In September 2014, HIHONOR was instructed by a leading liner company, a B/L Carrier, to advise on the swift release and return of its 74 laden containers of STFO cargo.  The receiver of the cargo was a Qingdao trading company, which imported it through a company based in Henan acting as the B/L Consignee.  The containers were shipped from the loading port Surabaya, Indonesia to discharge at port Qingdao under 8 separate voyages.  A total of 8 sets of straight B/L were issued by the Carrier for these shipments.

Due to the strict import quotas for such kind of STFO cargo, the Qingdao company appointed the state-owned Henan company as agent to sign the sale contract with the Indonesian exporter/shipper, and to handle all the import formalities under its own name.  Hence the Henan company was named Consignee under the 8 sets of B/L.

After the cargo’s arrival at Port Qingdao, the government surveyor CIQ found that lubricating oil was used in the declared STFO cargo and classified it as “Solid Waste”, the import of which is forbidden. CIQ issued a Notification of Inspection and Quarantine Treatment and firmly rejected to clear the cargo for entry.

As the cargo failed to pass Customs Clearance, the CIQ Notification required the waste cargo to be shipped out of China.  The Consignee and Receiver obtained Delivery Orders from the Carrier by surrendering the original B/L, but they could not take delivery of the cargo for the above reasons.  The Consignee failed to take any action to comply with the order issued by CIQ.  The 74 laden containers of STFO cargo had stayed in the QQCT for over 5 months before our lawyers’ intervention.

Our professional advice covered all legal and practical options, including the auction of the cargo by Customs or by Court and its destruction. The former we deemed impractical because the cargo was forbidden to be imported and the latter was too expensive. The domestic estimate for destruction was around RMB30, 000/per container, and the quotation from HK was around USD8, 000/container. Another option was to dispose of the cargo. Taking into account that the B/L Consignee did not abandon the cargo, the Carrier could not dispose of the cargo in the absence of consent from the Consignee.  Otherwise, it may result in a tort claim for infringement of property rights.

In line with the above and our vast experience handling such claims, we recommended the most effective course of action to put pressure on the Receiver and Consignee. After contacting the Receiver and B/L Consignee, we advised the Carrier to file lawsuits at Qingdao Maritime Court against them, requesting the two defendants to devan[SI1] , return and pay the 74 containers’ demurrage costs and losses to the Carrier.

The filing of lawsuits improved the Carrier’s position and bargaining power in negotiation with the cargo side. Our lawyers successfully exerted influence on the Receiver to find a new buyer in Malaysia for the STFO cargo. Before the cargo was shipped out of China, we assisted the Carrier with reaching a Settlement Agreement (“SA”) with the Receiver and Consignee.  In accordance with the terms of the SA, Qingdao Maritime Court issued a Mediation Statement, which is enforceable legal document under Chinese law. According to the SA, the Consignee undertook to take delivery of the cargo in a Malaysian port within a very short period, failure of which, would have entitled the Carrier to dispose of the cargo without giving any further notice, the Consignee being responsible for all costs and expenses incurred.

Through our lawyers’ continuous efforts, the 74 laden containers of STFO cargo were shipped from port Qingdao to a Malaysian port.  All containers were returned to the Carrier in good order and condition in January 2016.  In addition, the Carrier received the considerable amount for container demurrage losses of about RMB 1 Million from the Receiver Qingdao company.