Casual Understanding for time limit on Delivery without Bill of Lading

What is the time limitation for claim relating to delivery of cargo without collection of bill of lading? Would one-year time bar be a definite position? Depending on the jurisdiction involved, the legal professional may find that there could be no certainty in taking one year as the time limit for a claim by a party holding a bill of lading and demanding the delivery of the cargo therein .

A case for casual reading only on time limitation period involving a judgment delivered by the Supreme Court in China would provide some indication of the direction a legal basis could be raised to break the one-year time limitation.

This case is concerned with delivery of cargo without surrendering the bill of lading in which the Court established that the dispute relating to this was a dispute concerning carriage of goods by sea and that a one year time limitation would apply, such time commencing from the day on which the claimant knew or should have known his right has been infringed.

Judgment was delivered on appeal involving the following parties:

Appellant – IFB International Freight Bridge China

Respondent – Zhejiang Tuhsu Import and Export

Consignee – Phoenica Import and Export

Second voyage shipowner – Mutis Liners

On 4/12/1989 Tuhsu established a sales contract with Phoenica at Miami to supply carpet at CIF price for payment under D/P 90days. Tuhsu delivered the goods to IFB and the bill of lading was issued by Penavico Ningbo on behalf of IFB. Tuhsu was stated as shipper in the bill of lading. Consignee was stated “To Order” and Phoenica was stated Notify Party. This bill of lading was subject to HK law.

Goods was shipped to HK and transshipped from there to US onboard Henry Hardson Bridge owned by Mutis Liners. The master of second vessel issued bill of lading showing HK as port of loading and destination port Brassware. On 29/4/1989 the goods was carried to port of Long Beach and transported to Brassware by truck.

Upon arrival at Brassware, Mutis Liners accepted a Letter of Undertaking (LoU) from Phoenica and allowed delivery of goods without bill of lading. The LoU amongst other things provided a guarantee from the consignee to compensate for any losses suffered by the ship, agent or operator arising from such delivery. Subsequently Tuhsu demanded full set of trading documents including bills of lading and were able to receive these in March 1992. The IFB bill of lading provide for application of HK law and any claim or disputes arising from the bill of lading should be referred to the court in HK. Instead Tuhsu filed a compliant against IFB in Shanghai Maritime Court , alleging tort in delivering the cargo without producing the original bill of lading and claimed for payment for cargo and interest thereto.

The original judgment before appeal decided that IFB and Tuhsu have relationship not only with regard to carriage of goods by sea but also for storage of goods. As custodian, IFB shall deliver the goods to the holder of the original Bill of Lading and that in having delivered the goods under a LoU to another party, IFB have infringed the legal rights of Tuhsu. On basis that tort as such has occurred in China , Chinese law shall be applied.

IFB attempted to argue that being D/P 90 days and the goods was actually picked up by the US consignee on LoU there was no loss of cargo. In addition IFB sought the application of one year time bar under the Bill of Lading, as Tuhsu commenced action only in 1992. All these failed with the Court delivering judgment in favour of Tuhsu in accordance with the General Principles of Civil law in China .

IFB then appealed to the Supreme Court with argument that the claim for right to cargo under the Bill of lading provides for HK law which has a statutory law incorporating the Hague-Visby Rules. Therefore the original judgment applied the wrong law and the time bar had began when Tuhsu should have known their rights were infringed not withstanding the General Principle of Civil law in China .

Both parties extended elaborate arguments to support their positions with regards to the HK law and the statutory law incorporating the HV Rules was raised extensively.

In conclusion, the judgment on appeal is in favour IFB with summarized points as follows:

•  Delivery of cargo without surrendering of the original bill of lading constitutes breach of contract of carriage of goods by sea.

•  Time bar for breach of contract is one year counting from the cargo delivery date or date goods should have been delivered.