The cargo, 36 tons of spandex yarn, was loaded on the Su Yue, which was owned by China Shipping Development Co Ltd (the appellant). The appellant issued two bills of lading to Huayu Co Ltd (the shipper). These two bills of lading stated that the 'shipper should be fully responsible for the package, calculation and accuracy of the cargo'. These bills of lading were later endorsed by the shipper to China (Fujian) Foreign Trade Centre Co Ltd (the respondent). Following the discharge of the cargo, the respondent found that the cargo was textured yarn. The respondent claimed against the appellant for losses of USD 1,999,584. The first instance Court held that the appellant had the responsibility to take care of the cargo and ascertain the contents of the cargo. Failing to fulfil these two obligations, the appellant violated ss 71 and 78 of the Chinese Maritime Code 1992.

On appeal, the appellant claimed that these two bills of lading incorporated the Hague Rules. In light of the wording of these bills of lading, the shipper should be responsible for the statement of the goods. Therefore, according to art 4.2.i of the Hague Rules, the appellant should not be liable for any loss arising from the act or omission of the shipper or owner of the goods.

Held: Appeal dismissed.

The Hague Rules that had been incorporated into the bills of lading could serve as a basis for the handling of the case. Although China is not a State Party to the Hague Rules, the Rules could still be applied as an international custom.

Article 3.8 of the Hague Rules stated that 'Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in this Convention, shall be null and void and of no effect.' Therefore, the wording 'shipper should be fully responsible for the package, calculation and accuracy of the cargo' was of no effect. The appellant should be responsible for the losses.