Case on Dispute over Freight Transport Contract Fees on Behalf of Hong Kong Kangda Shipping Co., Ltd.
[Lead Attorney: Zhiming Law Firm]
I. Case Recap
In August 1994, Liu Caiyun, a salesperson of the defendant, China Electronics Materials Shenzhen Company, signed an "Agency Import and Export Agreement" with the plaintiff, the Yantai Office of Hong Kong Kangda Shipping Co., Ltd., in the name of the defendant, and affixed the defendant's special seal for customs declaration. The agreement stipulated that the defendant entrusted the plaintiff to transport containers loaded with ceramic cups to Los Angeles, USA. Upon receiving the defendant's export plan, the plaintiff was responsible for transporting the goods from the defendant's delivery warehouse to Yantai Port by rail or road, with a lump-sum charge, including port miscellaneous fees, of RMB 4,200 per 40-foot container; for shipment from Yantai Port to Los Angeles, USA, the full ocean freight was USD 2,700 per 40-foot container, with delivery at the port warehouse. The above costs were to be borne by the defendant (excluding DDC fees, with "DDC" being the English abbreviation for "Destination Delivery Charge"), and the relevant customs declaration procedures were to be provided by the defendant and handled by the plaintiff. After accepting the entrustment, the plaintiff arranged vessels to transport the fifteen containers loaded with ceramic cups, which Liu Caiyun had consigned in the name of the defendant, to the port of destination. The defendant paid the plaintiff, on August 26, 1994, October 12, 1994, and January 14, 1995, respectively, the ocean freight of USD 2,700 per container and DDC fees of USD 420 per container for the first eleven containers, totaling USD 34,320. However, for the four containers of goods actually carried by the plaintiff's subcontracted carrier, Shenzhen Shekou Dayang Shipping Co., Ltd., on the "Yuyang" vessel voyages V413S and V414S, the bills of lading, like those for the other eleven containers, all stated "freight and DDC prepaid," yet the defendant did not pay the ocean freight and DDC fees for these four containers on the two voyages. After multiple unsuccessful attempts to collect the payment, the plaintiff filed a civil lawsuit with the Guangzhou Maritime Court, requesting the court to order the defendant to compensate the plaintiff for cargo freight of USD 12,480, trailer charges and port miscellaneous fees of RMB 12,600, plus interest losses, and to bear the litigation costs of the case.
II. Case Outcome
Civil Judgment of Guangzhou Maritime Court [(1996) Guang Hai Fa Shen Zi No. 72] records:
In accordance with the provisions of Article 58, paragraph 1, item (5), and Article 61, paragraph 1 of the General Principles of the Civil Law of the People's Republic of China, the judgment is as follows:
The defendant, China Electronic Materials Shenzhen Company, shall pay the plaintiff, Kangda Shipping Co., Ltd., freight and other expenses totaling USD 12,480 and RMB 12,600, as well as the interest losses calculated at the concurrent loan interest rate of the People's Bank of China from July 22, 1996 until the date this judgment takes effect.
The litigation costs of this case amount to HKD 4,560, to be borne by the defendant.
III. Case Analysis
The focus of the dispute in this case lies in the validity of the contract, related fees and procedures, etc. The defendant, China Electronics Materials Shenzhen Company, rebutted that:
The plaintiff's lawsuit is completely without factual basis:
1. In December 1994, the defendant did not entrust the plaintiff to transport the goods; rather, it was entrusted by Liu Caiyun, a salesperson temporarily employed by the defendant.
2. According to the defendant's management practices, a salesperson such as Xiang Liucaiyun had no authority to sign agreements externally, and agreements signed using the customs declaration professional seal were invalid.
3. In accordance with international practice and domestic convention, an agreement must be signed for each shipment of goods. The plaintiff's inference of the freight charges for the December 1994 shipment based on the August 1994 agreement is inconsistent with standard practice.
4. According to international practice and the relevant regulations of U.S. Customs, DDC fees are freight charges paid by the consignee, and in the agreement signed between Liu Caiyun and the plaintiff, the fees paid by the defendant do not include DDC charges. Therefore, the plaintiff's demand that the defendant pay DDC fees of US$420 per container is completely unfounded.
5. The plaintiff requests the defendant to pay the cargo freight, but has to date not delivered to the defendant the export tax rebate and foreign exchange verification forms, which are necessary conditions for the payment of the freight.
The defendant requests that the plaintiff refund the DDC fees of USD 420 per container that the defendant overpaid in the freight charges for the 11 containers already paid.
By virtue of his proficient legal expertise and rich experience in handling maritime transport contract disputes, Lawyer Zhiming rebutted the defendant's defense one by one:
First, the issue of the validity of the agreement.
The agent believes: The cargo maritime shipping agreement between the plaintiff and defendant, although not entirely complete or standardized in its outward form, is nonetheless, when the actual performance of both parties is measured against the law, unquestionably legally binding, and both parties must fully perform their respective obligations. In this case, the defendant should by all means fulfill all of its payment obligations. In this regard, we have definitive legal provisions as evidence. Therefore, the agent can only express sympathy for the defendant's legal liability and economic losses incurred today as a result of internal mismanagement and improper hiring practices.
10. Second, the issue of freight rate changes.
Regarding the issue of freight rates, the agent believes that the shipping agreement that both the plaintiff and defendant can provide is only this one, and the goods shipped were porcelain cups loaded in 40 cartons, all of which are specific and clear. From the substantive circumstances, the defendant used the plaintiff's liner service for carriage, and the freight rates were relatively fixed; there was no issue of signing a separate agreement and setting a different freight rate each time. It is entirely normal that the ocean freight for this batch of porcelain cups shipped by liner in August 1994 and December 1994 remained relatively fixed — how can that be characterized as rate-setting by inference? To cite convention as an excuse at every turn, it seems the party may not be entirely clear about shipping conventions: ocean freight rates are general and unchanging, while the relatively fixed rate is specific. There should be no issue of freight rate variation in this case; in fact, the defendant has also failed to produce any evidence to show that this batch of goods had different freight rates.
Third, regarding the issue of USD420/ton (DDC) fees.
It is clearly evident from the contract between the plaintiff and the defendant that the ocean freight rate of 2700/40-foot container was the freight charge from China to the port of Los Angeles in the United States, and did not include the DDC fee from the port to the warehouse. Regardless of whether, according to international practice, this fee should be paid by the shipper or the consignee, it certainly would not be borne by the carrier itself. In the carriage of the goods in this case, a DDC fee was actually incurred and was paid on behalf by the carrier. Then, who should actually pay this fee to the carrier (the plaintiff)? On this question, it is not difficult to see from the bill of lading itself who the payer is, because the bill of lading itself is a maritime contract with clear terms, and the bill of lading expressly states that it includes the DDC fee. That is to say, when the defendant specifically handled the consignment of the goods, it clearly indicated that it would bear the ocean freight and the DDC fee. This is because the defendant not only accepted such bills of lading on multiple occasions, but also paid several freight payments under such bills of lading. Now, when the defendant subsequently refuses to pay the freight, raising this issue is nothing more than an attempt to reduce its own losses and shift them onto the plaintiff. This should be quite obvious.
Fourth, regarding the issue of the shipping route and foreign exchange verification forms.
The defendant claims that export procedures and foreign exchange verification forms are necessary prerequisites for the payment of ocean freight. However, after a thorough review of relevant international practices and Chinese maritime law, the agent found no basis whatsoever for such a claim. On what grounds does the defendant make this assertion? Evidence should be produced for verification, and if there are any relevant practice texts, they should also be presented. Without any corresponding basis, this can only be empty rhetoric. On the contrary, the plaintiff's assertion of customary practice is "release documents upon payment," namely, that the bill of lading is only issued after freight is paid first, which indeed has genuine justification and is supported by a substantial body of statutory authority. This is because it not only conforms to the Uniform Customs and Practice for Documentary Credits in international trade for payment against documents, but also complies with the operational regulations of Chinese shipping companies. The plaintiff's allowing the defendant to take delivery of the documents before remitting payment was already an accommodating gesture in business practice. The defendant's consequent refusal to pay and delay in settling ocean freight is even more inconsistent with reason and law. How can one, due to unpaid freight, fabricate other so-called necessary prerequisites in order to justify non-payment? The intention is obvious. The agent believes this is insufficient grounds for refusing payment and is moreover improper and unacceptable.
In summary, the agent submits that the facts of this case are simple and clear, and liability is well-established. The defendant's refusal to pay the maritime freight and other amounts is without legal basis, and the plaintiff's lawful property losses should be protected. Therefore, we respectfully request that the court carefully consider the agent's opinions and adopt them as appropriate, rendering a fair judgment in this case.
知明律师的代理意见完全得到海事法院的支持采纳，判决书[(1996)广海法深字第72号]载：“本院认为，——被告业务员刘彩云以被告名义 与原告签订运输合同《代理进出口协议书》后，被告已依协议托运了货物，并支付了部分运费，应认定为被告已通过实际履行确认了刘彩云代理行为的效力，因此， 支付本案运输合同费等有关费用的责任应由被告承担。——因原告已实际运输了被告的货物，被告理应支付原告在本案货物运输中实际发生的各项费用。被告在本案货物运输中已支付给实际负责货物运输的承运人每个40尺集装箱2700美元的海运费。因此，本案的海运费应以每个40尺集装箱2700美元认定。 本案四个集装箱货物提单上载明的DDC费用预付，且原告运输的其他十一哥集装箱货物，被告均已依提单的记载支付了每个集装箱420美元的DDC费用，应视为原、被告已约定该费用由被告负担。该费用已由原告代被告支付，故被告应支付原告每个集装箱420美元的DDC费用。——被告提出原告应提供出口 退税和外汇核销单作为被告支付运费的必要条件，希望原告退还已支付的十一个集装箱的DDC费用等主张，证据不足，本院不予支持。”
This case demonstrates that lawyers handling international trade, shipping, and maritime cases must not only possess extensive legal expertise and litigation experience and skills, but also have corresponding knowledge of international trade and economic law.
(Compiled and commented by Guo Tianxi)
Zhiming Office
May 11, 1996
