The case

Western Global Corp (WGC), as the shipowners of MV King Gregory (Vessel), and Sinograin Oils Corporation (Sinograin), as charterers, entered into a contract of carriage to carry a cargo of crude degummed soybean oil to Shanghai. Sinograin alleged that there was a shortage of cargo being delivered. The Guangxi branch of the People’s Insurance Company (Group) of China Limited (PICC), being the cargo insurer, paid out to Sinograin for its losses and brought a subrogation claim against WGC before the Shanghai Maritime Court as the court of first instance. WGC prevailed in the proceedings and the decision was subsequently appealed to the Higher People’s Court of Shanghai, where it was upheld. PICC was granted permission to appeal to the SPC. In its judgment, the SPC dismissed PICC’s claim, ruling in favour of WGC.

The main issue clarified by this case was which measurement of weight was to be used as authoritative evidence:

1. Sinograin/PICC alleged that there was a cargo shortage of 77.456 MT from the contracted amount of 9,876 MT as evidenced by the CIQ issued by the Shanghai branch of the Entry-Exit Inspection and Quarantine Bureau.
2. WGC relied on the ullage report and the dry certificate of the Vessel to argue that the total amount of cargo discharged by it was in fact 9,866.182 MT and so the cargo loss of a mere 9.818 MT (0.099 per cent) was within acceptable limits under the contract of carriage.

Upholding the decision in Hu Min Zhong No. 517 (2016) handed down by the Higher People’s Court of Shanghai, the SPC opined that the shore tank weight measurement used in the CIQ and the draft weight measurement used in the ullage report are equally reliable provided that they are measured in compliance with the respective rules on measurement. As in cases of liquid bulk cargo, the cargo weight should be calculated using the ullage report provided by the carrier unless the insurer can prove that the ullage report was defective in terms of the weight measurement, e.g., there was an inaccuracy in the tank calibration table or the measurement was not made in compliance with the applicable rules. In general, the cargo quantity measurement report based on the shore tankers figures provided by the receiver will not be accepted as the shortage evidence in proving the weight of the cargo at discharge, unless otherwise agreed by the carrier.

The SPC also confirmed that a carrier’s responsibility for transportation of bulk liquid cargo starts from the moment the ship’s manifold is connected to the flange of the shore pipeline at the port of loading, and continues until the ship’s manifold is connected to the flange of the shore pipeline at the port of discharge. In the case at hand, since the weight on the CIQ was measured after the end of Sinograin’s period of responsibility for the transportation of the cargo, it was incapable of proving that the shortage occurred during the period when WGC was responsible for transportation, and thus overturning the weight in the ullage report.

Takeaways

Following the SPC’s decision, it is now clear that the weight of discharged cargo will primarily be evidenced by the reports provided by the carrier, and not other measurements conducted after the cargo has been discharged. This decision might also have the effect of limiting carriers’ liability strictly to the period after cargo has been “shipped on board and prior to discharge”, when the cargo is under their full control.

It is also worth noting that ullage reports and dry certificates are only effective as proof of cargo weight if the weight is accurately measured and recorded. Hence, it is important for carriers to ensure that their measurements comply with the applicable rules on measurement and that their tank calibration table is accurate so as to better protect themselves against any potential post-discharge loss of cargo before onshore measurement.