1. Case Background

1.1 Cargo Damage Incident

Four/4 sets of robotic precision equipment loaded in two 40’ft flat rack containers were shipped from loading port Busan, Korea to disport Tianjin, China by vessel MV S. The vessel encountered severe weather during transit, which triggered cargo damage incident. The wooden packing crates inside the flat racks containers collapsed, resulting in damage to the equipment contained therein.

1.2 Parties involved

a) Company H, acting as NVOCC (Non-Vessel Operating Common Carrier) / Contractual Carrier issued House Bills of Lading, arranged the stuffing & lashing of the goods on the flat rack containers.

b) Company K, as performing carrier and the operator of the performing vessel, issued Sea Waybill for the consigned goods.

c) Company P, as cargo underwriter of the goods, paid insurance indemnity totaling over RMB 2 million to the insured/consignee after the occurrence of cargo damage and thereby acquired the right of subrogation from the consignee in China.

1.3 Cargo Damage Claim

P filed claim against actual carrier K and contractual carrier H, claiming for cargo compensation under the contract of carriage of goods by sea.

Company H once proposed a lump-sum settlement with P based on the affected cargo’s unit limitation of liability（2SDR/kg x 8040kgs= SDR16,080, equivalent to around RMB150,000）to resolve the claim, yet the cargo underwriter P rejected the carrier’s right to limitation, contending that H is not entitled to rely on the unit limitation of liability, for only top-over lashing was adopted for the goods on the open flat racks, which violated the requirements of the CTU Code, improper and insufficient lashing constituted gross negligence on the carrier side, so the NVOCC H was not entitled to the benefit of the Unit Limitation of liability (SDR16,080).

In December 2024, the cargo underwriter P, as Plaintiff, instituted litigation before the PRC Tianjin Maritime Court, listing company K as the 1^st Defendant and company H as the 2^nd Defendant, demanding the two defendants to compensate cargo loss oapproximately RMB 2 million.

We acted for the 2^nd Defendant company H to defend the cargo claim.

2. Key Legal Issues

1)  Whether the cargo damage was caused by insufficient lashing of goods on the flat rack containers;

2)  Whether company H, as NVOCC carrier, responsible for the cargo lashing and securing on the flat rack containers, lost the right to rely on the “Unit Limitation” of liability in this case?

3. Case Handling Process

3.1 Applying to Postpone the First Court Hearing

We accepted entrustment from NVOCC client H via its Korean legal counsel in mid. November 2025, while the court scheduled the first hearing to be held on 10 December 2025. We learned from the client that it had never received the court service documents, and only obtained information about the lawsuit and hearing date from the 1^st Defendant actual carrier K. After verification with the court, it is confirmed that the judicial documents were still pending to be served onto the 2^nd Defendant H via diplomatic channels and the service procedure had not been completed.

In accordance with relevant provisions of the Civil Procedure Law of PRC, foreign defendants are entitled to a statutory 30-day response period after receiving a copy of the Complaint served by the court. On this basis, we applied to court to postpone the hearing date, to secure the 2^nd Defendant’s statutory response period, accordingly, the hearing date was re-scheduled to 12 February 2026, granting our client sufficient time to investigate relevant facts, collect evidence and formulate our defense arguments.

3.2 Perusing other Parties’ Evidence

According to cargo survey report provided by the cargo underwriter P: the subject goods were packed in wooden crates, including 5 large crates and 8 small crates. Top-over lashing was adopted to secure the wooden crates on the two flat racks, and both flat racks were stowed on the upper-most layer of the deck. After the accident, only the goods on these two flat racks sustained damage, while the flat rack containers themselves remained unmoved toward the vessel/deck. All 5 large wooden crates on the two flat racks collapsed, and only one/1 small crate suffered damage.

The Survey Report submitted by the cargo underwriter identified two causes of the accident:

1)  Only top-over lashing was applied to the wooden crates on the flat racks, which breached the CTU Code and constituted insufficient lashing;

2)  After the vessel Master received severe weather forecasts, the Master and crew failed to safeguard cargo safety with good seamanship. The shipowner, charterer and crew failed to perform cargo care obligations amid severe weather conditions.

Meanwhile, the Sea Protest and Survey Report issued by the 1^st Defendant actual carrier K also attributed the cargo damage to insufficient lashing on the flat rack containers, for which the NVOCC H to be responsible and blamed.

3.3 Collecting Evidence from our Client

Acting for and on behalf of H, we collected evidence along the following:

1) Communication records between H and the cargo side generated during booking, to prove the cargo side (shipper/consignee/cargo forwarder) consented to stow the goods “On Deck”;

2)  Booking communications with the 1^st Defendant (the actual carrier /liner company K), as well as information recorded in the liner company K’s booking system. These materials evidenced that for the subject goods of Out-of-Gauge (OOG) cargo, actual carrier K provided lashing requirements to cargo side/lashing company and requested photos of completed lashing to be submitted to K for review and approval prior to loading. Our client H fully complied with all lashing requirements of K, and passed K’s review after submitting lashing photos;

3) Correspondence between H and the 3^rd party lashing company, proving that H forwarded actual carrier K’s lashing requirements and the lashing company finished all lashing work according to K’s Guidelines and passed K’s final review and approval.

3.4 Looking Beyond Court Filings to Trace Vital Evidence

Rather than limiting our analysis merely to materials formally filed in court proceedings, HiHonor legal team conducted an extensive review of correspondence/documents exchanged between the cargo underwriter and our NVOCC client during pre-litigation negotiation stage. This allowed us to discover the cargo insurer’s interim cargo survey report, which the plaintiff chose not to produce before the court.

The Interim Survey Report listed insufficient structural strength of the wooden packing crates as one of the causes to cargo damage, pointed out that the wooden crates were fabricated from extremely thin plywood, and all damaged areas concentrated on the crate bodies, while the lashing belts remained intact. Based on these observations, the cargo underwriter surveyor concluded that the plywood crates lacked sufficient structural strength to withstand multimodal transport, especially the sea carriage segment. However, this causal factor was completely deleted in the cargo surveyor’s final Survey Report.

3.5 Appointing Independent Expert Witness

H as NVOCC, did not appoint surveyors to conduct on-site inspection at disport Tianjin after the accident. Given the core dispute of the case centered on the technical issue of lashing, we consider necessary to retain expert to issue a technical analysis report regarding the cause of cargo damage.

We instructed an experienced independent marine expert, held thorough discussions with the expert and arranged all case materials for his consideration. The expert prepared technical analysis report, with conclusions outlined below:

1)  The top-over lashing deployed for the cargo stowed on the flat racks complied with the CTU Code, as the Code does NOT prohibit the use of top-over lashing arrangements.

2)  Calculation checks confirmed that the lashing strength applied to each large wooden crate on the flat racks was sufficient for the foreseeable sea conditions the vessel would encounter on the voyage.

3)  The internal securing arrangements for equipment within the wooden crates failed to meet standard requirements for ocean carriage.

4)  The wooden crates were substantially oversized relative to the robotic equipment housed within, creating significant void space above the equipment. No adequate bracing or filling materials were fitted within these voids. Consequently, the restraining force from external crate lashing could not be transferred to the equipment itself.

5)  The wooden crates possessed inadequate structural integrity to withstand impacts from the internally shifting and tilting equipment.

Furthermore, we obtained the court’s permission for the expert to attend the hearing. The expert explained his conclusions, answered cross-examination from all parties and clarified technical queries put forward by the tribunal, enabling the court to better comprehend the technical reasoning in his report.

4. Core Arguments

We substantiated before the court that H, as NVOCC under concerned Bs/L, was free from fault for the cargo damage and should not bear compensation liability, based on the following major arguments and points of defense:

1)  H strictly followed the shipper and consignee’s instructions during the booking process, secured the space for the exact voyage designated by the consignee’s cargo forwarder, and fully notified the shipper /consignee of the arrangement of On Deck stowage. The consignee/cargo side explicitly acknowledged and accepted all risks associated with deck cargo carriage;

2)  The lashing work performed for goods on the two flat rack containers by H was fully adequate. H entrusted a professional lashing/stuffing company to complete container stuffing and lashing, adopted lashing schemes formulated by the actual carrier K, and all lashing photos passed through the liner company K’s official review and approval prior to shipment.

3)  The expert Analysis Report submitted by our client H proved that the lashing arrangement on flat racks fully complied with CTU Code, could withstand all foreseeable risks during the sea voyage, and the cargo damage had no connection with the external lashing on the flat racks/containers;

4)  The cargo damage arose solely from defective packing of the goods in wooden crates and inherent special risks of on deck cargo, for which the carrier shall not be liable for compensation in accordance with law:

●  The wooden crates were made of ultra-thin plywood without diagonal bracing, making them prone to breakage and collapse and invalidating the external lashing straps. This factor was previously identified as a contributing cause in the cargo underwriter surveyor’s Interim cargo Survey Report.

●  The robotic precision equipment inside wooden crates lacked sufficient internal securing, and the internal restraints could not generate adequate anti-overturning torque.

●  Furthermore, the oversized wooden crates created large unfilled gaps between equipment and crate walls, preventing the external lashing force from acting on the equipment. The goods of precision equipment entirely relied on internal securing for stability, which significantly increased the risk of internal toppling and collision that ruptured the wooden crates’ structure.

●  Post-accident on-site inspection showed that all large wooden crates cracked, with collapsed top panels and detached broken side panels, while the external lashing straps remained intact and firmly anchored on the flat racks/containers. This physical evidence fully corroborated that the flat rack lashing was sufficient and the root cause of cargo damage was defective cargo packing inside wooden crates.

5)  Compounding the above defects, the vessel encountered severe weather and violent rolling at sea, which further amplified the risk of equipment cargo toppling inside the wooden crates.

6)  Apart from the above primary defenses, we also put forward alternative defensive grounds: the loss amount claimed by cargo underwriter P was unreasonable, and even if company H, as NVOCC was found partially liable for cargo damage, H was entitled to the liability limitation defense (in no way exceeding SDR16,080).

5. Case Outcome

Our defense points convinced the collegial panel of the court and secured an overwhelmingly favorable negotiating position for our client H.

Ultimately the case was concluded by court mediation at much lower lump sum settlement of RMB 50,000 (equivalent to USD7,332), representing only 1/3 of the carrier’s unit limitation of liability applicable in this case, achieving a highly favorable outcome for our NVOCC client.

Should you have any query or wish to know more of the case, pls. feel free to contact our lawyers via below:

xinwei.zhao@hihonorlaw.com huanying.liu@hihonorlaw.com