the basis of the value of CIF after the deduction of the expenses that had been
reduced or avoided as a result of the loss or damage occurred.
4.1 Calculation of Compensation for Damaged Goods
in Judicial Practice
In judicial practice, even if the same provision, namely, Article 55 of the CMC is to
be applied, different Maritime Courts may use different methods to calculate the
amount of damage to the goods. In the case of Senfu Company v. Hachiman Sea
Company and Japan Debao Maritime Co., Ltd.,
12 the methods to calculate the
amount of damage to the goods were different in the judgements of the first instance,
second instance and retrial Courts. In this case, the Senfu Company acquired the bill
of lading and became its legitimate holder through endorsements of it. Hachiman Sea
Company was the carrier and Japan Debao Maritime Co., Ltd. was the actual carrier.
The cargo was 1400 tons of chemical phenol, priced at about USD 1530/ton. The
total value of the goods was CNY 14,668,844.40. In transit from the port of Huelva,
Spain to Qingdao, China, there was a change of chromatic aberration of the cargo.
Between October and November 2008, the market price of phenol in China experienced a sharp decline. The plaintiff claimed that the two defendants must bear joint
and several liabilities for damage to the goods. Through analysis of the decisions of
the first instance, second instance, and the retrial courts, the controversial issues in
this case were:
1. whether the change of chromaticity of the phenol in the process of sea transportation constituted cargo damage;
2. if the goods were damaged, whether the two defendants should bear the liability;
3. how the amount of the cargo damage should be determined.
For first two disputes, the courts held that the change of chromatic aberration of
phenol constituted cargo damage and the two defendants should bear joint and
several liabilities. As to the determination of the amount of losses, methods of
calculation that were adopted by the three courts were very different. The first
instance court, Qingdao Maritime Court took the “cost of repair method” to calculate
the amount of compensation for the damaged cargo. Since there was a sharp decline
of the price of phenol in the domestic market, it held that it was more reasonable to
take the cost of repair which had been calculated by experts, as the standard for
calculating the compensation.
The Shandong Province Higher People’s Court adopted the “direct subtraction
method”. Since there was an expansion of loss in this case, the value of damaged
goods should be the actual value of the goods when it was handled at the port of
destination. The difference of the value of the goods before and after the damage was
12 No.7 Judgement [2013], Civil Division, Shandong Province Higher People’s Court.
216
L. Han and S. Cai
reduced or avoided as a result of the loss or damage occurred.
4.1 Calculation of Compensation for Damaged Goods
in Judicial Practice
In judicial practice, even if the same provision, namely, Article 55 of the CMC is to
be applied, different Maritime Courts may use different methods to calculate the
amount of damage to the goods. In the case of Senfu Company v. Hachiman Sea
Company and Japan Debao Maritime Co., Ltd.,
12 the methods to calculate the
amount of damage to the goods were different in the judgements of the first instance,
second instance and retrial Courts. In this case, the Senfu Company acquired the bill
of lading and became its legitimate holder through endorsements of it. Hachiman Sea
Company was the carrier and Japan Debao Maritime Co., Ltd. was the actual carrier.
The cargo was 1400 tons of chemical phenol, priced at about USD 1530/ton. The
total value of the goods was CNY 14,668,844.40. In transit from the port of Huelva,
Spain to Qingdao, China, there was a change of chromatic aberration of the cargo.
Between October and November 2008, the market price of phenol in China experienced a sharp decline. The plaintiff claimed that the two defendants must bear joint
and several liabilities for damage to the goods. Through analysis of the decisions of
the first instance, second instance, and the retrial courts, the controversial issues in
this case were:
1. whether the change of chromaticity of the phenol in the process of sea transportation constituted cargo damage;
2. if the goods were damaged, whether the two defendants should bear the liability;
3. how the amount of the cargo damage should be determined.
For first two disputes, the courts held that the change of chromatic aberration of
phenol constituted cargo damage and the two defendants should bear joint and
several liabilities. As to the determination of the amount of losses, methods of
calculation that were adopted by the three courts were very different. The first
instance court, Qingdao Maritime Court took the “cost of repair method” to calculate
the amount of compensation for the damaged cargo. Since there was a sharp decline
of the price of phenol in the domestic market, it held that it was more reasonable to
take the cost of repair which had been calculated by experts, as the standard for
calculating the compensation.
The Shandong Province Higher People’s Court adopted the “direct subtraction
method”. Since there was an expansion of loss in this case, the value of damaged
goods should be the actual value of the goods when it was handled at the port of
destination. The difference of the value of the goods before and after the damage was
12 No.7 Judgement [2013], Civil Division, Shandong Province Higher People’s Court.
216
L. Han and S. Cai