While cross-border trade offers significant opportunities, it also entails complex and unpredictable risks. This case outlines how Company C dealt with the sudden loss of goods at sea, how it sought compensation through marine insurance, and how Company A exercised its subrogation rights through legal proceedings.

Basic Facts

 In November 2020, Company C secured an overseas order to sell a batch of plastic water pipes to a U.S. customer. To complete the transaction smoothly, Company C booked shipping space with Company B. The two companies entered into an agreement with Company D for the transport of the goods through the vessel ONE APUS from Yantian Port in China to the Port of Long Beach, United States. To protect against potential losses during transit, Company C purchased cargo insurance from Company A, selecting an all-risk marine cargo insurance policy with a coverage amount of USD 126,415.87.

On November 19, 2020, the ONE APUS departed from Yantian Port en route to Long Beach. However, on November 30, the vessel encountered severe weather conditions in the North Pacific. A serious collapse of containers occurred onboard, and many, including the one carrying Company C's goods, were lost overboard. The vessel diverted to Kobe Port in Japan for refuge and discharged the remaining containers. Upon inspection, it was confirmed that Company C's container and its contents had been lost at sea.

Following the incident, Company B informed Company C of the container loss via a written incident report after receiving notice from Company D. To recover its losses, Company C initiated an insurance claim. On August 17, 2021, Company A paid Company C USD 120,095.08 in compensation. At the same time, Company C signed a subrogation agreement with Company A, transferring its rights of recovery to the insurer.

The matter did not end there. To substantiate its claim, Company A engaged Company E to conduct a loss assessment. Company E confirmed that the incident fell within the scope of coverage under the marine cargo policy. The assessed loss totaled USD 126,415.87, and after deducting the policy's deductible, the calculated claim amounted to USD 120,095.08.

Subsequently, Company A filed a lawsuit with the Guangzhou Maritime Court (GZMC), seeking RMB 777,795.79 in damages plus interest from Company B.

In response, Company B raised several defenses: 1. The portion of the insurance premium based on a 10% surcharge represented an extra obligation under the insurance contract borne solely by the plaintiff, and thus could not be claimed via subrogation. 2. Under the DDP (Delivered Duty Paid) Incoterm, the seller is responsible for freight, insurance, and customs clearance in the destination country. Since the bill of lading indicated freight payable at destination and Company B had not received freight charges for the shipment, the actual value of the goods should be reduced by unpaid freight, insurance premiums, and foreign customs clearance fees. 3. Company C held no cargo rights under the relevant contract of carriage of goods by sea, and therefore, Company A could not obtain subrogation rights through compensation for Company C. 4. The loss occurred due to natural perils at sea, which should be exempted under statutory provisions.

Further investigation by the court confirmed that Company B was a registered Non-Vessel Operating Common Carrier (NVOCC) authorized to conduct international freight forwarding services through Chinese ports.

According to the Incoterms rules, DDP (Delivered Duty Paid) means that the seller delivers the goods when they are placed at the disposal of the buyer, cleared for import on the arriving means of transport, ready for unloading at the named place of destination. The seller bears all costs and risks involved in bringing the goods to the place of destination and is responsible for clearing the goods for both export and import, paying any duties and taxes for both, and carrying out all customs formalities.

During the hearing, both parties agreed that the laws of the People's Republic of China should govern the case.

Court Decision

 On November 24, 2022, GZMC rendered the following civil judgment: 1. Company B shall compensate Company A for the loss of goods in the amount of USD 111,360.89 plus interest (converted into RMB 721,228.80 at the USD/CNY exchange rate of 1:6.4765 as published by the China Foreign Exchange Trading Center on August 17, 2021 under the PBOC's authorization, with interest calculated from August 18, 2021, at the Loan Prime Rate published by the National Interbank Funding Center until full payment is made). 2. The court rejected all other claims made by Company A.

Dissatisfied with the first-instance judgment, Company B appealed to the Guangdong High People's Court. The appellate court upheld the original ruling.

Rationale of Judgment

 This case is a typical dispute arising from the loss of containerized cargo at sea, where the insurer, after paying compensation, sought recovery via subrogation. The effective judgment accurately interpreted and applied Article 55 of the Maritime Code of the People's Republic of China. It reasonably determined the compensation amount under the DDP Incoterm in the event of cargo loss. The written judgment was clear, logically sound, and well-reasoned, providing valuable reference for similar cases.