Notes on Maritime Law: Debates on Delivery without Production of the Original Straight Bill of Lading
October 02, 2003 | BY
clpstaff &clp articles &Chinese maritime law and legal practice are gradually coming into conformity with international practice. However one key area that remains unclear is the legal status of the straight bill of lading.
By Zhao Shuzhou and Chen Xin, Wang Jing & Co. Law Firm, Guangzhou
There is a debate in Chinese legal and academic circles on any liabilities that might be incurred following delivery of goods without production of the original straight bill of lading (B/L). According to one view, if the carrier delivers goods to the named consignee at the destination port without the consignee surrendering the original straight B/L, the carrier shall be held liable for losses arising from or relating to that delivery to the holder of the straight B/L. The grounds sustaining this argument are derived from the definition of the B/L in Article 71 of the PRC Maritime Law (the Maritime Law) of the PRC (adopted on July 1 1993). The article provides, inter alia, that: "A B/L is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, based on which the carrier undertakes to deliver the goods against surrender of the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking." Since it would be difficult to argue that this Article does not cover straight bills of lading, the carrier is therefore obligated to deliver against surrender of the original straight B/L.
According to this view, the requirement of delivery against surrender of the original straight B/L as deduced from Article 71 of the Maritime Law serves to safeguard the right to the goods of the holder of the straight B/L, and to secure the performance of the trade contract. Some experts even believe that the delivery of goods should be more strictly controlled for a straight B/L than for an order B/L or bearer B/L.
The second opinion, which is more in line with international practice, holds that the straight B/L is not a document of title under Article 79(1) of the Maritime Law, because the straight B/L is not negotiable. The carrier shall therefore be entitled to deliver the goods to the named consignee without the latter having to produce the straight B/L. Furthermore, Article 78(1) of the Maritime Law stipulates that the relation between the carrier and the holder of the B/L with respect to their rights and obligations should be defined by the clauses of the B/L. Theoretically, the named consignee is only a beneficiary of the contract between the shipper and the carrier due to the characteristic of non-negotiability of the straight B/L. Therefore, when the carrier delivers the goods to the consignee named in the straight B/L, he thereby duly performs his contractual obligations; the surrendering of the straight B/L should no longer be an issue.
A 1994 Case Study
Until recently, courts have typically supported the first view. An example can be gleaned from a case stemming from 1994. A Chinese import and export company (the plaintiff) filed suit against a shipping company in the United States (i.e., the carrier/defendant) before the Guangzhou Maritime Court. The plaintiff (the seller) had concluded an export contract with a buyer in the US and had agreed that it would send the B/L by facsimile to the buyer after the agreed goods had been shipped. Meanwhile, the buyer would remit the payment for goods to the seller within three days upon receiving the facsimile, and the seller would deliver the B/L to the buyer upon receiving a copy of the note of remittance. The carrier issued a set of original straight bills of lading with the buyer designated as the consignee of the goods. When the goods arrived at the port of destination, the carrier released the goods against surrender of the letter of guarantee only, which was presented by the buyer. Hence, the plaintiff alleged that the carrier was in breach of its obligations under the carriage contract and had infringed the benefits of the plaintiff, and subsequently claimed against it for all losses resulting from the defendant's wrongful action.
The maritime court judged that Chinese law should be applied to this case in accordance with the same principle as in a case of tort; the law of the place where the tort was committed should apply. According to Chinese law, the B/L is a document that arranges the carrier to deliver the goods and the consignee to accept those goods against surrender of the same. The carrier is thus obliged to receive the B/L and verify the identity of the named consignee when delivering the goods to the consignee. In this case the carrier failed to take back the original straight B/L when it delivered the goods to a party that was not the holder of the original straight B/L, nor did it have express permission from the shipper to do so. The carrier was therefore found in breach of its fundamental obligation and as infringing upon the plaintiff's interests under the original straight B/L. The maritime court judged in favour of the plaintiff.
The carrier lodged an appeal. The appeals court ascertained that the Maritime Law does not differentiate between a straight B/L and other bills of lading. The carrier was therefore obliged to deliver the goods against surrender of the original B/L regardless of whether the B/L was straight or not. The appeals case was subsequently dismissed.
A 2003 Case Study
In a recent case dealing with a similar issue, the Guangzhou Maritime Court took a different view
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