Qingdao Maritime Court of the People’s Republic of China Civil Judgment (2014) Qing Hai Fa Hai Shang Chu No. 1006

　　Qingdao Maritime Court of the People’s Republic of China

　　Civil Judgment

　　(2014) Qing Hai Fa Hai Shang Chu No. 1006

　　Plaintiff: Bank of China Yuncheng City Branch.

　　Residence: 39, Zhongyinbei Road, Yuncheng city, Shanxi Province, PRC.

　　Representative: LiMinhong,president of the bank.

　　Authorized agent ad litem: WangFeng , lawyer of Beijing Tiantong Law Firm.

　　Authorized agent ad litem: YangJunxiao , lawyer of Beijing Tiantong Law Firm.

　　Defendant: Sea Powerful IISpecial Maritime Enterprise (ENE).

　　Residence: 85, AktiMiaouli, 185 38 Piraeus, Greece

　　Legal representative: Spyridon Buhayer, director.

　　Authorized agent ad litem: ShenXiangman , lawyer of Guangdong Wang Jing & CO. Law Firm.

　　Authorized agent ad litem: JiangZhou , lawyer of Shandong Minyang Law Firm.

　　The plaintiff, Bank of China Yuncheng City Branch (hereinafter referred to as “BOC Yuncheng Branch”), has filed a lawsuit against the defendant, Sea Powerful IISpecial Maritime Enterprise (hereinafter referred to as “Sea Powerful Enterprise”), for the infringement compensation for delivering goods without the original B/L in carriage of goods by sea. After accepting the case, the Court formed a collegial panel for trial according to law. The Court rejected the defendant’s objection to jurisdiction raised during the timeframe for submission of pleadings in accordance with the law. The defendant refused to accept the verdict and appealed to Higher People’s Court of Shandong Province. In the second instance, Higher People’s Court of Shandong Province issued a civil ruling of (2015) Lu Min Xia Zhong No. 449, rejecting the appeal and upholding the original ruling. After exchange of evidence, the Court heard this case in public in accordance with the law. WangFeng, YangJunxiao , the agents of the plaintiff, and ShenXiangman, JiangZhou, the agents of the defendant, attended the Court hearing. Now the trial of this case has been completed.

　　The plaintiff requested the Court to order the defendant to compensate for its loss of 8,751,526.28 US dollars, and then changed the amount to 8,351,704.94 US dollars on April 28 2017 during the trial.

　　Facts and reasons: on June 18 2013, the plaintiff and Shanxi Haixin International Steel Co., LTD. ( hereinafter referred to as “Haixin” ) signed a Credit Line Agreement with the number of 002 of Haixin, 2013, which stipulated that the plaintiff would provide trade financing for Haixin, including issuing international L/C and import bill advance. Article 6 (2) of appendix 1 of this agreement provides that after the plaintiff issues the L/C and makes advances or accepts or pays, it shall have the right to dispose of the full set of documents/goods under the L/C or any other guarantee interest or property interest that may be available under any applicable law or regulation. Article 4 (1) of appendix 2 of this agreement provides that the plaintiff has the right to dispose of the full set of documents/goods under import bill advance or any other guarantee interest or property interest that may be available under any applicable law or regulation.

　　On January 28 2014, Haixin applied to the plaintiff for issuing an international L/C because it needed to import iron ore, and then applied to the plaintiff for import bill advance on February 20 2014. The plaintiff agreed to issue the L/C after check. Thereafter, the plaintiff received the documents under the L/C presented by the foreign seller, including three originals of the shipped B/L with the number of “ONE”. The B/L specified that the shipper was Koolan Iron Ore Pty Ltd; the consignee and notifying party were “To Order”; the goods were 71,650 tons of iron ore; the ship was “MV ZAGORA” owned by the defendant; the port of loading was the Australian Island of Koolan, and the port of uploading were the main ports in China. The B/L was issued on December 14 2013 by the agent of ZAGORA’s captain, Inchcape Shipping Services Pty Limited, and endorsed by the shipper. The documents received by the plaintiff also included the sales contract, invoices, etc., showing that the value of the goods involved in the case was 10,310,107.27 US dollars. After examining the documents under the L/C, the plaintiff released 8.25 million US dollars under import bill advance to Haixin on February 21, 2014, and paid all the payment under the L/C using this amount of money together with other payments. The plaintiff still held three original bills of lading since Haixin had not paid the debt caused by import bill advance financing.

　　The “ZAGORA” unloaded the goods involved in the case at the Lanshan Port of Rizhao, China on December 29 2013. However, Haixin neither paid the arrears for the B/L nor entrusted the plaintiff to sell the goods. After being unloaded at Lanshan Port, all the goods involved had been picked up by others without an original B/L. Upon the plaintiff’s application, Qingdao Maritime Court arrested “ZAGORA” owned by the defendant in Lanshan Port on August 27 2014.

　　In conclusion, the plaintiff claimed that it was the legal holder of the original B/L which was issued by the agent of the defendant. The defendant’s “ZAGORA” ship, who transported the goods involved from Australia to Lanshan Port of Rizhao, was the carrier of the goods involved in this case. The defendant, as a carrier, violated the legal regulation and delivered goods without an original B/L, which harmed the rights under the B/L of the plaintiff and made plaintiff’s collection of debt impossible. Therefore, it ought to bear the liability for compensation. At the same time, during the trial of this case, the plaintiff made it clear that its claim was to require the defendant to bear tort liability.

　　The defendant pleaded:

　　1. The goods’ delivering without an original B/L alleged by the plaintiff was carried out without authorization by a shipping agent appointed by the disponent shipowner, and the defendant had no knowledge of this and shall not be held legally liable;

　　2. The plaintiff did not fulfill its obligation of examination in the issuance of the L/C and import bill advance. The plaintiff knew or should have known the goods had been picked up and there had been no corresponding actual goods under the B/L as well as actual transaction basis did not exist for the credit relations, however, the plaintiff still issued the L/C and handled import bill advance for Haixin. The plaintiff cannot be regarded as a bona fide holder of the B/L involved because of the gross negligence in the process of issuing L/C and handling import bill advance, therefore, it did not have the right to claim relevant compensation according to the B/L involved;

　　3. After Haixin picked up the goods through the delivery order, the B/L obtained by the plaintiff no longer represented any right, and the plaintiff could not claim the right of taking delivery of cargo against the carrier. Haixin should be responsible for the plaintiff’s loss because Haixin provided false information, causing plaintiff’s loss of the right to take delivery;

　　4. Even if the plaintiff had a right to the B/L, it was limited to the right of pledge under the bill of lading involved, and only to the damage to the plaintiff’s right of preferred compensation for the goods involved;

　　5. The defendant had no fault during delivery of the goods and shall not bear any liability. The plaintiff and Haixin had all or gross fault for the damage and shall bear all or a great part of the liability;

　　6. The L/C materials submitted by the plaintiff (i.e., the sales contract corresponding to the goods under the B/L and the basic documents of the L/C’s issuance) were incomplete and contradictory, therefore, there were serious defects in plaintiff’s right to claim compensation based on the B/L;

　　7. The plaintiff shall first be compensated through the maximum claim guarantee provided by the relevant guarantor and the deposit pledge provided by Haixin. The part that had been compensated shall not be supported, and the amount claimed by the plaintiff was obviously too high;

　　8. The delivery order involved was issued in accordance with the requirements of the local customs for customs transfer. According to the Maritime Law and relevant laws and regulations, the carrier can be exempted from liability in this case. To sum up, the defendant argued that plaintiff’s claims had no factual or legal basis and should be rejected.

　　The evidence provided by the plaintiff in support of its claims and cross-examination opinions of the defendant are as follows:

　　Group 1, evidence concerning the legal relationship between the plaintiff and Haixin, including:

　　Evidence 1.1: Credit Line Agreement (No. 002 of Haixin, 2013) and the attachment, to prove that the plaintiff had provided financing for import trade of Haixin, including issuing international L/C and import bill advance and to prove that the plaintiff had the right to dispose of the full set of documents/goods under import bill advance.

　　The defendant had no objection to the authenticity of the group of evidence.

　　Group 2, evidence proving plaintiff’s issuance of L/C, handling import bill advance, the external payment, and that the plaintiff was the legal holder of the B/L, including:

　　Evidence 2.1: application of the issuance of the international L/C (No. 0129 of Haixin, 2014); Evidence 2.2: L/C numbered LC0385114000004. These two pieces of evidence were to jointly prove the application of the international L/C to the plaintiff, which were for the iron ore mining business contract (No. CH-HX 04-2013) signed by Haixin and Cheongfuli (Hong Kong) Company Limited, (hereinafter referred to as “Cheongfuli”). And then the plaintiff issued a L/C numbered LC0385114000004 in favor of Cheongfuli with the amount of 10,275,804.00 US dollars (plus or minus 8%).

　　Evidence 2.3: B/L; Evidence 2.4: invoices. These two pieces of evidence were to jointly prove that the plaintiff received the full set of original B/L, invoices and other documents delivered by the beneficiary after issuing the L/C, and to certify the quantity and the value at the time of shipment of the goods under the B/L.

　　Evidence 2.5: application for import bill advance; Evidence 2.6: debit notice (February 21 2014); Evidence 2.7: notice of trade finance releasing; Evidence 2.8: details of payment data. These four pieces of evidence were jointly to prove that the plaintiff agreed to the application of import bill advance filed by Haixin and on February 21 2014, 8.25 million US dollars of import bill advance and the security deposit of 2,063,107.27 US dollars, which was a total of 10,313,107.27 US dollars, was used to pay the amount under the L/C.

　　The defendant had no objection to the authenticity of evidence 2.1, 2.2, 2.3, 2.4 2.5, but raised objection to the interest rate specified in evidence 2.5, and did not acknowledge evidence 2.6, 2.7 and 2.8 because there was no signature and seal of the plaintiff.

　　Group 3, evidence proving that the goods under the B/L were not under the control of the defendant, including:

　　Evidence 3.1: loading and unloading records of “ZAGORA”; Evidence 3.2: details of the customs declaration form of import goods. These two pieces of evidence were to jointly prove that Haixin had finished import customs declaration for the goods under the B/L and the goods had been out of the charge of the defendant.

　　The defendant had no objection to the authenticity of evidence 3.1, but did not acknowledge evidence 3.2 because it was not signed and sealed.

　　Group 4, evidence proving the loss suffered by the plaintiff as a result of the release of goods without an original B/L by the defendant, including:

　　Evidence 4.1: details of the declaration of plaintiff’s rights; Evidence 4.2: the civil ruling of Yuncheng Intermediate People’s Court of Shanxi Province. These two pieces of evidence were to jointly prove that Haixin had entered the bankruptcy restructuring procedure. The creditor’s right formed by the issuance of L/C and import bill advance, including the principal of 8,250,000 US dollars and the interest of 456,040.80 US dollars, cannot be recovered. The plaintiff suffered such losses because of defendant’s delivery of goods without an original B/L.

　　The defendant did not raise any objection to the authenticity of the form of evidence 4.1 but believed that it was unilaterally produced by the plaintiff and had no objection to the authenticity of evidence 4.2.

　　Group 5, evidence proving that the defendant was the carrier issuing the B/L, including:

　　Evidence 5.1: certificate of ownership of the ship “ZAGORA”; Evidence 5.2: the declaration that the ship involved was not bareboat chartered. These two pieces of evidence were to jointly prove that the defendant was the owner of the ship “ZAGORA” and that the ship “ZAGORA” involved in the case was not bareboat chartered when the goods were carried. The B/L was issued by the agent of the captain, so the defendant was the carrier.

　　The defendant had no objection to the authenticity of the evidence.

　　Group 6, evidence of Haixin authorizing interbank refinancing, including:

　　Evidence 6.1: application for authorizing interbank refinancing business. It was to prove that Haixin applied for interbank refinancing while applying for import bill advance. The application stipulated that the handling fee rate of interbank refinancing was 1.199%/year and the financing rate of import bill advance was 4.13%/year, which was 5.329%/year in total.

　　The defendant had no objection to the authenticity of this set of evidence.

　　Group 7, evidence which proves that the plaintiff had disposed of the documents as agreed, including:

　　Evidence 7.1: notice of external payment/acceptance (2014.2.14), to prove that the plaintiff has notified Haixin according to article 5 of appendix 1 of Credit Line Agreement after receiving the documents, and Haixin agreed to make sight payment on February 21 2014.

　　Evidence 7.2: documents arrival notice of negotiating bank; Evidence 7.3: quality certificate, weight certificate and certificate of origin, jointly to prove that the documents received by the plaintiff on February 14 2014 were in conformity with the requirements of the L/C, thus the plaintiff must make payment.

　　The defendant had no objection to the authenticity of this set of evidence, but argued that this set of evidence cannot prove that the plaintiff had actually paid.

　　Group 8, evidence of payment of L/C balance, including:

　　Evidence 8.1: notice of external payment/acceptance (March 17 2014); Evidence 8.2: debit notice (March 24 2014); Evidence 8.3: SWIFT message (March 24 2014), jointly to prove that the L/C balance documents arrived on March 17 2014, and Haixin agreed to make payment at sight on March 24, and the plaintiff made balance payment of 193,620.68 US dollars via the SWIFT system on March 24. Because Haixin’s deposit had been deducted, no debt had formed.

　　The defendant had no objection to the authenticity of this set of evidence, but argued that this set of evidence cannot prove that the plaintiff has actually paid.

　　Group 9, evidence that the defendant recognized that it had delivered the goods under letter of indemnity in a British action, including:

　　Evidence 9.1: judgment of the high court of England, to prove that the defendant claimed in an action at the high court that the goods had been delivered under letter of indemnity without the original B/L.

　　The defendant had no objection to the authenticity of the set of evidence.

　　Group 10, evidence of partial settlement obtained by the plaintiff in the restructuring procedure of Haixin, including:

　　Evidence 10.1: the restructuring plan and the civil ruling of Yuncheng Intermediate People’s Court of Shanxi Province approving the plan; 10.2: domestic payment receipts, jointly to prove that the plaintiff declared claims of RMB 237,840,339.95 in Haixin’s restructuring plan, and received RMB 9,681,382.63 with a repayment rate of 4.07%. The claims involved in this case was 8,706,040.8 US dollars, and the amount of compensation the plaintiff had not obtained is 8,351,704.94 US dollars according to the percentage.

　　The defendant had no objection to the authenticity of this set of evidence.

　　The evidence submitted by the defendant in support of its defense and the cross-examination opinions of the plaintiff are as follows:

　　Evidence 1: the charter party between the shipowner and Oden Dorf Co. and the Chinese translation of it, to prove that Oden Dorf was the disponent owner of “ZAGORA” and had the right to appoint an agent.

　　The plaintiff had no objection to the authenticity of the evidence, but argued that although Oden Dorf was the charterer of the time charter party, the B/L involved was issued by the defendant and the defendant was the carrier.

　　Evidence 2: letter of indemnity issued by Haixin to Cheongfuli, the previous seller, to prove that on December 18 2013, Haixin issued a letter of indemnity to Cheongfuli, requiring Cheongfuli to release the goods involved in the case to Rizhao Hailufeng International Shipping Agency Co., Ltd.

　　The plaintiff denied the authenticity of the evidence on the ground that it was a copy.

　　Evidence 3: emails about Oden Dorf authorizing the shipping agent and emails about the shipping agent reporting to Oden Dorf, to prove that on December 18 2013, Oden Dorf entrusted the shipping agent as its agent at the unloading port, Lanshan Port, and the shipping agent reported to Oden Dorf from time to time after accepting the entrustment.

　　The plaintiff did not acknowledge the authenticity of the evidence.

　　Evidence 4: notice of readiness for unloading, to prove that on December 28 2013, “ZAGORA” arrived at the unloading port, Lanshan Port, and submitted the notice of readiness.

　　The plaintiff had no objection to the evidence.

　　Evidence 5: list of imported goods carried by ships on international voyages to certify the condition of the goods carried by the ship “ZAGORA”.

　　The plaintiff had no objection to the evidence.

　　Evidence 6: stowage chart, showing the stowage of the goods on “ZAGORA”.

　　The plaintiff had no objection to the evidence.

　　Evidence 7: fact records of loading and unloading time, to prove that the “ZAGORA” arrived at Lanshan Port on December 28 2013, and started unloading on December 29, and finished unloading on December 31 2013.

　　The plaintiff had no objection to the evidence.

　　Evidence 8: copy of B/L, to prove the details of the shipment of the goods involved by “ZAGORA”.

　　The plaintiff had no objection to the authenticity of the evidence.

　　Evidence 9: delivery order, to prove that on January 3 2014, the shipping agent issued a delivery order for the goods involved, and the consignee was Haixin.

　　The plaintiff had no objection to the evidence.

　　Evidence 10: customs clearance form of entry cargoes, quality and weight certificate, to prove that Haixin submitted the customs clearance form of entry cargoes on January 6 2014 and subsequently obtained the quality and weight certificate issued by the inspection and quarantine department. Haixin was the consignee of the goods involved.

　　The plaintiff had no objection to the evidence.

　　Evidence 11: QQ chat records, to prove that Haixin had obtained the consent of its customers on the release and use of the goods involved, and confirmed that it had obtained the original B/L of the goods involved on February 18 2014.

　　The plaintiff did not acknowledge the authenticity and relevance of the evidence.

　　Evidence 12: the electronic track scale measurement sheets of Lanshan Port, to prove that the goods involved in the case were transported from Lanshan Port to the location of Haixin in batches from January 14 2014 to February 8 2014.

　　The plaintiff had no objection to the authenticity of the evidence, and asserted that the evidence was sufficient to prove that all the goods involved had been transported to Haixin and out of the control of the carrier.

　　Evidence 13: sales contract, to prove the terms of the sales contract between Haixin and Cheongfuli.

　　The plaintiff had no objection to the authenticity of the evidence, but argued that according to article 4 paragraph A of UCP600, the bank is not bound by the contract of sale.

　　Evidence 14: invoices, to prove that Cheongfuli issued invoices for the goods involved on December 21 2013, and the date of the invoice was inconsistent with that provided by the plaintiff.

　　The plaintiff did not acknowledge the authenticity of the evidence.

　　Evidence 15: certificate of analysis, weight and origin, to prove Cheongfuli’s description of the goods.

　　The plaintiff did not acknowledge the authenticity of the evidence.

　　Evidence 16: L/C message, to prove that the L/C was issued by the plaintiff on January 29 2014 with a unit price of 135.88 US dollars/mt, which was inconsistent with the price (148.28 US dollars/mt) on the provisional invoices submitted by the plaintiff.

　　The plaintiff had no objection to the authenticity of the evidence, but argued that the evidence cannot prove the plaintiff’s fault in the process of examining the documents.

　　Evidence 17: the issuance notice of trade financing for interbank refinancing business under the L/C, to prove that the interest rate of the financing involved was 5.329%, which was inconsistent with the financing interest rate of 4.13% recorded in the issuance notice of trade financing submitted by the plaintiff.

　　The plaintiff did not acknowledge the authenticity of the evidence but argued that the interest rate of Haixin’s trade financing involved in the case was indeed 5.329%, which was composed of the financing interest rate of 4.13% and the interbank refinancing business handling fee rate of 1.199%.

　　Evidence 18: emails between Oden Dorf and the shipping agent, to prove that after being informed of the lawsuit, Oden Dorf repeatedly asked the shipping agent about the status of the goods, and the shipping agent replied on September 1 2014 that it had no knowledge of the release of the goods.

　　The plaintiff did not acknowledge the authenticity of the evidence and argued that the evidence cannot overturn the fact that the goods had actually been out of the control of the carrier.

　　Evidence 19: (2014) Yun Zhong Po No. 1, 2, 3, 4, 5-2 Civil Ruling of Yuncheng Intermediate People’s Court of Shanxi Province, to prove that on August 11 2015, Yuncheng Intermediate People’s Court of Shanxi Province confirmed that the plaintiff’s ordinary claims of RMB 237,840,339.95 to Haixin was a claim without controversy, which already included the plaintiff’s claims in this case to the defendant.

　　The plaintiff acknowledged the authenticity of the evidence, but argued that the evidence cannot prove that the plaintiff’s claims have been paid off.

　　Evidence 20: Feng Wang’s testimony, to prove that plaintiff’s lawyer submitted testimony to Hong Kong’s court on November 17 2015, claiming that in March 2014, the plaintiff sent its employees to Lanshan Port to inquire the status of the goods, and found that the goods under the involved B/L had been taken by others without an original B/L.

　　The plaintiff had no objection to the authenticity of the evidence and argued that the goods involved had been taken before February 8 2014.

　　Evidence 21: the materials of declaration of claims by Haixin, to prove that the plaintiff had filed    a lawsuit with Yuncheng Intermediate People’s Court of Shanxi Province against one of the guarantors under the trade finance loan. Afterwards, the two parties reached a settlement agreement and the plaintiff obtained partial compensation. Specific amount of the compensation and the content of the final settlement agreement needed to be verified.

　　The plaintiff argued that the evidence could not prove that the plaintiff’s claims have been paid off.

　　Evidence 22: the emails between Shanghai Haiboxinhui International Trade Co., Ltd. and Xiamen C&D Co., Ltd., regarding the cargo transport by the involved ship， to prove that the real responsible parties were Shanghai Haiboxinhui International Trade Co., Ltd. and Haixin as well as the shipping agent, but not the carrier.

　　The plaintiff did not acknowledge the authenticity and relevance of the evidence.

　　Evidence 23: the application form for delivering B/L submitted by the seller, Cheongfuli, to prove that the original B/L had still been kept by the seller until February 10 2014. The plaintiff did not hold the original B/L as well as Haixin.

　　The plaintiff did not acknowledge the authenticity of the evidence and argued that the defendant could not claim that the plaintiff did not have the property right of the B/L or that the defendant had no mistake in releasing goods without an original B/L relying on the evidence.

　　Evidence 24: the Supplementary Agreement I of the sales contract between Haixin and Cheongfuli, to prove that Haixin shall obtain the L/C within 20 days after the completion of unloading, and the time of plaintiff issuing the L/C was inconsistent with the basic contract; the basic contract required the plaintiff to pay attention to the unloading time and the movement of the goods to determine the time of issuing L/C.

　　The plaintiff did not acknowledge the authenticity of the evidence and argued that it should not be bound by the time of issuing L/C promised by Haixin to the seller. Article 4 paragraph A of UCP600 also expressly stipulates that the issuing bank is not restricted by the underlying transaction contract.

　　Evidence 25: the L/C message of Bank of China (Hong Kong) Co., Ltd, to prove that the L/C in this case was issued by Taiyuan branch of Bank of China, and the plaintiff was not qualified and had no right to sue.

　　The plaintiff did not acknowledge the authenticity and relevance of the evidence.

　　Evidence 26: the certification report of hematite market price issued by China iron and steel industry association, to prove the market price of the goods at that time. The defendant further claimed that, in this case, losses should be determined based on the price of the time of plaintiff claiming pledge, namely the time of arrest of the ship, which was August 27 2014.

　　The plaintiff recognized the authenticity of the evidence but did not recognize its relevance.

　　Evidence 27: the central parity rate of RMB against US dollar on July 21 and August 27, 2014 issued by the People’s Bank of China, to prove the exchange rate status of the price involved in evidence 26.

　　The plaintiff recognized the authenticity of the evidence but did not recognize its relevance.

　　Evidence 28: Quarterly Report of Mount Gibson Iron Co., to verify the authenticity and objectivity of evidence 26.

　　The plaintiff recognized the authenticity of the evidence but did not recognize its relevance.

　　Evidence 29: basic provisions of international settlement and trade financing business of Bank of China, operational rules of international settlement and trade settlement financing business of Bank of China, to prove that the plaintiff had gross negligence.

　　The plaintiff did not acknowledge the authenticity of the evidence and argued that it could not prove the plaintiff was at fault.

　　Evidence 30: news report of deterioration of Haixin’s credit and total suspension of production, to prove that the plaintiff had gross negligence.

　　The plaintiff acknowledged the authenticity of the evidence, but argued that the reports appeared after the case and could not prove the plaintiff’s negligence.

　　According to the statements of the parties, evidence and cross-examination, the Court found the facts and evidence of the case as follows:

　　1. The fact that the plaintiff issued a L/C and handled import bill advance.

　　On June 18 2013, BOC Yuncheng Branch and Haixin signed the Credit Line Agreement with the number of 002 of Haixin, 2013. According to the agreement, BOC Yuncheng Branch would provide Haixin with a trade finance line of RMB 230,000,000. Haixin could use it for short-term loans, corporate account overdraws, bank acceptance bills, trade finance, letter of indemnity, capital business and other credit business, and the trade finance business included issuance of international L/C, import bill advance, delivery guarantee, packing loan,export bill advance, export discount under L/C, domestic L/C buyer bills, domestic L/C seller bills, domestic L/C negotiation, and other international and domestic trade financing business. The credit line shall be used from the effective date of the agreement to May 28 2014. Article 4 of this agreement stipulates that when Haixin applies to BOC Yuncheng Branch for the single line credit business under this agreement, it shall submit the corresponding application form and/or sign the corresponding contract or agreement with BOC Yuncheng Branch (collectively referred to as single line agreement). Article 10 stipulates that if Haixin fails to fulfill its payment and liquidation obligations in accordance with the terms of this agreement or single agreement, BOC Yuncheng Branch enjoys the right to exercise the security interest. Article 14 stipulates that the appendix 1 (Used for Issuing International L/C Business), appendix 2 (Used for Import Bill Advance) and appendix 11 (Used for Export Remittance Financing) constitute an integral part of this agreement and have the same legal effect as this agreement.

　　Article 4 paragraph 1 of appendix 1 Used for Issuing an International L/C Business of the Credit Line Agreement stipulates that if BOC Yuncheng Branch accepts Haixin’s application for issuing a L/C, it shall issue a L/C in accordance with the Application Form for Issuing an International L/C submitted by Haixin and the content of the L/C issued by BOC Yuncheng Branch shall prevail. It is agreed in paragraph 2 that if BOC Yuncheng Branch requires Haixin to submit documents related to the issuance of the L/C, such as the trade contract, it shall not be interpreted as BOC Yuncheng Branch undertaking the obligation of issuing the L/C in accordance with such documents. Article 5 paragraph 1 stipulates that Haixin shall deposit the prepared payment in accordance with the Application Form for Issuing an International L/C. Article 5 paragraph 3 stipulates, onceBOC Yuncheng Branch makes advance payment for accounts payable due to the insufficiency of payment in reserve deposited by Haixin, it shall constitute debts of Haixin to BOC Yuncheng Branch under the Credit Line Agreement and this appendix. Haixin shall promptly pay off, and advance interest rate and interest calculation shall be handled according to the application form. Article 6 paragraph 2 stipulates that after BOC Yuncheng Branch advances, accepts or promises to pay, it shall have the right to dispose of the whole set of documents/goods under the L/C or property rights or any security interests it may be entitled in accordance with any applicable laws and regulations. If the rights to dispose of a full set of documents/goods under the L/C belong to Haixin according to the applicable laws, regulations or the opinions of the competent court or arbitration institution, Haixin agrees to transfer such rights to BOC Yuncheng Branch unconditionally in the maximum permitted under applicable law, and acknowledges all the actions and omissions of handling the documents/goods by BOC Yuncheng Branch. If the rights to dispose of a full set of documents/goods under the L/C belong to BOC Yuncheng Branch in accordance with the applicable laws, regulations or the opinions of the competent court or arbitration institution, BOC Yuncheng Branch will retain such right until Haixin redeems the documents or fully pays the advance. Article 7 that other specific matters relating to the business hereunder shall be handled in accordance with the Application Form for Issuing an International L/C and the Application for Amendment to an International L/C.

　　As agreed in article 3 of appendix 2 Used for Import Bill Advance to the Credit Line Agreement, if BOC Yuncheng Branch accepts Haixin’s application for import bill advance, it shall pay the money to the presenting bank according to the currency and amount agreed in the Application Form for Import Bill Advance accepted by BOC Yuncheng Branch. Article 4 stipulates that BOC Yuncheng Branch has the right to dispose of the full set of documents/goods under import bill advance or any other security interest or property interest that it may be entitled in accordance with any applicable laws and regulations.If the rights to dispose of a full set of documents/goods under import bill advance belong to Haixin according to the applicable laws, regulations or the rulings of the competent court or arbitration institution, Haixin agrees to, in the maximum permitted by laws, regulations, transfer such right to BOC Yuncheng Branch unconditionally, and acknowledges all actions and omissions of BOC Yuncheng Branch’s disposal of documents or goods. If the rights to dispose of a full set of documents/goods under import bill advance belong to BOC Yuncheng Branch according to the applicable laws, regulations or the rulings of the competent courts or arbitration institutions, BOC Yuncheng Branch will reserve the right until Haixin fully pays off the bill financing provided by BOC Yuncheng Branch.

　　On January 28 2014, Haixin applied to BOC Yuncheng Branch to issue an international L/C, and submitted documents including the Application Form for Issuing an International L/C numbered Haixin Issuing No. 0129, 2014 and import contracts. It is agreed in article 2 of the application form that Haixin will deposit the full amount of reserve payment into the account opened by Haixin in BOC Yuncheng Branch, for external payment under the L/C, on the day one bank working day before the date of payment as specified in the L/C or other date required by BOC Yuncheng Branch (which is earlier). BOC Yuncheng Branch also has the right to take the initiative to debit Haixin’s foreign currency or RMB account for external payment. Article 3 stipulates that for advance payment of foreign currency, 30% more interest shall be charged on the basis of the fixed loan interest rate of within one year (including one year) stipulated by Yuncheng Bank of China from the date of advance, and compound interest shall be charged on a monthly basis from the date of advance. Article 4 stipulates that Haixin will pay to Yuncheng Bank of China on time the related expenses incurred as a result of the business under this application, and such fees shall be calculated and collected with basis, standards and methods stipulated by the relevant regulations of BOC Yuncheng Branch. Article 5 stipulates that Haixin shall provide deposit pledge. The amount of deposit is RMB 13,770,000, and the deposit account is 145451239190. BOC Yuncheng Branch signed and agreed on the Application Form for Issuing an International L/C.

　　When Haixin applied for the L/C, it also provided an iron ore sales contract signed with the seller Cheongfuli Company. The contract was signed on November 28 2013, numbered CH-HX 04-2013.

　　On January 29 2014, BOC Yuncheng Branch opened an irrevocable documentary credit with the number LC0385114000004 in accordance with the Credit Line Agreement and the application of Haixin. The beneficiary of the L/C is Cheongfuli Company, and the amount of the L/C is 10,275,804 US dollars (±8%). The L/C also stipulates that 98% of the down payment shall be paid seeing the B/L, temporary invoices, etc, and the balance shall be paid seeing the final invoice of the balance, etc.

　　After the L/C was opened, BOC Yuncheng Branch received the documents under the L/C from the beneficiary on February 14, including a full set of original B/L in triplicate, temporary invoices, quality certificate, weight certificate, and certificate of origin. Among them, the B/L stated that the number of the B/L was ONE; the shipper was Koolan Iron Ore Pty Ltd; the consignee was “To Order”; the ship was “ZAGORA”; the port of loading was the Australian Island of Koolan; the port of uploading were the main ports in China; the goods were 71,650 tons of iron ore. The B/L was issued on December 25 2013 by the agent of ZAGORA’s captain, Inchcape Shipping Services Pty Limited and endorsed by the shipper. The temporary invoice stated that the value of the goods at the time of shipment was 10,313,107.27 US dollars. After receiving the above-mentioned original B/L, invoices and other documents, BOC Yuncheng Branch considered that the documents complied with the provisions of L/C and issued an external payment/acceptance notice to Haixin. Haixin agreed the sight payment on February 21 2014.

　　Haixin applied for import bill advance from BOC Yuncheng Branch on February 20 2014 and submitted the Application Form for Import Bill Advance numbered 2014 Haixin Admittance No. 0221 and the Application for Interbank RefinancingService numbered 2014 No. 0221 due to insufficient reverse for payment under the L/C. Among them, the Application Form for Import Bill Advance stipulates that the rights and obligations arising from this import bill advance are in accordance with the Credit Limit Agreement numbered 2013 Haixin No. 002, its appendix 2 Used for Import Bill Advance and the application form; the amount of the bill advance is 8.25 million US dollars; the billing period is 150 days, and it is continuously calculated from the date of BOC Yuncheng Branch’s external payment; the settlement method is that the interest shall be paid together with the principal when it matures; the application form is the main contract of the Maximum Guarantee Contract numbered 2013 Haixin Trade Gaobao No. 002 which was signed by Yinguang Magnesium Industry (Group) Co., Ltd. of Shanxi, Wenxi and BOC Yuncheng Branch, the Maximum Guarantee Contract numbered 2013 Haixin Trade Gaobao No. 001 which was signed by Haixin Iron and Steel Group Co., Ltd. and BOC Yuncheng Branch, and the Maximum Guarantee Contract numbered 2013 Haixin Trade Gaobao No. 003 which was signed by Shaanxi Dongling Materials Co., Ltd. and BOC Yuncheng Branch at the same time. BOC Yuncheng Branch signed and agreed on the Application Form for Import Bill Advance.The Application forAuthorizing Interbank Refinancing Business states that the application constitutes a part of the Application Form for Import Bill Advance numbered 2014 Haixin Admittance No. 0221 signed by Haixin and BOC Yuncheng Branch. Haixin applied for authorizing interbank refinancing business for the above-mentioned import bill advance and agreed to pay the handling fee at the rate of 1.199%/year. On February 21, BOC Yuncheng Branch issued a notice on the issuance of trade financing and informed Haixin of providing trade financing of 8.25 million US dollars, with the financing period of 150 days, financing interest rate of 4.13%, financing due date on July 21 2014, and interest receivable of 141,968.75 US dollars. On the same day, BOC Yuncheng Branch debited RMB 12,592,587.84, which is 2,063,107.27 US dollars from Haixin’s deposit account, which was used to pay the amount under L/C, together with the above-mentioned 8.25 million US dollars of bill advance, totaling 10,313,107.27 US dollars. On March 4, BOC Yuncheng Branch deducted the amount of RMB 1,200,482.63 from Haixin’s deposit account to pay the balance of L/C. As Haixin failed to repay the principal and interest of the bill advance, the three original B/L were still held by BOC Yuncheng Branch.

　　The evidence on which the above facts are found includes: evidence provided by the plaintiff: 1.1 Credit Limit Agreement and appendix; 2.1 application form for opening international L/C; 2.2 L/C; 2.3 B/L; 2.4 invoices; 2.5 application form for import bill advance, 6.1 application form for authorizing interbank refinancing business; 7.1 external payment/acceptance notice; 7.2 documents arrival notice of negotiating bank; 7.3 quality certificate, weight certificate, certificate of origin; 8.1 external payment/acceptance notice; 8.2 debit notice; 8.3 SWIFT message, etc.; evidence provided by the defendant: evidence 8 B/L; evidence 13 sales contract; evidence 16 L/C message. The plaintiff and the defendant had no objection to the authenticity of the above-mentioned evidence, thus these pieces of evidence were confirmed by the Court. Although evidence 2.6 debit notice, evidence 2.7 trade finance issuance notice, evidence 2.8 payment data details provided by the plaintiff were not acknowledged by the defendant, the evidence were mutually confirmed with the evidence 17 the issuance notice of trade financing for interbank refinancing business under the L/C provided by the defendant, therefore, the Court also confirmed these pieces of evidence. The other evidence provided by the defendant around the disputed facts were copies not acknowledged by the plaintiff, therefore, the Court would not confirm the evidence.

　　The plaintiff had no objection to the above facts confirmed by the Court. The defendant objected to the facts concerning the financing interest rate of the import bill advance and whether the plaintiff had actually paid. The Court held that: regarding the financing interest rate of import bill advance, although evidence 2.7 notice of trade financing issuance provided by the plaintiff stipulated that the financing interest rate was 4.13%, which was lower than the financing interest rate of 5.329% stated in evidence 17 the issuance notice of trade financing for interbank refinancing business under the L/C provided by the defendant, the plaintiff had made a reasonable explanation for this: the import bill advance rate 4.13% plus the interbank refinancing service fee rate 1.199% totaled 5.329%. The evidence 6.1 application form for interbank refinancing business provided by the plaintiff confirmed this point and was consistent with the evidence 17 provided by the defendant. Therefore, defendant’s objection was overruled. Regarding whether the plaintiff actually paid externally, first of all, the L/C in this case was a sight payment L/C, which meant that after receiving the documents under L/C, the plaintiff must pay within five working days or refuse to pay on the basis of discrepancies between the L/C and the documents. Haixin agreed to the sight payment on February 21 2014, then the plaintiff paid by SWIFT message, and the parties in the legal relationship of the L/C did not raise any objection to it. According to this, it was enough to confirm that the plaintiff had actually paid. Secondly, although both the name of the plaintiff and the name “BANK OF CHINA TAIYUAN (SHANXI BRANCH)” appeared in the relevant documents related to the L/C, this was related to the SWIFT bank identification code. Moreover, the plaintiff was the branch of the Bank of China Shanxi Branch, which located in Taiyuan, therefore, the above statement could not deny the fact that the plaintiff had actually paid. In addition, the fact that the plaintiff had made external payment was confirmed by the court in the bankruptcy restructuring process of Haixin. Therefore, defendant’s objection was overruled.

　　2.The fact that “ZAGORA” ship delivered the goods without an original B/L.

　　On December 25 2013, the “ZAGORA” vessel loaded 71,650 tons of hematite ore in Kuran island, Australia. On the same day, INCHCAPE SHIPPING SERVICES PTY LIMITED issued the original B/L in triplicate as the agent of the “ZAGORA” vessel’s captain. The B/L stated that the number of the B/L was “ONE”; the shipper was Koolan Iron Ore Pty Ltd; the consignee was “To Order”; the ship was “ZAGORA”; the port of loading was the Australian Island of Koolan; the port of uploading were the main ports in China; the goods were 71,650 tons of hematite iron ore. The B/L was circulated after endorsement by the shipper and was finally held by BOC Yuncheng Branch.

　　On December 28 2013, the “ZAGORA” vessel arrived at Lanshan Port, and began to berth and unload on December 29, and the unloading was completed on December 31. On January 3 2014, the shipping agent at the unloading port issued a delivery order to deliver 71,650 tons of iron ore to Haixin. From January 14 to February 8, Haixin picked up all the goods.

　　On August 24 2014, BOC Yuncheng Branch applied to the Court for arresting the “ZAGORA” vessel because of carrier’s delivery of goods without an original B/L. Later, the Shanghai branch of the Commerzbank Co., Ltd. issued a letter of indemnity to release the “ZAGORA” vessel, and the Court subsequently released the “ZAGORA” vessel.

　　Sea Powerful Enterprise was the owner of the vessel and when the ship transported the goods involved and was detained for the dispute in this case, the “ZAGORA” vessel was not bareboat chartered. Oden Dorf GMBH & CO.KG was the time charterer when the goods were carried by “ZAGORA”.

　　The evidence on which the above facts are found includes: evidence provided by the plaintiff: evidence 2.3 B/L; 3.1 “ZAGORA” vessel’s loading and unloading records; 5.1 “ZAGORA” vessel’s ownership certificate; 5.2 the declaration that the ship involved was not bareboat chartered; evidence provided by the defendant: evidence 1 time charterparty; 4 notice of readiness for unloading; 5 list of imported goods carried by ships on international voyages; 6 stowage map; 7 loading and unloading time records; 8 B/L; 9 delivery order; 10 customs clearance form of entry cargoes, quality certificate, weight certificate; 12the electronic track scale measurement sheets of Lanshan Port; 20 the testimony of Feng Wang. The plaintiff and the defendant had no objection to the authenticity of the evidence, therefore, the Court confirmed the validity of the evidence. The authenticity of the other evidence provided by the defendant concerning the disputed facts which were copies or e-mails print of persons not involved in the case was doubtful. The evidence was not acknowledged by the plaintiff as well, therefore, the Court did not accept the evidence.

　　The plaintiff and the defendant had no objection to the above-mentioned facts confirmed by the Court.

　　3. The fact that BOC Yuncheng Branch’s claims had been partially compensated.

　　On November 12 2014, Yuncheng Intermediate People’s Court of Shanxi Province made (2014) Yunzhong Po No. 1, No. 2, No. 3, No. 4, No. 5 civil rulings, respectively accepting creditors’ application for restructuring of five companies including Haixin Company and Haixin Iron and Steel Group Co., Ltd. During the restructuring, the total amount of the claims declared by BOC Yuncheng Branch to the restructuring manager was RMB 237,840,339.95, including the principal of the import bill advance 8.25 million US dollars and the interest 456,040.8 US dollars, totaling 9,318,160.48 US dollars. On August 11 2015, Yuncheng Intermediate People’s Court of Shanxi Province made (2014) Yunzhong Po No. 1, 2, 3, 4, 5-2 civil rulings, which confirmed the above-mentioned claims of BOC Yuncheng Branch to Haixin. On September 25 2015, Yuncheng Intermediate People’s Court of Shanxi Province made (2014) Yunzhong Po No. 1, 2, 3, 4, and 5-5 civil rulings, which approved the restructuring plan of five companies including Haixin Company and Haixin Iron and Steel Group Co., Ltd. According to the restructuring plan, BOC Yuncheng Branch was compensated for RMB 9,681,382.63 on April 6 2016.

　　The evidence on which the above facts are found includes: the evidence provided by the plaintiff: evidence 4.1 details of plaintiff’s declaration of the creditor’s rights; 4.2 civil rulings of Yuncheng Intermediate People’s Court of Shanxi province; 10.1 the restructuring plan and the civil ruling of Yuncheng Intermediate People’s Court of Shanxi Province approving the plan; 10.2 domestic payment receipts; the evidence provided by the defendant: evidence 19 the civil ruling of the Yuncheng Intermediate People’s Court of Shanxi Province. The plaintiff and the defendant had no objection to the authenticity of the evidence, and the Court confirmed the validity of the evidence. The other evidence provided by the defendant concerning the disputed facts was not accepted by the Court because its authenticity and relevance had flaws.

　　The plaintiff had no objection to the facts ascertained by the Court. The defendant objected to the amount of the plaintiff’s claims having been compensated, claiming that the plaintiff’s claims had been compensated from other guarantors, but failed to provide evidence. The Court held that the parties are responsible for providing evidence for their own claims, and the defendant failed to provide evidence for its own defense, thus its defense was not accepted by the Court.

　　4. The fact that the parties to the charterparty chain provided the letter of indemnity for the delivery of goods without an original B/L.

　　Regarding the letter of indemnity disputes related to the delivery of goods without an original B/L in this case, the parties involved in the charterparty chain, including Sea Power Enterprise and Oden Dorf, also participated in the lawsuit in the High Court of the United Kingdom. The UK High Court verdict with index number [2016] EWHC3212 (Comm) stated that the cargo sales chain was as follows: on October 21 2013, SCIT Trading Company sold the goods to Xiamen C&D Co., Ltd. → on November 6 2013, Xiamen C&D Co., Ltd. sold the goods to Cheongfuli Company, a related company established in Hong Kong → on November 28 2013, Cheongfuli Company sold the goods to Haixin; the cargo transportation chain was as follows: SCITT Trading Company and SCITT Servicing Company had a affreightment contract → on November 19 2013, SCITT Servicing Company signed a charterparty with Oden Dorf CARRIERS GMBH & CO.KG → Oden Dorf CARRIERS GMBH & CO. KG had a long-term cargo sublease master agreement with Oden Dorf GMBH &CO. KG → on December 3 2013, Oden Dorf signed a time charterparty with the shipowner of “ZAGORA” (the time charterparty provided that the lessee shall provide the agent and pay the relevant amount for the agent. If the unloading port could not issue the original B/L, the lessee will issue a letter of indemnity, and the carrier could only unload the cargo when it received the fax of the letter of indemnity → on December 3 2013, Oden Dorf CARRIERS GMBH & CO.KG designated the ship to SCIT Servicing Company → on December 9 2013, SCIT Trading Company appointed the ship to Xiamen C&D Co., Ltd. Letter of indemnity for delivering goods without an original B/L chain was as follows: Xiamen C&D Co., Ltd. issued a letter of indemnity to SCITT Trading Co., Ltd. → SCIT Servicing Company issued a letter of indemnity to Oden Dorf CARRIERS GMBH & CO.KG → Oden Dorf issued a letter of indemnity to Sea Power Enterprise. The judgment finally concluded that Sea Power Enterprise had the right to file a claim withOden Dorf’s letter of indemnity → Oden Dorf CARRIERS GMBH & CO.KG had the right to file a claim with the letter of indemnity submitted by SCIT Servicing Company → SCIT Trading Company had the right to file a claim against Xiamen C&D Co., Ltd. according to the letter of indemnity provided by it.

　　The evidence to confirm the above facts was the judgment of the British High Court with the index [2016]EWHC3212 (Comm) submitted by the plaintiff.The defendant recognized the authenticity of the judgment, but argued that it was a judgment of a foreign court, therefore,the facts of the case could not be determined based on this judgment.

　　During the trial of the case on April 142016, the defendant admitted that Oden Dorf issued a letter of indemnity for the defendant’s delivery of goods without an original B/L.

　　The Court held that:

　　The dispute in this case was caused by the loss brought about bydelivering the goods without an original B/L in the carriage of goods by sea. Article 3 of Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading stipulates that where a carrier causes any loss to the holder of an original bill of lading for delivery of goods without the original bill of lading, the holder of the original bill of lading may require the carrier to bear the liability for breach of contract or bear the tort liability. The plaintiff chose to require the defendant to bear the tort liability in this case, which is in compliance with the law.According to the plaintiff’s claim, this case wasabout a dispute over the infringement damages caused by delivery of goods without an original B/L during the carriage of goods by sea. The defendant in this case was a foreign party, therefore, the case had foreign-related factors. During the course of litigation, both the plaintiff and the defendant unanimously chose the laws of the People’s Republic of China as the law applicable to the dispute in this case. Therefore, the law of the People’s Republic of China should be used as the applicable law for the trial of disputes in this case.

　　Article 71 of the Maritime Law of the People’s Republic of China stipulates that “a bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking.” In this case, the B/L was issued by the shipping agent at the loading port on behalf of the “ZAGORA”vessel. The defendant was the owner of the vessel and the vessel was not bareboat chartered. Accordingly, the defendant should be the carrier of the B/L in this case.

　　Althoughthe plaintiff held a full set of original B/L, its claim to exercise the rights to B/L should have legal reasons or basis, that is, it should be based on the existence of certain legal relationships. Although B/Lis a certificate for credit rights and also a property certificate and even a document of title, the plaintiff first obtained B/L under L/C based on fulfilling the obligation to issue L/C, and then continued to hold B/L based on the contract of the import bill advance, rather than based on the basis contract such as business contract or based on the way TO Order.Therefore, it cannot be determined that the plaintiff has obtained the ownership of the goods under B/L whenobtaining the B/L. The plaintiff did not enjoy the right of B/L like the owner of the goods or the consignee, and could not exercise the ownership-based property right claim. During the trial of the case, the plaintiff clearly stated that its right to the B/L was the pledge right of the B/L. Therefore, the case shall examine whether the plaintiff enjoys thepledge right to the B/Laccording tothe law and the agreement between the parties.

　　Article 223 of the Property Law of the People’s Republic of China stipulates that the right to B/L can be pledged. The Credit Limit Agreementinvolved in the case stipulated that if Haixin failed to fulfill its payment and repayment obligations in accordance with the terms of this agreement or an individual agreement, the plaintiff had the right to exercise the security interest. The appendix 1Used for Issuing International L/C Businessof the Credit Limit Agreement stipulated that after the plaintiff advanced or accepted or promised to pay,it had the right to dispose of the full set of documents/goods under L/C or enjoyother possible security interest or property interest stipulated by any applicable laws or regulations. According to the above agreement, under the legal relationship of L/C, the plaintiff had the right to make pledge of the B/L. The appendix 2 Used for Import Bill Advance of the Credit Line Agreementstipulated that the plaintiff had the right to dispose of the full set of documents/goods under L/C or enjoyother possible security interest or property interest stipulated by any applicable laws or regulations. Haixin applied to the plaintiff to hold the documents/goods to repay the bill advance, but it only acted as the trustee of the plaintiff. According to the above agreement, under the legal relationship of import bill advance, the plaintiff also had the right to make pledge of the B/L. This is in line with the trading customs and basic mechanisms of import bill advance and the transaction purposes of the parties to secure the billing bank’s claims by pledging the B/L. In the legal relationship of import bill advance, the importer pledges the full set of documents including B/L to the billing bank in order to obtain the goods in advance. Although the billing bank may hand over the B/L and other documents to the importer before the importer pays, and the importer pays the arrears to the bank after picking up the goods by the B/L and selling them, actually when the B/L is handed over to the importer, the bank will continue to guarantee its creditor’s rights by pledging the goods under the B/L. It can be seen that in the legal relationship of import bill advance, the billing bank guarantees its credit’s rights in the manner of enjoying the pledge of the B/L before handing the B/L to the importer; after the B/L is handed over to the importer,the creditor’s rights are guaranteed by means of enjoying the pledge of the goods.In this case, the plaintiff, as the issuing bank, obtained the B/L through legal means. After the import bill advance was handled, the B/L was not handed over to Haixin, but was legally held by the bank. Based on the facts that the plaintiff legally held the B/L, the law stipulates that B/L can be pledged, and the plaintiff and Haixin agreed to pledge the B/L in the import bill advance agreement, the plaintiff should be deemed to enjoy the pledge rights of the B/L.

　　The guarantee scope of the pledged B/L: the Application Form for Import Bill Advancewas the main contract for pledgingthe B/L.According to the agreement, the creditor’s right secured by the B/L was 8.25 million US dollars and interest charged at an annual interest rate of 4.13%. In addition, Haixin applied for interbank refinancing business as part of the application for import bill advance when applying for import bill advance. Therefore, the handling fee charged by the plaintiff for authorized interbank refinancing at an annual rate of 1.199% was also guaranteed by the B/L pledge. In the present case, the plaintiff claimed that the interest and handling fee guaranteed by the B/L pledge totaled 456,040.8 US dollars, which did not exceed the amount calculated according to the contract, therefore, it was approved by the Court.

　　The defendant, as the carrier specified in the B/L, had the obligation to transport the goods to the port of destination and completed the delivery against the original B/L. The plaintiff held the original B/L in triplicate, but the goods involved had been cleared at the port of destination and delivered to Haixin, which apparently belonged to the delivery of goods without the original B/L. Under the condition that both parties acknowledged that the goods had been withdrawn without the original B/L, the defendant should prove that it had properly performed the delivery obligation under the contract of carriage or put forward defenses. The defendant argued that the deliveryofgoodswithout the original B/L was implemented by the shipping agent at the unloading port designated by the charterer Oden Dorfunauthorized, and the defendant should not bear the corresponding consequences. However, to begin with,the defendant failed to provide valid evidence for the defense;secondly,even though the shipping agent at the unloading port was designated by the charterer Oden Dorf,as the agent of the “ZAGORA”, it should be legally regarded as the agent and business agent of the defendant.The plaintiff,as the third party to the principal-agent relationship between the defendant and the shipping agent, could not prove that the behavior of the shipping agent was beyond its authority. The plaintiff also could not prove the orders and contact between the two on the issue of delivering the goods. Instead,the plaintiff regarded the two as the same party. In addition, as the agent and business agent of the defendant, the shipping agent at the uploading port delivered the goods to the non-B/L holder, the civil liability shall be borne by the defendant. More importantly, the defendant has obtained the letter of indemnityfrom the time charterer Oden Dorf for delivering goods without the original B/L, which was enough to indicate that the defendant and the relevant parties had negotiated and reached a consensus on the delivery of the goods without the original B/L. In this case, the defendant’s claim that it did not have the subjective intentionfor delivering the goods without the original B/Llacked credibility. Therefore, the justification of the defendant could not be accepted by the Court. As the carrier under the B/L, the defendant had legal obligation to deliver the goods with original B/L.Delivering goods to Haixin without recovering the original B/Lwas a clear violation of the statutory obligations and infringed plaintiff’s pledge right to B/L as the holder of the B/L, thus constituting infringement.

　　As mentioned above, the plaintiff held a full set of original B/L and enjoyed the pledge to the B/L. The credit amount secured by the B/L was 8.25 million US dollars and the interest and handling fee was 456,040.8 US dollars, totaling 8,706,040.8 US dollars. Due to the defendant’s infringement, the plaintiff’s pledge was not realized, andthe goods under the B/L could not be cashed in. Eventually, the creditor’s main right could not be recovered in full amount. There was a direct causal relationship between the consequences and the defendant’s behavior of delivering goods without the original B/L. Therefore, the defendant shall bear the civil liability for infringement.

　　In the bankruptcy and restructuring of Haixin and other companies, the Yuncheng Intermediate People’s Court of Shanxi Province confirmed that the plaintiff’s general creditor’s rights including the creditor’s rights involved in this case amounted to RMB 237,840,339.95, the amount of compensation was RMB 9,681,382.63, and the proportion of compensation was 4.07%. Based on this calculation, the creditor’s right guaranteed by B/L pledge in this case was only compensated for 354,335.86 US dollars (8,706,040.8 US dollars × 4.07%) in the bankruptcy and restructuring of Haixin, and there was still 8,351,704.94 US dollars unpaid. The Court will support the plaintiff’s claim about the unpaid claims on this part because it had legal support. Article 6 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading stipulates that the amount of compensation for the loss of the original B/L holder caused by the carrier’s delivery of the goods without the original B/L is calculated in according to the value of the goods when shipping on board, the freight and the insurance fees. The plaintiff claimed that the loss was 8,351,704.94 US dollars in this case, which was lower than the value of the goods loading on board, therefore it was in line with the above provisions. The defendant’s argument that the date when the plaintiff arrested “ZAGORA” was the time for claiming the pledge and calculating the plaintiff’s loss at that date’s price did not meetArticle 6 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading. Moreover, the pledgee can choose the right time to achieve the pledge based on price fluctuations. The defendant’s argument that the plaintiff should first be compensated through the maximum guarantee provided by the relevant guarantor lacked legal basis. About the defendant’s argument that the plaintiff should first be compensated by the guarantee deposit provided by Haixin, the Court held that although when Haixin applied for the opening of a L/C, a deposit of RMB 13,770,000 was transferred to its deposit account (145451239190), the plaintiff had debited the deposit to pay the amount under the L/C on February 21 andMarch 24 2014. Therefore, the defendant’s above-mentioned defenses could not sustain.

　　Regardingthe defendant’s claim that the plaintiff had gross negligence, the Court held that there were legal relationships of the sales contract, L/C, and the import bill advance involved in this case, and among them, the plaintiff was the party of the legal relationships of L/C and import bill advance. In the legal relationship of L/C, in accordance with Article 4 of the Uniform Customs and Practice for Documentary Credits (UCP600), “a L/C and a sales contract or other contract on which it may be based are independent transactions, and even the contract is referred in the L/C , the bank is completely unrelated to the contract and not bound by it”. The legal relationship of L/C was independent of the underlying sales contract and the defendant had no evidence that the plaintiff knew the condition of the goods when the L/C was opened. Meanwhile, Article 5 of the UCP600 states that “the bank processes the documents, not the goods, services or performance behaviors that may be related to the documents”. The plaintiff, as the issuing bank, should pay unconditionally after receiving the documents from the negotiating bank and confirming the conformityof the documents, and Haixin also agreed to the sight payment. The plaintiff had no fault in the external payment, so it had no fault in the legal relationship of L/C. In the legal relationship of import bill advance, although the import bill advance was used to pay the money under L/C, the legal relationship of the import bill advance was also independent. The B/L held by the plaintiff was authentic with legal source, so the plaintiff had every reason to believe that the goods under the B/L were under the control of the carrier, and the pledge of the B/L can guarantee the creditor’s rights generated by the import bill advance. Moreover, the handling of import bill advance was the true intention of the plaintiff and Haixin, so the plaintiff also had no fault in the relationship of import bill advance. Neither the issuing bank in the legal relationship of L/C nor the bank in the legal relationship of the import bill advance, was necessary or possible to track and monitor the goods under B/L in the case of legal possession of B/L. It is unnecessarybecause the B/L is the document of title and the carrier would not deliver the goods unless seeing the original B/L. Also, the long-distance maritime transport, off-site storage and other factors, make it impossible to monitor in real time. It should be noted that the pledge of B/L on which the plaintiff’s rights were based was a pledge of right, not cargoes. When the pledge was established, the plaintiff examined the B/L instead of the goods. For the defendant’s defense that the plaintiff violated the internal operating procedures during the operation of the business, the Court held that the internal operation procedures of the bank were to prevent the risk, and even if there was a flaw in the specific operation process, the responsibility that should be assumed was internal administrative responsibility, which did not constitute a fault in the civil legal sense, and there was no legal causation between the flaw and defendant’s delivery of goods without original B/L, nor did it increase the civil liability of the defendant. The defendant’s liability could not be reduced or exempted because of this.

　　The defendant also proposed that the issuing of the delivery order by shipping agent was based on the requirements of the local customs to transfer the goods to another customs area, so the carrier could be excused. The defense obviously misinterpreted the process of transit transport. The transfer did not require the carrier to deliver the goods without an original B/L and they did not belong to the exemptions listed in the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading. Therefore, the defendant could not claim excuses.

　　In summary, the defendant, as the carrier of B/L, delivered the goods without the original B/L, causing the plaintiff to fail to exercise the pledge of B/L, thereby damaging the plaintiff’s legal right as the pledgee of B/L, with the result that the creditor’s rights guaranteed by B/L could notbe recovered in full. The plaintiff shall be compensated for the loss caused by the defendant. The plaintiff requested the defendant to compensate the loss of 8,351,704.94 US dollars and it did not exceed the guarantee scope of B/L pledge or the value of the goods when loading on the vessel. The request was in accordance with the law and the Court supported it. The defendant’s claim that he did not have any faults and its liability should be mitigated or exempted was lacking factual and legal basis and was not accepted by the Court. According to Articles 223, 224 and 4 of the Property Law of the People’s Republic of China, Article 71 and Article 72 paragraph2 of the Maritime Law of the PRC, Articles 2, 3, 6, and 15 paragraph 1, item 6 of the Tort Liability Law of the PRC, Article 44 of the Law of the Application of Law for Foreign-related Civil Relations of the PRC, Articles 2, 3 and 6 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading, the judgment was as follows:

　　The defendant, Sea Powerful IISpecial Maritime Enterprise (ENE), shall compensate the plaintiff, Bank of China Yuncheng City Branch, for a loss of 8,351,704.94 US dollars within seven days from the effective date of this judgment.

　　If the obligation to pay money was not fulfilled in the period specified in this judgment, the interest on the debt during the period of delay in performance shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China.

　　The case’s acceptance fee is RMB 310,415. The part which shall be borne by the plaintiff, Bank of China Yuncheng City Branch,was RMB 15,520, and the other part, which was RMB 294,895, shall be borne by the defendant, Sea Powerful IISpecial Maritime Enterprise (ENE); the preservation fee is RMB 5,000, which shall be borne by the defendant.

　　Any party who is dissatisfied with this judgment has the right to submit to the Court six originals of the statement of appeal, and the duplicates thereof in the number of the counterpart parties, within fifteen daysfor the plaintiff and thirty days for the defendantafter this judgment is served, for appealing before Higher People’s Court of Shandong Province.

　　Presiding Judge: ZhangYong

　　People’s Juror: WangWanchun

　　People’sJuror: LvZuowu

　　January 3, 2018

　　Court Clerk:LiZhenwei