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Is the Carrier Liable When Hazardous Substance Shipment in Transit is Detained in a Transit Country?

An export company A exported cyanide to a Vietnamese purchaser B, and entrusted a company C to transport the goods, which were transported from Ningbo port to Thailand by sea, imported at a port in Thailand, and then transported to Myanmar by land. After the goods arrived at the Thai port and unloaded, during the customs clearance process, Thai customs officers found that the imported goods belonged to hazardous substances and needed the relevant approval from the Thai Ministry of Industry before the import could be released. Due to the inability to provide the Thai Customs with the required approval, the goods were subject to restrictive measures and could not be cleared. As the goods could not be picked up and were stranded at the port for a long time, Company B, after the agreed grace period had expired, directly proposed to Company A to cancel the order, and Company A could only refund the purchase price and lost the goods at the same time.

Regarding this, Company A held that:

First, the multi-modal transport operator Company C should be responsible for transporting the goods from the port of shipment to the destination, as the carrier should be responsible for the whole transport;

Second, Company C has the obligation to control the goods transported, including timely declaration of cargo information to the customs, cooperate with customs inspection, obtain the necessary permits for the import of goods in transit countries, and complete customs clearance procedures;

And third, due to the carrier's default, the goods were not delivered to the purchaser on time, and the carrier shall be liable for compensation to it.

On the contrary, Company C argued that:

First, the failure of the goods to arrive at the destination on time was due to the administrative action of the relevant competent authority, which was not under the carrier's control and was not related to the carrier;

Second, the incident was not caused by the carrier's intentional or gross negligence, and was a cause for exclusion of liability for the carrier.

So, in this case, can the consignor find the liability of the logistics company for the loss caused by or related to the goods in transit being stranded in the transit country?

The answer is no. The consignor did not timely apply to the port, customs and other competent authorities for the procedures required for the transportation of goods, and the resulting losses should not be borne by the carrier.

According to Article 67 of the China Maritime Law, the consignor shall promptly to the port, customs, quarantine, inspection and other competent authorities for the transport of goods required by the procedures, and shall send the documents for the procedures to the carrier; because the procedures for the documents sent to the carrier is not timely, incomplete or incorrect, so that the benefits of the carrier is damaged, the consignor is liable for the compensation. According to the article, the law does not limit the procedures required for the transport of goods, there is no specific distinction between export, import or transit procedures in transit, so the consignor should handle the export, import and transit of goods in transit procedures.

In the above case, the consignor, Company A, failed to provide evidence that it had a special agreement with Company C, on the handling of customs clearance procedures or the provision of documents for the transit port. If there is no other agreement, the consignor shall bear the obligation of customs clearance and permission documents of the goods in the transit country. In other words, Company A shall deliver to Company C the documents that it has processed the import and export license and customs clearance in transit Thailand timely, completely and correctly. Therefore, the relevant results and responsibilities should only be borne by Company A, and not by Company C as a multimodal transport operator.

In the international trade of goods, considering the convenience of transportation and the reduction of logistics costs, sometimes the goods inevitably must transit through a third country. Compared with the procedures of import and export of two countries, the transit country procedures are more easily ignored by all parties, and because of its easily ignored, it leads to unclear responsibilities of all parties and thus leads to disputes.

In this regard, the following recommendations are made:

First, the consignor (exporting party), the consignee (importing party) should recognize that the goods in transit countries also need to go through transit procedures, and different from the relevant procedures in the exporting and importing countries, so they should be properly handled.

Second, the import and export enterprises and their respective freight forwarders and carriers of goods (multimodal transport operators or carriers of maritime transport), should be clearly agreed between the goods in transit procedures to handle the obligations of the subject, for specific matters and responsibility, to eliminate disputes caused by unclear rights and obligations.

Third, for logistics companies, they should be cautious in predicting business risks, reasonably plan transit routes, strengthen personnel and business management, grasp the overall customer characteristics and business risks, be familiar with the import and export regulatory policies of third countries and improve communication and cooperation with all parties.

Reference case:

Civil Judgment of the First Instance of Zhao Rong Rong for the Dispute of Contract of Carriage of Goods by Sea and Tonghai

Shanghai Maritime Court (2019) Hu 72 Minchu 2337 Hao

The court found that:

The plaintiff and Laos Chemical entered into a contract for the sale and purchase of sodium cyanide, entrusted to a third party for shipment, the shipper recorded in the sea export letter of entrustment is the plaintiff, the consignee is Laos Chemical, port of departure is Shanghai, China, destination is Vientiane, Laos.

The defendant issued a bill of lading, recording that the consignor/exporter is the plaintiff, the consignee is Lao Chemical, the place of delivery is Vientiane, Laos, and the cargo information is "Lao Chemical Company, via Thailand Linchaban to Laos", and the mode of delivery is CY-DOOR (yard to door).

According to the container inquiry information of the bill of lading, the status of the containers involved in the case were shown as "unloaded at the Port of Laem Chabang A2 (TLT) and need to be picked up before October 13, 2018".

Thai customs officers of the Linchaban Customs inspected the goods and found that the imported goods were class 3 hazardous substances, which required approval from the Department of Industrial Engineering of the Ministry of Industry for import and export. However, during the customs clearance process, the customs officials did not receive such approval. In view of this, the customs officials considered that this constituted a violation of the Customs Law as well as the Law on Hazardous Substances and the Ministry of Industry's list of hazardous substances in order to circumvent the restrictions and prohibitions on such substances.

The plaintiff and Laos Chemical reached a refund agreement on May 28, 2019, in which it was agreed that "due to the prolonged detention of the goods of sodium cyanide under the sale contract between the parties at the port of Thailand, the buyer and the seller have agreed to terminate the sale contract, and the seller shall refund the full amount of the payment received to the buyer."

The Court held that:

Should analyze and identify the subject of the obligation to prepare, handle, provide import and export-related documents or permits.

According to China's "Maritime Law" Article 67, the consignor shall promptly to the port, customs, quarantine, inspection and other competent authorities for the transport of goods required by the procedures, and shall send the documents for the procedures to the carrier; because the procedures for the documents sent to the carrier is not timely, incomplete or incorrect, so that the benefits of the carrier is damaged, the consignor is liable for the compensation.

In the absence of evidence to prove that the plaintiff and the carrier on the transit port clearance procedures or the provision of documents otherwise agreed, the provisions shall apply to the case. The cargo in this case in Thailand port transit customs clearance procedures and licensing documents should be the obligation of the consignor in accordance with the law, the consignor should timely, completely and correctly for the transit of Thailand's import and export licensing and customs clearance of documents sent to the multimodal transport operators.



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