s liability period and whether there were grounds for exemption from liability. With regard to the carrier’s liability period, the carrier’s liability for containerized goods should begin from the time when the goods are received at the loading port and end when the goods are delivered at the unloading port, during the entire period when the goods are under the control of the carrier. The goods in question, which were transported in a whole container, arrived at and were unloaded at the yard of the third phase of Shanghai Yangshan Port on April 5. They were then transferred from the yard to the auxiliary area of Luchao Port on April 8 without being delivered to the consignee. It was only after they were inspected and released by customs at the auxiliary area of Luchao Port on April 9 that they were finally transferred, after transshipment and change of the bill of lading, to the consignee at the auxiliary area of Luchao Port on April 12. Therefore, it can be seen that the goods in question were only transferred from the yard of the third phase of Shanghai Yangshan Port to the auxiliary area of Luchao Port for storage and inspection by customs on April 8, but were not delivered to the consignee. As the carrier, Danmar Company’s liability period for the goods in question should be until they were transferred, after transshipment and change of the bill of lading, to the consignee at the auxiliary area of Luchao Port on April 12. During this period of liability, if the goods are lost or damaged, except for statutory exemptions, Danmar Company, as the carrier, shall be liable for compensation.

 

customs inspection

 

As for whether the carrier can be exempted from liability, the goods in question were damaged due to unexpected rainwater during the process of unpacking and inspection of the entire container at the request of customs. This was not due to the carrier’s fault, but rather happened during the carrier’s liability period. According to the Customs Law and the relevant inspection management regulations, the party responsible for moving, opening, and resealing the goods during the inspection period is not the carrier, but the consignee or its agent. As the importer’s customs declaration agent, Far East Company sent personnel to the scene during the inspection of the goods in question and was responsible for the movement, opening, and resealing of the goods during the inspection process. If the goods are easily damaged due to their particular properties, or may be damaged due to improper opening, handling, stacking, or resealing, the consignee and its agent should make a prior declaration and bring it to the attention of the relevant parties before the customs inspection, and take appropriate measures to prevent and avoid damage to the goods during the inspection period. If the goods are damaged as a result, it is not the carrier’s fault for improper custody and care of the goods during the liability period. Therefore, the damage to the goods in question due to unexpected rainwater during the customs inspection period was not caused by the carrier or its hired and proxy persons’ fault, and Danmar Company, as the carrier, should not be liable for compensation in accordance with the law.

 

In conclusion, the Shanghai Maritime Court ruled that the claim of Zurich Insurance was not supported. After the first-instance judgment was made, Zurich Insurance appealed to the Shanghai High People’s Court. The Shanghai High People’s Court rejected the appeal and upheld the original judgment.

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