the amount of cargo damage can be calculated based on the difference between the CIF import price before the goods are damaged and the sales price of the damaged goods

[Basic details of the case] On April 8, 2015, the ship “Asia Aspara” owned by Asia Aspara Limited (hereinafter referred to as “Aspara”) sailed from the Port of Lubuk Baja, Indonesia to the Port of Zhapu, China. For the voyage, the ship carried two types of goods, that is, palm kernel oil and fatty acid. The ship agency of each type of the goods respectively signed two sets of clean bills of lading on behalf of the captain. Both the consignees had followed the instructions and had covered the goods with the cargo transportation insurance. To be specific: Goods set forth in the bill of lading No. LBG/ZHP-01: fatty acid of 5,000 tons; goods set forth in the bill of lading No. LBG/ZHP-02: fatty acid of 5,499.775 tons. All the foregoing fatty acid was loaded in the cargo holds 1-3P/S, 5-6P/S and SLOPP/S in bulk, totaling 10,499.775 tons. The goods were covered by the PICC Property and Casualty Company Limited Jiaxing Branch (hereinafter referred to as “PICC Jiaxing”). The notifying party of all the goods were Zhejiang Light Textile Supply and Marketing Co., Ltd. (hereinafter referred to as “Light Textile”) and Hong Kong Pacific International Holdings Limited, and the insured person was Light Textile. The goods were purchased by Light Textile from an overseas client CFR Zhapu, China. Goods set forth in the bill of lading No. LBG/ZHP-03: palm kernel oil of 1,470.915 tons, with Jiahua Company as the notifying party; goods set forth in the bill of lading LBG/ZHP-04: palm kernel oil of 980 tons, with Light Textile and Pacific Hong Kong International Co., Ltd. as the notifying parties. All the palm kernel oil under the two bills of lading were stored in cargo hold 4P/S, totaling 2,450.915 tons.

On April 18, 2015, the disputed ship arrived at the anchorage ground of the Port of Zhapu, Jiaxing, and was berthed at the Dock of Taidi, Zhapu on April 20 of the same year. The testing result of the pre-unloading measurement and sampling of the goods showed the quantity and quality were conforming. At 00:50, April 21 of the same year, the exit of the unloading manifold on board was connected to the head of the unloading hose of the dock. At 01:10, the unloading of the palm kernel oil in the cargo hold 4P/S was started, and the unloading of the fatty acid in the other cargo holds was then started successively. On the next day, the unloading of all the foregoing palm kernel oil and fatty acid was completed.

During the unloading process of the disputed goods, the unloading manifolds No. 1, No. 3 and No. 4 on board were used. As planned, the unloading manifold No. 4 was connected to the special pipeline for palm kernel oil on shore via the hose, and the palm kernel oil in cargo hold 4P/S was unloaded into the special shore tank T5101C. The fatty acid in the other cargo holds were unloaded into the shore tanks T5202B and T5206 by the unloading hoses No. 1 and No. 3 through the connection with the special fatty acid pipeline on shore via the hoses and U-shape t-branch pipe. Due to the maloperation by Aspara during the process of unloading, the fatty acid of 683.534 tons that should have been unloaded into the shore banks T5202B and T5206 via the unloading manifold No. 1 or No. 3 was actually unloaded into the special palm kernel oil pipeline and entered the shore tank T5101C via the unloading manifold No. 4, which was mixed with palm kernel oil of 2,450.915 tons in the tank, causing cargo damage. For such mixing accident, Light Textile suffered a loss of fatty acid of RMB 945,491.57. PICC Jiaxing, as the insurer of the goods, paid compensation of RMB 975,041.86 to Light Textile in accordance with the insurance contract on October 8, 2015. Subsequently, Light Textile issued the compensation receipt and letter of subrogation to PICC Jiaxing. PICC Jiaxing claimed that Aspara, as the carrier, should be liable for the disputed cargo damage, and that Aspara should be liable for compensation of RMB 975,041.86 and the interest.

 [Main idea of adjudication] Through trial, the Ningbo Maritime Court found that PICC Jiaxing had already paid the insurance compensation to the insured person Light Textile, the latter had also issued the letter of subrogation, and PICC Jiaxing had already obtained the right of subrogation according to law. In accordance with the Reply of the Supreme People’s Court about the Request for Instructions on Issues Concerning Applicable Laws in the Case of Cargo Marine Insurance Subrogation between Nanjing Petroleum Transportation Co., Ltd. and Huatai Insurance Co., Ltd., the period when the carrier is responsible for the transportation of bulk liquid goods shall be the full period when the goods are under the control of the carrier from the end of the flange plate of the connection between the oil-conveying pipe of the ship and the oil-conveying pipe in the shore tank at the loading port, to the end of the flange plate of the connection between the oil-conveying pipe of the ship at the loading port and the oil-conveying pipe in the shore tank at the port of discharge. Aspara, as the carrier of the disputed goods, shall properly and prudently unload the goods shipped. During the process of the disputed unloading, Aspara unloaded the fatty acid of 683.534 tons that should have been unloaded into the shore banks T5202B and T5206 into the palm kernel oil shore tank T5101C. As a result, the fatty acid was mixed with the palm kernel oil of 2,450.915 tons in the tank, causing cargo damage. The cargo damage should be deemed to have occurred during the period when the carrier was responsible, and Aspara should be liable for it. For such mixing accident, Light Textile suffered a loss of fatty acid of RMB 945,491.57, and Aspara should make compensation to PICC Jiaxing. As for the difference loss arising from the compensation made by PICC Jiaxing that exceeded the amount of compensation identified by the Court, PICC Jiaxing should handle on its own. It was obvious that the losses arising from the disputed goods did not exceed the statutory liability limit. Thus, the liability limitation was not applicable. As prescribed by Paragraph 1, Article 46 of the Maritime Law of the People’s Republic of China and other provisions, Aspara was ordered to pay PICC Jiaxing of RMB 945,491.57 and the corresponding interest, and the other claims of PICC Jiaxing were dismissed. Both PICC Jiaxing and Aspara were not satisfied with the judgment of first instance and filed an appeal respectively. The Zhejiang Provincial Higher People’s Court dismissed the appeal and upheld the original judgment.

[Typical significance] This case is one of the Hong Kong-related series disputes concerning contracts of carriage of goods by sea caused by the same cargo mixing accident. In this case, the Court focused on whether the accident happened during the period when the carrier was responsible, analyzed the assessment report provided by each party in detail, broke through the convention, recognized the reasonableness of hose sampling, referred to the inspection at the dock and shore tank zone on site, expert opinions, etc., and demonstrated the high probability of cargo mixing caused by the maloperation by the ship owner from five major aspects. Generally, unloading samples should be extracted from the residue space in the unloading manifold of the ship and should not exceed the flange plate of the unloading manifold. As notified by the carrier, after swiping with compressed air, there was no sample available at the residue space. As witnessed by both parties on site, the sample could be got from the place directly connected to the exit of the manifold, and the sample result should be binding on the carrier. Regarding the way to calculate the cargo loss, as the disputed goods were not widely used in China, there was no mature spot market, neither party was able to provide the market price of the goods in good conditions and the price fluctuation at the destination port, there was no goods of the same kind and the same nature for reference, and thus the depreciation rate of the goods could not be calculated by reference to the case No. 6 (2013) M. T. Z. of the Supreme People’s Court. Therefore, the cargo loss was calculated by the “direct subtraction method,” which has some reference value for the trial of cases of the same kind in the future.