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On 18 March 2012, the Supreme People’s Court promulgated the Provisions on Some Problems in Hearing Disputes over Marine Cargo Forwarding Agency (hereinafter referred to as “the Provisions”) which will be implemented as of 1 May 2012.

1.       In what circumstances shall the cargo forwarding enterprises take the liabilities as carrier? (Article 4)

Article 4 of the Provisions explicitly provides that a cargo forwarding enterprise shall take the liabilities as a carrier under the following circumstances:

1When a cargo forwarding enterprise issue bills of lading, sea waybills or other transport documents in its own name;2When a cargo forwarding enterprise fails to prove the authorization from a carrier, although the bills of lading, sea waybills or other transport documents are issued in the name as the carrier’s agent. On the contrary, if a cargo forwarding enterprise manages to prove the authorization from the carrier, it won’t be held to take the liabilities as carrier.

2.  Can a cargo forwarding enterprise sub-entrust some business? (Article 5)Article 5 of the Provisions stipulates that sub-entrustment is generally not allowed, except for the following two circumstances:

1The authority to sub-entrust business is granted to and agreed by a principal (mainly the shipper, hereinafter referred to as “Principal”,) with a cargo forwarding enterprise;2Although no authority on sub-entrustment is agreed, the acts of a Principal definitely express its acceptance of sub-entrustment.

Notwithstanding above 2), it is still advisable that cargo forwarding enterprises make explicit agreement on sub-entrustment, for the purpose of avoiding unnecessary disputes in this regard.

3.  Can cargo forwarding enterprises withhold documents? (Article 7)Article 7 of the Provisions definitely stipulates that when a Principal fails to pay the relevant expenses, a cargo forwarding enterprise is entitled to withholding the related cargo documents, which however shall meet the concrete requirements as below:

1No bill of lading, sea waybill or other transport document can be withheld,  unless it is explicitly agreed by the cargo forwarding enterprise and the Principal that delivery of the documents shall be preconditioned that the Principal has made the payment. 2As to the documents other than bills of lading, sea waybills or other transport documents, a cargo forwarding enterprise may withhold them no matter whether there is agreement in the contract or not.

It has been in hot dispute for long term whether a cargo forwarding enterprise can withhold the transport documents, such as the bills of lading when a Principal fails to pay the relevant expenses. Now the Provisions explicitly stipulate that as long as the Principal and the cargo forwarding enterprise agree in the contract that payment is the premise of delivering the documents, the cargo forwarding enterprise is entitled to detain the transport documents, including bills of lading, when the Principal fails to pay in a timely manner. We foresee some standard clause such as “No Payment, No Delivery” may be incorporated into the standard freight forwarding contracts in the near future.

4.  To which party shall the cargo forwarding enterprises deliver the bills of lading when both the domestic seller and the oversea buyer request delivery of documents under FOB term,? (Article 8)

Under FOB term of trade condition, it is in hot dispute to which party a cargo forwarding enterprise shall deliver bill of lading, when both the domestic seller, i.e. the actual shipper and the oversea buyer, i.e. the contractual shipper request  delivery of the documents at the same time.

In this regard, Article 8 of the Provisions tends to be in a position to protect the interest of the cargo owner. So it definitely specifies that the bills of lading shall be delivered to the actual shipper, i.e. the seller in China who actually delivers cargo.

However, the cargo forwarding enterprises are likely to be exposed to the claims filed by oversea buyers, i.e. the contractual shippers located in foreign countries subject to their local law. Then the conflicts of laws will occur. It remains to be solved after further study and clarification by the judicatory.

5.       In what circumstance, can the cargo forwarding enterprises be exempted from liabilities for indemnifying losses the Principal? (Article 10)

Article 10 of the Provisions definitely stipulates that a cargo forwarding enterprise shall be held liable to compensate the losses arising from the agency and suffered by Principal, unless the cargo forwarding enterprise manages to prove that it has no fault.

According to the above provision, as long as a Principal proves that it has delivered the cargo to the cargo forwarding enterprise, and damage has occurred to such cargo during the term of agency, the cargo forwarding enterprise shall be held liable for such losses; unless the cargo forwarding enterprise can prove it has no fault, it cannot be exempted from the liability for indemnification.

The Provisions definitely provides that to hear the cases of disputes over marine cargo forwarding agency contract, the principle of presumptive faults on the cargo forwarding companies shall be applicable, so the cargo forwarding enterprise bears the burden of proof to clarify it acts without any faults, which is commonly deemed as a reasonable regulation.

6.  For operators without NOVCC qualification but acting as non vessel carriers

1Is there any risk when a cargo forwarding enterprise, upon an entrustment by cargo owner, concludes a transport contract with an unqualified NOVCC?Article 11 of the Provisions definitely stipulates that a cargo forwarding enterprise, upon the entrustment from a cargo owner, concludes a transport contract with an unqualified NOVCC (who operates NOVCC business without going through the bill of lading registration with the Ministry of Transport of PRC), the cargo forwarding enterprise shall be held liable for the improper selection.( Article 11)

2Is there any risk when a cargo forwarding enterprises issue the bills of lading on behalf of an unqualified NOVCC?2.1Article 12 of the Provisions definitely stipulates that a cargo forwarding enterprise and an unqualified NOVCC shall assume joint and several liabilities for losses under a bill of lading, when the cargo forwarding enterprise issues this bill of lading on behalf of the unqualified NOVCC.( Article 12)2.2Article 14 of The Provisions requires that people’s courts shall send judicial suggestion letters to the competent transport authority to propose punishment be imposed on a cargo forwarding enterprise when the cargo forwarding enterprise without NOVCC qualification acts in violation of related regulations, such as to issue bills of lading, sea waybills or other transport documents in its own name.( Article 14)

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