Congestion on the High Seas; Who’s Liable? – The Nanjinger

The shipping industry in China has faced extreme congestion levels of late, the effect of which came to a head in May with authorities in Guangdong cancelling flights, locking down the city and suspending trade in order to rein in a COVID-19 spike in the region.

Likewise, the Meishan terminal in Ningbo port (worlds third-busiest container port and the busiest in the world in terms of cargo tonnage) was also shut in August, after a COVID Delta variant outbreak. As a result, further exacerbation of the crisis across supply chains after the previous closure in the South of China surely affected nearby ports as well as those further afield.

Therefore, as constraints on the global supply chain are unlikely to go away soon, perhaps it is important to outline exactly how legal liability is governed regarding the carriage of goods by sea in China.

China has not ratified or acceded to the Hague Rules (minimum standards upon commercial carriers of goods by sea), the Hague-Visby Rules (which apply to Bills of Lading) or the Hamburg Rules (which apply to any contract of carriage by sea against payment of freight). However, several provisions of the Hague-Visby Rules regarding carriers responsibilities, exemptions and limitation of liability, and those of the Hamburg Rules, are adopted into the Chinese Maritime Code, which governs contracts of carriage in the Peoples Republic of China.

Under the Maritime Code, the responsibilities of the carrier concerning goods which have been placed within a container start from the time the goods are taken over at the port of loading and end when the goods have been delivered at the port of discharge.

In relation as to whether a carrier, considering the congestion at numerous ports, as well as the aforementioned port shutdowns, may deviate from their originally predestinated route, according to Article 49 of the Maritime Code, unless the carriers have some justified reasons for saving or attempting to save life or property at sea or any other reasonable deviation which is in keeping with the appropriate standard of care for the goods carried, the goods shall be transported to the discharge port on the agreed or customary or geographically direct route.

Therefore, in instances in which carriers during the current port congestion crisis are required to deviate from their route, such may be considered reasonable under the Chinese Maritime Code, as long as the carrier ensures a proper level of care the goods.

No doubt at the forefront in the minds of many parties shipping goods, Article 50 of the Maritime Code strictly defines delay in terms of carriage contracts as when the goods have not been delivered at the designated port of discharge within the time expressly agreed upon.

However, although the carrier would be liable for economic losses caused by the delay in delivery of the goods (liability for the carrier is limited to that of the amount equivalent to the freight payable for the delayed goods), unless such economic losses had occurred from causes for which the carrier is liable, there will be no liability placed on the carrier for the delay in delivery.

Instances regarding delay in delivery of the goods relevant to the current port congestion crisis include an act of government or other competent authorities, quarantine restrictions or any other cause not the fault of the carrier, e.g. a congested port. However, it is worth bearing in mind, that in such circumstances, the carrier bears the bear the burden of proof in showcasing that the carrier was not at fault for the delay.

The Chinese Maritime Code sets out various parameters regarding the delay of the delivery of goods and deviations from routes which are issues facing parties transporting goods by sea. The current port congestion crisis amidst a global pandemic has produced a unique and unprecedented scenario regarding global trade and it is therefore imperative that parties adhere to their obligations to the best of their abilities at such a difficult time.

DISCLAIMER

This article is intended solely for informational purposes and does not constitute legal advice. Although the information in this article was obtained from reliable, official sources, no guarantee is made with regard to its accuracy and completeness. For more information please visit dandreapartners.com or WeChat: dandreapartners

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Congestion on the High Seas; Who's Liable? - The Nanjinger