DALIAN MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No. DHFSC149(2001) Plaintiff: FORTUNE UNIVERSAL INC. Address: 2506 Florence Ave, Arcadia, California, United States of America. Legal representative: Shao Xiangchun, Chairman of the Board of Directors. Agent ad litem: Mao Yanguo, lawyer of Dalian Huaxia law office. Defendant: DALIAN JIHANG SHIPPING AGENCY CO., LTD. Address: A-4016, Hengtong Edifice, Zhigong Street, Zhongshan District, Dalian City, People’s Republic of China. Legal representative: Guo Xiuli, general manager. After this court entertained the cases of dispute over compensation for freight losses with respect to an agency contract between the Plaintiff, FORTUNE UNIVERSAL INC. (hereinafter referred to as Plaintiff), and the Defendant, DALIAN JIHANG SHIPPING AGENCY CO., LTD. (hereinafter referred to as Defendant), Judge Xiao Yan, Judge Bu Yuchun and Judge Shen Yanjun constituted the collegial panel legally and heard the case in open sessions. The Plaintiff’s agent ad litem Mao Yanguo and the Defendant’s legal representative Guo Xiuli attended the court hearing. Now the case has been concluded. The Plaintiff alleged that in December 2000, JILIN ZHONGGU INTERNATIONAL CO., LTD. (hereinafter referred to as ZHONGGU CO.) entrusted the Defendant on behalf of the Plaintiff with booking and handling formalities for the carriage of 3 containers of mung beans from Dalian to USA. The Defendant accepted the entrustment and arranged to have the cargo loaded on m/v Chang Jin Tianjin, which departed on January 3rd, 2001. The Plaintiff agreed to and accepted the suggestion of the Defendant that the freight be paid to the Defendant and then transmitted to the carrier because in this way the Defendant could get a cheaper price. The Plaintiff remitted the freight US$4890 to the Defendant on January 16th, and entrusted them to pay to the carrier. The Defendant received the money but didn’t pay to the carrier as they promised. On January 17th, the Plaintiff received the B/L from the Defendant. m/v Chang Jin Tianjin arrived at the Port of Long Beach, USA on January 23rd, 2001. When the Plaintiff was going to take delivery of the cargo, the agent of the carrier demanded them to pay freight because the carrier hadn’t received it at the port of departure and there was a “Freight forward” clause in the B/L. So the Plaintiff paid the freight US$4890 again. As the Defendant didn’t carry out their promise to pay the freight to the carrier, the Plaintiff phoned and faxed to them many times to ask for the freight, but they didn’t reply. So the Plaintiff proceeded against the Defendant and requested that they compensate for the Plaintiff’s freight and other relevant losses. The Defendant pleaded that it was Hu Hongliang, but not the Plaintiff, that entrusted the Defendant with booking and handling formalities for the carriage. Hu Hongliang acted for himself. The Defendant had neither faxed to the Plaintiff or ZHONGGU CO., nor promised to pay the freight to the carrier. Though the fax message received by the Plaintiff and ZHONGGU CO. showed that the sender’s fax number was the Defendant’s, maybe it was Hu Hongliang who used the Defendant’s fax machine. Because the Defendant’s accountant Li Jun had quit the job and they couldn’t find him, they couldn’t identify Li’s signature. Even if the signature were true, the fax was invalid for lack of the Defendant’s stamp. The Defendant collected a list of Hu Hongliang’s debts that showed the Plaintiff’s US$4890 was paid to discharge a debt for Hu but not paid for freight. It was in the presence of the Defendant that Hu Hongliang called the Plaintiff and asked them to remit the money to the Defendant. The Defendant didn’t know what Hu said to the Plaintiff. After offsetting Hu’s debt of RMB40587, the remaining amount of the freight was no more than RMB2261.79. The balance should be returned to Hu, but not to the Plaintiff. The Plaintiff’s assertion that the money was the freight to the carrier was groundless. It should be rejected. The Plaintiff argued against the pleadings of the Defendant, saying that Hu Hongliang was irrelevant to this case. Even if he played a role, he acted for the Defendant. It was established by the court after the examination and hearing that the Plaintiff and ZHONGGU CO. concluded a contract for the sale of goods on December 22nd, 2000. They agreed in the contract that ZHONGGU CO. sells 60MT of mung beans to the Plaintiff under the term F.O.B. Dalian; Payment: T/T; Destination port: Los Angeles, USA. The Plaintiff entrusted ZHONGGU CO. for booking, packing and Customs Procedures and inspection. ZHONGGU CO. entrusted the Defendant and the Defendant accomplished them. On December 28th, ZHONGGU CO. received a fax message from the Defendant’s fax machine that indicated: “The arrangements were as follows: M/V Chang Jin Tianjin, V.053E; B/L SITD053E803/20X3; Destination Port: LONG BEACH; Departure on January 3rd, 2001; Description of Goods: Mung Beans; Quantity: 60MT; Freight: US$1630X3=US$4890.00. Please transmit the fax message to the American company before the festival, so that they may pay the freight”. The fax message also indicated the Defendant’s RMB and US dollar accounts. There was the Defendant’s accountant Li Jun’s signature in the fax. Then ZHONGGU CO. transmitted the fax to the Plaintiff. After the goods were loaded on board, the Defendant got the negotiable B/L (No.SESDLLB803) indicating “Freight to collect” from the carrier SESCO GROUP INC. The B/L showed that: the shipper was ZHONGGU CO.; the consignee was the Plaintiff; the ship was M/V Chang Jin Tianjin (V.053E); the port of departure was Dalian; the port of destination was Long Beach, USA; the cargo was 60MT of mung beans in 3 containers; the date of loading and issuing the B/L was January 3rd, 2001. At the same time, the Defendant received the agency fees of RMB4080. The Defendant didn’t transmit the B/L to the Plaintiff. On January 15th, the Plaintiff received a fax message from the Defendant’s fax machine that repeated the contents of the fax message dated December 28th and asked the Plaintiff to pay the freight to them. The Plaintiff paid the freight through Los Angeles branch of Bank of China to the Defendant. After receiving the freight, the Defendant delivered the B/L to ZHONGGU CO. and ZHONGGU CO. delivered it to the Plaintiff. But the Defendant didn’t pay the freight to the carrier. M/V Chang Jin Tianjin (V.053E) arrived at Long Beach on January 23rd, 2001. When the Plaintiff was going to take delivery of the cargo, they were told that the carrier hadn’t received the freight at the port of departure and there was a “Freight to collect” clause in the B/L, so they should pay the freight of US$4890. The plaintiff paid the freight and took delivery of the cargo. But the defendant hadn’t returned the freight to them. Therefore the Plaintiff brought an action against the Defendant and claimed to the Defendant to compensate for the freight and its interests, counting from January 23rd, 2001 to the date of payment at the corresponding loan interest rate for US dollars issued by the People's Bank of China, and pay the acceptance fee. The plaintiff added claims in the court hearing that the Defendant should compensate for their flight tickets for asking the freight plus notary fee. But they didn’t hand in the acceptance fee. This court froze the account of the Defendant at the request of the Plaintiff during the trial. In hearing this case, the court demanded the Defendant to provide the sample of their accountant Li Jun’s signature to identify the signature in the fax, but the Defendant didn’t. ZHONGGU CO. submitted two letters to this court in order to explain and prove that the Defendant suggested that they pay freight to the carrier in order to get a cheaper price, so the Plaintiff accepted the suggestion. The Defendant presented no evidence which could prove that the two fax messages were sent by Hu Hongliang. Furthermore, the Defendant presented no evidence which could prove that even if the fax messages had actually been sent by Hu, Hu acted for himself only. Besides, the Defendant presented no evidence which could prove that the US$4890 from the Plaintiff was to pay for Hu Hongliang’s debts. The Plaintiff and the Defendant both declared they didn’t know where Hu was. The above facts could be ascertained on the basis of the evidence submitted during the cross-examination, including: the same Bs/L submitted by both the Plaintiff and the Defendant; two faxes and two freight payment vouchers submitted by the Plaintiff; the sales contract in this case, the Customs declaration, the consignment bill of the containers and the shipping order submitted by the Defendant; the letters of explanations submitted by ZHONGGU CO. with another sales contract and payment voucher as proof; and the court’s investigation and the records of the hearing. It was held by this court that this case was about the dispute over compensation for freight losses with respect to an agency contract. Although the contract between them was not in writing, yet, the act of the Defendant who offered by fax and the Plaintiff who accepted by performing an act dealing with matters regarding a contract was in conformity with the legal requirements for a contract. The offer became effective when the Defendant’s fax arrived at the Plaintiff’s. When the Plaintiff remitted the freight to the Defendant on January 16th, 2001, the acceptance became effective and the contract was made. Although the Plaintiff had duties to conclude the contract of carriage and pay the freight as the buyer of the F.O.B. contract, they entrusted the seller with booking and the latter then entrusted the Defendant. The fact that the Defendant had told the Plaintiff to pay the freight (not other fee) to his account showed obviously his intention to pay the freight directly to the carrier on behalf of the Plaintiff. The intention was exact, definite, true and valid. It was an offer by which the Defendant should be bound. The remittance of the freight by the Plaintiff showed that they had accepted the offer and entrusted the Defendant to pay the freight to the carrier. It was an acceptance of an act that showed the Plaintiff’s true intention. It was valid. So the Plaintiff and the Defendant reached an agreement and the relationship of a new contract for paying the freight to the carrier was formed between them. When the Plaintiff paid the freight in accordance with the contract, the Defendant should also have carried out their promise and paid the freight to the carrier. But the Defendant didn’t carry out their promise, so they should be liable therefor. The Defendant declared that Hu Hongliang but not the Defendant who sent the fax messages, but the Defendant submitted no relevant supporting evidence therefor. Even if Hu had been involved in this case, still the Defendant had submitted no evidence to prove Hu acted for himself only. It was reasonable for the Plaintiff to believe that the fax messages were sent by the Defendant, because they received the fax messages in the Defendant’s name from the Defendant’s fax machine. The Plaintiff couldn’t judge whether the faxes showed the Defendant’s intention. When the Plaintiff accepted the fax messages and paid the freight to the Defendant, the relationship of a contract for paying the freight was established. The Defendant should compensate for the Plaintiff’s losses which resulted from the Defendant’s breaching of contract. Furthermore, the Defendant had received the freight and their accountant Li Jun did sign the fax messages. Though the Defendant argued they didn’t know the signature was true or not, but they ought to be able to identify their accountant’s signature. They had the duty to submit Li Jun’s signature on other papers, but they refused to do so. The Defendant also argued that the fax messages were invalid for lack of their business stamp. This was not reasonable because it was inconsistent with the relevant regulations, rules, and trade practice that the employer should be responsible for the consequences of the acts of his employees within the scope of their business functions. The Defendant had no other evidence to prove the list of Hu Hongliang’s debts. Even if the debt were true and Hu wanted to discharge it with the Plaintiff’s freight, Hu and the Defendant’s agreement was invalid owing to the lack of the Plaintiff’s consent. So the Defendant’s declaration that the freight was paid for Hu’s debt had no basis. The Plaintiff alleged that the Defendant should compensate for the freight losses and its losses of interests because the Defendant and the Plaintiff had concluded a contract for paying the freight and the Defendant breached the duties to pay the freight to the carrier. This allegation as it was based on facts and legally well founded should be accepted. The Plaintiff’s claim of the interests from the day on which they paid the second freight was reasonable and should be supported. The plaintiff’s additional claims that the Defendant should compensate for their flight tickets for this case shouldn’t be taken into consideration in this trial because they hadn’t handed in the acceptance fee. The Plaintiff and the Defendant hadn’t concluded an agreement on applicable law. Because the place of the Defendant’s domicile and the places in which the facts of this case occurred were both in the territory of the People’s Republic of China, the law of the People’s Republic of China shall apply in accordance with principle of closest connection. In accordance with Article 64 (1) of the Civil Procedure Law of the People’s Republic of China, Article 145 (2) of the General Principles of the Civil Law of the People’s Republic of China, Article 8, Article 11, Article 13, Article 16 (1), Article 22, Article 26 (1), Article 107 and Article 406 (1) of the Contract Law of the People’s Republic of China, this court hereby decides: The Defendant DALIAN JIHANG SHIPPING AGENCY CO., LTD. shall compensate for the freight losses of US$4890 suffered by the Plaintiff FORTUNE UNIVERSAL INC. and its interests from January 23rd, 2001 to the day on which this judgment becomes effective at the corresponding loan interest rate for US dollars issued by the People's Bank of China. The compensation shall be paid within 10 days after the day on which this judgment becomes effective, failing which the court will enforce Article 232 of the Civil Procedure Law of the People’s Republic of China. The acceptance fee of RMB1620 and the preservation fee of RMB 208 (both prepaid by the Plaintiff FORTUNE UNIVERSAL INC.) shall be paid by the Defendant DALIAN JIHANG SHIPPING AGENCY CO., LTD. If refuses to accept this judgment as final, the Plaintiff may appeal to the Higher People’s Court of Liaoning Province by submitting an appeal petition with 2 copies to this court within 30 days of the date of service of this judgment, while the Defendant may appeal within 15 days thereof. Presiding Judge: Xiao Yan Judge: Bu Yuchun Judge: Shen Yanjun Certified true copy Sep 27th, 2001 Court clerk: Sun Guan

HIGHER PEOPLE’S COURT OF GUANGDONG PROVINCE PEOPLE’S COURT OF CHINA CIVIL JUDGMENT No YFJERZZ.303 (2000) Appellant (Plaintiff in First Instance Trial): Pearl River Container Transportation Co.,Ltd. Domicile: No.185 Chang Ti Avenue, Guangzhou, China Legal Representative: Li Ming, General Manager Agents ad litem: Fang Ruifeng，Zhao Dengfeng, Lawyers of Guangzhou Jinma Law Office Appellant (Defendant in First Instance Trial): P & O Nedlloyd B. V. Domicile: 3011 XB Rotterdam, Boompjes 40, the Netherlands Legal Representative: R.P.M. van Slobbe, Managing Director Agents ad litem: Wang Jing, Chen Xiangyong, Lawyers of Wang Jing Maritime Law Office, Canton With respect to the cases of dispute between the Appellant - Pearl River Container Transportation Co.,Ltd. (hereinafter referred to as “Pearl River”) and the Appellant – P & O Nedlloyd B. V. (hereinafter referred to as “Nedlloyd B. V.”) over the release of cargo without presentation of the original bill of lading, both Appellants refused to accept the No. GHFSZ 61(1998) Civil Judgment entered by Guangzhou maritime Court and filed appeals before this court. After having entertained the case by this court, a collegial bench was duly formed to hold hearings in open sessions. Now the trial of this case has been concluded. It was established after examination that: On 9, 12 and 15 February, 1996, Pearl River issued the Through Bs/L No.PRBT-96008, No.PRBT-96009 and No.PRBT-96012 from Sanbu, PRC to Shixin Garment Factory who processed the garments as entrusted by the holder of Through Bs/L - D.K. REMINGTON INTERNATIONAL. It was stated in Bs/L No.PRBT-96008 and PRBT-96009 that the shipper was Shixin Garment Factory, the consignee was to order, the carrying vessel was M/V “OOCL FAIR”, the loading port was Sanbu, PRC and the port of discharge was Puerto Quetzal, Guatemala. The cargo under the foregoing two Bs/L were carried in containers No.GSTU5609103 and No.KNLU3071375, which contained 225 cartons of manufactured garments. The aforesaid bills of lading were endorsed by Shixin Garment Factory and the International Commercial Bank of China. The cargo loaded in the said two containers was shipped to Hong Kong under the arrangement of Pearl River and was then transshipped to the destination port. On February 5, NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B.V., accepted the offer made by Pearl River for booking of shipping space and issued the Booking Notes No.HKGVA207 and No.HKGVA208, in which it was expressly indicated that Pearl River was the shipper. On February 10, the cargo carried in the aforementioned two containers was loaded onto m/v “OOCL FAIR” at Hong Kong. NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B.V., issued the on-carriage Bs/L No. HKGVA207 and No. HKGVA208 at Hong Kong, in which it was specified that the shipper was Pearl River, the consignee was the holder of the original Bs/L No.PRBT-96008 and No.PRBT-96009, the loading port was Hong Kong and the port of discharge was Puerto Quetzal, Guatemala. It was stated in B/L No.PRBT-96012 that the shipper was Shixin Garment Factory, the consignee was to order, the carrying vessel was m/v “NED DEJIMA”, the loading port was Sanbu, PRC and the port of discharge was Puerto Quetzal, Guatemala. The cargo under the foregoing two Bs/L was carried in container No.TPXU6932857, which contained 225 cartons of manufactured garments. The aforesaid bills of lading were endorsed by Shixin Garment Factory. The cargo loaded in the said two containers was shipped to Hong Kong under the arrangement of Pearl River and was then transshipped to the destination port. On February 9, NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B. V., accepted the booking of shipping space offered by Pearl River and issued the Booking Note No.HKGYT620, in which it was expressly indicated that Pearl River was the shipper. On 16 February, the cargo carried in the aforementioned two containers was loaded onto M/V “NED DEJIMA” at Hong Kong. NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B.V., issued the on-carriage B/L No. HKGYT620, in which it was specified that the shipper was Shixin Garment Factory, the consignee was to order, the loading port was Hong Kong and the port of discharge was Puerto Quetzal, Guatemala. Article 25(1) of the aforesaid three sets of Bs/L specified that “All actions under the contract of carriage evidenced by this Bill of Lading shall be brought before the Court at Rotterdam and no other court shall have jurisdiction with regard to any such action”. The container No.TPXU6932857 under B/L No.PRBT-96012 was discharged at Puerto Quetzal, Guatemala at 2400 hours on 23 March, 1996, while the containers No.GSTU5609103 and No.KNLU3071375 under Bs/L No.PRBT-96008 and No. PRBT-96009 were discharged at Puerto Quetzal, Guatemala at 0105 hours on 24 March, 1996. On 19 December, NEDLLOYD (H.K.) LTD. sent a fax to Pearl River, stating that the foregoing cargo had been delivered to the consignee by the Customs of Guatemala according to the agent of NEDLLOYD (H.K.) LTD. at Guatemala. It was also said in the fax that “The cargo was placed under the custody of the local Customs upon completion of discharge at Guatemala port. The carrier had nothing to do with the delivery of cargo, and it was the Customs of Guatemala who was the sole organization entitled to dispose of the cargo. Therefore, it was the local Customs rather than the carrier that should be legally responsible. The legal liability assumed by the carrier was terminated once the cargo had been delivered to the local Customs. Pearl River should file the claim directly against the Customs of Guatemala for the loss of cargo”. Nedlloyd B.V. had not provided to the Court of First Instance the cargo manifest or the relevant statutory provisions of Guatemala pertaining to the care for the goods carried by sea. At the court hearing in the first instance, Nedlloyd B.V. showed the three sets of original on-carriage bills of lading which it collected from Pearl River and which had been endorsed by Peal River . Meanwhile, Pearl River also submitted another set of on-carriage bills of lading without overleaf clauses issued by Nedlloyd B. V. On 3 February, 1997, D.K.REMINGTON INTERNATIONAL commenced the proceedings before the Court of First Instance with the original Bs/L No.PRBT-96008, No.PRBT-96009 and No.PRBT-96012 it possessed on the grounds of the loss resulting from the delivery of cargo without presentation of original bills of lading by Pearl River Container Transportation Co., Ltd. Hong Kong Branch, viz. Pearl River in this case. On 17 February, 1997, the Court of First Instance served the Notice to Reaction, Copy Plaint and the Writ of Summons upon Pearl River . On 6 October, 1998, the Court of First Instance delivered the Civil Judgment No. GHFSZ 13 (1997), ruling that: I. Pearl River shall make compensation for the loss of cargo amounting to US$70,200 and its corresponding interest (accruing from 1 March, 1996 to the day on which the judgment comes into force at the loan interest rate of the circulating fund issued by the People’s Bank of China) to D.K.REMINGTON INTERNATIONAL; II. The litigation request filed by D.K.REMINGTON INTERNATIONAL against Pearl River in this case shall be rejected. Pearl River shall pay the legal fee of US$ 2,560. On the same day, the Court of First Instance handed down the Civil Judgment No. GHFSZ 14(1997), ruling that I. Pearl River shall make compensation for the loss of cargo amounting to US$140,400 and its corresponding interest (accruing from 1 March, 1996 to the day on which the judgment comes into force at the loan interest rate of the circulating fund issued by the People’s Bank of China) to D.K.REMINGTON INTERNA-TIONAL; II. The litigation request filed by D.K.REMINGTON INTERNATIONAL against Pearl River shall be rejected. Pearl River shall pay the legal fee of US$ 4,200. Pearl River refused the aforesaid two judgments delivered by the Court of First Instance and instituted an appeal to the Higher People’s Court of Guangdong Province, which handed down the Civil Judgments No. YFJERSZ 436 (1998) and No.YFJERSZ 437 (1998) as the final judgments, ordering that the appeal be dismissed. On 3 March, 1997, Pearl River brought an action against P & O Nedlloyd B.V. Hong Kong Branch before the Court of First Instance on the grounds of release of cargo without presentation of original bill of lading. On 19 September, 1997, Pearl River made an application to the court for joining Nedlloyd B.V. in the proceedings as the co-defendant. The application was approved by the court, which gave a notice to Nedlloyd B.V. for the attendance at the proceedings. Nedlloyd B.V. raised the dissension of jurisdiction within the period of defence. On December 19, 1997, the Court of First Instance rendered a ruling rejecting the dissension of jurisdiction raised by Nedlloyd B.V. This court issued a ruling on 30 March, 1998, revoking the ruling made by the Court of First Instance on the dissension of jurisdiction and rejecting the claim filed by Peal River. On 5 June, 1998, Pearl River submitted an application to the Court of First Instance for the arrest of m/v “NEDLLOYD LOUTMAN” owned by Nedlloyd B.V. On 6 July, 1998, the Court of First Instance ruled that the application filed by Pearl River for property preservation prior to the proceedings be approved, and arrested M/V “NEDLLOYD LOUTMAN” of Nedlloyd B. V. at Shekou, Shenzhen on the same day. Pearl River paid to the Court of First Instance the ship arrest application fee of RMB 5,000 and provided the Court of First Instance with a security of RMB 800,000. On 8 July, Nedlloyd B.V. submitted to the Court of First Instance the Letter of Undertaking issued by PICC Guangdong in the amount of US$ 400,000. On the same day, the Court of First Instance lifted the order of arrest of M/V “NEDLLOYD LOUTMAN” and Nedlloyd B. V. paid the property preservation execution fee of US$3,000. It was held by the Court of First Instance: This case was about the claim of recovery of loss filed by Pearl River against the carrier in respect of the second-leg voyage, namely, Nedlloyd B.V. under the circumstance where D.K.REMINGTON INTERNATIONAL, the holder of the through bills of lading, had brought a lawsuit against the carrier in respect of the entire voyage, namely, Pearl River, before the Court of First Instance on the grounds of dispute over release of cargo without the original bills of lading. It was the contract of carriage of goods evidenced by the through bill of lading that determined the rights and obligations between the holder thereof and the carrier in respect of the entire voyage. The carrier in respect of the second-leg voyage, being in charge of sectorial transport of the shipment, was the actual carrier. Hence, the responsibilities assumed by the actual carrier shall be based on the statutory stipulations rather than the contract of affreightment covering the entire voyage. The through bill of lading was not an evidence of the contract of carriage of goods between the carrier in respect of the entire voyage and the carrier in respect of the second-leg voyage. Under the on-carriage bills of lading in question, where Nedlloyd B.V. accepted the offer made by Pearl River for booking the shipping space, Pearl River was the shipper and Nedlloyd B.V. was the carrier in respect of shipment on the second-leg voyage, and the on-carriage bills of lading were the documents evidencing the contract of carriage of goods between Pearl River and Nedlloyd B.V. Therefore, it was the booking notes and the contract of carriage of goods evidenced by the on-carriage bills of lading that determined the relationship between Pearl River and Nedlloyd B.V. in respect of their rights and obligations. Although Nedlloyd B.V. expressly provided in the Bs/L that the law of the country of domicile of Nedlloyd B.V. should be applicable in settling the dispute, Pearl River never accepted such provision. Pearl River and Nedlloyd B.V. did not reach a consensus on the law governing the settlement of dispute in this case, under which Hong Kong was the place where the contract of carriage was concluded as well as the place of shipment, while the Netherlands was the place where Nedlloyd B. V. had its domicile, and Guatemala was the place of destination. All the foregoing places had actual connections with the subject dispute. Since neither party to this action had furnished any law of the aforementioned places nor any legal advice presented by the relevant legal experts therefrom, the law of the PRC shall be applicable to this case in the light of Article 193 of the Opinions of Supreme People’s Court on Several Issues Concerning the Implementation and Enforcement of the General Principles of the Civil Law of the PRC, Nedlloyd B. V. was under the obligation of delivering the cargo to the consignee stated in the on-carriage bills of lading at the destination port. It was stated in the On-Carriage Bs/L No.HKGVA207 and No.HKGVA208 that the consignee was the holder of the original Bs/L No.PRBT-96008 and No.PRBT-96009. Albeit Nedlloyd B.V. had collected the original on-carriage bills of lading, it was still bound to deliver the cargo against presentation of the Through Bs/L as agreed upon. As the aforesaid Through Bs/L were in the possession of D.K.REMINGTON INTERNATIONAL, Nedlloyd B. V. should be liable for breach of contract inasmuch as it failed to fulfill the afore mentioned obligation. Nedlloyd B. V. did not provide the documents in support of its allegation that the said cargo had been placed under the custody of the Customs of Guatemala, thus Nedlloyd B. V. could not be exonerated from the liability for compensation for the loss sustained by Pearl River due to the release of cargo without the original bills of lading. In accordance with the final judgment No. YFJERZ 437 (1998) handed down by the Higher People’s Court of Guangdong Province, the loss suffered by Pearl River including the loss of cargo amounted to US$ 140,400, plus its corresponding interest (accruing from 1 March,1996 to the date on which the judgment comes into force at the loan interest rate of the circulating fund of the People’s Bank of China). The legal cost of US$ 4,200 incurred in the first instance trial should be paid by Nedlloyd B. V. as well. It was specified in the On-carriage B/L No.HKGYT620 that the consignee was to order. It was not stated in this bill of lading that Nedlloyd B.V. should deliver the cargo against surrendering the original through bill of lading at the destination port. Therefore, Nedlloyd B.V., who had collected the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon. Article 257(1) of the Maritime Code of PRC stipulates: “The limitation period for claims against the carrier with regard to the carriage of goods by sea is one year, counting from the day on which the goods were delivered or should have been delivered by the carrier. Within the limitation period or after the expiration thereof, if the person allegedly liable has brought up a claim of recourse against a third person, that claim is time-barred at the expiration of 90 days, counting from the day on which the person claiming for the recourse settled the claim, or was served with a copy of the process by the court handling the claim against him”. Basing on the foregoing stipulations, Pearl River was entitled to choose to bring up a claim of recourse against Nedlloyd B. V. in this case within 90 days counting either from the day on which it settled the claim filed by D.K.REMINGTON INTERNATIONAL, or the day on which D.K.REMINGTON INTERNATIONAL brought the lawsuit against Pearl River. The wording “settled the claim” can be interpreted as voluntary resolution of the claim by the parties through negotiations or settling the dispute through litigation or arbitration. Such interpretation better accords with the principle of justice. The holder of the Through Bs/L D.K.REMINGTON INTERNATIONAL and Pearl River in this case resorted to legal action to settle the claim between them. Pearl River initiated the action against Nedlloyd B. V. after 90 days counting from the day on which it received the Copy Plaint served by the Court of First Instance upon the holder of the Through Bs/L - D.K. REMINGTON INTERNATIONAL. Apparently, Pearl River chose the day on which the original claim was settled as the starting time for counting the time limitation in respect of the recovery of claim. It was on 22 July, 1999 that the Higher People’s Court of Guangdong Province handed down a final judgment on the case of dispute between D.K.REMINGTON INTERNATIONAL and Pearl River over the release of cargo without original bills of lading. Thus that date should be ascertained as the day on which the party liable settled the claim. The day on which Pearl River brought the lawsuit against Nedlloyd B. V. was still within the 90-day time limitation Period for the recovery of the loss. The proposition made by Nedlloyd B. V. that the action brought by Pearl River had been time-barred was legally groundless and shall be dismissed by the Court of First Instance. In summary, the Court of First Instance handed down a judgment pursuant to the provisions of Article 71 and Article 257(1) of the Maritime Code of the PRC and Article 106 of the General Principles of the Civil Law of the PRC, as follows: P & O Nedlloyd B. V. shall indemnify for the cargo loss of US$ 140,400 and its corresponding interest (accruing from 1 March, 1996 to the day on which the judgment comes into force at the loan interest rate of the circulating fund of the People’s Bank of China) as well as the loss of the legal fee of US$ 4,200 sustained by Pearl River Container Transportation Ltd.. The legal fee for this case amounted to US$ 7,130, of which US$ 3,640 shall be paid by Pearl River and US$ 3,490 shall be borne by Nedlloyd B.V., who shall also pay the application fee of RMB 5,000 and the execution fee of US$ 3,000 in respect of property preservation. In filing an appeal, Pearl River pleaded: The Court of First Instance merely awarded that Nedlloyd B. V. pay US$140,400 to Pearl River as indemnity for the loss of goods, while dismissed another litigation request for the cargo loss of US$70,200 filed by Pearl River Ltd.. Pearl River was thus of the view that part of the findings of facts under the bill of lading in question made by the Court of First Instance was wrong. It was held by the Court of First Instance thus “It was specified in the On-carriage B/L No.HKGYT620 that the consignee was to order. It was not stated in this bill of lading that the defendant should deliver the cargo against surrendering the original through bill of lading at the destination port. Therefore, the Defendant, who had collected the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon.” Such finding was absolutely incorrect in that: 1. The alleged On-carriage B/L No.HKGYT620 issued by Nedlloyd B.V. was not collected by Nedlloyd B.V. at the time of delivery of goods at the destination port on 23 March, 1996, but was endorsed and collected by Pearl River on 16 February, 1996 after Pearl River had shipped the cargo under the B/L to Hong Kong and delivered the same to Nedlloyd B.V.. The said on-carriage bill of lading was merely used as a record of takeover of the transshipped goods, and the goods should be released against surrendering the original through bill of lading at the destination port. 2. It was specified in the On-carriage B/L No.HKGYT620 that the shipper was “Shixin Garments Factory” and the consignee was “to order”, and the B/L was endorsed by Pearl River Ltd.. Such bill of lading was extremely irregular. Pearl River wondered under whose instruction Nedlloyd B.V. delivered the cargo: was it Shixin Garments Factory or Pearl River? In accordance with the provisions of Article 79 of the Maritime Code of the PRC and international shipping practice in respect of delivery of goods against the bill of lading, the bill of lading in which it was indicated that the consignee was to order, just like those in which it was indicated that the shipper was to order, must be endorsed by the shipper before it could be assigned to the consignee. 3. It was stated by Nedlloyd B. V. in its fax to Pearl River. Dated 19 February, 1996 that: “the cargo was placed under the custody of the local Customs upon completion of discharge at Guatemala port. The carrier had nothing to do with the delivery of cargo, and it was the Customs of Guatemala who was the sole organization entitled to dispose of the cargo. Therefore, it was the local Customs rather than the carrier that should be legally responsible. The legal liability assumed by the carrier was terminated once the cargo had been delivered to the local Customs. Pearl River should file the claim directly against the Customs of Guatemala for the loss of cargo”. This fax served as an indication that Nedlloyd B.V. itself professed that it had delivered the cargo to the Customs of Guatemala instead of Pearl River Ltd. or other consignee. In addition, Nedlloyd B.V. never furnished any list of goods handed over to the Customs or other consignee, and it was therefore reasonable for Pearl River to suspect that Nedlloyd B.V. had encroached on the goods. In the meantime, it also showed that substantially the withdrawl of the alleged bill of lading by Nedlloyd B. V. and the delivery of goods were two different matters. In other words, it was not because the cargo had been delivered to the actual consignee that the bill of lading was withdrawn from the actual consignee. In summary, the Court of First Instance found that: “the Defendant, who had withdrawn the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon”. This was the contradiction between the failure of Nedlloyd B.V. in delivering the goods to the consignee, as proclaimed by Nedlloyd B.V., and the alleged circulation of the on-carriage bill of lading. Failure of Nedlloyd B. V. to deliver the goods to the destination port was the substance, while the circulation process of the on-carriage bill of lading was the form. As substance is absolute and negates the form, the finding of facts in relation to the on-carriage bill of lading in question made by the Court of First Instance was incorrect. Basing on the foregoing facts, Pearl River asked the Court of First Instance to order the Respondent to make compensation for the loss of goods in the amount of US$210,600, the interest accrued therefrom (counting from 1 March, 1996 to the day of actual payment at the Loan Interest Rate of Circulating Fund of the People’s Bank of China) as well as the loss of legal fee amounting to US$6760. The legal fees with respect to the court of first instance and court of appeal shall be borne by Nedlloyd B.V. Nedlloyd B. V. contended that : I. It consented to and accepted the aforementioned findings made in the Civil Judgment No. GHFSZ 61 (1998) delivered by the Court of First Instance. As shown by the merits ascertained by the Court of First Instance, it was specified in the B/L No.HKGYT620 that the consignee was “to order”. The said B/L contained complete and valid overleaf clauses. Hence, as established by the Court of First Instance, the relationship between the parties to the B/L with respect to their rights and obligations should be defined by the said on-carriage bill of lading. In the present case, Nedlloyd B. V. had delivered the cargo to the destination port - PUERTO QUETZAI, Guatemala safe and sound as agreed on in the aforesaid on-carriage bill of lading, and had withdrawn the whole set of the original on-carriage bill of lading. Thus it was entirely correct for the Court of First Instance to hold that “the Defendant (Nedlloyd B. V.), who had withdrawn the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon”, which conformed to the statutory stipulations and coincided with the facts of this case. Thus such findings should be buttressed by the court of appeal. II. Pearl River, who was not a party to the B/L No.HKGYT620, was disentitled to bring any action against Nedlloyd B. V. in reliance of the said B/L. Article 42(3) of the Maritime Code provides: “‘Shipper’ means: a) The person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier; b) The person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea”. It was evident from the foregoing definition that the shipper included the person who concluded the contract of carriage of goods by sea and the person who delivered the goods to the carrier. The essential condition was the conclusion of the contract or delivery of the goods, among which delivery of goods embraced various circumstances, such as: 1. Delivering the cargo directly to the carrier. 2. Entrusting others to deliver the cargo to the carrier in his own name. Under such circumstances, the actual consignee was different from the shipper named in the contract of carriage. 3. Entrusting others to deliver the cargo on his behalf. Under such circumstances, the principal himself was the shipper, while the person who actually delivered the cargo was the one entrusted to deliver the cargo. It could be ascertained from the foregoing ways and means of delivery of cargo that the person who directly delivered the cargo (who may be called “the actual shipper”) was not necessarily the owner of the cargo so delivered. Furthermore, difference existed between the legal relationship of the aforesaid two kinds of shippers and carriers, thus the legal status of the aforesaid two kinds of shippers was distinct. The first kind of shipper may sue the carrier in reliance of the bill of lading regardless of whether the shipper’s name was specified therein. As far as the second kind of shipper was concerned, there was a pure relation of contract (bill of lading) between such shipper and the carrier, all rights and obligations shall be subject to the bill of lading. Hence, in case the second kind of shipper was not named in the box of shipper in the bill of lading, he would be deprived of the status of the party thereto. Since he was not a party to the contract, he was therefore disentitled to enjoy the rights thereunder and was deprived of the title to sue under the bill of lading. In the present case, Pearl River should be conceived as the shipper under the latter circumstance inasmuch as he was entrusted by the contractual shipper - Shixin Garments Factory to hand the cargo over to the carrier. But as by mistake, he had never put down his name in the box of shipper in the bill of lading, he had been deprived of the title to sue under the bill of lading and was disentitled to bring an action against Nedlloyd B.V. in reliance of the same. After negating that Pearl River had the title to sue as the shipper, Nedlloyd B.V. went to deal with the question concerning the burden of proof to be borne by Pearl River in case he attempted to assert the right in the name of the holder of the bill of lading. In this case, if Pearl River wished to assert the rights against Nedlloyd B.V. in the name of the holder of the bill of lading, Pearl River must first adduce evidence to prove that the B/L held thereby was lawful, which signified: 1. The bill of lading must be valid; 2. The holder of the bill of lading lawfully held the bill of lading, i.e., the holder must obtain the bill of lading and the rights thereunder in a lawful manner. Pearl River had never accomplished the aforementioned burden of proof. In the first place, Pearl River was not in possession of any set of original bill of lading, which had already been collected by Nedlloyd B.V. Secondly, even if it was assumed that Pearl River was holding the said bill of lading, the bill of lading must be effectually endorsed by the shipper specified therein when Pearl River asserted the title to the cargo thereunder in reliance of the said B/L which was an order bill of lading. The situation of the present case was that the B/L had been endorsed by the shipper named therein, namely, Shixin Garment Factory, so that, Pearl River had never acquired the rights thereunder. In view of this, Pearl River had no right to assert the rights under the bill of lading in the name of the holder thereof on the basis of the same. The foregoing views of Nedlloyd B.V. gained support from the Ruling No. JHFSCC 41(1993) . Since Pearl River was neither a party expressly indicated in the order bill of lading under consideration (the parties thereto included the shipper - Shixin Garments Factory, the carrier - Nedlloyd B.V. and the consignee - to order), nor the holder of the bill of lading, it ,therefore, did not enjoy the substantive rights to propose delivery of cargo or assert the title thereto against Nedlloyd B. V. In other words, as far as the alleged loss of goods under the bill of lading was concerned, Pearl River was not entitled to sue Nedlloyd B.V.. III. The action brought by Pearl River against Nedlloyd B.V. had been time-barred, and his litigation requests should not be supported by the court and should be dismissed in accordance with law. Time Limitation for Action means that “the obligee will be deprived of his right of applying to the court for compelling the obligor to fulfill the obligations according to the litigation procedures, if the obligee does not exercise his right within the limitation period prescribed by law. The limitation period prescribed by law as mentioned herein is called the limitation period for action, that is, the effective time period when the obligee can apply to the people’s court for protecting his rights according to the litigation procedures. At the expiration of the limitation period for action, the obligee will lose the right of applying to the court to compel the obligor to fulfill the obligations according to the litigation procedures. Therefore, the time limitation for action falls within extinctive prescription.” Time limitation for action has three characteristics, as follows: 1) time limitation for action falls within extinctive prescription; 2) completion of time limitation for action does not extinguish the substantive rights; 3) time limitation for action is a compulsory prescription, that is, the time limitation for action and its specific content must be prescribed by the law of the state, and the whole of the civil subjects is required to conform to it. Any agreements reached by the parties concerned relating to shortening or extending the limitation period for action, or abandoning the benefit of time limitation in advance, shall be invalid. In this case, pursuant to Paragraph 2 of Article 1 of the Hague/Visby Rules to which the two parties involved in the case agreed to apply, i.e. “the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered.” and the definition on time limitation for action mentioned above, any claim against the carrier under the three bills of lading involved in this case shall be brought “within one year of delivery of the goods or of the date when they should have been delivered by the carrier”, counting from March 23 and 24, 1996 on which the goods were discharged from the ship, and in this case, the time limitation for any claims against the carrier should have expired on March 23 and 24, 1997. Besides, in respect of the limitation period for claiming for recourse, it was provided in Paragraph 3 of Article 1 of the Hague/Visby Rules that: “An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself.” We can see from the above provision, that after the expiration of the year provided for in Paragraph 3 of Article 1 of Hague-Visby Rules, the time limitation for claiming for recourse against the third party is decided by the limitation period prescribed by the law of the court seized of the case. However, the time allowed should be no less than three months commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself. According to such a provision, in this case, the limitation period within which the carrier for the entire voyage claimed against the actual carrier was three months, counting from the day on which the Plaintiff was served with the copy of the Statement of Appeal submitted by the B/L holder D.K. REMINGTON INTERNATIOAL on February 3, 1997 and the Notice to Reaction by Guangzhou Maritime Court, that is, the time limitation shall expire on or after May 3, 1997, a period of time counting from the day of the service by the court. In this case, as the fact established by the court of first instance indicated, the Statement of Complaint of Pearl River was dated July 21, 1998, and the court entertained the case on July 24, 1998. The claim was filed far more than one year after the above-mentioned goods arrived at the destination port and far more than three months after Pearl River was served with the copy of the Statement of Complaint of the through B/L holder and the Notice to Reaction of the court. Therefore, the claim filed by Pearl River against Nedlloyd B.V. exceeded the time limitation prescribed by law, thus it shall not be protected by this court. Although on June 5, 1998, Pearl River made an application to Guangzhou Maritime Court for arresting m/v “Nedlloyd Houtman” owned by Nedlloyd B.V., the act of property preservation prior to proceedings occurred after the expiration of the above-mentioned time limitation. For this reason interruption of time limitation had not been constituted. Therefore, no matter viewing the case from whatever angle, Pearl River had lost the protection of law in respect of the time limitation for action and had been deprived of the right to win the lawsuit in this case. Therefore, his litigation requests against Nedlloyd B.V. shall be dismissed according to law. On second thoughts, even the matter of time limitation should be applied by the relevant provisions of the Maritime Code of the PRC, as it was held by the court of first instance that pursuant to Article 257, Paragraph 1 of the Maritime Code of the PRC, the limitation period of 90 days for recourse is counted “from the day on which the person claiming for the recourse settled the claim, or was served with a copy of the process by the court handling the claim against him”. Under this provision, the alternative conjunction “or” has been clearly adopted, which definitely means that one is to be alternatively chosen out of the two. However, the court of first instance held that the wording “settled the claim” should be interpreted as voluntary resolution of the claim by the parties through negotiations or settling the dispute by means of litigation or arbitration. If this be the case, wouldn’t it be senseless in Article 257 of the Maritime Code to say “or was served with a copy of the process by the court handling the claim against him”? So, the parts before and after the word “or” in Article 257 of the Maritime Code would be self-contradictory. How could the settlement by means of litigation either choose effective judgment (perhaps several years after the day the copy of the process was served) or filing the claim for recovery on or after the day when the copy of the Plaint was served? If the legislation was so short of definability, stability and operability, the parties concerned would be at a loss as to what to choose. Such a law will be impossible at all to achieve the essential purpose of legislation for protecting the legitimate rights and interests of the parties concerned. Prof. Zhu Zengjie, Deputy Director of the Drafting Committee of the Maritime Code, presented his views in the column of Zhu Zengjie’s Mail Box in Admiralty Adjudication Vol.2, 1995 that: it is clearly indicated in the above prescription that: “1. The limitation period for a claim of recourse is 90 days; 2. Either within the limitation period (that is, within the limitation period of one year with respect to carriage of goods by sea) or at the expiration of the time limitation (one year), the limitation period for a claim of recourse shall be 90 days; 3. The day from which the time limitation of 90 days for a claim of recourse is counted shall be settled by two ways: (1) counting from the day on which the person claiming for the recourse settled the claim; (2) or was served with a copy of the process by the court handling the claim against him.” According to his understanding, “the first case is such that the two parties have settled the claim, while the second case is with regard to the procedures through which a claim is brought according to law. In the first case, the person claiming for the recourse has settled the claim; in the second case, the person claiming for recourse was only served with a copy Plaint, but he was not ruled to make compensation, still less the compensation has been made and the case has been finalized. According to the above analysis, the first case indicates that as the person claiming for recourse has made compensation to the victim, he is entitled to claim for recourse, therefore it is undoubtedly logical that the time limitation is counted from the day on which the claim was settled; in the second case, a claim has been brought against the person claiming for the recourse, and the court hearing, judgment and enforcement are pending. In case the time limitation for a claim of recourse is counted after the case has been finalized, it will be a waste of time and detrimental to the timely conclusion of the case of recovery.” According to the above analysis and enunciation of Prof. Zhu Zengjie, , it is obvious that in this case the position of Pearl River falls within the second category of the above said cases. That is, the time limitation of 90 days shall be counted from the day on which Pearl River was served with a copy Plaint of D.K. REMINGTON INTERNATIOAL by the court, and it was not necessary and should not at all be counted after the final settlement of the dispute between Pearl River and D.K. REMINGTON INTERNATIOAL. Therefore, it was entirely wrong for Pearl River to allege that according to Article 257 of the Maritime Code of the PRC, that in this case, Pearl River was still allowed 90 days for the claim even after the compensation was made to D.K. REMINGTON INTERNATIOAL. In the 《Science of International Maritime Law》published by Beijing University Publishing House with Mr. Chen An working as the editor in chief, as regards the claim against the third party, they hold the view that ‘settling a claim’, according to the systematic interpretation principle of “the expression of one thing is the exclusion of another”, is different from “bringing a lawsuit” and falls within the method of settling the dispute outside litigation. It mainly means that the parties concerned held consultations of their own accord and reached an agreement”. Given the foregoing analysis, the action initiated by Pearl River against Nedlloyd B. V. had been time-barred, thus it should not be supported by this court and should be rejected pursuant to law. Nedlloyd B. V. filed an appeal as follows: The court of first instance failed to seize on the key issues of the case during the trial and committed serious deviations in the determination of the limitation of time for claims and the interpretation of the sphere of application of the time limitation for recourse at the expiration of 90 days as prescribed in Article 257 of the Maritime Code of the PRC, so that the conclusion of this case was wrong. I. The court of first instance was wrong in giving holding on the law applicable to this case. 1. The court of first instance was wrong in determining the law and application clause in the overleaf clause of the on-carriage bill of lading involved in the case. The court of first instance held that although it was expressly provided in the Bs/L that the law of the country of domicile of Nedlloyd B. V. should be applicable to the settlement of the dispute, Pearl River had never accepted such provision. Pearl River and Nedlloyd B. V. did not reach a consensus on the law governing the settlement of dispute in this case”, but Nedlloyd B. V. could not agree to the above view of the court of first instance. In as much as the court of first instance held that it was the booking note and the contract of carriage of goods evidenced by the on-carriage bills of lading that determined the relationship between Pearl River and Nedlloyd B. V. in relation to the rights and obligations, obviously no reason could be found to deny the applicable law expressly provided in the overleaf clauses of the above-mentioned on-carriage bill of lading. Furthermore, it was even groundless for the court of first instance to hold that Pearl River and Nedlloyd B.V. did not reach a consensus on the law governing the settlement of dispute in this case. Firstly, although the on-carriage bill of lading determining the relationship between Pearl River and Nedlloyd B.V. in relation to the rights and obligations was a format contract produced by Nedlloyd B.V., yet the contents of which had been made available to the public, so that any party concerned could freely obtain it from Nedlloyd B.V. and study it before concluding a contract. As one of the largest container liner shipping companies in the world after the amalgamation, Nedlloyd B.V. had a wide range and a huge volume of business, and such information as its liner sailing schedule was regularly published in the world’s major shipping publications. Therefore, any of its business partners could have abundant opportunities finding out Nedlloyd B.V.’s sailing schedule as well as the format and the overleaf clauses of the bill of lading used by Nedlloyd B.V. In this case, as a specialized shipping company with fairly good strength, Pearl River could be comprehensively acquainted with the provisions contained in the liner bill of lading produced by Nedlloyd B.V. in the course of booking the shipping space with Nedlloyd B. V. Furthermore, even in common sense, Pearl River, who was the shipper under the on-carriage bill of lading and arranged for transshipment of the cargo at Hong Kong for the cargo interests, should also know about the overleaf clauses of the bill of lading involved in this case. Secondly, Pearl River had consigned cargoes to Nedlloyd B.V. for shipment for many times before this consignment, and each time the bill of lading issued to Pearl River by Nedlloyd B.V. was in the same format. Therefore, Pearl River should not and could not deny the fact of knowing of the existence of the “Law of Application Clause” in such bill of lading. Thirdly, in case the law of application clause in the bill of lading was inferred in the logic of the court of first instance, any law of application clause of bills of lading printed in format will no longer bear any significance of existence at all, in that they were not legally binding as they fell within the realm of “lack of consensus of the two parties concerned” as viewed by the court of first instance. Obviously, the standard of “consensus” as concerned by the court of first instance was neither objective nor in conformity with the actual situation. In view of this, Nedlloyd B. V. held that the issue of “Law of Application” contained in the overleaf clauses of the on-carriage bill of lading in this case was the conclusion of the true intention mutually expressed by both parties concerned, which constituted the consensus of the two parties to this case. However, the court of first instance entirely ignored such a consensus reached by the two parties which was revealed from the facts and the internal logic of this case, but wrongly held that Nedlloyd B.V. and Pearl River did not reach a consensus on the law governing the dispute involved in this case. In this regard, Nedlloyd B.V. was of the opinion that this should be corrected by your esteemed court. 2. The court of first instance did not have any holding of the fact that the on-carriage bill of lading had the stipulation in its overleaf clauses that Hague-Visby Rules shall be applied. It was especially worth mentioning that the first Article of the above-mentioned on-carriage bill of lading expressly provided that Hague/Visby Rules were compulsorily applicable to this bill of lading. As to such an explicit stipulation between Nedlloyd B.V. and Pearl River in relation to the law of application, the court of first instance did not have any holding. According to the common understanding of the present international shipping and judicial practices and the provisions of Hague-Visby Rules, the Convention shall be applicable to the bill of lading if: (a) the bill of lading was issued in a contracting State, or (b) the carriage was from a port in a contracting State, or (c) the bill of lading itself provided that the rules of this Convention or legislation of any State giving effect to them were to govern the contract whatever the nationalities of the ship, the carrier, the shipper, the consignee, or any other interested person may be. Pursuant to the above provisions, as in this case, it had been expressly provided in Article 1 of the overleaf clauses of the Bill of Lading that Hague/Visby Rules shall apply, Hague/Visby Rules, as the applicable law in this case, shall be binding upon the two contracting parties to the Bill of Lading with respect to their rights and obligations. In addition, as Hague-Visby Rules itself was not a law of any State, but an international Convention well known in the field of ocean shipping and maritime justice over the world, there was no need of any evidence as to its contents. Pursuant to Article 75, sub-paragraph (2) of Opinions of the Supreme People’s Court on Certain Issues respecting Implementation of the Civil Procedure Law of the PRC that “the party concerned is not bound to present evidence for the facts, natural law and theories known to all”, the party concerned was not bound to present evidence for the contents of Hague-Visby Rules mentioned above. Moreover, even if the court of first instance should require such evidence presentation, Nedlloyd B.V. had already completed the process of evidence presentation in respect of the relevant contents of the Rules in the documents such as the Submissions to the court of first instance. However, being entirely regardless of the consensus reached between Nedlloyd B.V. and Pearl River on the application of law, the court of first instance did not make any holding on the application of Hague-Visby Rules in this case, but subjectively held that the law of PRC shall be applied in Nedlloyd B. V.’s opinion. The above-mentioned view of the court of first instance was wrong as it was obviously in lack of factual and legal basis. 3. The above said view of the court of first instance did not comply with the judicial principle established by the judicial precedents of the Supreme People’s Court. According to retried case concerning dispute over release, taking delivery of and agency release of goods carried by sea without presentation of bill of lading arising between Yue Hai Company, Cang Ma Company and Te Fa Company, and the Case No. JTZ 1(1997) tried by the same court, which were published in the Public Notice of the Supreme People’s Court of PRC, Vol. 1, 1997 by the Supreme People’s Court, a dispute over release of goods without presentation of original bill of lading should be “a dispute over contract of carriage of goods by sea”. On this basis, the Supreme People’s Court admitted the legal force of the law of application clause contained in the Bill of Lading in both of the two cases mentioned above, by holding that Hague Rules and Hague-Visby Rules should be respectively applicable to the two cases, and further holding that the carrier should bring the action for indemnity within one year as provided for in the above-mentioned Rules. Although China is not a case-law country, yet the precedents announced in the public notices of the Supreme People’s Court and the judicial principles established by these precedents are assuredly of fairly good value of reference and certain binding force to the courts at a lower level. In this case, the act of the court of first instance as derogating from the above-mentioned precedents and the judicial principles of the Supreme People’s Court in the trial was obviously improper and shall be rectified according to law. II. The court of first instance was wrong in giving holding on the time limitation for action in this case. Article 1, Paragraph 2 of Hague-Visby Rules which the two parties involved in the case agreed to apply provided: “the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered.” According to this provision and the definition on time limitation for action mentioned above, any claims against the carrier under the three bills of lading involved in this case shall be brought “within one year of delivery of the goods or of the date when they should have been delivered by the carrier”, counting from March 23 and 24, 1996 on which the goods were discharged from the ship, and in this case, the time limitation for any claims against the carrier shall expire on March 23 and 24, 1997. Besides, in respect of the limitation period of claiming for recourse, it was provided in Article 1, Paragraph 3 of Hague-Visby Rules that “An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself.” From the above provision, we can see that after the expiration of the year provided for in Article 1, Paragraph 3 of Hague-Visby Rules, the time limitation for claiming for recourse against the third party is decided by the limitation period prescribed in the law of the court seized of the case. However, the time allowed shall not be less than three months counting from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself. According to such a provision, in this case, the limitation period within which the carrier for the entire voyage entitling to claim against the actual carrier was three months, counting from the day on which Pearl River was served with the copy of the Statement of Appeal submitted by the B/L holder D.K. REMINGTON INTERNATIOAL on February 3, 1997 and the Notice to Reaction served by Guangzhou Maritime Court, that is, the time limitation shall expire on or after May 3, 1997, a period of time counting from the day of the service of the court. In this case, as the fact having been held by the court of first instance indicated, the Statement of Appeal of Nedlloyd B.V. was dated as July 21, 1998, and the court seized of the case on July 24, 1998. The claim was filed far more than one year after the above-mentioned goods had arrived at the destination port and far more than three months after Nedlloyd B.V. had been served with the copy of the Statement of Appeal of the through B/L holder and the Notice to Reaction by this court. Therefore, the claim filed by Nedlloyd B.V. against Pearl River exceeded the time limitation prescribed by law, thus it shall not be protected by this court. Although Pearl River did apply to Guangzhou Maritime Court on June 5, 1998 to arrest m/v “Nedlloyd Houtman” owned by Nedlloyd B.V., yet the act of property preservation prior to proceedings occurred after the expiration of the above-mentioned time limitation, for this reason interruption of time limitation had not been constituted. Therefore, viewing the case from whatever angle, Nedlloyd B. V. had lost the protection of the law in respect of the time limitation for action and had been deprived of the right to win the lawsuit in this case. Therefore, its litigation requests against Pearl River shall be dismissed according to law. On second thoughts, even the matter of time limitation should be applied by the relevant provisions of the Maritime Code of the PRC as it was held by the court of first instance (the grounds for which were the same as in the foregoing Pleadings of Pearl River), the court of first instance had serious mistakes in interpreting and holding the meaning of Article 257 of the Maritime Code, therefore it should be rectified according to law. III. Part of the facts of this case was not ascertained by the court of first instance or the ascertainment was not clear: 1. The court of first instance did not give holding on such an important fact that Nedlloyd B.V. was not the actual carrier of the goods under Bs/L No. HKGVA207 and No.HKGVA208 involved in this case. As revealed by the facts established by the court of first instance, the goods under Bs/L No.207 and No.208 were loaded on m/v “OOCL FAIR” at Hong Kong on February 10, 1996, and were actually shipped to Guatemala per the same vessel. Nedlloyd B.V. was not the shipowner of m/v “OOCL FAIR”. According to the registration of ships in Lloyd’s Register 1995-96, the shipowner of the vessel was Orient Overseas Container Line Ltd. (hereinafter referred to as “OOCL”). For this reason, as regards the two consignments of goods mentioned above, Nedlloyd B. V. was not the actual carrier, but the contract carrier same as Pearl River. The contract carrier, as it was held by the court of first instance, shall not undertake any liabilities for the delivery at the port of destination. In addition, in the court hearing of the first instance, Nedlloyd B.V. merely alleged that the goods were discharged and under the custody of the Customs, but not that the goods were delivered to any receiver, and Pearl River had never presented any evidence that Pearl River delivered the goods to anybody. In fact, basing on the facts mentioned above, the responsibility for delivery of the goods at the port of destination actually should not be undertaken by Nedlloyd B.V. Without even holding on such an important fact that the actual carrier for the consignment of goods was “OOCL”, the court of first instance was obviously groundless in adjudicating that Nedlloyd B.V. undertook the liability for the release of goods at the port of discharge. Nedlloyd B.V. Hereby once again emphatically pointed out that Nedlloyd B.V. was neither the carrier for the entire voyage, nor the actual carrier for the goods involved in this case. Its identity was only the contract carrier under the on-carriage bill of lading involved in this case. In this case, Nedlloyd B.V. had taken back the full set of original on-carriage bill of lading in respect of the two consignments and accomplished his obligation as contract carrier under the on-carriage bill of lading. Therefore, Nedlloyd B.V. shall not be held liable for the losses alleged by Pearl River. 2. Nedlloyd B.V. held that the court of first instance was not clear in holding the following facts in the judgment of the first instance: Did Pearl River exercise due diligence as the carrier for the entire voyage? Did the agent at the loading port fulfill the obligation of delivery as per the through bill of lading? As indicated by the facts established by the court of first instance, Pearl River, as the carrier for the entire voyage, was entrusted by the shipper to ship the goods in question from Sanbu, PRC to Puerto Quetzal, Guatemala, and issued through bills of lading No.PRBT-96008, No.PRBT-96009 and No.PRBT-96012 correspondingly. Pursuant to Article 46 of the Maritime Code of the PRC , the responsibilities of Pearl River, as the carrier of the goods in question for the entire voyage, covered the entire period from the time the carrier took over the goods at Sanbu, PRC, until the goods were delivered at Puerto Quetzal, Guatemala. As regards the normal process of transportation, the actual consignee shall exchange for the on-carriage bill of lading with Pearl River’s agent at the discharging port by surrendering the through bill of lading, which was obtained after payment of the equivalent price, and then exchange for the delivery order by surrendering the on-carriage bill of lading before the goods could be taken. The second-leg carrier’s obligation was fulfilled, as long as he had withdrawn the on-carriage bill of lading issued by him at the port of discharge. In this case, after Nedlloyd B. V. had fulfilled the obligation of presenting evidence by presenting the full set of original on-carriage bill of lading to the court and given proof that Nedlloyd B.V. had properly performed the obligation of the second-leg carrier, the court of first instance had never conducted any investigation to find out whether the carrier for the entire voyage had fulfilled his due obligations. Instead, obviously without any factual basis, the court held that Nedlloyd B. V. should fulfill the obligation of delivery of the goods at the port of discharge, under the circumstances of entirely not knowing whether the carrier should designate the agent at the port of discharge, who was the agent at the port of discharge and whether he had fulfilled the obligation of properly delivering the goods which should have been performed by the carrier for the entire voyage. 3. Nedlloyd B. V. could not agree to the holding of the court that as Nedlloyd B. V. had not provided with the court the list of the articles handed over to the Customs, it was unable to hold that the carrier had fulfilled his obligation of delivery of the goods. After the goods arrived at the port of destination, Nedlloyd B.V. had withdrawn all the three sets of original on-carriage bills of lading which were issued by itself, and delivered the goods to the Customs for supervision according to the regulations of the port of destination. Therefore, as the second-leg carrier, Nedlloyd B.V. had properly fulfilled all the obligations that it should fulfill according to the provisions of the on-carriage bill of lading, and completed the carriage he was in charge of. As mentioned above, the obligation of release of goods at the port of destination was undertaken by Pearl River as the carrier for the entire voyage. Therefore, Pearl River shall be held liable for presenting evidence in respect of release of goods at Guatemala. The court of first instance made no ruling on the afore-mentioned evidential documents furnished by Nedlloyd B.V., but on the contrary, determined that Nedlloyd B.V. had not properly fulfilled the obligation of delivery of cargo on the grounds of its failure in discharging the burden of proof in the judgment. The court of appeal was called upon to redress the mistake made by the court of first instance in this respect. IV. The court of first instance partially violated the procedural law in hearing the present case. In this case, the court of first instance established that Nedlloyd B.V. made an indemnity on the basis of the amount of liability to be borne by Pearl River to the holder of the through Bs/L as determined in the Civil Judgments No. YFJERS 436 and 437 (1998) handed down by the Higher People’s Court of Guangdong Province on 22 July, 1999. As shown by the facts in this case, the last round of court hearing was held on 14 April, 1999 , earlier than the time when the foregoing judgments were rendered. Subject to the said provision of the Civil Procedure Law, if the court of first instance intended to rule on the onus to be borne by Pearl River by reference to the amount ascertained in the aforesaid two judgments, then the two judgments should have undergone the legitimate procedures for cross-examination. But in effect, the aforesaid judgments had never been cross-examined by Nedlloyd B.V. and Pearl River at the court hearing, nor had Nedlloyd B.V. any opportunity to plead for the amount ascertained therein. Hence, Nedlloyd B.V. took the view that the court of first instance failed to follow the statutory procedures for cross-examination when determining the amount of indemnity in this case, thus such mistake should be rectified by the court of appeal, and the litigation requests filed by Pearl River in the first instance should be dismissed in accordance with the law. In summary, Nedlloyd B.V. requested the court of first instance to amend the first and the second items of the original judgment according to law, to order that Nedlloyd B.V. be not liable for the losses alleged by Pearl River, and adjudicate according to law that Pearl River bear the legal fees in the first and the second instances of this case. Pearl River argued: I. Whether the overleaf clauses of the memo bills of lading for the second-leg voyage were valid and whether the present suit was time-barred became the focus of attention of the dispute between the two parties. Container Ltd. was of the opinion that this case should be governed by the law of the PRC, and it was not time-barred. Thus Nedlloyd B.V. should be liable to make indemnity for its failure to deliver the goods as agreed upon. II. In this case, the memo bill of lading for the second-leg voyage could not regulate the acts of both parties in transportation. 1. In this case, the memo bill of lading for the second-leg voyage, which had been regained on the spot at the office of Nedlloyd B.V. in Hong Kong, the port of shipment, was devoid of the functions and features of the bill of lading regarding “the document based on which the carrier undertakes to deliver the goods against surrendering the same”. Hence, it was not a bill of lading in legal sense, but the evidence of the taking over of the goods by Nedlloyd B.V. (1) The procedures for issuing the memo bill of lading for the second-leg voyage to Container Ltd. by Nedlloyd B.V. was as follows: Container Ltd. transported the cargo to Hong Kong and handed it over to Nedlloyd B.V. After Container Ltd. paid the freight, Nedlloyd B.V. informed Container Ltd. to send its staff to the Hong Kong office of Nedlloyd B.V. and affix its seal on the reverse side of the memo bill of lading for the second-leg voyage, which was later regained on the spot by Nedlloyd B.V. , who gave the short form bills of lading without overleaf clauses to Container Ltd. instead. The seal affixed by Container Ltd. on the bills of lading served as the evidence of payment of freight, and Nedlloyd B.V. would not release the cargo to the holder of the original bills of lading at the destination port without the endorsement made by Container Ltd.. As stated by Nedlloyd B.V. in his Statement of Appeal, before Container Ltd. consigned the cargo in dispute to Nedlloyd B.V. for shipment, Container Ltd. had entrusted Nedlloyd B.V. to transship the cargo for many times, in which cases Nedlloyd B.V. had issued the bills of lading in the same form as those of Container Ltd. (2) It was stated by Nedlloyd B.V. in his Statement of Appeal that Nedlloyd B.V. had withdrawn the full set of original bills of lading (3/3) issued by it after shipping the cargo to the destination port, and had handed the cargo over to the local Customs for supervision as per the regulation of the port. This was a story fabricated by Nedlloyd B.V. In accordance with shipping practice, the procedure for “delivering the goods in exchange for the bill of lading” in respect of the delivery of goods at the destination port is that the carrier hands over the cargo to the consignee, who endorses the bill of lading, which is then regained by the carrier. But in the present case, despite the fact that the memo bill of lading for the second-leg voyage endorsed by Container Ltd. was still held by Nedlloyd B.V., Nedlloyd B.V. did not deliver the cargo to the consignee. Evidently, the memo bill of lading for the second-leg voyage issued by Nedlloyd B.V. was not regained after delivery of goods at the destination port, but was withdrawn at the time of transshipment at Hong Kong. (3) Nedlloyd B.V. stated in the fax d

Plaintiff: CHINA BANK, SEOUL BRANCH Domicile: 20/F, YongFeng Building, Ruilingdong, Zhonglu District, Seoul, Korea Representative: YUE YI, General Manager Entrusted Agent: KONG PENG, of Beijing Bei Dou Law Firm Defendant: CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. Domicile: Zhongyi Building, 103, Jixiang Li, outside Chaoyang Men, Beijing Legal Representative: ZI ZHAN RONG, President Entrusted Agent: FU RUI, Female, of 38-year-old, Deputy Director of President Office of CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. In the dispute cases of general guarantee contract, the plaintiff, CHINA BANK, SEOUL BRANCH (hereinafter referred to as “SB”), versusing the defendant, CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. (hereinafter referred to as “CAC”), the entrusted agent of the plaintiff, SB, KONG PENG and the entrusted agent of the defendant, CAC, FU RUI were present in court to participate in action. This case has now finalized. The plaintiff, SB, asserted that: our bank had all along offered credit service to HUA YI CO., a subsidiary company of CAC, which is guaranteed by CAC and the guarantee of CAC has been approved by State Administration of Foreign Exchange. The concrete situation is that: on December 3rd, 1998, our bank signed a contract on conferring a credit sum of $3,000,000US with HUA YI CO.; on December 2nd, 1999, our bank renewed the contract on the conferred credit sum of $3,000,000US signed with HUA YI CO.; on February 27th, 2001, our bank renewed a contract on a conferred credit sum of $1,500,000US signed with HUA YI CO.. CAC provided the guarantee of joint and several liabilities on all of the said contracts. HUA YI CO. confirmed that the debt it owned our bank was $1,162,566.14USD and 435,843,287WON after the expiration of the said contracts, February 27th, 2002. On the ground that HUA YI CO. cannot repay the debt, our bank suited to the court, asking CAC, as the guarantor of the joint and several liabilities, to bear the repaying liability of the said sums of money. In order to prove its claim, SB provided following evidences and documents: 1. An agree signed on December 3rd, 1998 and an officer and written reply (Ref. 1998 151) and a registration certificate of external guarantee (Ref. GFG 0617) rendered and issued by State Administration of Foreign Exchange; 2. An agreement signed on June 2nd, 1999; 3.An agreement signed on December 3rd, 1999 and an officer and written reply (Ref. 1999 298) and a registration certificate of external guarantee (Ref. GFG 0573) rendered and issued by State Administration of Foreign Exchange; 4.An agreement signed on June 1st, 2000; 5.An agreement signed on December 1st, 2000; 6.An agreement signed on February 27th, 1998 and an officer and written reply (Ref. 2001 40) and a registration certificate of external guarantee (Ref. GFG 0573) rendered and issued by State Administration of Foreign Exchange; 7.Three copies of KUN-guarantee; 8. A bill of paying 30 Million WON on March 3rd, 1999; 9. A bill of paying 1 Billion WON on December 1st, 1998; 10.A correspondence of debt confirmation sent to HUA YI CO. on January 28th, 2002; 11. A notice asking the fulfillment of guarantee liability sent to CAC on January 28th, 2002. CAC has no objection on subjective truthfulness and contents of the said evidences provided by SB. Defendant, SB, pleaded in the trail that: 1.The loan in WON SB provided to HUA YI CO. has exceeded the guarantee scope applied by our company and approved by State Administration of Foreign Exchange, thus our company shall not bear guarantee liability on the debt on WON owned by HUA YI CO. (1) The guarantee our company provided to SB as the guarantor of HUA YI CO. in 2001 is “ mainly used in issuing sight credits, usance credits or back-to-back credits in bilateral trades and trilateral trades”. However, in practice, besides the loan in USD provided by SB to HUA YI CO. under items of the credit, the loan it continually provided was 130 Million WON, which is beyond the external guarantee scope applied by our company which had been approved. (2) The loan of 130 Million WON provided by SB to HUA YI CO. had actually changed the content of the loan contract, but without getting a written agreement from our company; thus our company shall not bear guarantee liability on this non-credit loan in WON. 2. Regarding to the contract signed by SB and HUA YI CO., the type of loan confirmed by both parties is “the sight and /or usance LC with limitation of 130 Million WON”; however, from details of the credit sum HUA YI CO. owned SB, which is provided by SB, it shows that the period of validity of the credits issued by SB had all exceeded 90 days, which broke the agreement in the loan contract. This change did not ask the agreement of our company; thereby our company should not bear the guarantee liability of the LC loan exceeding the period of validity of 90 days. 3. The sum of money claimed by SB exceeds 1.5 Million USD, thus our company shall not bear the guarantee liability for it. By reason of the foregoing, our company holds that the claim provided by SB has exceeded the guarantee liability scope of our company, thus our company shall not bear the guarantee liability and ask the court to dismiss the claim of SB. Therefore, CAC provides to the court evidences and documents as follows: 1. Application Regarding to Extend the Time Limit of the Credit Sum, 30 Million USD, of HUA YI CO., Korea (Ref. 2001 CAF509/29) of CAC; 2. A bill showing that SB paid 300 Million WON; 3. A bill showing that SB paid 1 Billion WON; 4. A contract signed by SB and HUA YI Co. on December 3rd, 1998; 5. A contract signed by SB and HUA YI CO. on February 27th, 2001; 6. The notice SB sent on January 28th, 2002, asking CAC to fulfill the guarantee liability; 7. A confirming correspondence, regarding to the LC money advanced for others and the loan, SB sent to HUA YI Co. on January 18th, 2002; 8. A schedule of the LC money advanced for others owned by HUA YI Co. SB has no objection on subjective truthfulness of the said evidence provided by CAC, except the contents the said evidence proved. In evidence 1, though CAC holds that the application was written clearly that it was mainly used in opening LC, it did not exclude general loans; regarding to evidence 2 to 7, SB holds that they can support its opinion to prove that the loan in WON is within the guarantee scope of CAC; regarding to evidence 8, CAC holds that all the LCs listed in the schedule have the situation of exhibition the period and counts the interest of the exhibition, thus it shall not be regarded as exceeding the LC time limit that agreed and also shall not be regarded as beyond the guarantee item that agreed. When the said evidence provided by the parties has been cross-examined, both parties have no objection on the subjective truthfulness of the evidence provided by the other, thus this court confirms the said evidence. Based on the evidence cross-examined by both parties and the trail notes, the facts this court has found are as follows: On December 3rd, 1998, SB and HUA YI CO. signed a contract, agreeing that: the sum of conferred credit was 300 Million USD; the type of conferred credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON; the date of conferring the LC was December 3rd, 1999.Whereafter, SB and CAC signed the contract of KUN-GUARANTEE, agreeing that in order to ensure the interest of the debtee, SB, the guarantor, CAC, expressly made the joint and several guarantees with the debtor, HUA YI CO., repaying and paying the any and all debts or owes that the debtor may owe the debtee now or henceforth within the scope of the following debts or owes. The debt scope CAC guaranteed includes any or all obligations, debts and owes, either existing now or may occur in the future, the debtor owned to the debtee rooting, referring or concerning to the following business: loan by bill, discount of bill, loan by contract, current credit related to foreign exchange and debts from other current credits, and so on; guaranteed debts include interests, interests exceeded time limit, incidental debts and any and all other obligations which the highest limitation is 3 Million USD or other currencies equal to the worth that has occurred before conferring the date of guaranteed debt, whatever the highest limitation of the guaranteed debt, the guarantor must bear liabilities on any interest, interest exceeded time limit or all other incidental debts produce or occur after the confirmation of the guaranteed debt; the guaranteed debt expired on December 3rd , 1999。CAC sealed on the blank of Guarantor of joint and several liabilities. State Administration of Foreign Exchange replied the official and written replay (Ref.1998 151) concerning providing external guarantee by CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP., agreeing CAC to provide the external guarantee, 3 Million USD with which the allotted time of the debt under the items of the guarantee was one year, the warrantee was HUA YI CO. and the beneficiary under the items of guarantee was SB. On December 28th, 1998, State Administration of Foreign Exchange provided the External Guarantee Registration (Ref. GEG 0617), expressly written: external guarantee provided by your company to SB as a guarantor of HUA YI CO. has gone through examination and is approved to register now. On June 2nd, 1999, SB and HUA YI CO. signed a contract, extending the time limit of the local currency loan, 1.3 Billion WON, of HUA YI CO. from June 3rd ,1999 to December 3rd on the interest rate of 9%. On December 2nd, 1999, SB signed an contract with HUA YI CO., arranging exhibition period of the credit of HUA YI CO., of which the sum of credit was 3 Million USD, the type of credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON and the date of conferring the LC was June 3rd, 2000. At the same time, SB and CAC signed the Contract of KUN-Guarantee. The sum of guarantee of CAC was 3 Million USD; the guaranteed debt expired on December 3rd, 2000, in which the content was the same with the said Contract of KUN-Guarantee. The official and written replay (Ref.1998 151) made by State Administration of Foreign Exchange on September 28th, 1999, which concerned providing external guarantee by CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP., agreeing CAC to provide the external guarantee, 3 Million USD with which the allotted time of the debt under the items of the guarantee was one year. On December 28th, 1999, State Administration of Foreign Exchange provided the External Guarantee Registration (Ref. GEG 0617): the external guarantee provided by CAC to SB as a guarantor of HUA YI CO. has gone through examination and is approved to register. On June 1st, 2000, SB signed a contract with HUA YI CO., arranging exhibition period on 6 month of the credit of HUA YI CO., of which the sum of credit was 3 Million USD, the type of credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON and the date of conferring the LC was December 2nd, 2000. On December 1st, 2000, SB signed a contract with HUA YI CO., extending the local currency loan, 1.3 Billion WON, which was available by HUA YI CO. at that time. The new expiration date was February 27th, 2001. On February 27th, 2001, SB signed a contract with HUA YI CO., arraigning one year exhibition period of the loan which was available by HUA YI CO. at the time. The sum of credit was 1.5 Million USD, the type of credit was cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term was 90 days, on a sub-limitation of 1.3 Billion WON and the date of conferring the LC was February 27th, 2002. At the same time, SB and CAC signed the Contract of KUN-Guarantee. The highest sum of guarantee of CAC was 1.5 Million USD; the guaranteed debt expired on February 27th, 2002, in which the content was the same with the said Contract of KUN-Guarantee. The official and written replay (Ref.2001 40) made by State Administration of Foreign Exchange on February, 26th, 2001, which concerned providing external guarantee by CAC, agreeing CAC to extend one year of the external guarantee which the sum of debt under the items of guarantee was 3 Million USD. State Administration of Foreign Exchange gave clear indication on the original External Guarantee Registration (Ref. GEG 0573) that the time limit extended to February, 2002. On January 28th, 2002, SB sent a correspondence of confirming the debt to HUA YI CO., stating: “ Close to February 28th, 2002, the balance of the debt your company owned to our bank is 430,000,000WON and the relative interest is 5,843,287WON. The interest of the debt that exceeded time limit is counted from February 29th, 2002, on the interest rate of 10%.” HUA YI CO. sealed on this correspondence to confirm. In the same day, SB sent the Notice of Submitting to fulfill the Guarantee Liability to CAC, stating: “Close to January 28th, 2002, the debts your company guarantees for the credit HUA YI CO. got from our bank add up to: 1. $1,148,325.36USD that issued and accepted under items of import LC, the interest, $1,258.74USD, of the money advanced by our bank for HUA YI CO., totally $435,843,287WON; 2.the loan, $430,000,000WON, and the interest of loan, $5,843,287WON, which has not paid yet, totally $ 435,843,287WON. The said debts have been confirmed to be inerrability by HUA YI CO. and please, your company fulfill the above liabilities as soon as practicable.” Both SB and HUA YI CO have sealed this notice. During the trail, CAC had no objection on the sum of SB’s claim. SB also confirmed that CAC could pay in USD, WON or RMB. This court further found that regarding to the LCs exceeded the longest term-90days-provided by CAC; it should be the change of guarantee items. SB explained that on the ground that extending period of LC regularly occurs in operating LCs’ business and the item of the interest of extending would be listed in the schedule of money advanced for others through LC, it should not be the situation that proceedings of guarantee have changed. CAC has no obligation on the said explanation made by SB. This court holds that: 1. Regarding to the problem of jurisdiction of this case. The plaintiff, SB, is a bank registered in Korea, thus this case is a civil case-related to foreign elements in according to regulations of CILVIL PROCEDURE LAW. Based on Article 245 of CILVIL PROCEDURE LAW, “If in a civil action in respect of a case involving foreign element, the defendant raises no objection to the jurisdiction of a people's court and responds to the action by making his defense, he shall be deemed to have accepted that this people's court has jurisdiction over the case”, the defendant, CAC, has not raised objection on jurisdiction of this court, further, it responded to action and pleaded. Thereby, this court has jurisdiction to this case. 2. Regarding to the application of law in this case. In procedure, both parties expressly showed that they choose law of People’s Republic of China to settle the contract dispute, thereby, law of People’s Republic of China is the applicable law to settle the contract dispute in this case. 3. Regarding to the facts of SB’s claim. After signing the credit contract with HUA YI CO. SB signed three Contracts of KUN-Guarantee with CAC, each on 1998, 1999 and 2001. All the three guarantee contracts are true declaration of will of the parties, moreover, when CAC provided external guarantee, it had already been approved by State Administration of Foreign Exchange and had registered, which was in line with law; thus, the said three guarantee contracts shall be regarding as valid. CAC shall bear joint and several guarantee liabilities of the debt confirmed by HUA YI CO. in accordance with the agreement in the guarantee contract. Regarding to the facts of CAC’s pleading that it should not bear the guarantee liabilities. In the agreement signed by SB and HUA YI CO., it is expressly agreed: the sum of credit is 3 Million USD, the type of credit is cycling short-term trade capital accommodation, issuing a sight and/or usance LC, which the longest term is 90 days. The sum of external guarantee CAC applied to State Administration of Foreign Exchange, which has been approved, is 3 Million USD. In practice, SB used form of USD or WON, general loan or money advanced by LC to confer the credit to HUA YI CO., which did not exceed the guaranteed sum scope bore by CAC. As to the stating of CAC that all the LCs issued in the arrearage schedule of HUA YI CO. exceed the allotted time of 90 days agreed in the agreement, on the ground that extending period occurred in the LC business and the sum of money advanced for others did not exceed the guaranteed sum of scope of CAC; thus, the said plea of CAC cannot be obtained and CAC cannot avoid the guarantee liability. By reason of the forgoing, based on Article 13 and Article 18 of LAW OF THE PEOPLE’S REPUBLIC OF CHINA ON SEQURITY, this court now judges as follows: CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. shall bear joint and several repaying liabilities on the debs of $1,162,566.13USD and $435,843,287WON HUA YI CO. still owes CHINA BANK, SEOUL BRANCH, within seven days after the present judgment takes effect (if repays in RMB, the repayment shall be converted according to the foreign exchange qutoeprice published by China Bank on the same day). Fees for accepting and hearing the case are 71,099RMB, which are paid by CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. (within seven days after the present judgment takes effect). If any party takes exception to the judgment, CHINA BANK, SEOUL BRANCH can submit an appeal within 30 days after the service day of the Judgment to this court and CHINA NATIONAL ARTS & CRAFTS IMPORT & EXPORT CORP. an submit an appeal within 15 days after the service day of the Judgment to this court, in addition, any party submits the appeal shall provide the copies according to the number of people in the other party and pay the fees of accepting the appealed case, 71,099RMB (Opening Bank: Industry and Commercial Bank of China, Dong Tie Yin Small Local Branch, Account No.: 0200000409014420281, Payee: The Second Intermediate People’s Court of Beijing), the appeal goes to the High People’s Court of Beijing. Seven days after the mature appeal term, the appellant still not paying the fees of accepting the case yet shall be handled as withdraw the appeal automatically. Chief Judge SHEN XIAO QI 　　　　　　　　　　　　　　 Deputy Judge ZHANG RU 　　　　　　　　　　　　　　 Deputy Judge CAO XIN September 20th, 2002 Court Clark CHENG HUI PING

Appellant (plaintiff of the original trial): Ryoden Lift & Escalator Company Limited Domicile: 8/F., Manulife Tower, 169 Electric Road, North Point, Hong Kong. Litigation Representative: HU FAGUANG, Board Chairman of the Company. Entrusted Agent: PU WANYU, Lawyer from Guangdong Hua Han Law Firm. Appllee (defendant of the original trail): China Everbright Bank, Shenzhen Branch Domicile: 2/F, Tower Three, Shenzhen Huaqiang Industry Co., Ltd., North of Huaqiang Rd., Shenzhen. 　　 Litigation Representative: ZHU FAQING, President of the Bank.　 Entrusted Agent: YAO ZHAOWU, Lawyer from Guangdong Jing Tian Law Firm Entrusted Agent: LIN LING, Assistant of the General Manage of the Bank Appellant, Ryoden Lift & Escalator Company Limited (hereinafter referred to as “RC”), taking exception to the Civil Judgment (Ref.2001 SICE2O 108) rendered by the Intermediate People’s Court of Shenzhen on a dispute of L/C, versusing appellee, China Everbright Bank, Shenzhen Branch (hereinafter referred to as “EBank”), lodged an appeal with this court. This court set up a collegiate bench to take up the cases and has now finalized the case. On August 6th, 2001, the appellant, RC, brought an appeal to the original court, stating: on April 20th, 1998, based on the application of the applicant for the credit, SHENZHEN XINWANG INDUSTRIAL & COMMERCIAL DEVELOPMENT CO., LTD (hereinafter referred to as “XWC”) and the publication No.500 of International Chamber of Commerce, the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (hereinafter referred to as “UCP500”), EB opened an irrepealable sight L/C with RC as the beneficiary. When RC negotiated this L/C, EB held that the bill had some discrepancies, however, during the process that EB decided to hold the bill and wait for the direction, it was not based on the regulations of UCP500 to strictly fulfill its obligations of noticing the applicant for the credit and consulting the applicant’s opinions. EB did not notice the applicant and ask the applicant to waive the discrepancies, but allowed the beneficiary to change the discrepancies. It intentionally made the beneficiary miss the 15-day-period of time for presentation of document, which occurred the new discrepancy of “late for presentation of document”. Again, during the process of keeping the bill and waiting for the disposition, EB waved aside the direction, waiving the discrepancies, of the applicant, XWC, and refused to base on the regulations of UCP500 to fulfill the paying obligation under items of the L/C, which led to the situation that up to now, the beneficiary, RC, had not got the sum of money and incurred great economic losses. Thereby, ask the court to order EB to pay the sum of money, 5,160,000HKD, under the terms of the L/C, the interest of deferring payment, 821,076.00HKD, and pay fees of this case in accordance with law. The appellee, EB, defended in the original trail that: 1. RC was incompetent appellant and EB asked the court to reject RC’s claims. In this dispute over L/C referred to this case, RC was not the appellant for credit, but only the beneficiary. Based on Article 3, Paragraph 1 of UCP500, “Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s),” and Paragraph 2: “A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank”, EB had no interested relationship with RC. Thereby, RC was incompetent with the essentials of complain of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA; and please the court to reject its claims. 2. EB should not be the appellee. Before this litigation, RC had submitted an application of arbitration to China International Economic and Trade Arbitration Committee on December 16th, 1999, based on the same facts. The Arbitration Committee made effective arbitration award on April 5th, 2000, confirming that it was XWC who need to pay RC the money for cargoes. Instead of applying to enforce the arbitration award, RC suited EB to the court, which obviously violated Article 9 of ARBITRATION LAW OF THE PEOPLE’S REPUBLIC OF CHINA, “The single single ruling system shall be applied in arbitration. The arbitration commission shall not accept any application for arbitration, nor shall a people's court accept any action submitted by the party in respect of the same dispute after an arbitration award has already been given in relation to that matter.” Thus it can be seen that RC’s act in action was against the arbitration award and asked to remove it, which means that the appellee should be the arbitration organization making the arbitration award, but not EB. 3. EB had strictly abided the relevant regulations of UCP500 in respect of L/C when issuing the L/C, transacting the modification, looking through the bills, protesting and returning the bill, with no fault during the operation process of L/C. RC had no objection on both unconformities brought by EB in two separate time in its bill of complaint, however, it stated that the efficient amse occurring its economic losses was the act of nonfeasance of EB. This viewpoint was absolutely wrong. Based on Article 4 and Article 9 of UCP500, the issuing bank bears the payment liability only under the condition that the documents are coherence with each other. In the event that the documents contained the unconformities, the issuing bank can be released from the payment liability, according to Article 14, Item (d) of UCP500, if only the disposal of the documents of the issuing bank is coherence with the requirement of this regulation. It has no legal liability to accept documents; even it receives an announcement from the applicant, claiming to give up the unconformities. On 1997, in ICC’s QUESTIONS AND REPLIES OF UCP500, the above viewpoints have already been confirmed by experts of ICC. The claims of RC had no facts and basis, thus please the court to reject its claims. Through the trail, the original court found that: on March 31st, 1998, RC signed a Sales Contract of Lift & Elevator with XWC. The contract agreed that: RC sole to XWC eight passenger-service- elevators of MITSUBISHI ELECTRIC, controlled by computers; the payment for goods were totally 6,880,000HKD and XWC paid the subscription, 10% of all the payment, by itself; the balance of 90% of the payment, counting for 6,192,000HKD, would be paid by XWC through the irrepealable sight L/C issued by EB. After signing the contract, EB, as the issuing bank, issued the irrepealable sight L/C (No. EBSZ98LC0104) on April 20th, 1998: the applicant of this L/C was XWC; the beneficiary was RC; the payment for cargoes was 6,192,000HKD, paid in three times, separately as part A 5,160,000HKD, part B 963,200HKD and part C 68,800HKD. The bills for negotiation that stated in the L/C are: 1. Two copies of original commercial invoices which have been signed and give clear indication of number of the L/C, name of the facture and the number of the contract, 1521-8054; 2. The whole set clear maritime bill of loading, which the goods have already been loaded, with the title of the issuing bank and clear indication that “freight paid” and the numbers of the L/C and the contract through “CHINA　GUANGAO DEVELOPMENT　GROUP IMP AND EXP CO OF 18／F.，SHANRONG BLDG.，JINSHA EAST ROAD，SHANTOU，CHINA(Tele：0754-8160080)”; 3. Two original copies of packing list, giving clear indication of quantity and the gross weight, net weight and packing of every box; 4. One original copy of insurance policy or credence, in which the amount insurance is 110% of the sum of the invoice and clear indication that the place of compensation is China, the way of paying is money of BE which endorsed blankly by the policy holder and the risks of insurance are Comprehensive Freight Risk (full insurance), War Risk (on freight) and Strikes Risk (on freight); 5. One original certificate of quantity issued by the commodity-manufacturing unit; 6. One original certificate of quality issued by the commodity-manufacturing unit; 7. One original certificate of producing area issued by the commodity-manufacturing unit; 8. A fax, which is faxed to the applicant within 48 hours after loading and has been confirmed by the beneficiary, notifying name of the ship, date of loading, quantity, weight and worth of cargoes and giving clear indication of numbers of the L/C, the B/L and the invoice. Additional conditions of negotiating the L/C are: 1. The P.O. with EB as the payer; 2. Any discrepancy that has been found in any set of documents, the beneficiary needs to pay the fee, 50USD, for the discrepancy and the fee will be deducted while balance every set of documents; 3. Documents must be submitted through the bank within 15days and the period of validity after forwarding; 4. The applicant and the beneficiary of the L/C will pay 10% of the invoice through other means. After issuing the L/C and seven-time modifying, the last agreed date of the L/C is July 13th, 1999; the effective cutoff time is January 25th, 2001; the dead line of the shipping is August 10th, 1999; the conditions of delivering the cargoes and the delivery place are “CIF Shenzhen, China”. Item 1 of the negotiating bill has been changed to: “following documents and the D/D of 5,160,000.00HKD, issued by the beneficiary, attached”; Item 2 has been changed to: “the whole set undertake carrying documents with blank title, which is issued by the shipper, indicating that the freight has been paid and noticing the applicant of the L/C.” Item 4 has been changed to: “the insured amount is 7,568,000.00HKD on Comprehensive Land Transportation Risk, War Risk and Strike Risk”; Item 8 “delete the name of the ship and the number of the B/L”. Then, RC shipped the cargoes on July 19th, 1999 and submitted the shipping documents of part A to negotiate to Bank of China, Hongkong Branch on July 27th, 1999. On August 4th, 1999, after checking up the documents applied by EB, RC brought up three discrepancies and notified Bank of China, Hongkong Branch by telegraph, expressing “keep the documents and wait the indication of your bank” and “the risks will be bore by your bank”. Bank of China, Hongkong Branch sent word of the discrepancies to RC, asking RC to modify them. Three discrepancies are: 1. The brand of car “CE609” is different with those in the other documents; 2. It is unreasonable and later than the consignment day that three certificates of producing area of the customer-service elevators were issued on August 25th, 1999; and 3. The name of cargoes in the invoice did not give clear indication of packing. After modification, RC submitted the documents, again, to the negotiating bank, the Bank of China, Hongkong Branch, on August 6th, 1999. On August 11th, 1999, EB received the documents, however, through checking up, EB hold that the documents still had the unconformity of “late to submit” and notified the Bank of China, Hongkong Branch by telegraph on August 13th, 1999, stating: “ Our bank will keep the documents and wait the indication from your bank. The risks will be born by your bank.” On September 7th, 1999, the applicant of issuing the L/C, XWC, faxed to EB, stating that: agree your bank to pay 5,160,000.00HKD externally in time and now ask your bank to pay externally again, but do not agree your bank to return the documents. If not, all aftereffects occurred by doing so would be bore by your bank. Then, EB twice notified the presentation bank, the Bank of China, Hongkong Branch, by telegraph, stating that it does not accept the discrepancy and has intention to return the whole set of documents to the Bank of China, Hongkong Branch as soon as practicable. On September 15th, 1999, EB notified the Bank of China, Hongkong Branch, by telegraph, stating that it refused to accept the discrepancy and would return the whole set of documents to the presentation bank Thereafter, RC and XWC have consulted many times on how to pay for the cargoes, however, no result came out. On December 16th, 1999, RC brought an application for arbitration on this payment for cargoes to the China International Economic and Trade Arbitration Committee, Shenzhen Chamber, asking to arbitrate that XWC pays the cargoes on 5,160,000HKD and its interest and fees for storage. The China International Economic and Trade Arbitration Committee, Shenzhen Chamber made the arbitration award on April 5th, 2000, supporting the application of RC. XWC did not pay as scheduled in according to the arbitration award; thus RC suited EB to this court at the dispute over the L/C, asking EB to pay the cargoes on 5,160,000HKD and its interest and the cost of this case. The facts mentioned above have been proved by the Sales Contract of Elevator, the revision and the translation of the L/C, the contacting telegraphs and the revised documents coming and going amount RC, the presentation bank, EB and XWC provided by RC and the Arbitration Award of the China International Economic and Trade Arbitration Committee provided by EB. Both parties have no objection to the other party. The original court has confirmed the above-mentioned facts. The original court holds that: the Sales Contract of Elevators signed by RC and XWC is the truth declaration of will of both parties, thus it is lawful and valid, further, the Sales Contract has been fulfilled by both parties. After receiving the cargoes of RC, XWC has paid RC Part B and Part C. The payment for Part A referred to this case has been applied the arbitration to the Arbitration Award of the China International Economic and Trade Arbitration Committee by RC, asking XWC to pay for the cargoes; and the Arbitration Award of the China International Economic and Trade Arbitration Committee, Shenzhen Chamber has made the arbitration award on this dispute over the payment for cargoes between both parties. As the finial award, it has already settled the dispute over the payment for cargoes between the parties. Now the party brings a lawsuit to the People’s Court on the same dispute over the payment for cargoes, whereas, the People’s Court would not settle this complain again. In this case, by the application of XWC, EB issued the L/C, with RC as the beneficiary, thus the bill relation of the L/C between RC and EB occurred and was separate with the original Sales Contract of Elevator. Article 13 of UCP500 stipulates: Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit shall be determined by international standard banking practice as reflected in these Articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit. Article 14 stipulates: If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such banks may refuse to take up the documents. If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies). This does not, however, extend the period of seven banking days following the day of receipt of the documents. This Article also stipulates: If the Issuing Bank acting on its behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents. Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presenter. To view the case from the operation handled by EB: after receiving the documents submitted by the presentation bank on July 27th, 1999, EB found three discrepancies on the face of the documents and the L/C through examining. Then, EB noticed the presentation bank on August 4th, 1999, the sixth day after receiving the documents, stating, “ Our bank will hold the documents and wait the direction of your bank”. Receiving the notice of the discrepancies, RC did not bring up any objection and modified the documents, then, presented the documents again to be negotiated. On August 11th, 1999, when EB received the modified documents submitted by the presentation bank, the date had exceed the presenting period that the documents must be submitted within 15 days after shipping and the period of validity of this L/C (the shipment date was July 19th, 1999), which occurred a new discrepancy of late presentation. Again, EB noticed the presentation bank for this discrepancy on August 13th, 1999, the second day the bank received the documents. On September 6th, 1999, the applicant, XWC, sent a correspondence to EB, directing to loan and stating to waiver the discrepancy, however, the date had already far away exceed the seven banking days after receiving the documents that stipulated by UCP500. It is obvious that the operation of EB did not violate the regulations of UCP500, and it is right that EB refused to pay the sum under the terms of the L/C at the situation that the documents not to be in compliance with the L/C. Furthermore, the claim of the payment for cargoes brought up by RC has been supported by the Arbitration Award. Now it had no legal basis for RC to ask, again, EB to pay for cargoes, thus the original court did not support the claim. Based on Article 13 and Article 14 of UCP500, Article 259 of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA and Article 9 of ARBITRATION LAW OF THE PEOPLE’S REPUBLIC OF CHINA, the original court decided to reject the complain of RC and the fee for accepting the case was 42,008.76RMB which shall be paid by RC. RC, taking exception to the original judgment, lodged an appeal with this court, asking this court to withdraw the original judgment and order EB to pay the cargoes under the items of the L/C and the interest and bear the legal cost of this case. The reasons were: 1. It was inappropriate of the original court to apply Article 13 and Article 14 of UCP500. The original court held: “On September 6th, 1999, the applicant, XWC, sent a correspondence to EB, directing to loan and stating to waiver the discrepancy, however, the date had already far away exceed the seven banking days after receiving the documents that stipulated by UCP500. It is obvious that the operation of EB did not violate the regulations of UCP500”. On this point, the law applied by the original court was inappropriate. Article 14 of UCP500 stipulates: If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies). This does not, however, extend the period mentioned in sub Article 13 (b). Sub Article 13 (b) stipulates: The Issuing Bank, the Confirming Bank, if any, or a Nominated Bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly. It could be seen form the above Articles: the so-called seven banking days was aimed at the working procedure ruled by the bank and the time XWC stated wavering the discrepancy had no relation with the seven banking days at all; thus it was inappropriate for the original court to applied Article 13 and Article 14 of UCP500 on this point. 2. The standard whether the discrepancy brought by EB was effective discrepancy shall be determined by international standard banking practice. Based on the opinions of Export Committee of International Chamber of Commerce in the QUESTIONS AND REPLYS OF UCP500, within the discrepancies stated by EB, at least one of them, the certificate of producing area being late of the shipping day, did not composed the effective discrepancy. As regards the cargo invoice without noticing the packing, it does not compose the discrepancy in the banking practice of Hongkong. 3. The original court held that the parlance of RC, no legal basic to ask EB to pay for the cargoes on the condition that the claim on the payment for cargoes having gained the support of the Arbitration Award, denied the relation of L/C between RC and EB. The Arbitration Award settled the contractual relationship of sale of the cargoes, however, the original trailed the relationship of the L/C, in which different parties referred to these two organizations. Although the Arbitration Award went in advance, it did not mean that the original court could not trail the dispute over the L/C. In practice, RC could not get double payments for cargoes. The parlance of the original court mentioned above actually denied the relationship of the L/C between the parties. During the investigation of this court, RC claimed that transport vehicles were not the objects of the contract, thus the first discrepancy stated by EB, the brand of the vehicle, “CE609”, in the insurance policy being different with the other documents, cannot be the effective discrepancy. RC also claimed that since the applicant of issuing waived the discrepancies, EB should pay the sum of money. The appellee, EB, defended: 1. It was appropriate for the original court to apply UCP500. Based on Article 3 (a), “Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s),” and (b), “A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank”, of UCP500, there was not any interested relationship between EB and RC. Thereby, RC was not suitable to the essentials of complaint of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA; and it was completely according to law for the original court to reject the claims. Furthermore, EB was strict to related regulations of UCP500 of L/C, during the operation of issuing the L/C, dealing with the modification, examining the documents, protesting and returning the documents etc. and had not any fault in the operation possess of the L/C. 2. The law applied by the original court was right. RC brought the complain to the court in according with the same fact, reasserting the creditor’s right, under the situation that it had already got the Arbitration Award, which violated Article 9 of ARBITRATION LAW OF THE PEOELE’S REPUBLIC OF CHINA, “The single ruling system shall be applied in arbitration. The arbitration commission shall not accept any application for arbitration, nor shall a people's court accept any action submitted by the party in respect of the same dispute after an arbitration award has already been given in relation to that matter. It was in line with the law that the original court rejected the claims. Based on the reasons mentioned above, EB asked the court of the second trail to reject the appeal of the appellant and maintain the original judgment. Through the trail, this court finds that the facts found by the original court are real and both parties have no objection on the facts, thus this court grants the confirmation. This court holds that this case is a dispute over the L/C. The appellant, RC, as the beneficiary of the L/C, accepted the irrevocable L/C issued by EB, thus both parties formed the contractual relation with the content of the items of L/C. The L/C referred in this case stipulates clearly that it bases on the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (ICC Publication No. 500, that is UCP500), which shall be regarded as the regulations of law the parties agreed to choose. Based on Article 145, Paragraph 1 of GENERAL PRINCIPLES OF THE CIVIL LAW OF THE PEOPLE’S REPUBLIC OF CHINA, this regulation referred to choosing law is within the law and valid, thus, this dispute shall be applied to UCP500. As one party of the L/C relation, RC’s complaint, versusing the other party, EB, is in line with the essentials of complaint stipulated by CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA. Using the Article 3 of UCP500 as the basis, EB defends that there is no interested relation between RC and EB, thus RC’s complaint is not in line with essentials of complaint stipulated by CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA. This court holds that EB makes distinctly mistakes in understanding the Article 3 of UCP500; further, the problem of the essentials of complaint is a problem of procedure, which shall apply to lex fori, that is CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA which has no relation with UCP500. Thereby, the reasons EB dependents cannot be sustained. Based on Article 13 of UCP500, banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit, shall be determined by international standard banking practice as reflected in these Articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit. To be brief, in the Credits business, banks have document-examined obligation to insure “Documents being consistent with the Credit” and “Documents being consistent with one another”. During the process of performing the document-examined obligation, EB brought three discrepancies from the documents submitted by RC. One focus of the dispute between the parties is whether the discrepancies can be regarded as effective in according with the international standard banking practice stipulated by Article 13 of UCP500. This court holds: regarding to the first discrepancy, the fact that the brand of the vehicle in the certificate of insurance is CE609 but in the other documents is EC609 is obviously composed to “Documents being inconsistent with one another”. During the courtroom investigation, RC’s claim held that the vehicle of transportation referred in this case was not the object of the insurance policy, thus this discrepancy cannot be the effective discrepancy, which cannot be supported by this court. The reason is that whether the vehicle for transportation is the object of the insurance or not, will not affect the confirmation of “Documents be inconsistent with one another” made by the document-examined bank. This discrepancy is effective. Regarding to the second discrepancy, RC held that it could not be effective discrepancy that the certificate of producing area being late of the shipping day. Generally, this claim is sustained in international standard banking practice. The reason is: from the nature of the certificate of producing area, it has no connection with the shipping day on logic. The fact, the issuing day later than the shipping day, would not bring any effect to the “producing area”. However, the day of issuing the certificate of producing area referred in this case is August 25th, 1999, the shipping day of the cargoes is July 19th, 1999 and the date presenting the documents to the presentation bank is July 7th, 1999, that is to say, the date of issuing the certificate is not only later than the shipping day, but also later that the presenting date. It is as good as to show that the certificate of producing area was issued after presenting, which is obviously absurd. Thereby, this discrepancy is effective. This court will not support RC’s claim on that the discrepancy is not effective. Regarding to the third discrepancy, based on the reason that the items of the L/C referred in this case required only the number of the L/C, name of the factory and the number of the contract to be noticed clearly in the commercial invoice but not the packing condition of the cargoes; further, the packing condition of the cargoes is not the necessary content of an effective commercial invoice, thus, this court will support RC’s claim on that without noticing the packing condition the discrepancy should be ineffective. It is thus evidence that among three discrepancies brought by EB, two are effective. In international standard banking practice, as long as on discrepancy has been found by the bank during the examination, it is enough to be regarded as that the documents appear on their face not to be in compliance with the terms and conditions of the Credit. Within seven banking days after receiving the documents, EB noticed the presentation bank, Bank of China, Hongkong Branch, regarding to the discrepancies, and held the documents, waiting the indication of the presentation bank. When RC submitted the revised documents to the presentation bank, the date had already exceeded the submitting period of 15 days after shipping the cargoes, which is stipulated by the L/C. Then, within seven banking days, EB, again, submitted the discrepancy of “ being late to submit” to the presentation bank in time. During dealing with the documents, the practice of EB was in line with Article 9, Article 13 and Article 14 of UCP500. In this case, the applicant of issuing the L/C, XWC, noticed EB to state to waive the discrepancies of the documents and ask this bank to pay the money. Under this situation, the other focus of the dispute, between the parties, in this case is that whether EB shall negotiate the L/C in according to the direction of the applicant. Although Article 14 (C) of UCP500 stipulate that the Issuing Bank may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies), it gives the presentation bank only the sole-judgment-right to approach the applicant for a waiver of the discrepancy (ies), but not the right referred to the payment, after the applicant waiving the discrepancies, paid to the beneficiary of the L/C. To settle this problem shall base on Article 9and Article 3 of UCP500. Article 9 (a) of UCP500 stipulates: “An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with each other”, and Article 3 (b) stipulates: “A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank.” The regulations mentioned above show that: the Issuing Bank has legal liability to pay the Beneficiary of the irrevocable Credit as long as the documents are compiled with the terms and conditions of the Credit. To waive the discrepancy by the applicant cannot constitute the paying promise of the Issuing Bank. Under this condition, the Issuing Bank may in its sole judgment decides whether to pay the Beneficiary of the L/C in accordance with the direction of the Applicant, that is, under the condition that the Applicant waiving the discrepancy (ies), the Issuing Bank has no legal liability to pay the Beneficiary. Further, the contractual relation between the Beneficiary of the L/C and the Issuing Bank is independent of the contractual relation between the Applicant of the L/C and the Issuing Bank, thus the Beneficiary cannot use the contractual relation between the Applicant of the L/C and the Issuing Bank to plead the Issuing Bank on the reason of that the Applicant waiving the discrepancy (ies), which cannot constitute the effective plea. Thereby, it is appropriated and in line with UCP500 that EB refused to pay RC, disregarding the notice of XWC waiving the discrepancies. In the court investigation, RC holds that EB shall pay after the Applicant waiving the discrepancies, which will not be supported by this court. It belongs to improperly quote the law that: the original court connected the problem that whether the Issuing bank shall pay after RC’s waiving the discrepancies with the examining period, seven banking days stipulated by UCP500 in respect that the date XEC stating to waive the discrepancies has no legal connection with the examining period. Thereby, this court supports the claim of the Appellant that it is inappropriate for the original court to apply UCP500. The facts of this case indicates that before RC appealed to the court, the Arbitration Award of the China International Economic and Trade Arbitration Committee, Shenzhen Chamber has made the effective arbitration award on the loan dispute between RC and XWC. Under this condition, another focus of this case is whether RC can appeal EB or not. This court holds that the contractual relation between the Beneficiary of the L/C and the Issuing Bank is independent of the contractual relation between the Applicant of the L/C and the Issuing Bank, in which the natures and subjects are different from each other. The Arbitration Award settles only the contractual dispute over sales of cargoes between the Applicant and the Beneficiary, but not the Credit dispute between the Beneficiary and the Issuing Bank, in which the Beneficiary has dependant right in litigation that the right to sue the Issuing Bank to the court. It does not violate Article 9 of ARBITRATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA and Article 259 of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA, regarding to the regulation that the party cannot submit an action to the People’s Court in respect of the same dispute after an arbitration award has already been given in relation to that matter, on the reason that in this case, the Credit dispute is clearly not the same dispute with the contractual dispute over sales of cargoes which has been settled by the arbitration award. Thereby, this court will not support EB’s defense on claiming that RC’s complain violates Article 9 of ARBITRATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA. It belongs to wrong invitation of law and shall be corrected that the original court invoked Article 9 of ARBITRATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA and Article 259 of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA as the legal basis to reject RC’s complaint. Although RC has right to sue EB, it does not mean this company has substantive right to claim the payment from EB for the right is only the right to sue. In this case, XWC has actually got the cargoes, but it did not operate according to the L/C’s process, which shall pay to redeem documents, and then take delivery of cargoes according to the documents. It delivered the cargoes to XWC on its own behave. Actually, on the reason that, at last, EB returned the negotiated documents to RC, neglecting the indication that XWC waiving the discrepancies, which made XWC impossible to pay to atone for the documents in according to the L/C operation process. Whereas the way XWC got the cargoes is not in line with basic principles of the mode of payment of Credit, moreover the Issuing Bank refuses to pay, it shall be regarded that both parties of the cargoes sales waive the mode of payment of Credit and have a desire to pay through other modes. Thereby, XWC’s paying claim, on substantive right, to EB cannot gain the support, that is, though RC can suit EB, the court will not support its claim of asking EB to negotiate the L/C. By reason of the forgoing, it is appropriate for RC to bring a lawsuit on the L/C dispute. EB’s acts, on refusing to negotiate the L/C on the reason that the documents not to be in compliance with the Credit and refusing to accept the indication of waiving the discrepancies from the Applicant, XWC, are according with the regulations of USP500. Based on law, it has no basic for RC to ask EB to negotiate the L/C, after it actually, waive the mode of paying in Credits. Thereby, this court will not support the claim of RC. The facts the original court found are clear, but part of laws it applied to be wrong, which shall be correct; however, the judgment is appropriate and shall be maintained. Based on Article 153, Paragraph 1(1) of CIVIL LITIGATION LAW OF THE PAEOPLE’S REPUBLIC OF CHINA, this court now adjudges as follows: Dismiss the appeal and maintain the original judgment. The fees for accepting the second trail of this case are 42,008.76RMB, which shall be paid by the Appellant, RC. This judgment is final. Chief Judge ZHANG YAO JUN Deputy Judge HE WEN LONG Deputy Judge DU YI XING December 12th, 2002 　　　　　　　　　　　　 Clark HOU XIANG LEI LI WAN MING

Applicant for Reconsideration: Inter-aegis Association for China Shipping Owners Domicile: 5/F, Paul Whit Collar Building, 38, Chaowai Av. Chaoyang District, Beijing This court accepted and heard the cases of conservation of maritime evidence of Mine Transportation Ltd. and Inter-aegis Association for China Shipping Owners. The applicant for reconsideration, taking exception to the Civil Ruling (File 2002MGLB No.36-1) rendered by this court, lodged an application for reconsideration to this court on August 5th, 2002, asking this court to modify the Civil Ruling (File 2002MGLB No.36-1) to remove the conservation of maritime evidence of Inter-aegis Association for China Shipping Owners and Mine Transportation Ltd. to bear economic losses of Inter-aegis Association for China Shipping Owners made by wrongly application. Main reason for reconsideration of the applicant of reconsideration, Inter-aegis Association for China Shipping Owners, is that there were disputes occurred on a voyage charter of “Yun Cheng” signed by Xiamen Ocean Shipping Company and Mine Transportation Ltd and the two said companies had brought arbitrations respectively to China Maritime Arbitration Committee in accordance with the arbitration term agreed by both parties. Based on Article 22 of ARBITRATION RULES “When a party applies for taking interim measures of protection of evidence, the Arbitration Commission shall submit the party's application for a ruling to the maritime court in the place where the evidence is located; when a party applies for taking interim maritime of protection of evidence after beginning the arbitration procedure, the party shall submit to the maritime court in the place where the evidence is located in accordance with Chapter Five of SPECIAL PROCEDURE FOR MARITIME LITIGATION OF THE PEOPLE’S REPUBLIC OF CHINA.” Based on the Arbitration Rules, if Mine Transportation Ltd. applies for taking interim measures of protection of evidence after the arbitration procedure beginning, it shall first submit an application to the Maritime Arbitration Committee and then the Maritime Arbitration Committee submits the application to the Maritime Court. Before submitting an application to the Maritime Arbitration Committee, it has no right to directly submit the application for conservation of maritime evidence to the court. Until the end of the trail, Mine Transportation Ltd. and Xiamen Ocean Shipping Company had exchanged evidences and went through procedures of cross-examination and debate and both parties exchanged the last attorneys’ opinions. The arbitration court confirmed the latest date of adducing evidence according to the Arbitration Rules. During the procedure, Mine Transportation Ltd. had never submit the application of conservation of evidence to China Maritime Arbitration Committee, however, it directly applied to the maritime court for conservation of evidence on July 29th , 2002, which obviously violated the Arbitration Rules. Whereas Mine Transportation Ltd. has no right to directly apply to the maritime court for conservation of evidence, thus asks the court to modify the ruling and remove the measures taken to Inter-aegis Association for China Shipping Owners for consideration of evidence. The applicant further claims that: even if Mine Transportation Ltd. has right to apply the conservation of evidence, it should conserve the evidence-if there is necessary to conserve evidences related to indemnity problem between Inter-aegis Association for China Shipping Owners and Xiamen Ocean Shipping Company-according to the problem that if the party of arbitration procedure, Xiamen Ocean Shipping Company, should get the indemnity or not, but not the person, Inter-aegis Association for China Shipping Owners, other than involved in the arbitration case, on the ground that Inter-aegis Association for China Shipping Owners is not a party involved in the arbitration case. The reason that Mine Transportation Ltd. applies for conservation of evidence is that: in the arbitration case, Mine Transportation Ltd. and Xiamen Ocean Shipping Company have dispute on the problem that whether the Protection and Indemnity Association had indemnified Xiamen Ocean Shipping Company. Mine Transportation Ltd. holds that Xiamen Ocean Shipping Company has already received the indemnity from the Protection and Indemnity Association, thus if Xiamen Ocean Shipping Company asked the indemnity from Mine Transportation Ltd., its act might constitute to be maritime fraud, which would make the case go beyond the arbitration scope and a new action might form; thus, Mine Transportation Ltd. applies the conservation of evidence before the institution of an action according to law, asking the court to obtain the evidence related to the indemnity Inter-aegis Association for China Shipping Owners gave to Xiamen Ocean Shipping Company, which has no relationship with the ongoing arbitration and which will not be provided to the arbitration court to prove the facts of the arbitration case. Through examining, this court holds that, the disputes occurred on the voyage charter of “Yun Cheng” signed by Mine Transportation Ltd and Xiamen Ocean Shipping Company is in arbitrating of the China Maritime Arbitration Committee now, based on Article 22 of ARBITRATION RULES “When a party applies for taking interim measures of protection of evidence, the Arbitration Commission shall submit the party's application for a ruling to the maritime court in the place where the evidence is located; when a party applies for taking interim maritime of protection of evidence after beginning the arbitration procedure, the party shall submit to the maritime court in the place where the evidence is located in accordance with Chapter Five of SPECIAL PROCEDURE FOR MARITIME LITIGATION OF THE PEOPLE’S REPUBLIC OF CHINA.” Thus if the application of conservation of evidence applied by Mine Transportation Ltd. is to be provided to the arbitration court to prove the facts of the arbitration case, it shall submit an application to the Maritime Arbitration Committee first, then the Maritime Arbitration Committee submits to the Maritime Court. Before submitting the application of the conservation of evidence to the Maritime Arbitration Committee, it shall not submit the said application to the court directly; however, Mine Transportation Ltd. has already stated that the evidence it applied to conserve is not used to prove the facts of the ongoing arbitration case and will not be provided to the arbitration court during the trail of the arbitration case. Thereby, based on regulations of SPECIAL PROCEDURE FOR MARITIME LITIGATION OF THE PEOPLE’S REPUBLIC OF CHINA, the application of conservation of evidence before institution of the action submitted by Mine Transportation Ltd. does not belong to applications during the arbitration procedure and has no relation to the case brought to arbitration by both parties. The case of conservation of evidence accepted by this court does not apply to Article 22 of ARBITRATION RULES, thus this reason for reconsideration of the applicant, Inter-aegis Association for China Shipping Owners, cannot be sustained. Regarding to the reason of reconsideration that the applicant of reconsideration, Inter-aegis Association for China Shipping Owners, is not a party in the arbitration case and the application of conservation of evidence shall be submitted as Xiamen Ocean Shipping Company as the other party, but not involved the person other than involved in the case, this court holds that SPECIAL PROCEDURE FOR MARITIME LITIGATION OF THE PEOPLE’S REPUBLIC OF CHINA stipulates that a claimant of applying conservation of evidence is a party of maritime claim and a requested person is a person related to the evidence applied to conserve. Based on this regulation, as long as a person related to the conserved evidence, he can become a party of the case of conservation of evidence, even though he is not a party in a maritime claim. To this case, the evidence applied to conserve by Mine Transportation Ltd. is the evidence whether Inter-aegis Association for China Shipping Owners has indemnified Xiamen Ocean Shipping Company on not, thus Inter-aegis Association for China Shipping Owners is the person related to the evidence applied to conserve, further, it is the party in the case of conservation of evidence. Thereby, its reason for reconsideration cannot be sustained. The claim of Inter-aegis Association for China Shipping Owners on asking Mine Transportation Ltd. to bear economic losses made by the wrongly application cannot be supported on the ground that there is no evidence to prove. By the reasons forgoing, the reasons for reconsideration of Inter-aegis Association for China Shipping Owners cannot sustain and the original ruling shall be maintained, thus, based on Article 69, Paragraph 1 of SPECIAL PROCEDURE FOR MARITIME LITIGATION OF THE PEOPLE’S REPUBLIC OF CHINA, this court decides as follows: Dismiss the application of reconsideration of Inter-aegis Association for China Shipping Owners.

Appellant (plaintiff of the original trial): GUANG ZHENG CO.LTD, Domicile: Room 1, 12/F, King Ma Trade Building, 30-32 King Ma Lun Road, Tsim Sha Tsui, Hong Kong, PRC. Legal Representative: PENG BI HONG, Board Chairman Appellant (plaintiff of the original trial): JAPAN CHINA FOOD CO.LTD Domicile: 15, 4Fan, Gong Qian Er Mu Ding , Shan Bin District, Tokyo, Japan Legal Representative: He Tian Jia Shou, Board Chairman Appellant (plaintiff of the original trial): LIQUIDATING GROUP OF XI’AN DONG LING REFRLGERATION EQUIPMENT CO.,LTD. Domicile: Tower F-2A, High·Tech Development Zone, Xi’an, Shan Xi Province, PRC. Legal Representative: PENG BI HONG, President of LIQUIDATING GROUP Appellee (defendant of the original trial): XI’AN JIAOTONG UNIVERCITY Domicile: 28, Xiannin Xi Road, Xi’an, Shan Xi Province, PRC Legal Representative: XU TONG MUO, Headmaster Appellee (defendant of the original trial): TECHNICAL & ENGINEERING DEVELOPMENT CO. OF SHANXI PROVINCE Domicile: Inside the Office Building of Provincial Planning Commission, Xincheng, Xi’an, Shan Xi Province, PRC Legal Representative: WANG YI, General Manager Appellee (defendant of the original trial): XI’AN JIAOTONG UNIVERCITY KETE COMPRESSO TECHNIQUE EXPLOITING CO., LTD. Domicile: 28, Xiannin Xi Road, Xi’an, Shan Xi Province, PRC Legal Representative: XIONG ZE NAN, General Manager Appellee (defendant of the original trial): XIONG ZE NAN, Femail, Sixty-five-year Old, of Han Nationality, Professor of Xi’an Jiaotong University Domicile: Room 104-13-3, Xi’an Jiaotong University Appellee (defendant of the original trial): QIAO ZONG LIANG, Mail, Sixty-seven-year Old, of Han Nationality, Professor of Xi’an Jiaotong University Domicile: Room 104-13-3, Xi’an Jiaotong University Appellee (defendant of the original trial): SHAN XI INVESTMENT CO. Domicile: 92, Qingnian Road, Xi’an, Shan Xi Province, PRC Legal Representative: QING JIAN MIN, Manager Appellee (defendant of the original trial): WANG XIN LIN, Mail, Sixty-five-year Old, a Retried Cadre of No.4 Academe of Space-Flight Industrial Co. Domicile: No.4 District of Space-Flight, Tianwang Town, Baqiao District, Xi’an, Shan Xi Province, PRC Appellee (defendant of the original trial): XI’AN SUNYIUNG SPACEFLIGHT INDESTRY CO. Domicile: Tianwang Town, Baqiao District, Xi’an, Shan Xi Province, PRC Legal Representative: YE TING YOU, Manager Appellant, GUANG ZHENG CO., LTD.(hereinafter referred to as “GZC”), JAPAN CHINA FOOD CO.LTD(hereinafter referred to as “CFC”) and LIQUIDATING GROUP OF XI’AN DONG LING REFRLGERATION EQUIPMENT CO.,LTD. (hereinafter referred to as “DLLG”), taking exception to the Civil Rule (File 2001 No. SCF1) rendered by the High Court of Shan Xi Province on a dispute over damage of infringement, versusing appellees, XI’AN JIAOTONG UNIVERSITY (hereinafter referred to as “XAJU”), TECHNICAL & ENGERRING DEVELOPMENT CO. OF SHANXI PROVINCE (hereinafter referred to as “T&E”), XI’AN JIAOTONG UNIVERCITY KETE COMPRESSOR TECHNIQUE EXPLOITING CO., LTD., (hereinafter referred to as “KC”), XIONG ZE NAN, QIAO ZONG LIANG, SHANXI INVESTMENT CO. (hereinafter referred to as “XIC”), WANG XIN LIN and XI’AN SUNYIUNG SPACEFLIGHT INDESTRY CO. (hereinafter referred to as “SYC”), lodged an appeal with this court. This court set up a collegiate bench, with the Presiding Judge occupied by Wang Yun and the attending of two Acting Judges, Ren Xue Feng and Chen Ji Zhong, to take up the cases and has now finalized the case. The three appellants in this case brought an action to the court of the original trail. The court of the original trail placed the case on a file; and after the trail, the court holds that: XI’AN DONG LING REFRLGERATION EQUIPMENT CO.,LTD. (hereinafter referred to as “DLC”) is an enterprise with Chinese and foreign investment founded by joining the capitals from GZC, CFC,KC and SYC. Later, according to the official and written replay from the Manage Committee of Xi’an High·Tech Development Zone, DLC founded DLLG. During the period of liquidation, SYC brought an action for a declaratory judgment on sum of investment, regarding DLLG as the defendant, to the Intermediate People’s Court of Xi’an; the action got an effective finial judgment rendered by the High Court of Shan Xi Province. CFC and GZC brought an application to China International Economic and Trade Arbitration Committee at the same fact and the same cause, regarding SYC as the accused party; and the Arbitration Committee made the final arbitration as well. In the same period, DLLC brought an application to China International Economic and Trade Arbitration Committee at the cause that KC conducted dishonest act and breached the contract during the procedure of signing and fulfilling contracts and agreements, which made an economic loss to DLC. According to this application, the Arbitration Committee made the finial arbitration that KC shall pay 1,200,000RMB to DLLG to indemnify the economic loss of DLLG made by the breach. DLLC had brought to the People’s Court of Beilin District, Xi’an an action of contract dispute regarding equipment transfer, who had reached an effective judgment rendered by the Intermediate People’s Court of Xi’an. Now, based on the above-mentioned facts and causes, the three plaintiffs brought a tort action to this court again, which violates the stipulation of the CIVIL LITIGATION LAW OF PEOPLE’S REPUBLIC OF CHINA regarding that judgments and rulings that have already been in forcing shall be handled according to the procedure of appeal and the stipulation of the ARBITRATION LAW OF PEOPLE’S REPUBLIC OF CHINA regarding that if the parties bring an arbitration again or an action to a People’s Court at the same dispute, the arbitration committee or the court shall not accept. Three appellants asked to order Xiong Ze Nan and Qiao Zong Liang return back fees for technical service and salary they received during the period they occupying General Manager and General Engineer of DLC, which shall bring an arbitration to Labor Dispute Arbitration Committee in advance, based on the relative stipulations of the LABOR LAW OF PEOPLE’S REPUBLIC OF CHINA. The action of tort on right of reputation brought by XAJU, regarding Hong Kong Mirror Newspaper and Liu Wei as defendants, has no legal interested relation with the three appellants and shall be respect to another civil jural relation; thus, this case will no involve it. Based on Article 108 and Article 111, Paragraph 1(5) of the CIVIL LITIGATION LAW OF PEOPLE’S REPUBLIC OF CHINA and Article 9 of the ARBITRATION LAW OF PEOPLE’S REPUBLIC OF CHINA, the court adjudged as follows: Dismiss the claim of GZC, CFC and DLLG. The fees for the first trail are 8,5010RMB, which shall be paid by GZC, CFC and DLLG together. GZC, CFC and DLLG taking exception to the original ruling, appeal to this court, claiming: the original trail on merits did not base on legal procedure, the facts found in the ruling are wrong and the law it applied to is inappropriate. 1. This case is a joint tort case based on the same cause inflicting damage, the same harmful consequences and the same legal consequence, which involves a legion of colitigators, many consequent claimings and various evidences and has, in some degree, complexity. It is hard to compellent that the court of the original trail simply confirmed it as “the same dispute” without going through the trail on merits. 2. This case is a dispute over restitution of property and damages caused by torts, which is in line with the essentials of complaint stipulated in Article 108 of the CIVIL LITIGATION LAW. 3. The original ruling dissevers and translates this case, which is a whole and complete claim based on the same cause inflicting damage, into irrelevance and odd disputes. The ruling arbitrarily holds that these disputes are the same with this case, which confuses and closes over the real legal facts and the basic of legal relations in this case. Moreover, the original ruling losses fair by not mentioning a word on codefendants’ positive and negative acts in every different form and different expressions to make feints, hide the truth and conduct the act to infringe the contract to the plaintiffs together. 4.The ruling rendered by the court of the original trail, as the court is the court of the second trail of dispute for a declaration on the amount of the investment and knows there is effective arbitration term written clearly in the Joint Venture Contract binding that the disputes between shareholders shall be settled through Arbitration, avoids to mention the fact that the court had jurisdiction over the case by force and adjudged the final judgment which is completely different to the arbitration. 5. The ruling made by the court of the first trail does not take the principle of taking facts as the basic and the law as criterion. On these grounds, please order: 1. Withdraw the original ruling. 2. Retrial the case by the court of the second trail, completely trail the facts of this case and the application of the law, and change the original trail based on laws. XAJU replied; 1. It is not in line with the impersonality facts that the appellant states the court of the first trail did not complied with the legal procedure. 2. The appellants enumerate several simple cases that have been trailed and have no relationship with each other, in which all the plaintiffs and the defendants have not qualified the subject qualification of a joint action. The appellants are not coplaintiffs and the appellee is not codefendants. 3. It is totally in line with the laws and correct for the court of the first trail to dismiss the ruling. Therefore, please order to dismiss the appeal and sustain the first ruling. KC replied: 1. The trail is complied with the normal procedure. 2. This case is composed by several cases, which have been made effective judgments and rulings and have no relationship to each other, and cases do not accepted by the court they brought to. To the first trail, the legal procedure is compiled with, the facts are found clearly and the application of laws and regulations to the law is correct. 3. This case is not in line with the regulations of joinder, thus the “indispensable joint action” brought by the appellants cannot be sustained. 4. Liquidation Group, as a special group in a special period, which is complied special law derogating common law, shall “handle relative liquidating business according to the consultative principles” based on regulations to special law. 5. It violates the laws and the regulations for the appellants to ask the court of the second trail to change the original judgment. On these grounds, please order to dismiss the appeal based on the laws. SYC and Wang Xin Lin replied: 1. The object of the litigation brought by the plaintiff at the first trail does not qualify the lawful conditions of joinder. DLLG brought an action without been consulted by the members of the liquidation group. The object of the litigation brought by the plaintiff in the original trail has already reached the final judgment rendered by the High Court of Shan Xi Province. Moreover, the action brought by GZC is brought over again by binding the judgment rendered by the court and the ruling rendered by the Arbitration Organization before. Thereby, it is completely correct for the court of the original trail to dismiss the action. 2. The dispute over investment between our company and DLLG has reached the finial judgment rendered by the High Court of Shan Xi Province. GZC and CFC brought an application for arbitration to the Arbitration Committee, based on the same facts and the same legal relation. To such case, Peng Bing Hong, again, illegaly patched it and several other cases that have been adjudged or arbitrated up and brought a tort action to the High Court of Shan Xi Province, which play tricks on the laws of our country. Three plaintiffs of the original trail are confused on who the plaintiff is and who the defendant is in this case, furthermore, the procedure it brought an action is completely out of line with the laws; thus shall be dismissed. 4. DLLG is composed by shareholders. Peng Bing Hong used seals and rights in his hand and usurped the name of DLLG at will to list other members of the Liquidation Group as defendants, without consulting with our part y and other shareholders, which is a serious unlawful act. Thereby, please dismiss the appeal. Xiong Ze Nan replied: the principal is not a proper defendant; the litigation of this case is an abuse of litigious right. Please dismiss the appeal according to law. Qiao Zong Liang replied: 1. The description of the trail made by the appellants is not based on facts. 2. The reasons the appellants used to negative the first ruling cannot be sustained. 3. It is unreasonable that the appellants blindly look into delaying the service of the first ruling. Please the court of the second trail dismiss the appeal and sustain the original ruling. Other appellees did not brought up written pleadings. Through the trail, this court holds that: this case is the dispute over torts and indemnity. From the Bill of Complain of the three appellants (plaintiffs of the original trail), the tort acts in the Complain, conducted by the codefendants in the original trail, occurred in the process regarding every party signing and fulfilling the Contract of Xi’an Dong Ling Refrigeration Equipment Co., Ltd. using Chinese and Foreign Investment (hereinafter referred to as “ Contract of DL Joint Venture”), the Articles of Xi’an Dong Ling Refrigeration Equipment Co., Ltd. using Chinese and Foreign Investment (hereinafter referred to as “ Articles of DL Joint Venture”) and the Agreement of Technology Transfer. Moreover, in the Contract of DL Joint Venture signed by GZC, CFC and KC, SYC, the Articles of DL Joint Venture as DLC is Side A and the accessory of the Articles of DL Joint Venture, the Agreement of Technology Transfer, signed by every shareholders of DLC, there is effective Arbitration Term written clearly as a faith. Based on therein Arbitration Term, all disputes related to the contract (article) or the fulfillment of the contract (article) that cannot be settled by negotiating, shall go through the Arbitration. Moreover, once, CFC and GZC have been to the applicator, regarding SYC as the party against whom the application is filed, to bring an application to the Arbitration Committee for disputes that occurred between them, based on the Arbitration Term in the Contract of DL Joint Venture. DLLG has brought an application, regarding KC as the party against whom the application is filed, to the Arbitration Committee for disputes that occurred between them, based on the Arbitration Term in the Agreement of Technology Transfer and the Articles of DL Joint Venture. Thereby, the tort dispute brought by the three plaintiffs of the original trail, regarding KT and SYC as the defendants, shall be settled by going through arbitration, based on the faith they agreed. The prosecution brought by the three plaintiffs to KC and SYC shall be determined to dismiss. The disposition in the original ruling regarding this section is correct and this court shall support it. To the dispute over tort brought by the three plaintiffs of the original trail, regarding Xiong Ze Nan, Qiao Zong Liang and Wang Xin Lin as the defendants, the act of torts of the three defendants mentioned above that described in the dispute is the act of position conducted by the three people separately representing KT and SYC. Article 42 of the Supreme People’s Court on Several Questions in Relation to the CIVIL LITIGATION LAW OF THE PEOPLE’S REPUBLIC OF CHINA on Application stipulates that: “If the act of position or the act authorized of an employee employed by a legal person or another organization occurs a litigation, this legal person or this organization shall be the litigant.” Thereby, it lacks legal basic for the three plaintiffs of the original trail to list the therein three people to be the defendants in this case. On these grounds, the prosecution brought by the three plaintiffs to these three people shall be determined to dismiss. The disposition in the original ruling regarding this section is correct and this court shall support it. To the action of tort brought by the three plaintiffs of the original trail to XAJU, T&E and IC, from the content of the loss, describing in the Bill of Complain, which is made by the tort acts of codefendants, can hold that the plaintiffs of the original trail have direct interested relationship with this case, moreover, the clear defendant. The plaintiffs of the original trail brought concrete claims, facts and causes in the Bill of Complain. At the checkup stage, People’s Court merely requires the plaintiff to provide a certain facts and causes in form to determine if the court accept the case or not. However, the questions of whether these facts and causes are true or not and whether they are strong enough to support the claim or not will be find out at the process of the trail of the merits. Thereby, whether the act of tort described by the plaintiff is sustained or not will not affect the litigant’s complain to sustain. The three plaintiffs of the original trail bring a tort action against XAJU, T&E and IC shall be in charge of People’s Court, furthermore, the court of the original trail is the court at the domicile of the defendant, which has jurisdiction to this case. On these grounds, the action brought by the three plaintiffs of the original trail against XAJU, T&E and IC is in line with Article 108 of the CIVIL LITIGATION LAW, thus, the court of the original trail should accept. However, the dispute of transferring a Surface Grinding Machine (No. MM7132) between DLLG and XAJU has already reached the finial judge of the People’s Court; thus the action, concerned to the dispute of transferring the Surface Grinding Machine (No. MM7132) and brought by the three plaintiffs of the original trail, shall not be accepted by the People’s Court. By the foregoing reason, the original ruling is partly wrong and shall be corrected. Based on Article 108 and Article 111, Paragraph 2 and Paragraph 5 of the CIVIL LITIGATION LAW OF PEOPLE’S REPUBLIC OF CHINA, Article 5 and Article 9, Paragraph 1 of the ARBITRATION LAW OF PEOPLE’S REPUBLIC OF CHINA and Article 42 and Article 145 of the Supreme People’s Court on Several Questions in Relation to the CIVIL LITIGATION LAW OF THE PEOPLE’S REPUBLIC OF CHINA on Application, this court now adjudges as follows: 1. Withdraw the Civil Ruling ( 2001 No. SCC1), rendered by High People’s Court of Shan Xi Province; 2. Dismiss the action brought by GUANG ZHENG CO., LTD., JAPAN CHINA FOOD CO.LTD. and LIQUIDATING GROUP OF XI’AN DONG LING REFRLGERATION EQUIPMENT CO.,LTD. versusing XI’AN JIAOTONG UNIVERCITY KETE COMPRESSOR TECHNIQUE EXPLOITING CO., LTD., XI’AN SUNYIUNG SPACEFLIGHT INDESTRY CO., XIONG ZE NAN, QIAO ZONG LIANG and WANG XIN LIN. 3. The action brought by GUANG ZHENG CO., LTD., JAPAN CHINA FOOD CO.LTD. and LIQUIDATING GROUP OF XI’AN DONG LING REFRLGERATION EQUIPMENT CO.,LTD. versusing XI’AN JIAOTONG UNIVERCITY, TECHNICAL & ENGIEERING DEVELOPMENT CO. OF SHANXI PROVINCE, and SHANXI INVESTMENT CO. shall be accepted by the High People’s Court of Shan Xi Province The fees of the trail are 50RMB, which GUANG ZHENG CO., LTD., JAPAN CHINA FOOD CO.LTD. and LIQUIDATING GROUP OF XI’AN DONG LING REFRLGERATION EQUIPMENT CO.,LTD. shall pay 25RMB and I’AN JIAOTONG UNIVERCITY, TECHNICAL & ENGIEERING DEVELOPMENT CO. OF SHANXI PROVINCE, and SHANXI INVESTMENT CO. shall pay 25RMB. Presiding Judge WANG YUN Acting Judge REN XUE FENG Acting Judge CHEN JI ZHONG 25th July 2002 Clerk YANG HONG LEI

TIANJIN MARITIME COURT CIVIL JUDGMENT Planintiff: Shanxi Industrial Products Import & export Co. Address: No.133 Xinjian Road,Taiyuan,Shanxi Legal Representative: Yan Wenjing, general manager Agent ad Litem: Shi Chuan, lawyer of Tianjin Liren Law Office Defandant: Huanlian Marine (China) Co. Service Address: Suite 6, Section A, Wanlong Central Mansion, No.85 Liuwei Road, Hedong District, Tianjin Legal Representative: Zhang Zhijian, president Agent ad Litem: Wang Hong, lawyer of Tianjin Dawei Law Office Defendant: Huanlian International Consulting Service (Tianjin) Co., Address: Suite 6, Section A, Wanlong Central Mansion, No.85 Liuwei Road, Hedong District, Tianjin Legal Representative: Shen Jinfu, president Agent ad Litem: Wang Hong, lawyer of Tianjin Dawei Law Office Defendant: COSCO Container Lines Address: No.1555 Changyang Road, Shanghai Legal Representative: Wei Jinfu, president Agent ad Litem: Liu Zuoming, lawyer of Beijing Haitong Law Office Third Party: COSCO International Forwarding Co., Ltd., Tianjin Address: 19-21 Flooor, Section A, COSCO Building, Hedong District, Tianjin Legal Representative: Ye Weilong, president Agent ad Litem: Shao Zhong, staff of the company With respect to the cases of dispute over contract of carriage of good by sea filed by Shanxi Industrial Products Import & Export Co. (the Plaintiff) against the Defendant Huanlian Marine (China) Co. (hereinafter referred to as the first Defendant), the Defendant Huanlian International Consulting Services (Tianjin) Co., Ltd. (hereinafter referred to as the second Defendant), the Defendant COSCO Container Lines (Hereinafter referred to as the third Defendant) and the third party COSCOTianjin International Freight Co., Ltd., a collegial panel was constituted in accordance with law to hear the case in public after this Court entertained the case. The agents ad litem of the Plaintiff Shi Chuan, Li Xin, the agent ad litem of the first and second Defendant Wang Hong, the agent ad litem of the third Defendant Liu Zuoming and the agent ad litem of the third party Shao Zhong attended the Court hearing. The case has bee conclude now. It is claimed by the Plaintiff that they entrusted the Defendants to ship goods on June 2000 in accordance with the sales contract concluded between the Plaintiff and the Canadian buyer R&G ,a party irrelevant to this case. As the agent of the first Defendant, the second Defendant signed and issued the Bill of Lading No.HF21Hl008, in which it was stated that name of vessel was M/V “Feng He”, description of goods was stainless coupler, port of loading was Tianjin and port of destination was Vancouver. Originally, the quantity of goods entrusted by the Plaintiff to carry was two metal cases, but actually it was three metal cases shipped on board the vessel. In the cases, but actually it was three metal cases shipped on board the vessel. In this aspect, the Plaintiff had ever notified the second Defendant to alter the quantity of goods shipper on 28 June 2000. It is claimed by the Plaintiff that they entrusted the Defendants to ship goods on June 2000 in accordance with the sales contract concluded between the plaintiff and the Canadian buyer R&G, a party irrelevant to this case. As the agent of the first Defendant, the second Defendant signed and issued the Bill of lading No.HF21HL008, in which it was stated that name of vessel was M/V “Feng He”, description of goods was stainless coupler, port of loading was Tianjin and port of destination was Vancouver. Originally, the quantity of goods entrusted by the Plaintiff to carry was two metal cases, but actually it was three metal cases shipped on board the vessel. In this aspect, the plaintiff had ever notified the second Defendant to alter the quantity of goods shipped on 28 June 2000. In the return letter, the second Defandant responded that there was no time to make such alteration as the goods had reached the port, thus two metal cases out of the three at the warehouse were bounded together as one packing for shipment. Further, the second Defendant promised that the foregoing act would not affect the taking delivery of the goods in question at the destination port. After arrival of the goods at the destination port, the consignee took delivery of two metal cases only and there was one case short delivered. The consignce immediately contacted the carrier’ agent at Vancouver, requesting them to look for the missing goods but in vain. Therefore, the consignee requested the Plainitiff to make up the missing goods. Under the circumstance that the Plaintiff had requested the Defendant and their agents to look for the goods on several occasions but in vain, the Plaintiff had to make up the missing goods to the Canadian buyer R&G on 30 October 2000 and to pay 20% damages for breach of contract according to the sales contract. On 26 December 2000, R&C informed the Plaintiff that the carrier’s agent notified them that the missing metal case had been found and that the goods was not delivered at Vancouver for reason that it was miscarried to Toronto. As the Plaintiff had made up the missing goods, R&G no longer needed such goods and requested the Plaintiff to dispose of the goods themselves. Under the repeated requests of the Plaintiff, R&G finally agreed to accept the goods at only 60% of the contract price. As a result, the Plaintiff suffered the losses in sun of RMB58,423.43 for the lowering price, the freight, tariff for the making up goods and the damages for breach of contract. The Plaintiff took the view that the three defendants and the third party should be under the absolute liability for such delay in delivery of goods, which resulted in the economic losses of the Plaintiff. Therefore, the Plaintiff requested the court to order the three defendants and the third party to indemnify them the above mentioned economic losses. During the hearing of the case, the first Defendant contended that: 1) After delivering the goods in accordance with the sales contract, the Plaintiff ahd fulfilled all the obligations thereunder and should be under no obligation to take the risk and liability of the consignee. The Plaintiff’s making up the missing goods should fall into the scope of another legal relationship. Therefore, the Plaintiff was not entitled to sue against the carrier. 2) The goods in question had never been under the management and control of the first Defendant. If the court were to support the matters of fact as alleged by the Plaintiff, it was those persons actually responsible for the management and control of such shipment that should be held liable for the delay in delivery. 3) The first Defendant had fulfilled their obligation to deliver the goods and had never received the Letter of Claim from the Plaintiff. There fore, the claim of the Plaintiff had been time barred. The second Defendant contended that, as the first Defendant’s agent, they should not undertake the liability for delay in delivery of the goods in issue. The third Defendant contended that: 1) As the Bill of Lading in question had been transferred to the consignee, who had accepted such transfer and take delivery of the goods against the same, through endorsement, the Plaintiff was not entitled to file a lawsuit against the carrier. 2) Seen from the Bill of lading issued by the third Defendant, the Plaintiff, who was neigher the shipper, nor the consignee and had no any legal relationship with whe third Defendant, was not entitled to sue against the third Defendant. 3) Since the Plaintiff failed to adduce positive avidence to prove that it was three metal cases that the Plaintiff actually shipped, the lawsuit raised by the Plaintiff lack the suppor of evidence and the basis of facts. 4) As the goods received and delivered by the third Defendant was full container load cargo and the seal was intact in delivery, the third Defendant had fulfilled the obligation of delivery. 5) Even if the Plaintiff could establish that it was three metal cases of goods actually shipped, it was due to insufficient mark and improper declaration of the goods on the part of the Plaintiff that one case of goods was not timely taken delivery at the destination port. There was no any fault or negligence on the part of the carrier. Therefore, the carrier should not be held liable for damages by law. 6) The constitution of delay in delivery of goods must satisfy two legal requirements, that is, definite time of delivery a agreed on one hand and definite place of delivery one the other. In this case, there was no such specification as to the period of delivery in the two Bills of Lading in issue. Therefore, no delay in delivery had ever occurred, as alleged by the plaintiff. 7) Even if delay in delivery did exist and such delay was caused by the carrier, who shall not be exempted, the liability of the carrier for the damages shall be limited only to the freight by law. 8) Since there was no any direct or positive causal relationship between the losses of the Plaintiff and the delay in delivery of the goods, the Plaintiff should not claim for damages against the carrier in accordance with law. The third party contended that: 1) After the transfer of B/L through endorsement, the title to the goods shall be the consignee. The plaintiff, who was neither the B/L, was not entitled to file the lawsuit against the third party. 2) The prerequisite for constituting delay in delivery is that the carrier and the shipper clearly provide the period of delivery. Where there is no such provision, delay in delivery shall not establish. Even if there was delay in delivery in this case, the consignee or the Plaintiff should adduce taking-over record to prove that the goods in question was delivered to the consignee six months after the vessel arrived at the destination port. Otherwise, is could only indicate that, after signing for the goods, the consignee failed to take delivery of the goods timely or to checked the goods carefully and resulted in shortage in taking delivery. Hence, it was the consignee who should be held liable and it was irrelevant to the carrier. 3) The evidences submitted by the third party were sufficient to prove that, during the whole business operation, the cargo condition as appeared on all documents showed that there only two cases of stainless products. In the meanwhile, it was stated in the delivery order that the goods delivered were in apparent good order and condition. Therefore, there was no delay in delivery or shortage occurred at all. 4) From the day when the consignee signed for the goods, the B/Lheld by the consignee had completed its function of taking delivery of the goods therein and did not serve as the document of title to the goods any longer. With respect to the assumption of liability for breach of contract, the making up goods and the disposal of goods by lowering the price, they were all the disputed over trade between the Plaintiff and the consignee and were of no relevance to the carrier. 5) The evidences of the Plaintiff were insufficient to prove the genuineness of economic losses suffered thereby so far. As the third party did not see the bank account transfer vouchers of payment of damages for breach of contract, the freight for the making up goods of the Plaintiff and payment of the price lowered goods, the evidences of the Plaintiff were seriously insufficient. In summary, the third party requested the court to dismiss the litigation requests of the Plaintiff. During the hearing of the case, it was not disputed by the parties concerned as to the following matters of fact: On June 2000, the Plaintiff entrusted the second Defendant to carry originally two metal cases of goods, but actually three cases loaded into the container. In this aspect, the Plaintiff had ever notified the second Defendant to alter the quantity of goods shipped on 28 June 2000.In consideration that was no time to revise the Customs Declaration Form , the second Defendant instructed the operator of the third party at container loading station to bandage two cases thereof together according to the earlier practice and to make the three cases into two for the convenience of carriage .in the meantime ,the second Defendant notified the plaintiff of such circumstance and advised them that they had full container goods, the second defendant , as the agent , signed the bill of lading of the first defendant to the plaintiff as the container-loading carrier ,the third party loaded twelve shipments of goods including the goods in question in one container and then delivered to the third defendant for carriage to Vancouver ,the port of destination . the consignees took delivery of the goods on 27 July 2000. The Plaintiff alleged that after the goods in question were carried to the Vancouver ,the consignee only received two cases and there was one case or shortage .the plaintiff requested the defendant and their agent to look for this case on several occasions. On 26 December 2000,R&G informed the plaintiff that the carrier’s agent just notified them that the missing case bad been found and that the case were not delivered at Vancouver because it was miscarried to Toronto ,Canada and thus resulted in the delay in delivery. The third party alleged that , seen from the evidences submitted thereby, it was two cases of goods on all documents from receipt of the goods to delivery thereof and there was no short delivery occurred at all .up till now ,the third party did not see the documents issued by the warehouse at the destination port EUROASIA company and the third party’ agent at the destination port SEAGO , evidencing that they lost the goods and then delivered to the consignee after finding the same . nor did the third party see the agency agreement between O.T.S and SEAGO. Upon examination ,it was found that the second defendant actually received three metal cases with 2,981 kilograms in weight and 2.2cubic meters in volume. Although there only cases specified in the Bill of Lading issued by the third party , they were 2,981 kilograms in weight and 2.2cubic meters in volume. After taking delivery of the goods and discovering the short delivery, the consignee immediately notified the plaintiff of the same, the plaintiff then checked with the second defendant .both the second and the third defendant had ever contacted and checked with SEAGO, the third’s agent party in Canada. The foregoing matters of fact were evidenced by the correspondences exchanged between the plaintiff and the buyer and the correspondences exchanged between the second and the third defendant and SEAGO. As to O.T.S Canadian telecom system co., Ltd . was whose agent . in the correspondence addressed to R&G from O.T.S submitted by the plaintiff ,O.T.S alleged that they had just received the notice from the agent company of warehouse EUROASIA, viewing that the missing goods of the buyer had been found. In the meantime ,O.T.S declared that they were no longer the agent of SEAGO and hoped that R&G would contact SEAGO directly .both the address and fax in Vancouver in the letterhead of SEAGO as submitted by the second defendant and the address and fax of the third party’s agent at the destination port as stated in the bill of lading were the same as the address and fax of O.T.S On basis of the foregoing facts and evidences ,this court held that ,although the third party denied receiving three cases of goods , the volume and the weight measured at loading the container were those of three cases. Further ,when checking with their agent at the destination port ,the third also alleged that the shipment in question was two packing(holding three metal cases).However , the consignee only received two cases of goods .therefore ,it was not a matter of fact in this case that the third party only received two cases of goods according to the specification in the bill of lading . evidenced by the address and fax of the third party’s agent SEAGO at the destination port Vancouver as stated in the bill of lading and acknowledged by the third party ,O.T.S was the agent of SEAGO ,which was the third party’s agent. 2)As to the making up goods of the plaintiff. The plaintiff submitted to this court the bill of lading of M/V“Lin Xing”V.0037E to prove that they did make up 17 cases of goods to the Canadian buyer on 1 October 2000. in light of the foregoing bill of lading and the invoices No.0372547 and 0371548 issued by Yake International Transportation( china )Co., Ltd , the court supported the face that the plaintiff made up the goods. 3)As to the damages for breach of contract paid by the plaintiff to the Canadian buyer. The plaintiff did not provide any direct evidence with respect to their payment of damages for breach of contract to the buyer with this court . According to the sales contract , the conditions for breach on the part of the seller were that the shipment was more than fifteen days late as stipulated in the contract , or that the cargo shortage was higher than10%. In this case , the plaintiff did not break the provision of the contract and should not pay damages .therefore ,this court did not sustain such as fact alleged by the plaintiff. In light of the above mentioned matters of fact , it is held by this count that: 1)Now that the defendants had received three cases of goods and specified two cases in the bill of lading only , the defendants should make if clear to the third party and their agent at the destination port so as to avoid short delivery . Obviously ,the first defendant failed to assume the foregoing obligation and should be held party liable for the delay in receiving the goods of the consignee. 2)As the first defendant’s agent , the second defendant should conduct acts of agency within the scope of authorized by first defendant. In accordance with the relevant provisions of agency under Chinese law ,it was the first defendant who should take the legal consequences arising from acts of the second defendant and the second defendant should not be held liable. 3)Although the third defendant was the carrier of the goods in question ,the period of responsibility there of was sound and intact at the container yard when delivery and that it was not the obligation and act of the defendant to deliver the goods to the ultimate consignee , the third defendant should not be held liable for the litigation requests of the plaintiff. 4)As the party responsible for the goods to the consignee as stated in the bill of lading , the third party ,who actually received three cases of goods and specified only two cases in the bill of lading , failed to timely notify their agent at the destination port of such circumstance . at the cheek of the consignee when discovering the short delivery of goods ,the goods agent failed to find the short delivered goods either .as a result ,the goods were delivered six months later .it was obvious that the third party and their agent failed to exercise due diligence to fulfill their obligation of delivery of goods in excess of reasonable period . 5)In the circumstance that the customs clearance of the goods had bee made, the plaintiff altered the number of cases. As a result , the second defendant had to specify two cases in the bill of lading even though actually receiving three cases so as to make the documents conform to those of the customs declaration , which was the hidden trouble for likely short delivery . therefore ,the plaintiff should have notified the consignee timely as to the foregoing circumstance . however the plaintiff did not make such notice in time , resulting in the short taking delivery of the consignee ,to which the plaintiff should be held party liable. 6)Seen from the items of the plaintiff a claim ,the conditions for payment of breach of contract damages were that the shipment period was more than fifteen days late as specified in the contract ,or that the cargo shortage was higher than 10%. In this case ,the shipment was within the period as stipulated in the contract ; there was no cargo shortage shipped by the plaintiff . according to the trade term in the contract , i.e., CIF , the obligation of the seller as regards delivery should have been completed once the goods were delivered to the carrier . As to the cargo shortage thereafter, the buyer should undertake such risk . the plaintiff should not be under the obligation to pay damages in accordance with the sales contract . hence, the loss of damages raised by the plaintiff was not reasonable and positive and was not sustained by this court . with respect to the loss of lowering price ,as the goods in question were neither seasonable nor damaged ,such item of loss was not positive loss resulting from the delay in delivery ,but form the trade activities between the Buyer and the seller and was irrelevant to the carrier. Therefore ,the court did not support such item of claim. 7)Being the shipper of the goods under the Bill of Lading in issue, the Plaintiff had transferred the Bill of Lading through endorsement. With the transfer of the said Bill of Lading, the right of claim against the carrier under the contract of carriage transferred form the shipper to the consignee as well. In this case, as the shipper in the Bill of Lading is concerned, the Plaintiff was not entitled to raise the claim against the carrier. 8)The Plaintiff submitted to this court a letter of subrogation made by the Canadian buyer R&G to the effect that the Plaintiff was subrogated to the right of claim, through which the Plaintiff obtained the right of claim against the carrier under the contract of carriage. However, the right to be subrogated could be only that of the transferor according to the contract of carriage. As far as this case is concerned, it was only the right of claim arising from the losses suffered thereby due to the breach of contract on the part of the carrier that R&G could transfer to the Plaintiff, that is, the basis of the right of claim was losses suffered by R&G. The court noted that the losses claimed by the Plaintiff(the damages for breach of sales contract, freight of making up goods, loss of pricc lowered cargo)were all the losses of the Plaintiff rather than R&G. Therefore, with respect to the litigation requests for the foregoing losses of the Plaintiff against the Defendant on basis of the letter of subrogation, this court did not sustain. To sum up the above, in accordance with Article 84,112 of General principles of civil Law of PRC, Article 79,402 of Contract Law of PRC, the court hereby render the judgment as follows: The acceptance fee of this case in sum of RMB2,236 shall be born the plaintiff. Any party who is not satisfied with this judgment may file a Statement of Appeal in quintupicate within 30 days for the Defendant and within 15 days for other parties concerned upon the date of service of the judgment for appealing at the Higher People’s Court of Tianjin. The party appealed shall pay the appeal fee RMB2,263 to the Higher People’s Court of Tianjin within 7 days from the date of filing the statement of Appeal (Bank Account: Agricultural Bank of China, New Technology Product Zone Sub-branch Office 394-9887000390). Exceeding the foregoing prescribed time limit shall be deemed as waiver of appeal. Presiding judge :Chen Xianzhang Judge :He Yiru

Appellant (defendant of the original trial): China Oversea Shipping Guangdong Co. Domicile: 233, Guanyuan Zhong Road, Guangzhou? Legal Representative: Zeng De, General Manager? Agent ad Litem: Li Hui & Jiang Tao, Guangdong Jun Xin Law Firm ?Appellee (plaintiff of the original trial): Maoming Food Import & Export Co., Guangdong Domicile: Foreign Trade Building, Sixth of Youcheng Road, Maoming Legal Representative: Qiu Bing, General Manager? Agent ad Literm: Lin Yi Hua & Chen Jian Qiu, Guangdong Yong Hang Law Firm? Defendant of the Original Trial: China Oversea Shipping Guangdong Huangpu Co. Domicile: 97, Hai Yuan Road, Huangpu District, Guangzhou ? Legal Representative: Qi Long Fei, General Manager? Agent ad Litem: Li Hui & Jiang Tao, Guangdong Jun Xin Law Firm? Defendant of the Original Trial: China Oversea Shipping Guangdong Huangpu Co., Xia Gang Branch. Domicile: 97, Hai Yuan Road, Huangpu District, Guangzhou ? Responsible Person: Qi Long Fei, General Manager.? Agent ad Litem: Li Hui & Jiang Tao, Guangdong Jun Xin Law Firm? 　　Appellant, China Oversea Shipping Guangdong Co. (hereinafter referred to as “GDOS”), taking exception to the Civil Judgment (Ref. 2000 GMLE No.201) rendered by the Guangzhou Maritime Court on a dispute of torts on landing the cargo without the original B/L, versusing appellee, Maoming Food Import & Export Co., Guangdong (hereinafter referrd to as “MMC”), defendant of the original trial, China Oversea Shipping Guangdong Huangpu Co. (hereinafter referred to as “HPOS”), China Oversea Shipping Guangdong Huangpu Co., Xia Gang Branch (hereinafter referred to as“XGOS”), lodged an appeal with this court. This court set up a collegiate bench to take up the cases and has now finalized the case. ? 　　In the original trial, MMC stated that in December 1999, Jun Ya Fabric Ltd. (hereinafter referred to as “JYL”) authorized MMC to serve as the agent of exporting a batch of Acrylic blanket. On February 2000, MMC consigned XGOS for shipping the cargoes, from Huangpu, Guangzhou to Peiraiefs, Greece, by passing Chi Bay, Shenzhen. On 25th February, GDOS issued MMC the original triplicate B/L (File No. HXG9912229). MMC had paid GDOS the freight allowance. Under the situation that MMC still hold the whole set of original B/L, GDOS informed MMC that the cargoes had been released at the destination harbor. XGOS sent a correspondence to MMC on 26th October, promising to indemnity the loss of MMC before 25th December, but to now XGOS hasn’t implement the promise. Based on Artical 41 and Artical 60 of the MARITIME AND ECONOMY LAW OF THE PEOPLE’S REPUBLIC OF CHINA, GDOS, as the carrier, shall undertake the liability for indemnity; XGOS, as promising to indemnity, should take the joint and several liability; and by virtue of being a branch of HPOS, XGOS has no legal personality, so HPOS should also take the joint and several liability. Please order the defendant, GDOS, indemnity the loss of 106,400USD of MMC and the interest 5, 325USD, according to the annual rate 5% from the day of releasing the cargo which is a year until now; order the defendants, HPOS, XGOS and GDOS take the joint and several liability. ? 　　GDOS, HPOS and XGOS defended: MMC adapted the person to pick up the cargo by using the fake B/L, at the reason that MMC has fault on wrongly releasing the cargoes, MMC has no right to claim an indemnity. The B/L in this case has been written clearly that GDOS signed by representing the master captain; and it was signed and issued by Ethernal Way Limited (hereinafter referred to as “EWL”), the limited authorized by the Mediterranean Shipping Co, therefore, GDOS is not the shipping carrier in this case, but the agent of the carrier and shall not take the liability for indemnity. Aggregate of MMC’s claims is not true. The correspondence sent by XGOS has not written clearly the main debtor and the sum of the debt, therefore, it cannot be the guarantee contract; even if it can be construct as the guarantee, it is still ineffective, due to the issue was not authorized by upper legal person. In addition, the correspondence was sent to JYL, MMC has no legal basis to ask XGOS and HPOS take the joint and several liabilities for indemnity. Please reject the claim of MMC. ? 　The court of the original trial finds and holds that on 15th December 1999, GDOS and EWL signed an agency agreement on traffic freight, promising that the GDOS is the sub mandated agent of the Mediterranean Shipping Co., whose agent is EWL, on carrying cargoes; according to the designation of EWL, GDOS signed and issued the vicegerent B/L for EWL or the Mediterranean Shipping Co. and EWL provides the detail information on the ship of carrying the cargoes; GDOS charges 2.5% of the whole course freight from EWL as commission of issuing B/Ls and helping to collect freights. On 25th December, MMC and JYL signed an agency agreement on exporting, promising that MMC serves as an agent on exporting 8,560 pieces acrylic blanket to Greece. On 25th February 2000, GDOS signed and issued the triplicate clean B/L at Guangzhou. This B/L is the style B/L of GDOS, stated clearly in writing: consignor is MMC, on the column of consignee is FREDERIKI BATZALI IVOTA 41K．ACHAIA GREECE, the ship of carrying is MSC ROSSELIA 0007R, the port of shipment is Chi Harbor, and the port of loading is Peiraiefs, Greece. The cargoes delivered are five containers with forty foot each, containing 1.090 boxes blanket, gross weight 32,700kg and 305m3. In the column of cargo label puts down ZAKOY　CFTC　GREECE　C／NO．1-. After the cargoes described above arrived the destination port on 25th July 2000, they were been released under the situation that the person picking up the cargoes did not have the original B/L. MMC asked GDOS for the indemnity, but with ineffective result; and MMC still hold the whole set of the original B/L. 　　XGOS has no legal personality, which is a branch of HPOS. On 26th October 2000, XGOS sent a correspondent to JYL, saying: attending to the fact that the cargoes, five containers with forty foot each of HXG99122299 B/L, were taken by the impersonator, this company will indemnify to JYL the loss of these five containers, forty foot each of HXG99122299 B/L, before 25th December, based on the direction of the upper company (GDOS). ? 　In order to proof its just the agent of the carrier, GDOS provides the fax copy of the sub-agency agreement signed by the Mediterranean Shipping Limited and EWL on 1st September 1998, besides the agency agreement of cargoes signed with EWL. The sub agency agreement puts down clearly that: Mediterranean Shipping Hong Kong Limited, as the agent of Mediterranean Shipping Limited, is designated EWL to serve as the sub-agent of Mediterranean Shipping Limited in Guangdong Province and handle the business in this area; this agreement takes effect from 1st September 1998. The duty of EWL includes representing the Mediterranean Shipping Hong Kong Limited and/or the master captain to sign the B/L and other marine documents required by shippers and/or local governments, but not if the law of this country requires the port agent of the country or other agent ad litem. MMC holds that this evidence shall not be admitted, at the reason that GDOS did not provide the original copy of this evidence. ? 　　To proof it has paid the freight to GDOS, MMC provides the invoice issued by GDOS on 22nd February 2000. The title of the invoice is written: XGOS, the port of shipment, Guangzhou; the port of loading, Peiraiefs, Greece; cargoes, five containers with forty foot each; freight, 13,215USD. The court of original trail holds that MMC has the original copy of this invoice and GDOS, HPOS and XGOS do not provide the counter evidence to proof that MMC got this invoice by an illegal way, therefore, the payment written in this invoice shall be presumed to be paid by MMC; the port of shipment, the port of loading and the quantity of cargoes written in this invoice are the same with those written in the B/L which is referred in this case and GDOS, HPOS and XGOS do not provide the counter evidence to proof that this invoice is issued for other business, therefore, the truth of this evidence shall be admitted and the fact that the cargoes freight 13,215USD, written in the B/L in this case, was paid by MMC to GDOS shall be admitted. About the worth of the cargoes, the title of the invoice (No. MS－20008A) provided by MMC is the cargo receiver of the B/L in this case, the content in the column of cargo label is the same in the B/L and the price terms is CIF Peiraiefs. The quantity of the 3kg box of blanket is 1,010 boxes, 8,080 pieces, 12.20USD/p, total 98,576USD; the quantity of the 4kg box is 80 boxes, 480 pieces, 16.30USD/p, and total 7,824USD. The lump sum of the two kinds of box is 106,400USD. MMC provides two exporting customs declarations issued by Lao Gang Customs, Huangpu, in writing Forwarding Unit-MMC, Date of Declaring-16th February, Destination Port-Peiraiefs, Trade Terms-CIF and Cargo-acrylic blankets. One of the declarations puts in: 6,136 pieces of blanket, 4.2229USD/p, total 75,302.80USD; the other puts in: 2,424 pieces of blanket, 4.1833USD/p, total 30,421.20USD. The above price amounts to 105,724USD.Both exporting customs declarations have the examination seal of LaoGang Customs, Huangpu. GDOS, HPOS and XGOS hold that the sum of money in the invoice is different from the exporting customs declarations, both provided by MMC, so the indemnity MMC claimed according to the invoice is unreasonable. They bring up the photocopy of the invoice issued by MMC on 10th February 2000 and state this invoice is provided to the port in Greece and the agent of the carrier by the person picking up the cargoes in this case and the price of the cargoes shall be calculated based on this invoice. The title of this invoice is the cargo receiver in the B/L in this case; the cargoes are 6,540 pieces acrylic blanket, 1,090 boxes with 8.3USD/p, which is total 54,282USD. MMC denied this invoice was issued by it. The court of the original trail holds that: the photocopy of the invoice provided by GDOS, HPOS and XGOS cannot be the criterion of the cargoes price, at the reasons that it is the photocopy without other documents to verify its authenticity and it is denied by MMC of the issue; the sum of money on the invoice cannot be admitted, at the reason that the sum of money on the invoice provided by MMC is higher than the exporting customs declarations; the cargo price shall be the one in putting on the exporting customs declarations, which have been examined by the customs. The court of the original trail finds that the cargo price is CIF Peiraiefs, 105,724USD. ? 　　XGOS Consignment Bill, provided by MMC, puts down in writing that: Consignor-MMC, Destination- Peiraiefs, Cargo Receiver- GEORGE BATZALIS IMPORT－EXPORT OF TRADE IVOTA 43K ACHAIA GREECE, Label and Number- ZAKOY CFTC GREECE C／NO． 1－, Cargo Name-acrylic blanket, Quantity-1,090 boxes, Gross Weight-32,654kg, five containers with forty foot each. XGOS brings up the opposition on this Consignment Bill by stating that it cannot proof to receive this invoice and holding that there is traces of altering in the column of Consignor. The court of the original trail holds that this evidence has the traces of altering and MMC cannot provide the evidence to proof that XGOS has received this Consignment Bill; besides, the B/L held by MMC is issued by GDOS, not XGOS. On these grounds, the court does not admit this evidence. The photocopy of XGOS’s Bill of Storing the Bulk Cargo provided by MMC puts down in writing that: Purchase Unite-Exporting Department of XGOS, No. of B/L-HXG9912229, Name of Cargo-acrylic blanket, Number of Piece-1,090, Weight-32,654kg. 　? 　　This court confirms the above factual proofs, which have no opposition, brought up, found by the court of the original trail except the fact of relevant agency rejected by GDOS. This court further finds that: MMC did not confirm that its action was tort action or contract action in the bill of complain, but it confirmed in its supplemental complaint that its action was “Dispute over Delivering the Contract of Marine Transport”. The court of the original trail confirms the action as tort action and in this trail; MMC still confirms its action brought to the original trail as tort action. ? 　　After the first trail, the court of the original trail holds that: this case is the dispute over trots on releasing the cargoes carried by sea without the original B/L. Although the cause of action confirmed by MMC is tort action, the dispute in this case focuses on the fact that whether GDOS is the carrier in the contract of carriage of cargoes by sea in this case or not; and all the legal regulations quoted by MMC are the regulations of Chapter 4, Contract of Carriage of Cargoes by Sea, of the MARITIME LAW OF THE PEOPLE’S REPUBLIC OF CHINA. On these grounds, the nature of this case is contract action. ? 　　MMC is the shipper of carriage of cargoes in this case without the independent carriage contract signed with the carrier, and the B/L issued by GDOS does not put down clearly the carrier, therefore the carrier shall be determined based on comprehensive facts of relevant records and situations at the time the B/L issued. The said B/L is the style B/L of GDOS, saying: it is issued by GDOS as the agent of the master captain. GDOS holds that its just the agent of the carrier and shall has the burden of producing evidence. However, the evidences provided by GDOS can only proof that EWL authorizes it the right of issuing B/L for EWL and Mediterranean Shipping Co., but not that EWL has the right to issued B/Ls as the agent of the master of captain and the right to sub authorize others to issued B/Ls as the agent of the master of captain, that is, GDOS cannot proof it has the legal authorization to issued B/Ls as the master of captain, besides, there is no evidence to proof that GDOS has told MMC its identity of agent when issuing the B/ L. On these grounds, GDOS’s claim on the agent of the carrier cannot be set up. GDOS shall take the rights and obligations of a carrier under the items of the said carriage contract in this case. By charging the freight, GDOS shall safely carry and deliver the cargoes according to legal regulations and the contract. The B/L is the legal document the carrier shall base on at the time delivering cargoes, however, GDOS let others pick up the cargoes of the said B/L under the situation that MMC still holds the whole set of the original B/L; thus the act already breached the contract and GDOS shall take the liability to indemnify the loss of MMC. The sum of indemnity is 105,724USD, calculated on the actual price of the cargoes. GDOS, HPOS and XGOS defense that MMC has fault on wrongly releasing the cargoes of the said B/L in this case, which does not proofed by enough evidence; this court will not support the said defense of GDOS, HPOS and XGOS. MMC’s claim on the indemnity from GDOS, plus the interest from the day of releasing the cargoes which is a year to now, is in line with the law and should be supported. MMC claims to calculate the interest on the annual rate of 5% without providing the relevant evidence to proof the legality of the said rate; thus the interest rate shall be the annual rate of loans in USD. ? 　XGOS sent a correspondence to JYL, promising to indemnify the loss of the said B/L in this case. This promise is not sent to MMC, thus MMC’s claim that XGOS and HPOS take the joint and several liabilities on indemnity lacks legal basic; the court will not support the said claim. Based on Article 55, Paragraph 1, Article 71 of the MARITIME LAW OF THE PEOPLE’S REPUBLIC OF CHINA, the court of the original trail adjudges as follows: 1. Order GDOS indemnify MMC 105,742USD and the interest from 25th July 2000 to 24th July 2001, calculating on the annual rate of loans in USD; 2. Reject MMC’s claim to HPOS and XGOS. The court fees are 31,014.76RMB, which MMC pays 309.76BMB and GDOS pays 30,705RMB. GDOS appeals and asks to reject the claims of MMC and to order MMC to pay the court fees of the first and the second trail. Its facts and reasons: GDOS holds that the judgment of the court of the original trail has following problems: 1. The court of the original trail has negligence on finding evidence. The court of the original trail does not admit the truth of the agency agreement on the ground that GDOS did not provide the original copy of the said agreement signed by EWL and Mediterranean Shipping Co.. However, the fact is that GDOS couriered the original copy of the said agreement to the court on 6th July 2001 and the court signed after receiving the courier in the same day. Now the said agreement is in the volume of the court of the original trail. As the content of the said agreement can confirm that the right of GDOS to issue B/Ls as an agent is authorized by Mediterranean Shipping Co., the negligence of the court of the original trail affects the Judgment directly and leads to the result that GDOS fail in the suit; 2. The court of the original trail changes the cause of action of MMC, which reduces the burden of producing evidence of MMC and effects GDOS’s right of defense and right to win a lawsuit. In the original trail, MMC confirms that its action brought up to GDOS is tort action not contract action. It is the disposal of GDOS to its right of litigation. The choice of the said cause of action decides the legal relation in the original trail in this case shall be the existence of torts between GDOS and MMC. Under this precondition, the conditions of torts decide that MMC must proof the fault of GDOS and the said fault has the relationship of fact-and-result with the loss of MMC; thus, GDOS shall take the responsibility. Obviously, MMC cannot fulfill the burden of producing evidence. However, the court of the original trail made an unapproved judgment that “the nature of this case is a contract action” and ordered GDOS to take the responsibility based on the contract action. GDOS holds that, the law does not give judges the right to change the cause of action, especially when the cause of action has a close connection with the burden of producing evidence, the right of defense and the right to win a lawsuit of parties in a litigation. The act the court of the original trail took to change the cause of action of in this case, changing the burden of producing evidence of MMC and effecting the right of defense and the right to win a lawsuit of GDOS, has no legal basic and is unfair to MMC; 3. There is no law to say GDOS has the obligation to tell its status of an agent, which is held by the court of the original trail. In the Judgment, the court of the original trail holds that GDOS has the obligation to tell its status of an agent when issuing the B/L to MMC. From the angle of law, the requirement from the court of the original trail to the agent of issuing B/Ls does no base on law. From the practice of shipping, to put down in writing, “ agent as represent the master of captain” on the B/L, when issuing the B/L, is enough to MMC, on the ground that the master of captain is always regarded as the agent of shipowner. Therefore, from the B/L in this case, MMC can clearly acknowledge that GDOS issued the B/L as the agent of “MSC　ROSSELLA”, which is already enough. It is thus clear that the denying of the agent status of GDOS, based on GDOS’s not telling the status, cannot be set up. By reason of the forgoing, the court of the original trail has negligence on finding the key evidence, which directly affects the Judgment; the court of the original trail changes the cause of action, violating litigants’ wills and benefits in the litigation, changing the burden of producing evidence of MMC and effecting the right of defense and the right to win a lawsuit of GDOS; the requirement of the court of the original trail that the agent issuing B/Ls has the obligation to reveal the status has no legal basic and not conform to the practice of shipping, therefore, the original Judgment is inappropriate. On these grounds, GDOS claims the court to retrial the case based on the tort action, under the precondition of the finding of the agency agreement signed by EWL and Mediterranean Shipping Limited; and reject all the claims of MMC by the reason that GDOS is just the agent of the carrier. 　MMC defenses: 1. In the Judgment of the first trail, in this case, MMC is the shipper; GDOS is the carrier; and the facts of the relationship in the contract of carriage of cargoes by sea between MMC and GDOS is accurate; thus, GDOS shall take the indemnity liability of releasing the cargoes without the original B/L, which is under the item of the carriage contract in this case. Based on Article 41 of the MARITIME LAW OF THE PEOPLE’S REPUBLIC OF CHINA, “ Contract of Carriage of Cargoes by Sea, is the contract that carrier charges the freight and has the duty to transport the cargoes of the shipment from one port to the other port by sea.” Article 42, Paragraph 1 ordains: “ Carrier, is the person who will sign the contract of carriage of cargoes by sea with the shipper or authorizes others to sign the contract in the name of the principal. In this case, GDOS charged the through freight, issued the whole set original B/L at the same time and delivered the cargoes of MMC to the actual carrier shipping the cargoes to the destination port. The said facts proof that the contract relationship of carriage cargoes by sea does exist between MMC and GDOS and GDOS is the carrier of the contract of carriage of cargoes by sea in this case. Although GDOS authorized the cargoes shipping to the actual carrier, it still has the duty to the through shipping of the cargoes, as the through carrier and according to the law. The facts further proof that the cargoes in this case released without the B/L is absolutely the fault of GDOS by noting “agent by the destination port” on the front of the B/L, which seriously damaged the legal interest of MMC. Based on Article 60 of the MARITIME LAW OF THE PEOPLE’S REPUBLIC OF CHINA: “ To the shipping of the actual carrier, the carrier shall take liability to the act of the actual carrier or the act of employees and agents of the actual carrier, performing in the field of employment or authorization.” Therefore, GDOS shall take responsibility to indemnify all the loss of MMC based on the releasing the cargoes without the B/L. ? 　　2. The evidence provided by GDOS cannot proof that it signed the B/L as the agent of the master of captain. First, the signature and the meaning of the Chinese in the Agreement of Sub-agency signed by Mediterranean Shipping Co. and EWL, provided by GDOS, has not been confirmed by the effective legal procedure and the form condition of the said evidence does not accord with the demands of the law, therefore, it is correct that the court of the first trail doe not confirm the said evidence. Even if the above mentioned evidence is effective and legal, it still could not proof that GDOS has the right to issue the B/L by representing the master of captain, according to the Agency Agreement of Carriage of Cargoes signed by GDOS and EWL. The reason is that Item 2 in the Agency Agreement of Carriage of Cargoes puts down in writing clearly: “ the B/L issued: Side A (GDSO) issues the agent B/L for Side B (EWL) or MSC, according to the instruction of Side B and Side B provides detail information of the carrying ship and cargoes. In fact, no evidence in this case can proof that GDOS issued the said B/L based on the instruction of EWL or the details of the carrying ship and cargoes provided by EWL. In fact, GDOS issued the B/L on the information of the cargoes provided by MMC. And Article 3 of the Agency Agreement of carriage of cargoes states: “Side A charges 2.5% of the through freight as the procedure fees of issuing the B/L and collecting the freight, and Side A keeps 1.5% if Side A only need to collect the freight. In fact, after issuing the B/L to MMC, GDOS collected the through freight from MMC in the name of GDOS without other evidence to proof that GDOS collected the money as any others’ agent. According to the above-mentioned facts, there is no fact warrant on GDOS’s claim of issuing the said B/L in this case as the agent of the master captain, which is actually issued in the name of GDOS. ? 　　3 . The first Judgment on the fact of the actual price (sum of indemnity) is correct. ? 　　GDOS, HPOS and XGOS denied MMC’s claim on the sum of indemnity by using the photocopy of the alleged invoice issued by MMC on 10th February 2000 as the excuse. However, the said invoice has following problems: （1）The number of this invoice is not the regularity one of MMC; （2）On the certificate of the origin of the said cargoes, puts down in writing clearly that the number of the invoice is MSC-20008 and the date is 27th January 2000, which are totally different with the invoice provided by GDOS; （3）The quantity in the said invoice is 6,450 pieces, which differ from the quantity 8,560 pieces in the exporting customs declarations and the certificate of the origin; （4）The style of the characters in the said invoice differ from the original invoice provided by MMC; and （5）There is no original copy of this invoice. On these grounds, only the relevant documents, including the invoice and two exporting customs declarations from Huangpu Lao Gang Customs, provided by MMC can be the basis of the price of the cargoes( sum of the indemnity), however the invoice provided by GDOS has no direct relative with this case and cannot oppose the evidence provided by MMC. Thus, it is reasonable and within the law that the court of the first trail does not adopt. By reason of the foregoing, the facts in the first Judgment are clear and the application of the law is correct, thus please reject the appeal of GDOS. ? 　　HPOS and XGOS did not reply.? 　　This court holds that: although MMC did not conform this case is tort of action or contract of action in the complaint, it conformed this case is tort of action during the period of the first and the second trail, which is the true declaration of will the party disposing his right in civil affairs and civil action; thus, shall be established by this court. Therefore, this case is the dispute over trots on releasing the cargoes carried by sea without the original B/L. GDOS appeals to claim that the court of the original trail has no legal foundation to change the cause of action of MMC. The claim is established and is supported by this court. GDOS appeals that it is wrong that the court of the original trail did not admit the sub-agency agreement provided by GDOS, signed by Mediterranean Shipping Hong Kong Co. and EWL, and held that GDOS has no agent right. This court holds that on the grounds that MMC brought up the opposition of the authenticity of the sub-mandated agency agreement provided by GDOS, signed by Mediterranean Shipping Hong Kong Co. and EWL; in this sub-agency agreement, the domicile of the parties, the place of close and sign and the place of performance are all in Hong Kong and have not been notarized and attested by authorization organization of Hong Kong and have no other evidence to proof; therefore, it is appropriate to the court of the original trail to deny the sub-mandated agency agreement. Moreover, the said sub-agency agreement only shows that Mediterranean Shipping Hong Kong Co. is the agent and EWL is the sub-agent, which still cannot proof directly the legal status of GDOS as the agent of the carrier in this case. Therefore, in this case, the evidences provided by GDOS can only proof that EWL authorized it the right to issue B/Ls as the agent of EWL and Mediterranean Shipping Hong Kong Co., but not the right to issue B/Ls as the agent of the master of captain and the right of Mediterranean Shipping Hong Kong Co. and EWL to sub mandated others to issue B/Ls as the agent of the master of captain. That is to say, GDOS cannot proof its legal authorization to issue B/Ls as the agent of the master captain, the agent status of the carrier and the identity of the carrier. With this understanding, the B/L issued by GDOS is the style B/L with no certain carrier on it and GDOS collected the freight from MMC. Article 71 of the MARITIME OF THE PEOPLE’S REPUBLIC OF CHINA ordains: “B/L, is the document to proof the contract of carriage of cargoes by sea and the cargoes already been received or loaded by the carrier and the carrier promises to deliver the cargoes based on it. The items in a B/L make the guarantee of delivering the cargoes by the carrier, which puts down in writing that delivering cargoes to the named person, or delivering according to the direction of the instructing person, or delivering to the person holding the B/L.” Therefore, GDOS shall take the legal responsibility to the B/L issued by it.- 　　The facts of this case already state that MMC still holds the original B/L issued by GDOS, whereas other person picked up the cargoes of this B/L. As GDOS has collected the freight and issued the original B/L related to the said cargoes, it shall deliver the cargoes on the B/L in this case, according with Article 71 of the MARITIME OF THE PEOPLE’S REPUBLIC OF CHINA, this fact itself, releasing the cargoes at the destination port without the original B/L, indicates that GDOS infringes the right of property of MMC under the B/L, which already constructs the act of tort. Article 106 of the GENERAL PRINCIPLES OF THE PEOPLE’S REPUBLIC OF CHINA ordains: “Citizen and legal person shall take civil responsibility on breach of contract or fail to fulfill other obligations. Citizen and legal person shall take civil responsibility on damage the estate belonging to the state and the collective by fault. Without fault, but if the law ordains that shall take civil responsibility, shall take civil responsibility.” Therefore, the first Judgment is correct to order GDOS take the indemnity responsibility of the loss of MMC and this court supports the Judgment. This court further admit the sum of the indemnity, based on Article 55, Paragraph 1 of the MARITIME LAW OF THE PEOPLE’S REPUBLIC OF CHINA and sufficient evidence and law basis, besides, GDOS does not bring up the opposition of the said sum. Thus, although there is fault on the original Judgment on finding the cause of the action, the treatment of the substantive problem of this case is correct and can be affirmed; GDOS’s claim on about, the court of the original trail changed the cause of action of in this case, which lead to change the burden of producing evidence of MMC and affect the right of defense and the right to win a lawsuit of GDOS cannot be established and be supported. ? By the reason foregoing, although there is fault on the original Judgment on finding the cause of the action, the facts in the original Judgment is clear and the treatment of the substantive problem of this case is correct and can be affirmed; the appeal of GDOS is unreasonable, thus, shall be reject. Based on Article 153, Paragraph 1(1), this court now adjudges as follows:? Reject the appeal and affirm the first Judgment. ? GDOS pays the court fees of the second trail 31,014.76RMB.? 　 This judge is finial. 　　　　　　　　　　　　　　　　　　　　　　 Chief Judge Deng Yan Hui 　　　　　　　　　　　　　　　　　　　　　　Deputy Judge Yang Hui Yi 　　　　　　　　　　　　　　　　　　　　　　Deputy Judge He Wen Long 　　　　　　　　　　　　　　　　　　　　　　13th May 2002

Appellant (plaintiff of the original trial): Tu Dong Qing, male, born on 5th Dec. 1959, Han nationality. Address: 406-132, Dongfeng Road, Changsha Entrusted Agent: Yang Jing Zhu, Hunan Tong Cheng Lawyer Group Law Firm Entrusted Agent: Xia Jun Mei, Hunan Tong Cheng Lawyer Group Law Firm Appllee (defendant of the original trail): China.com. Corporation Limited Address: 20/F, Wan Guo Bao Tong Center, 18 Weifei Road, Brass Gong Gulf, Hong Kong 　　Litigation Representative: Donna Dongli Li　　 Entrusted Agent: Fan Huai Li, Guangdong Wan Shang Law Firm 　　Entrusted Agent: Wu Di, Guangdong Wan Shang Law Firm 　　Appellant, Tu Dong Qing, and appellant, China.com. Corporation Limited (hereinafter referred to as “CcC”), taking exception to the Civil Judgment (Ref. 2001CIE2C No.178) rendered by the Intermediate People's Court of Changsha on a dispute over tort of network copyright, lodged an appeal with this court. This court set up a collegiate bench accordingly to try the cases openly. The appellant, Tu Dong Qing, and his entrusted agent, Yang Jing Zhu and Xia Jun Mei, and the entrusted agent of CcC, Fan Huai Li all attended the trail. This court has now finalized the case. 　　The original court finds that: On 15th March 2000, CcC made an announcement on its website, China.com, saying: “ From 15th March 2000 to 15th May 2000, we launch a competition about starting a business on website. We name the competition as CHINA CUP. The competition starts on 15th March 2000; by using the form of invitational tournament, it’s going to set up sub-competition district in eight cities all over the country; and after collecting all the information of the competitors, the China Organization will choose the reward through public appraisal. The whole campaign is temporarily decided to end up at the bottom of June.” When the plaintiff, Tu Dong Qing, read the advertisement of CcC online, he registered in to be the member of CcC by using the name dongqing, and signed an agreement on secret information which means his member category is the member of the agreement on secret information (paper of starting a business). On 14th May 2000, Tu Dong Qing sent a starting project to the defendant online. The main content is: intending to set up a tutor website for the entrance examination of MBA and concrete conceives of the feasibility of setting up this website, way to run the website, construction plane, financial analysis and foreground analysis. In the project, Tu Dong Qing mentioned that due to no similar website in the country at the moment he released the project; there should be no competition between the similar websites. In addition, the training before the MBA examination contains huge business chance, therefore, the website should be set up as quickly as possible and the martek should be occupied as soon as possible. After the foreground analysis of the market, Tu Dong Qing mentioned the detail steps to set up the website and the finacial analysis. He anticipates that the website is founded in the period of July 2001 to June 2003, the assume investment is 5, 400, 000RMB and the total profit in the three years is 10, 600, 000RMB. At the end of the project, Tu Dong Qing put down a note, saying “ Don’t open the project to the public eye, please e-mail me the result of the choice.” For three times, CcC made the announcement to postpone the end of the competition to 31st August 2000 and the date to announce the award is also postponed to September 2000. In the period of attending the competition, Tu Dong Qing began to find partners for the prophase work of starting the business, but had not set up the website yet. When Tu Dong Qing went online again to look into his project, he found his project had already been published on the website of CcC and the times of reading is 30, so he stopped the prophase work. During the litigation of the first trail, Tu Dong Qing brought forward that due to the default and the tort made by the defendant, his loss has reached several millionsRMB, he claimed the indemnity from the defendant was 500,000RMB. At the same trail time, Tu Dong Qing provided to the court of the first tail invoices and records of fees for lawyers, traffic, printing and consulting, etc. 　　The original court holds that the announcement about CHINA CUP Starting A Business Online Competition was posted by CcC, with its concrete and certain contents, specialized object and being in the competition only by showing the promise, should be categorized as an offer. Tu Dong Qing’s acts of registering as the member of the agreement on secret information and signing the agreement on secret information with CcC online, which was accepted by CcC, are lawful and effective. According to the competition announcement and the agreement signed by both sides, CcC should keep the information of Tu Dong Qing’s project secret, however, Tu Dong Qing’s Project of Starting a Business has been clicked and read. CcC has not performed its obligation to the project secret; therefore, its act already constructs the breach of contract and shall take the responsibility. Tu Dong Qing’s Project of starting a business, being a creative and originality work on COPYRIGHT LAW, should be protected by COPYRIGHT LAW. The defendant used Tu Dong Qing’s work on its own website without Tu Dong Qing’s permission, therefore its acts already construct torts of Tu Dong Qing’s copyright and should take the responsibility. After Tu Dong Qing appealed to the original court and the original court sent the relative legal documents, CcC has withdrawn Tu Dong Qing’s project and stop the acts of breach and tort. It has no occasion for Tu Dong Qing to ask the sentence to withdraw the project. Tu Dong Qing’s claim for 500,000RMB indemnity from CcC, based on CcC’s acts of breaching the contract and infringing upon Tu Dong Qing’s copyright, cannot be entirely support due to no enough evidences provided, however, according to the result made by the defendant, Tu Dong Qing should get the discretionary indemnity. The original court does not support Tu Dong Qing’s other claims. On these grounds, based on Article 84 and Article 106 of GENERAL PRINCIPLES OF CIVIL LAW OF PEOPLE’S REPUBLIC OF CHINA, Article 2 and Article 45 of COPYRIGHT LAW OF PEOPLE’S REPUBLIC OF CHINA, ORDER: 1. CcC shall pay to Tu Dong Qing, a sum of 60,000RMB, within ten days after the present judgment takes effect. 2. Reject other claims from Tu Dong Qing. The court acceptance fees of 10,010RMB for the first trial shall be paid 8,000RMB by CcC and 2,010RMB by Tu Dong Qing. 　　 Tu Dong Qing, taking exception to the above Judgment and lodging an appeal with this court, states that the torts of CcC on copyright are established. Based on Article 46 of COPYRIGHT LAW, CcC shall take the responsibility to stop the torts, eliminate the effect, offer an apology openly, indemnity the loss etc.. The appellant’s claim of the open apology from CcC shall get the support from the court. The act CcC took to infringe upon the appellant’s copyright is malicious act, which brings serious results to the appellant and significant effect to the protection from network economy and intellectual property; and based on Judicial Interpretation of the Supreme Court, when the court decides the sum of indemnity, the court can consider the claim of the appellant to calculate the sum according to the direct loss and the expected benefits damaged by the torts, therefore, the sum of indemnity decided by the first trail is too small. In addition, under the situation that the appellant is totally innocent, the court of the first trail orders the appellant to take a part of the court fee and reject the appellant’s claim that CcC pay the fees, such as lawyer fees. This decision is not appropriate. At the same time, the first Judgment rejects the appellant’s claim that CcC shall choose the first time CHINA CUP Starting A Business Online Competition through public appraisal on the original day. On these grounds, the appellant asks the court of the second trail that: 1. Order CcC to offer an open apology to Tu Dong Qing on China.com; 2. Order CcC to indemnify 2,000,000RMB to Tu Dong Qing as the loss; 3. Order CcC to pay the court fees of the first and the second, the lawyer fees of the appellant, Tu Dong Qing, in the first and second trail and other relative fees; and 4. Order CcC to choose through public appraisal on the original date (15th May) and by the original way (the jury consisted by famous experts and authorities in the field). 　　During the second trail, the appellant, Tu Dong Qing, exhibited to this court his willingness to choose COPYRIGHT LAW OF PEOPLE’S REPUBLIC OF CHINA to ask CcC to take the tort liability action over the torts on writer’s right of publication in Copyright Law, Which is based on the regulation of the Article 122 of CONTRACT LAW OF PEOPLE’ S REPUBLIC OF CHINA, and withdraw the item 4 of the above claims. The appellant, Tu Dong Qing admits the facts found by the first trail. In the period of the second trail, Tu Dong Qing does not provide new evidence to this court. 　　In the period of the second trail, CcC does not hand over the defense aiming at the appeal of Tu Dong Qing to this court. 　　CcC, taking exception to the Judgment of the first trail and lodging an appeal with this court, states that Intermediate Court of Changsha has no jurisdiction on this case, no matter this case is based on the dispute of “breach and tort” or is based on the dispute of “tort”. At the time, 21st August 2000, the court of the first trail serviced lawsuit writs by post, CcC brought up a written form of the objection of jurisdiction to Intermediate Court of Changsha on 27th October 2000 and Intermediate Court of Changsha did not reply, therefore, the trail procedure is illegal; the determination of the nature of this case is wrong, due to the breach and the torts are two different kind of disputes and has no possibility to exist at the same time; Tu Dong Qing’s starting project has only two pages, only some thound words, which obviously has not much intellectual and creative work in it. The project has no operability if there is no enough investment and according to the precedents on torts on the copyright, the sums of indemnity are limited, therefore, the sum of indemnity decided by Intermediate Court of Changsha is too high and damages legal rights and economy profits of CcC. On these grounds, the appellant asks the court of the second trail that: 1. Withdraw the original Judgment; 2. Transfer this case to the people’s court, which has the jurisdiction; and 3. The appellee pays the appeal fees. 　　In the period of the second trail, CcC brought to this court the opposition the fact found by the court of the first trail that Tu Dong Qing’s project has been clicked for 30 times. CcC holds that although the project was been published, it did not be clicked. To this object, CcC does not provide evidence to proof. CcC admits other facts found by the first trail. To support its claims above, CcC provides to this court during the second trail the following evidences: 　　 1、Company registering information of CcC to proof the company is registered in HongKong. 　　 2、The Project of Starting a Business to proof Tu Dong Qing’s project has no operability. 　　Both evidences above have cross-examined in the court and Tu Dong Qing has no opposition on the reliability of these two evidences. 　　In the period of the second trail, Tu Dong Qing does not hand over the defense aiming at the appeal of CcC to this court. 　　In the period of the second trail, this court show a copy of Detail Form of International Special Delivery filled in on 22nd August by Intermediate Court of Changsha and a copy of Certificate issued by Dongfeng Road Post Office, Kaifu District, Changsha. They proof that the statement of complaint of the first trail of this case was posted on 22nd August and arrived on 24th. 　　Evidence above has cross-examined in the court and Tu Dong Qing has no opposition. The appellant, CcC, has opposition on the Certificate issued by Dongfeng Road Post Office, Kaifu District, Changsha. CcC holds that “arrived” cannot proof the party concerned have signed after receiving the legal documents. For this reason, this court asks CcC to adduce evidence to proof the accurate time the statement of complaint was signed, but in the prescribe period CcC did not provide related evidence to this court. 　　After the second trail, this court holds that the court of the first trail has a clear holding on the basic evidences and facts of this case. Alought CcC has opposition on the fact that the Project of Starting a Business has been clicked for 30 times, which is related in this case and has been inquired by the court of the first trail, this fact has been proof by the evidence downloaded from the website and provided by Tu Dong Qing and CcC did not provide counter-evidence, therefore, CcC’s opposition of this fact cannot establish. CcC registered in HongKong and the statement of complaint of the first trail of this case was posted on 22nd August 2000 and arrived the company on 24th August. 　　Above facts have been proofed by the evidences of transcripts of the first and the second trail, the Judgment of the first trail, company registering information of CcC, detail form of mailing from the court of the first trail and the Certificate from the post office, etc.. 　　This court holds that Tu Dong Qing is the writer of the Project of Starting a Business referred in this case and shall have copyright according to law. During the CHINA CUP Starting A Business Online Competition held by CcC, CcC published the Project of Starting a Business on the website without the permission and cause the project been opened and read online. CcC’ s acts breaches the will of Tu Dong Qing and goes counter to the competition announcement and the agreement of secret information signed with Tu Dong Qing, which constructed the acts of breach of contract. At the same time these acts also violate the right of publishment in the copyright of Tu Dong Qing. Tu Dong Qing’s act of choosing Copyright Law of People’s Republic of China to ask CcC to take the tort liability action over the torts on writer’s right of publication in Copyright Law, Which is based on the regulation of the Article 122 of CONTRACT LAW OF PEOPLE’ S REPUBLIC OF CHINA, is correspondent to the regulation and shall get the support. CcC shall take relative responsibility violating the copyright. This case is the dispute over torts on copyright and Tu Dong Qing did not provide to this court the evidences to proof the actual loss made by the torts of copyright, besides his claim about the loss of expected profits are the expected profits he can gain after entering the operation of the business of the Project of Starting a Business, which are not the profits coming from the copyright of the Project of Starting a Business, and it beyond the protection field of Copyright Law. And due to the clicked time on the Project of Starting a Business is limited and CcC already stops the tort in the period of the trial, therefore, this court will not support Tu Dong Qing’s claims about the 2,000,000RMB indemnity from CcC and the open apology on China.com. The sum of indemnity and the way of apology in this case will be discretionary decided by this court by systhesizing the fact of torts, details and results of CcC, the regulation of Acts of Reward on Publish Work published by Copyright Bureau of the Country, the possible reward Tu Dong Qing would get by publishing the Project of Starting a Business, fees for the investigation to stop the torts (including traffic fees and printing fees, etc.) and litigation fees. This court rejects Tu Dong Qing ‘s claim about CcC pays the lawyer fees and court fees due to no law can be relayed on. CcC did not bring up the opposition of jurisdiction during the reply period after receiving the copy of the statement of complaint of the first trail, which shall be regarded to accept the jurisdiction of Intermediate Court of Changsha, therefore, this court does not support CcC’s claim that to transport this case. Based on Article 2, Paragraph 1, Article 10, Paragraph 1, Item 1 and Article 46, Paragraph 1, Item 1 of COPYRIGHT LAW OF PEOPLE’S REPUBLIC OF CHINA, Article 122 of CONRTACT LAW OF PEOPLE’S REPUBLIC OF CHINA, and Article 153, Paragraph 1, Item 2 of LITIGATION LAW OF PEOPLE’S REPUBLIC OF CHINA, this court now adjudges as follows: 　　1. Change the first item of the Civil Judgment (Ref. 2001 CIE2C No. 178) rendered by the Intermediate Court of Changsha to: CcC shall pay to the Tu Dong Qing the indemnity, a sum of 16,000RMB within ten days after the present judgment takes effect. If payment is ineffective after the prescribe period, execution will be take on according to Article 223 of CIVIL LITIGATION LAW OF PEOPLE’S REPUBLIC OF CHINA 　　2. CcC shall post an announcement on the home page of its website to offer an open apology to Tu Dong Qing (the content shall be eaamine by this court) with within ten days after the present judgment takes effect. If the apology is ineffective after the prescribe period, this court will post this Judgment on a nationwide website and the costs will be paid by CcC. 　　3. Reject other claims of appellant Tu Dong Qing and Appellant CcC. 　　The total sum of court fees of the first trail and the second trail of this case is 20,020RMB, the appellant CcC shall pay the 80% (16,016RMB) and the appellant Tu Dong Qing shall pay the 20%( 4,004RMB). 　　This judgment is final. 　　　　　　　　　　　　　　　　　　　　　　　　Chief Judge Guo Zhi Gang 　　　　　　　　　　　　　　　　　　　　　　　　Deputy Judge Zeng Zhi Hong 　　　　　　　　　　　　　　　　　　　　　　　　Deputy Judge Luo Wen Fei 　　　　　　　　　　　　　　　　　　　　　　　　 18th April 2002 　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　 　　　　　　　　　　　　　　　　　　　　　　　　 Deputy Clerk Wang Hui Fang

Plaintiff: Grain & Oil (Group) General Co. , Hebei Province Address: No.37, Ziqiang Road, Shijiazhuang City, Hebei Province. Legal representative: Pang Yingbiao, chairman of the board. Authorized attorney: Wang Peng, attorney-at-law of MAGNA Law firm. Authorized attorney: Wang Hongyu, attorney-at-law of MAGNA Law firm. Defendant: ASIL GIDA KIMYA SANAYI VE TICARET A.S. Address: Prof. Dr. Bülent Tarcan Sokak No.5 Gayrettepe-Istanbul, Turkey. Legal representative: H. Canan Pak Tumay, general manager. Authorized attorney: Yang Wengui, attorney-at-law of Haitong Law Firm. Authorized attorney: Liu Zuoming, attorney-at-law of Haitong Law Firm. The plaintiff, Hebei Province Grain & Oil (Group) General Co., took legal action against defendant, ASIL GIDA KIMYA SANAYI VE TICARET A.S. before Tianjin Maritime Court for damages compensation of maritime freight transport contract on August 11, 2000. The court constituted the collegiate panel in accordance with the law after accepting the cases and finishing the jurisdictional dispute procedure. The court held two public hearings on July 6, 2001 and July 18, 2001 respectively. Authorized attorneys of plaintiff, Wang Peng and Wang Hongyu (absent at second hearing), and authorized attorneys of defendant, Yang Wengui (absent at second hearing) and Liu Zuoming, appeared in court and participated in the lawsuit. Now the case is finished. Before the acceptance of this lawsuit, on July 13, 2000, the court made Civil Judgment (2000) Hai Gao Li Bao Zi No. 31 to accept the preservation of evidences asked by Plaintiff, and ordered “MUSTAFA NEVZAT” steamship owned by defendant to submit pertinent freight documents to the case. On the same day, the court made Civil Judgment (2000) Hai Gao Li Bao Zi No. 32 to accept preservation of property and arrested the ship. After afforded RMB 13,000,000 Yuan for guarantee, the defendant can get the ship back. The plaintiff alleged: the plaintiff, acted as agent of Lipin Company Hebei Province, made a contract with Singapore WILMAR TRADING PTE. LTD (hereinafter referred to as WILMAR) to import soybeans produced in Brazil on April 27, 2000. The contract says, WILMAR provides plaintiff 24,000 tons (±10% decided by the seller) soybeans produced in Brazil with USD 224.50 per ton on CNF (Tianjin, China). The cargo was loaded on the ship “MUSTAFA NEVZAT” which owned by defendant at ITACOATIARA port of Brazil on May 9, 2000. The loading port representative on behalf of the captain of defendant signed uniformity of three clean bills of lading as No.2. It shows that the amount of loading cargo is 24,800.424 m tons. WILMAR provided plaintiff various inspection certificates and commercial invoices to prove that cargo were in perfect condition during the loading. Plaintiff paid full price of cargo through Communication Bank Shijiazhuang Branch and insured full coverage with USD 15,360.55 insurance fee. The ship arrived at Tianjin port on July 1, 2000. During unloading it was found that parts of the cargo were seriously mildewed. Through the inspection of Tanggu Depart & Entry Inspection and Quarantine Bureau (hereinafter referred to as IQB), the losses of cargo reached RMB 12,190,698.05 Yuan. The plaintiff holds original Clean Bill on Board B／L, and has the right to get perfect cargo at unloading port. The defendant as carrier should take the responsibility of compensation of the damaged cargo. During the hearing, the plaintiff changed the claim and alleged that the loss was verified as RBM 8,274,151.80 Yuan. It includes the following items: ①Cost Insurance and Freight (CIF) market price of concerned cargo in good condition is RMB 2,300 Yuan per ton. The received damaged cargo were in three degrees, 80%, 60% and 30% respectively and the cargo loss was RMB 7,455,790.40 Yuan; ②The extra cost for damaged cargo treatment like fractional load and short shifting was RMB 698,956.40 Yuan; ③Damage commercial inspection cost was RMB 34,942 Yuan; ④Legal cost and preserving costs were RMB 84,463 Yuan. The defendant argued that because of the high moisture, too many broken kernels, together with the influence of weather, temperature and long time in the navigation, and all these led to the cargo mildewed. It is not the fault of carrier. The carrier provided the seaworthy ship; did their best to ventilate the cargo during the navigation and took their duty to keep the cargo in good condition. The plaintiff does not have enough evidences to support his damage, and he does not have the right to sue. The defendant petitioned the court to reject claims of the plaintiff. During the hearing both plaintiff and defendant agree with following facts: The Plaintiff import soybeans produced in Brazil on May 9, 2000, and the cargo was loaded on the Turk ship “MUSTAFA NEVZAT” owned by defendant. The defendant signed the Clean Bill on Board B／LNo.02. The B/L shows that the consignor was WILMAR; the consignee followed instruction; informer was defendant; loading port was ITACOATIARA/AM/Brazil; unloading port was Tianjin, China; loading cargo was 24,800.424 m tons soybeans produced-in-Brazil in bulk, which was loaded in holds 2, 4, 6 and 7 respectively; carriage charge was paid in advance. On July 1, the cargo arrived at Tianjin port and cargo damage was found out during the unloading. IQB inspected the damaged cargo and made damage certificate: through the inspection to holds 2, 4, 6 and 7, it was found that all cargo in the surface layers was hardened and mildewed seriously; and there was obvious rancid smell in the holds. The mildewed cargo of surface layers showed gray-white and there was clear waterlog marks on it. The waterlog marks was obvious under the hatch coaming and the cargo mildewed seriously. The cargo cross sections of hardened and mildewed layers in holds 2, 4 and 7 showed a depth of 30 cm; there were obvious waterlog marks at the joint parts between cargo and hold walls and shells; cargo hardened and mildewed; the depth of cargo cross sections of hardened and mildewed layers in hold 6 reached 50 cm; the cargo under mildewed layers appeared brown because of heat redding and parts of cargo appeared black because of charring accompanied, and together with obvious rancid smell. Through the further inspection, weight and damage analysis after fractional unload, the damaged amount and degree of losses are the following: ①1,827.800 m.t. of cargo mildewed seriously and could not be used for original purpose; cargo damage reached 80%; ②844.630 m.t. of cargo reddened, charred and were mixed with mildewed substances together with rancid smell; sales and use of which would be affected; estimated damage was 60%; ③4,242.100 m.t. of cargo partly reddened and charred; sales and use of which would be affected; estimated damage was 30%. After unloading, the plaintiff picked up the cargo referred to the case with original B/L and defendant delivered the cargo. During the pre-suit preservation of property evidences period, our judges made two investigation notes while investigating the captain of the ship, and many kinds of evidences in connection with freight were collected, including ship structural drawing, ship specifications, ownership certificate of the ship, ship's classification certificate, ship safety equipment certificate, international load waterline certificate, notice of readiness, chief mate's receipt, cargo stowage plan, cargo plan, crew list and certificate of competency of main senior seamen respectively. After the cross-examination, both parties agreed with the truthfulness of the evidences mentioned above. The collegiate panel accepts the facts and evidences mentioned above, to which both parties had no dissent. In the case, the main disputes of both parties focused on following aspects: the plaintiff’s right to sue; reasons of cargo damage; amount of losses and applicable laws etc. The main statements and evidences from plaintiff and defendant to concerned disputes and adoption of the collegiate panel are the following: I. Whether the plaintiff has the right to sue Plaintiff claimed: The plaintiff purchased the concerned cargo by making trade contract and paid full sum of money under the trade contract. The way of payment was changed from credit to document against payment in oral form. Plaintiff got B/L by legal way so that plaintiff was legal consignee. With this B/L, plaintiff picked up cargo and defendant delivered cargo. It showed that defendant recognized plaintiff as legal consignee during the consignation of cargo. Based on juridical relation of freight contract arising from B/L, plaintiff as consignee had right to request that defendant as carrier should deliver cargo according to status recorded in B/L and had right to claim for damages compensation during liability term of defendant. Plaintiff provided B/L, insurance certificate, payment document of insurance, purchase contract of cargo, commercial invoice, payment certificate of Bank of Communication Shijiazhuang Branch, and trade bill of WILMAR as evidence. After the cross-examination, defendant agreed with the truthfulness of the evidences mentioned above. Defendant claimed: The concerned B/L was an order bill of lading. Endorsement of B/L showed that consignor, WILMAR, carried through blank endorsement first; and thereafter BANK BOSTON N.A. SINGARPORE BRANCH transferred the named B/L of full endorsement to BANK OF COMMUNICATION. After that, BANK OF COMMUNICATION holds the B/L without any transferring. Hence, the owner of this B/L is BANK OF COMMUNICATION but not the plaintiff. It is the BANK OF COMMUNICATON has the right to claim damages against defendant. The sales contract that submitted by plaintiff is copy but not the original. The contract gives clear indication that the settlement will be done by Letter of Credit, but in the commercial invoice saying the payment will be done once submit the B/L, so the evidences are mutually contradictory, and it is not believable. The payment notice made by bank has no contract number on it, so it cannot prove this payment is for the concerned cargo. Also, whether the plaintiff has the right to sue should depend on the B/L, other evidences only can be considered as reference. Hence, the plaintiff is not the final assignee (the owner) of this B/L, also no evidences to prove the plaintiff is the consignee, so the plaintiff does not have right to claim damages against defendant. The collegiate panel accepts the evidences which both parties had no dissent. The collegiate panel deemed: whether the plaintiff has the right to sue, the key point is depended on whether consignee has the legal position. According to the “Maritime Law of the People’s Republic of China” article 42 section 4, “the consignee”, is the person who has the right to pick up the cargo. The B/L that mentioned in this case is an order B/L, WILMAR company as the carrier, made a blank endorsement on it, and the B/L is on circulating according to the sales contract. Only the party that has paid against it, will be the legal owner of this B/L, and has the ownership for the cargo under this B/L. The bank is only the finance organization that is in the link of cargo payment, and does not pay for the cargo. Being in the position of payment link, the bank holds the B/L. The bank is not the legal assignee or owner of the B/L, and the endorsement on the B/L made by the bank has no determinative meaning. To confirm the consignee in this case, should be depended on the legal fact. The plaintiff made a purchase contract with WILLMAR company for the cargo concerned in the case; paid the relevant consideration; obtained the original B/L; picked up the cargo from defendant relying on the B/L. Defendant delivered the cargo to plaintiff. Plaintiff submitted one original B/L to court as the evidence. The cargo delivery action of defendant to plaintiff, and proved that defendant had accepted plaintiff’s legal position as consignee of the cargo at the time of his delivery. About the issues raised by the defendant: the different ways of payment between sales contract and invoice; there is no contract number in payment notice of the bank etc. As the payment amount is exact same as the invoice and money order, the fact of payment can be confirmed. At the situation of the payment has been done and the cargo has been picked up already, the different expressions of the payment in concerned documents are not so important any more, and plaintiff’s further evidence on it should be avoided. Plaintiff is the legal consignee of the concerned cargo. For the damage of the cargo during the period of carrier in charge, plaintiff has the right to claim for compensation. II. The reasons of cargo damage Plaintiff claimed: According to Chinese laws, if the cargo has any loss or damage during the period of carrier in charge, the carrier should take the responsibility of compensation, unless he can submit the evidences that the reasons of cargo damage belong to the legal exemption reasons. In this case, the inspection report of cargo in loading port and the clean bill signed and issued by defendant, confirm that the quality of cargo is perfect when it was loading. But the inspection certificate from IQB confirms that the cargo was damaged when unloading from the ship. It was the defendant duty to submit evidences for the reasons of cargo damage and fulfilled his duty properly in taking charge of the cargo during the period under his control. Otherwise, the defendant should take the responsibility of compensation if he cannot submit the evidences for the cargo damage. Plaintiff submitted the certificate of weight of cargo, certificate of quality of cargo, certificate of safety of cargo, certificate of chemical leftover of cargo, certificate of plant hygiene of cargo, B/L, inspection report from IQB etc. After the cross-examination, defendant agreed with the truthfulness of the evidence mentioned above. Defendant claimed: The steamship “MUSTAFA NEVZAT” was made by Japanese NKK which was well-known by common with rigorous. Based on the certificate renewed on April 17, 2000, it is bulk steamship and was made in Feb 1995. With the inspection, it is qualified for all of the requirements asked by NKK, there is no doubt for its navigability. The captain of this steamship, Mr. O. ORAHAL has rich experiences of navigation and transportation. He has transported soybean many times. The Inspection Engineer of Agriculture Ministry of Brazil and the Inspection Person that designated by carrier, LINKMILAR SERVICES LIDA inspected holds separately before loading. They confirmed that the holds were clean, dry, perfect, and they were suitable for transport Brazil soybean crops in 2000. The fact mentioned above confirmed that the defendant had careful managed the steamship for its navigation before it set sail and started for the sail. Defendant submitted “The work journal of deck department” and logbook of “holds ventilation time record” indicated that during the entire voyage, seamen made proper ventilation for holds according to the temperature and moisture, weather and situation of the sea. Defendant did his best to perform his duty of looking after the cargo properly. The reasons that caused this damage concerned in this case are the following: the moisture content of the cargo has beyond its standard, the broken rate is higher, and the bad quality of the cargo. The inspections by Tandgu IQB and by the steamship self, confirm that moisture content of the cargo reaches 16%, which is beyond the Safety Moisture Content standard 11.5%-12.5%. The inspection certificate of cargo quality in loading port records: general broken kernel is 6.0%, heat-broken kernel is 3.4%, broken kernel 11.5%, in another word, the total broken kernel is 20.9% in loading port. According to the sampling analysis made by the Maritime Science Research Institute of Communication Ministry (hereinafter called research institute) in unloading port, the broken kernel reaches 33%. Too much broken kernel lead to absorb more moisture, and it causes the mildew. Rely on the international standard about soybean of our country, the quality of the cargo concerned in this case is very bad, belongs to the substandard products. “The surface of the cargo is good” which recorded in B/L by captain, doesn’t equal to “ensure the quality of cargo is good”. The damage of the mentioned cargo is created by the intrinsic defect of it. Based on Chinese laws, carrier should not take any responsibility of compensation. Defendant submitted the following evidences: the analysis report of the damage reasons by research institute, deck work journal, ventilation time record, registration certificate of the ship, inspection certificate of the ship, loading fact record, stowage plan, chief mate’s receipt, the abstract of regulations and rules of ocean going ship etc. After the cross-examination, Plaintiff disagreed to the analysis report supported by research institute. According to plaintiff, the research institute is not qualified for inspection and analysis the damage of cargo, the persons who involved in the report, have no professional experiences of transportation cargo in bulk. This steamship did ventilation in overcast and rainy days, but the report does not point out this kind of fault action. It shows that the report writers do not have enough common knowledge. Therefore, this report should not be used as evidence. Plaintiff doubts the truthfulness of the deck work journal, ventilation abstract, either. The reason is that there are no any signatures and stamps on the work record, and it conflicts with the abstract recordation of ventilation time. For instance, the work record claims that the ventilation time is 8:00 to 18:00 on June 19, but the abstract recordation claims no any ventilation during this time. Plaintiff agreed with the truthfulness of other evidences. The collegiate panel accepts the evidences which both parties had no dissent. The analysis report of the research institute cannot be used as evidence in the case, and it only can be considered as academic materials since the research institute cannot prove its professional inspection status on analyzing cargo damage and cannot submit its inspection certificate either. In the deck work record provided by defendant, there were neither any stamps of ship and signature of captain, nor signatures of daily duty person. It did not meet the basic condition of valid evidence, and should not be accepted as evidence in the case. The abstract of ventilation time provided by defendant, it is said extracting from the navigation journal, cannot show any origin and source by itself. Defendant does not provide the logbook to check, and the evidence does not meet the basic condition of valid evidences, should not be accepted as evidence in the case. The collegiate panel deemed: based on the “Maritime Law of the People’s Republic of China” article 48, carrier should properly, prudently loading, move, stowage, transportation, keeping, looking after and unloading the cargo who carried. Defendant, as the carrier, has the duty to submit the evidences that he had properly, prudently stored and looked after the cargo, especially made proper ventilation for the cargo during transportation. The collegiate panel noticed, the inspection report from IQB indicates that the surface of the cargo had obvious waterlog mark, on the place contact with hold walls and under the hatch board were more seriously. It shows that in the place of the cargo’s surface and hold walls, hatch board, the dew was formed. This is the reason of why the surface cargo was mildewed while the deep was still good. The collegiate panel studies many documents and teaching materials, and finding out the basic principles of the holds ventilation are the following, lower the dew point of the holds and makes it lower than the body of the ship or lower than the temperature of cargo surface; otherwise, the dew will be formed in the body of the ship and cargo surface. Besides the good preparation should be made before loading and ensure the holds dry with no water, it is very important to make proper ventilation according to the dew point both inside and outside the holds during the navigation. In case of no automatic dew point recorder, the psychrometer together with the dew point checked chart will be used to ascertain the dew point. In this case, the cargo was transported from the southern hemisphere, cross the equator, reaching the northern hemisphere. The temperature changes a lot; the navigation period is very long, and the proper ventilation is more important. According to the investigation to the captain by our judge, this steamship did not have automatic dew point recorder, and defendant cannot provide valid original record to prove the seamen had measured the humidity based on the situation of climate and weather, and cannot prove he made proper ventilation according to the dew point both inside and outside the steamship as well. Defendant cannot perform his duty to provide the evidences that he had properly, prudently stored and looked after the cargo. Defendant insisted that the containing moisture reached 16%, and the quality was lower than the state standard, but he could not submit any related evidences to it. In the inspection certificate of loading port indicates the soybean containing moisture is 12.7%, meets the standard of 12.5%-13% in related materials. The contradictory fact is that the surface cargo mildewed but the cargo in deep about 80% is still in good condition. Therefore, the idea of cargo damage was caused by intrinsic defect of cargo cannot be accepted. Defendant who did not made proper ventilation caused the cargo damage, and it led the dew formed on the body of ship and cargo. III. The concrete amount of the Plaintiff’s losses and law application Plaintiff claimed: the amount of the Plaintiff’s losses should include, the loss of damaged cargo, inspection charge of IQB, extra charge for deal with the damaged cargo, legal cost of court, related bank interest. According to the confirmation of Pricing agency in Tianjin, the market price of wholesale from June 21 to July 20, 2000 is RMB 2,300 Yuan per ton. According to the terms in the back of B/L: “Hague principle” and “Hague-WISIBI principle”, the market price of destination port is applicable. According to the estimated loss percentage by IQB, the amount of cargo losses is RMB 7,455,790.40 Yuan. The other losses of plaintiff include separating unloading charge for damaged cargo RMB 698,956.40 Yuan; short shifting charge RMB 698,956.40 Yuan; inspection charge RMB 34,942 Yuan; legal cost, property preserving fee, evidence preserving fee RMB 84,463 Yuan, total RMB 8,274,151.80 Yuan. Plaintiff claimed: as agent of Hebei Lipin Company to export the concerned cargo, and the damaged cargo has been sold out according to the inspection certificate. In two sales contracts, the amounts are RMB 5,531,698.40 and RMB 1,309,190.95 Yuan separately, total RMB 6,840,889.35 Yuan. Plaintiff provided not only the evidences mentioned above, two trade invoices, insurance receipt, inspection certificate etc. but also the letter from the Pricing Agency of Tianjin, invoice and related charges list of RMB 698,956.40 Yuan from Tianjin Lian Long International Trade Limited Company to Lipin Company Hebei Province for “handling charges (storage, pileup, short shifting) and other related bills; plaintiff works as agent to deal with import and settlement agreement for Hebei Lipin Company; Lipin Company Hebei Province makes two sales contracts with Hebei Tianyi Lipin Limited and Agricultural Byproducts Produce and Sale General Company of Baodi county separately for selling damaged cargo. After the cross-examination, defendant agreed with the truthfulness of the evidences mentioned above. Defendant claimed: According to the terms in the back of B/L, the precondition to apply “Hague principle” and “Hague-WISIBI principle” is that the destination port country already be approved or join these principles, otherwise the principles cannot be forced to apply. For non-contract country, the destination port country’s law should be applied to the B/L. Therefore, Chinese laws should be applied in this case. The price of the cargo should be calculated by the pre-lading price +freight + insurance fee. The letter from Pricing agency is not suitable to this case. The price for sales the damaged cargo exacts the same as the estimated price in inspection certificate, and the truthfulness of the sales contract is doubtful. Moreover, the seller for the damaged cargo is Lipin Company Hebei Province, but not the Plaintiff. So, both the inspection certificate and sales contracts cannot be used as evidences of the damaged cargo. The loading and unloading company which authorized by consignee, did not do their best to reduce the damage during unloading the cargo, and this action led to the huge amount of cargo losses. After unloading in Tianjin Port, other cargo 28,351.144 m. ton was unloaded in Zhangjiagang Port, the damaged cargo is only 2,488.658 ton according to the inspection. For the enlarging losses, carrier should not take the responsibility of compensation. The invoice and detail list of charges for handling the damaged cargo provided by Plaintiff cannot be proved that they have any relationship with the damaged cargo, and cannot be used as evidences. Defendant submitted the damaging inspection certificate from IQB of Zhangjiagang Port. After the cross-examination, Plaintiff agreed with the truthfulness of the inspection certificate, but don’t think it has anything to do with this case. The collegiate panel accepted the evidences which both parties had no dissent. The collegiate panel deemed: The claim of Defendant about the law applicable in this case comes into existence. China has not joined “Hague Principle” and “Hague-WISIBI Principle”. According to the terms in the back of B/L, the law applicable in this case is unloading port country, that is Chinese laws. Based on the related regulations of the “Maritime Law of the People’s Republic of China”, the compensation amount for the damaged cargo should calculated by the actual price difference of before and after the damage, and the actual price should be the loading price + insurance fee + freight, that is US $ 225.12 per m. ton. According to the damaging rate claimed in inspection certificate, the cargo loss is US $ 729,760.24, and converts into RMB 6,035,117.20 Yuan. The losses of Plaintiff that caused by the damaged cargo also include inspection fee, the cost of preservation of action both in evidences and property. Plaintiff claimed for his extra payment of the damaged cargo, but only submitted the invoice and detail list of Lian Long Company who is not involved in the case, and plaintiff neither can prove the legal position of Lian Long Company, nor supply his payment voucher and the original evidence for the works related. Because of the insufficient evidences submitted by Plaintiff, court does not support this item claimed by Plaintiff. The Lipin Company Hebei Province, is the real import party for this cargo, the sales price of the damaged cargo was same as the price estimated in inspection certificate, it shows that the Plaintiff did not do any false examination and made profit from it. IQB is state’s inspection organization, and performs its inspection duty independently. The result of the inspection for special cargo has authoritative. The inspection made by IQB of Lianyungang Port for other cargo, cannot represent the damaging situation of the cargo related in this case, and the inspection certificate has no relationship with this case. In conclusion, the collegiate panel deemed: this case is a maritime cargo transportation contract of compensation for damage. To regard with both carrier and consignee, the B/L has the function of transportation contract, the right or duty of both parties should following the B/L. Any losses or damages of the cargo during the period of carrier in charge, unless because of the reason of exempt, the carrier should take the compensation duty. In this case, defendant, as the carrier, did not submit related evidences to prove he had properly, prudently stored and looked after the cargo. The other way round, be confirmed by related evidences, during the period of carrier in charge, the dew formed on hold walls and cargo, and it caused the cargo mildewed. Defendant should take the compensation duty for the damaged cargo; related inspection charge; preserving charge as well as related bank interest. The legal cost should be paid by the losing party according to the regulation of law, rather than be claimed as losses. The court does not support the other claims of the Plaintiff because of his insufficient evidences. Hereby, based on the “Maritime Law of the People’s Republic of China” article 46 section 1, article 48, article 55 section 1, section 2; the “Civil Procedure Law of the People’s Republic of China” article 64 section 1, the court gives the following judgments: I. Defendant should pay Plaintiff RMB 6,035,117.20 Yuan for the damaged cargo; RMB 34,942 Yuan for inspection charge; RMB 5,000 Yuan for evidences preservation of action; RMB 5,000 Yuan for property preservation of action, total RMB 6,080,059.20 Yuan; according to the bank interest rate, pay the bank interest from the date of July 14, 2000 till the payment date in this judgment. The payment mentioned above should be paid within 15 days from the effective date of this judgment. If fails to meet the time limit of the payment, the judgment should be enforced based on article 232 of the “Civil Procedure Law of the People’s Republic of China.” II. Reject other claims of Plaintiff. The legal cost of this case is RMB 51,381 Yuan, and the Plaintiff shall pay RMB 13,616 Yuan, and the Defendant shall pay RMB 37,765 Yuan. Defendant shall pay Plaintiff the legal cost he bears (RMB 37,765) in executing this judgment, and the court will not handle money return. If refuse to accept this judgment, Plaintiff may submit appeal petition and with 4 copies of it to Tianjin Maritime Court within 15 days after the date of service this judgment; Defendant may submit appeal petition and with 4 copies of it to Tianjin Maritime Court within 30 days after the date of service this judgment. The appeal shall be accepted by the Higher People’s Court of Tianjin. Appellant should pay cost of appeal RMB 51,381 Yuan to the Higher People’s Court of Tianjin (Bank account: Agriculture Bank of China new technical park branch, A/C no. 394-9887000390) within 7 days after the appeal petition. If payment delays for the time limit, the appeal will be treated as withdraw automatically. Chief Judge: Dong Li Juan Judge: Shi Wen Xi Assistant Judge: Shi Fu Xin July 18, 2001 Court Clerk: Bai Xin