To: Transport Industry Operators

What is the difference between a straight bill of lading and an order bill of lading? This can be illustrated in the Wuhan Maritime Court’s Judgment dated 17 September 2019 concerning a cargo misdelivery claim of US$89,838.

On 8 December 2016, Tingyi Company (the seller) reached a sale of goods agreement with the buyer, an Italian company named Bica Company. The agreement was to sell iron rattan chairs and iron glass tables. The payment method was O/A (payment on delivery) within 60 days. On 19 December 2016, Tingyi Company stuffed 420 boxes of iron rattan chairs into 7 containers, and issued the related commercial invoice and packing list. The invoice showed the buyer as Bica Company, with a total amount of US$89,838.

On 20 December 2016, Yangming Marine issued 3 straight original bills of lading to Tingyi Company in Nanchang. The bills of lading stated the consignee and the notify party as Bica Company. The bills of lading also stated the port of loading as Nanchang, China, and the port of discharge as Piraeus, Greece, with the ship names “Ganyuan 31” and “THESEUS.” Tingyi Company sent the full set of original straight bills of lading to its trade intermediary to be forwarded to the so-called Bica Company.

On 17 January 2017, Yangming Marine contacted Bica Company to take delivery of the goods, informing it of the expected arrival date of 22 January and the related costs, but received no response. On 22 January 2017, the 7 laden containers were discharged by Yangming Marine at Piraeus. Subsequently, a company called PA Company holding the three original straight bills of lading contacted Yangming Marine to handle the delivery of the goods. The back of the bills of lading bore the stamp of Bica Company as well as the stamps of Tingyi Company and PA Company. Yangming Marine then released the goods to PA Company.

As Tingyi Company later on did not receive the payment from Bica Company, it contacted the insurer of the export goods, Sinosure. Sinosure subsequently found out that the real Bica Company denied receiving the goods, denied having any trade relationship with Tingyi Company, and refused to make any payment. On 16 April 2018, Yangming Marine also contacted Bica Company via email regarding the collection of goods and the endorsement of the bills of lading. Bica Company replied that it did not know Tingyi Company, and had never had any communication or business dealings with Tingyi Company, and that the signatures and seals of Bica Company used on the bills of lading were fake.

Tingyi Company sued Yangming Marine in the Wuhan Maritime Court, claiming that Yangming Marine wrongly delivered the goods and seeking compensation for the losses of the cargo payment and interest.

According to China’s Maritime Code, a bill of lading is the transport document based on which the carrier undertakes to deliver the goods against surrendering the same. The bill of lading stating the cargo delivery to a named consignee constitutes such an undertaking of the carrier. A bill of lading is also the evidence of the contract of carriage of goods by sea. Yangming Marine issued a straight bill of lading to Tingyi Company, which constituted Yangming Marine’s basic contractual obligation to undertake the cargo delivery to the named consignee, Bica Company. Such contractual obligation of Yangming Marine was not affected by the fact that Tingyi Company did not hold the original straight bills of lading when it sued Yangming Marine for compensation. Yangming Marine violated the legal provisions for cargo delivery under the straight bill of lading by delivering the goods to PA Company without the authorization of Tingyi Company.

Different types of bills of lading have different conditions for releasing goods. If Yangming Marine considered the stamp of Bica Company on the back of the straight bill of lading as sufficient for it to deliver the goods to another party, it essentially confused the straight bill of lading with an order bill of lading that can be endorsed and transferred. This did not comply with China’s Maritime Code’s clear provisions on straight bills of lading. Therefore, Yangming Marine could not use Bica Company’s stamp as the basis for releasing the goods. Since the bill of lading was not an order bill of lading, it could not be transferred and the cargoes could not be delivered merely by endorsement. Otherwise, the protective function of the straight bill of lading would lose, harming the shipper’s right to secure cargo payment under the bill of lading.

According to the Civil Law of China, an authorization letter must specify the name or title of the agent, the matters entrusted, the scope of authority, and the duration, and must be signed or sealed by the principal. The authorized party specified in the authorization letter submitted by Yangming Marine was not PA Company, and the authorization matters were unrelated to PA Company’s act of taking delivery of the goods. Therefore, the argument put up by Yangming Marine that PA Company could on behalf of Bica Company take delivery of the goods was not supported by the Court.

In conclusion, the basic obligation of the carrier issuing a straight bill of lading is to deliver the goods to the named consignee. Yangming Marine as the carrier failed to deliver the goods to the named consignee Bica Company, which constituted a breach of contract. Therefore, Yangming Marine should bear the liability for compensating the cargo payment and interest to Tingyi Company.

The Court gave the Judgment that Yangming Marine should compensate Tingyi Company for the loss of goods amounting to US$89,838 (converted to RMB 615,893.39) and interest amounting to RMB 29,011.14.

Please feel free to contact us if you have any questions or if you would like to have a copy of the Judgment.



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