Limitation periods when goods are released without a bill of lading

In a dispute involving the release of goods without an original bill of lading, legal action taken by the holder of the original bill of lading will need to commence within the limitation period.

Article 257 of the PRC Maritime Law specifies that “the limitation period for claiming compensation against a carrier in respect of the carriage of goods by sea shall be one year, counting from the date on which the carrier delivered or ought to have delivered the goods”.

The first paragraph of article 14 of the Supreme People’s Court Several Issues Concerning the Application of the Law in Cases of the Delivery of Goods Without the Original Bill of Lading Provisions specifies that “in a legal action instituted by the holder of the original bill of lading on the grounds that the carrier delivered the goods without the original bill of lading, article 257 of the PRC Maritime Law shall apply, with the one-year limitation period commencing on the date on which the carrier ought to have delivered the goods”.

The second paragraph of the same article of the provisions provides that article 257 of the Maritime Law will also apply in a tort action against the carrier and the party that took delivery of the goods.

Thus whether in contract or tort, the limitation period in such circumstances is one year.

However, the provision that the period should commence on “the date on which the carrier ought to have delivered the goods” is vague and can be problematic.

Court practice

The views of the courts on which date is correct are also inconsistent. These views can be summarized as follows.

The day immediately following the date on which the goods reach the port of destination

Courts that take this view hold that the carrier satisfies the conditions for delivering the goods on the day immediately following the date on which the vessel carrying the goods reaches its destination. Accordingly, the limitation period should start on this day, not the date on which delivery of the goods is taken. If this view is adopted, the parties may disagree over the date on which the vessel reached the destination. Courts may also disagree over this date.

The date on which the goods are delivered to the party that does not hold the bill of lading

Some courts hold that the rights of the holder of the bill of lading are only infringed on the date on which the goods are released without the bill of lading. If this view is adopted, it is easy for the carrier to pinpoint when the limitation period begins. If the carrier is named as the defendant in subsequent legal action, it may argue that the limitation period has already expired.

The date on which free storage of the goods at the port of destination expires

Courts with this view hold that the term “delivery” in the Maritime Law means the delivery of the goods by the carrier to the consignee (i.e. the lawful holder of the original bill of lading). Accordingly, the limitation period should not start on the date on which the goods are delivered to the party that does not hold the bill of lading. Also, the vessel’s arrival at its destination signifies only that the goods satisfy the conditions for delivery, and is therefore not the date “on which delivery ought to have been made” as meant by the Maritime Law. Accordingly, in this view, the date on which the vessel reaches the port of destination should also not be the start of the limitation period.

Once goods reach their destination, ports usually allow a charge-free storage period. When this period expires, the carrier should deliver the goods to the lawful holder of the original bill of lading. In the opinions of the courts outlined above, this should mark the beginning of the limitation period.

The date on which the holder of the original bill of lading carries out the procedures for taking delivery of the goods

Still other courts hold that the limitation period should begin on the date on which the holder of the original bill of lading carries out the procedures for taking delivery of the goods. This is because without the bill of lading, the holder of the original bill of lading only learns that the goods have been released when he carries out those procedures, and only then knows or ought to know that his rights have been infringed. This is consistent with the limitation provisions in general civil law.

However, if the holder of the original bill of lading is absent, who should carry out the procedures for taking delivery of the goods?

The authors acted in a case in which the consignor, after delivering the goods to the carrier, delivered a set of documents for the negotiation of a letter of credit (including the bill of lading) to the issuing bank for mailing to the advising bank at the port of destination. However, the consignee had already taken delivery of the goods without the bill of lading, and so did not carry out the payment and redemption procedures. The documents sat at the advising bank for a long period. When the advising bank mailed the documents back to the issuing bank and the issuing bank forwarded them to the consignor, the consignor learned from the carrier that the goods had been delivered without the bill of lading. The consignor prepared to institute legal action against the carrier, but the one-year limitation period had long expired.

Ultimately the case did not go to court, so the question of when the limitation of actions began was not addressed.

However, both the consignor and the carrier were at fault. The carrier released the goods without the bill of lading. But if the consignor had not neglected to recover the money and exercise its rights, it appears likely that no dispute over the limitation period would have arisen.

The authors hope that the relevant departments will provide an explanation of this area of law in order to resolve the current inconsistencies in judicial practice.

Henry Lee is a senior partner and Jessy Wang is a lawyer at Dacheng Law Offices