Summary of the (unknown clauses) in China's Maritime Law

In the business of freight forwarding companies, there are often transactions involving the delivery of entire containers. However, when freight forwarding companies issue bills of lading, they often overlook the clauses that are more favorable to them - the "unknown clauses". Article 77 of China'sMaritime Lawclearly stipulates that, except for reservations made under Article 75, the bill of lading issued by the carrier or its agent is preliminary evidence that the carrier has received the goods in the condition stated on the bill of lading or that the goods have been loaded onto the ship. However, under Article 75, if the carrier or its agent does not have a proper method to check the bill of lading, they can annotate on the bill of lading that they are unable to verify it. This practice by the carrier is known as writing "unknown clauses" on the bill of lading. This can be recorded on the front of the bill of lading, such as writing "as claimed to be inside" or "as declared by the shipper" or "weight and quantity unknown", etc.; it can also be confirmed as a disclaimer clause in the terms and conditions on the back of the bill of lading. In simple terms, the "unknown clauses" means that the carrier, as stated on the bill of lading, relies on the shipper to provide information on the weight, size, markings, numbers, quality, content, and value of the goods, and thus transfers the responsibility for the goods matching the description to the shipper, appropriately reducing the carrier's liability.

The impact and effectiveness of annotating "unknown clauses" in the bill of lading mainly involve three aspects. Firstly, the evidence effectiveness of the bill of lading will be affected. If the carrier or the person who signs the bill of lading on behalf of the carrier annotates valid "unknown clauses" in the bill of lading, the evidence effectiveness of the bill of lading will be weakened. In principle, the carrier will not be liable for any shortages or discrepancies in the quantity or weight of the goods. Secondly, a bill of lading with "unknown clauses" is not necessarily considered a "dirty" bill of lading. A "dirty" bill of lading refers to a bill of lading in which the carrier indicates suspicion that the goods loaded on board do not match the bill of lading, and specifies the discrepancies and the basis for suspicion. In China's Maritime Law, Article 75 combines the carrier's suspicion of the goods with the "unknown clauses" in the same clause, but in fact, they are not equivalent. Banks have the right to refuse payment for "dirty" bills of lading, but for bills of lading with "unknown clauses", the mainstream view and UCP600 indicate that they can be accepted theoretically. Finally, when the carrier writes "unknown clauses", the burden of proof changes. At this point, the carrier only needs to prove that the goods were delivered to the consignee in good condition and with an intact seal. The burden of proof originally borne by the carrier will then be transferred to the consignee or shipper.

In practice, carriers tend to include "unknown clauses" in bills of lading to minimize their liability. As a shipper, it is important to fully understand the meaning of "unknown clauses" and the risks they may bring. You should consciously pay attention to this part of the content on the bill of lading, conduct a full risk assessment, and avoid being caught off guard in case of disputes. At the same time, try to use other terms to highlight the carrier's obligations to supervise and be responsible for loading, and incorporate them into the bill of lading or transportation contract. If these measures fail, at least communicate and negotiate with the carrier in advance to reach a relatively satisfactory compromise on this issue.

As a carrier, it is important to fully recognize the dual nature of "unknown clauses".

On the one hand, including "unknown clauses" in the bill of lading effectively transfers the burden of proof regarding the consistency of the transported goods and the bill of lading to the shipper, thereby avoiding excessive liability.

On the other hand, the inclusion of "unknown clauses" does not mean that the carrier is exempt from its duty of reasonable care. The carrier still needs to fulfill its obligations as much as possible, and conduct necessary checks on whether the goods and the list are consistent, and understand the actual situation of these goods. In practice, there have been cases where the court excluded "unknown clauses" and held that the carrier failed to fulfill its duty of reasonable care and reasonable cargo management. For example, in the 2013 cargo damage dispute case between Hachiman Shipping Co., Ltd., Shanghai Shenfu Chemical Co., Ltd., and Japan's Tepco Shipping Co., Ltd., the Supreme People's Court supported the argument made by the second instance court, stating that "although the bill of lading issued by Tepco Shipping Co., Ltd. contained a notation that 'the carrier and the captain are not aware of the size, weight, specifications, quantity, nature, value and condition of the goods,' according to Article 75 of the Maritime Law, carrier's notation on the bill of lading regarding the 'unknown' characteristics of the goods needs to explain the basis for the suspicion, and clearly state the fact or reason for the 'unknown' as a precondition for effectiveness; otherwise, this notation is not legally binding on the holder of the bill of lading."

The use of "unknown clauses" is a strategy that can be both beneficial and risky for carriers. On one hand, it allows carriers to transfer the responsibility of verifying the accuracy of the cargo to the shipper, reducing their own liability. On the other hand, this clause does not absolve the carrier from exercising reasonable care and due diligence in handling the cargo.Therefore, the effectiveness of the "unknown clause" depends on the reasonableness of its application. It should not be used arbitrarily or solely for the purpose of avoiding responsibility, as this may lead to the clause being invalidated by the court.Despite the potential risks, the "unknown clause" can still be a useful tool for freight forwarding companies, especially in cases where full-container delivery is involved. However, it is important for the staff to have a high level of professionalism and expertise in order to use this clause effectively and responsibly.

Zhai Dongwei International Trade & logistics Attorney team was founded in 2007. Its founder, Zhai Dongwei, is the founding partner of Guangdong Yingzun Law Firm. Focusing on International trade,maritime affairs, and supply chain cases for more than 16 years, the team currently has more than 30 professional logistics attorneys, of which more than 10 have overseas work and study experience, and can use Chinese, English and French to work and participate in business negotiations.