Ik Wei Chong, Clyde + Co, Shanghai
According to Article 46 of the Chinese Maritime Code, the responsibility of a carrier for cargo carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the cargo at the port of loading, until the cargo has been delivered at the port of discharge. However, in circumstances where the cargo damage occurred beyond the carrier’s period of responsibility but the cargo damage should be caused by the carrier’s fault or negligence, would the carrier still be held liable for such damage? The latest Court decision in Shanghai Changying Industries Co Ltd v. Pacific International Lines Pte Ltd numbered (2014) Hu Hai Fa Shang Chu Zi No. 1159 (issued in 2016) (上海常瀛實業有限公司與太平船務（私人）有限公司海上貨物運輸合同糾紛案) provided us with some answer and guidance.
In this case, the carrier (Defendant) carried a shipment of bananas from the Philippines to China. After arrival at the consignee’s (Claimant) premises, the bananas were found to be damaged due to freezing / low temperature.
Relevant evidence showed that when the refrigerated container was collected by the shipper on 2 April, the temperature of the container was set as 13.5°C. The temperature within the container generally remained normal until the container was discharged from the Vessel on 21 April. On 25 April (after the container was delivered to the consignee but was still not destuffed yet), the container temperature indicator showed abnormal code of *** (i.e. 3 asterisks) and since then, the temperature within the container lowered to around 0°C. When the container was destuffed on 29 April, it was found that the temperature of the bananas was 0°C and was damaged due to freezing / low temperature.
As anticipated, the carrier argued that the cargo damage obviously occurred beyond its period of responsibility (i.e. after the cargo was delivered to the consignee) so that the carrier should not be liable for such cargo damage.
The Shanghai Maritime Court decided as follows:
1) According to Article 46 of the Chinese Maritime Code, if the cargo damage occurred during the carrier’s period of responsibility, the claimant does not need to further prove the cause of damage and the carrier shall be liable, unless the carrier can provide contrary evidence to exempt itself from liability.
2) Article 46 has never excluded the carrier’s liability for loss of or damage to cargo if the cargo damage occurred beyond the carrier’s period of responsibility. It is just that the claimant would be imposed with the burden of proof to show the cause of cargo loss or damage.
3) In the present matter, there was evidence to prove that the cause of cargo damage was malfunction of the refrigerated container which was provided by the carrier. The carrier failed to ensure that the container was fit and safe to store the cargo which was in breach of the carrier’s obligations to keep and care for the cargo properly and carefully (according to Article 48 of the Chinese Maritime Code).
The Shanghai Maritime Court therefore decided that the carrier should assume liability for the cargo damage in full. There was no appeal and the Judgment came into force.
We can therefore conclude certain issues for reference in the future:
1. The burden of proof rule remains unchanged. The claimant first needs to prove that the cargo loss / damage occurred during the carrier’s period of responsibility, but the carrier may then prove to the contrary that the cargo loss / damage was caused by an event for which it should be exempted from liability (e.g. error in navigation, Act of God etc).
2. If the cargo loss / damage occurred beyond the carrier’s period of responsibility, the claimant will be imposed with a heavier burden of proof to prove that the cargo loss / damage was caused by the carrier’s fault or negligence.
This situation is not uncommon in containerised shipments, where the container provided by the carrier may be defective, e.g. the refrigerator system may be malfunctioning, or there is a hole in the container leading to rain water entering the container.
To ensure a successful defence, it is necessary for forwarders and carriers to collate as much evidence as possible in relation to the state and condition of container, which may include the temperature records of the refrigerated container, equipment interchange receipts of the container at both the port of loading and port of discharge (containing accurate remark on the condition of the containers), relevant photographs taken and so on.