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6.1 The parties to the contract of carriage of goods by sea evidenced by bill of lading are the shipper and the carrier. Besides the contractual shipper and the contractual carrier, there are also the concepts of an actual shipper and an actual carrier in the CMC 1992. The actual shipper is the person other than the contractual shipper who delivers goods to the carrier for shipment. It is a term used in judicial practice, but is simply termed “shipper” in the CMC 1992. The actual carrier is defined in the CMC 1992 to be distinguished from the contractual carrier who does not actually carry the goods but has contracted with the shipper. A consignee is defined in the CMC 1992 as not a party to the contract evidenced by bill of lading, although its name may sometimes appear on the straight bill of lading. The consignee and the bill of lading holder are responsible for some obligations under the CMC 1992 or the Contract Law. The consignee and the bill of lading holder may be also affected by charterparties if they are validly incorporated into the bills of lading.
The carrier
6.2 “Carrier” in the CMC 1992 means the person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper.1 It requires a contractual relationship with the shipper, regardless of whether the carrier actually carries the goods by sea. Identification of a carrier is always a fundamental task in cargo claims or the claims against the cargo interests in Chinese maritime courts. The difficulty in identification of a carrier is mainly caused by the inconsistencies found between the head section of bill of lading, signature on the face of bill of lading and terms on the reverse side of bill of lading. The Chinese judicial practice for identification of carriers follows and respects the commercial sense used in shipping practice.
6.3 When a standard bill of lading is issued, the name or logo in the head section of the bill of lading may be obvious, but it may not be used for identification of the carrier. In Mohamed Gad.Karim ABD EL Rahim Othman v Evergreen Marine Corporation,2 the bill of lading was a standard bill with the words “EVERGREEN LINE” in the head section. However, it was found that not only Evergreen Marine Corporation but also other companies were entitled to use this standard bill of lading. A signature of Italia Marittima SPA as
the carrier was found in the signature box of the bill of lading.3 Therefore, it was held that Italia Marittima SPA was the carrier, and not Evergreen Marine Corporation. Even if the company named in the head section of the bill of lading has some internal and commercial relationship with the company that signs the bill of lading as the carrier, the company named in the head section will not be considered as the carrier if they are two different and independent companies. In China House Enterprises Co Ltd v Bondex Logistics Co Ltd Guangzhou Branche and others,4 the company in the section head was Maersk Sealand, but both the signature on the face of the bill of lading and the terms on the reverse side of the bill of lading identified “Dampskibsselskabetof1912” as the carrier. It was held that “Dampskibsselskabetof1912” was the carrier although those two companies were two core commercial units of A.P. Moller Maersk Group.
6.4 If a person is recognised as the carrier on the face of the bill of lading, it cannot rely on the terms on the reverse side of the bill of lading to deny its status as the carrier. In Taizhou Hisource International Trade Co Ltd v U.S. United Logistics Inc (Taizhou Hisource v UUL),5 the agent signed on the face of the bill of lading but denied its status as the carrier according to the terms on the reverse side of the bill of lading. It was held that the carrier should be identified by the signature on the face of bill of lading because it would cause difficulty to the shipper and the bill of lading holder in good faith in identification of the carrier if the carrier hid behind the bill of lading. This case reflects the common understanding in shipping practice.66.5 It is reasonable to give the priority to the information on the face of bill of lading for identification of the carrier. However, the problem in Taizhou Hisource v UUL is that, when the agent signed the bill of lading on behalf of the carrier, the agent should not be considered as the carrier unless it signed the bill of lading “as carrier”.7 If an agent who signs and issues a bill of lading on behalf of a carrier, in order to prove that it is not the carrier, it would need to prove that its principal, namely the carrier legally exists when the bill of lading is issued and that it has obtained the principal’s authority to issue such a bill of lading. Otherwise, the agent will be considered as the carrier.8 Of course, if the shipper including the actual shipper knows the fact that the agent acts on behalf of the carrier, the agent is exempted from such a burden of proof.9
The actual carrier
6.6 “Actual carrier” in the CMC 1992 means the person to whom the performance of carriage of goods, or of part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted under a sub-contract.10
The actual carrier may exist in carriage of goods by sea when the carrier is a non-vessel carrier or the actual carrier performs part of the carriage, e.g. second carriage of a transhipment carriage. The provisions with respect to the responsibility of the carrier contained in the CMC 1992 are applicable to the actual carrier. The defence and limitation of liability including the loss of limit provided for in the CMC 1992 applies to the servant or agent of the actual carrier.116.7 In some special circumstances, the actual carrier may not be considered as the actual carrier but the contractual carrier. In PICC P&C Co Ltd Shanghai Branch v Kawasaki Kisen Kaisha Ltd and Blackship Line SA,12 the contractual carrier was the charterer and the actual carrier was the shipowner to a charterparty. An agent signed and issued a bill of lading on behalf of both the charterer and the shipowner as the carrier. It was held that both the charterer and the shipowner were carriers and they should bear joint and several liabilities. However, according to the CMC 1992, only where both the carrier and the actual carrier are liable for compensation shall they be jointly and severally liable within the scope of such liability.13 This judgment may not be appropriate if the actual carrier actually had no fault for the cargo claim but is held jointly liable. It might be sensible only when the contractual carrier has no financial capacity for its liability. However, this consideration is inconsistent with the CMC 1992. In Huamei Trade Co Ltd v Qingdao Haisheng International Ship Agency Co Ltd and Yang Ming Marine Transport Corp,14 there was no contract between the shipper and the actual carrier. However, it was held that the actual carrier could not thus deny its contractual relationship with the shipper. There was no authority for such conclusion in the judgment. The purpose of this judgment seems to consider the actual carrier as the carrier even though there is no legal ground in the CMC 1992. Other Chinese courts have denied such a contractual relationship between the shipper and the actual carrier.156.8 Unless otherwise agreed in contract, where the performance of the carriage or part thereof has been entrusted to an actual carrier, the carrier nevertheless remains responsible for the entire carriage. The carrier is responsible, in relation to the carriage performed by the actual carrier, for the act or omission of the actual carrier and of his servant or agent acting within the scope of his employment or agency.16 However, the actual carrier is not liable for any loss caused by the fault of the carrier. In Woodtrans Navigation Corporation, Panama and Sanwai Navigation SA, Panama v Angang Group International Trade Corporation,17 the time charterer as the carrier issued two bills of lading to the voyage charterer and the claimant for the same goods and the shipowner as the actual carrier delivered the goods to the voyage charterer according to the instruction of the time charterer under the time charter. The claimant claimed against both the time charterer and the shipowner as the actual carrier. It was held that the shipowner was not liable for the delivery of goods without the claimant’s bill of lading.
6.9 Under the CMC 1992, where both the carrier and the actual carrier are liable for compensation, they shall jointly and severally be liable within the scope of such liability.18 Where a carriage is performed by an actual carrier who is liable for damage to goods, the shipper may claim against the carrier for breach of contract and claim against the actual carrier for tortious liability. If the shipper claims against both the carrier and the actual carrier, the shipper may have difficulty in identifying the nature of the action,19 namely the action for breach of contract or action for liability in tort. In SINOCHEM Lianyungang Branch v Jiangsu Globle Foreign Trade Transportation Co Shanghai Branch and others,20 the actual carrier delivered goods without a bill of lading and the bill of lading holder chose to claim against the carrier and the actual carrier in tort. The Shanghai High People’s Court pointed out that joint liability of the carrier and the actual carrier in the CMC 1992 is different from joint contractual or tortious liability in Chinese civil law. The choice of nature of action is uncertain in these circumstances because of the special provision in the CMC 1992. Therefore, the bill of lading holder’s claims would be not affected by the choice of the nature of action. The allocation of liability between the carrier and the actual carrier and the right of recourse are different issues. The CMC 1992 does not affect the recourse between the carrier and the actual carrier.21
The common carrier
6.10 The common carrier is a not a concept in Chinese maritime law. In common law jurisdiction, the term “common carrier” may refer to a person that holds itself out to the general public to provide transportation by water of passengers or cargo.22 In shipping practice, the common carrier refers to the liner carrier who provides carriage service based on the published schedule and tariff. Whether such a common carrier is a public carrier was a controversial issue in China. The SPC gave its clear answer in Prime International (Xiamen) Co Ltd v Maersk (China) Shipping Co Ltd, Xiamen Branch and Maersk (China) Shipping Co Ltd.23 In this case, Maersk (China) Shipping Co Ltd (Maersk Company) notified PENAVICO Xiamen that it was ceasing to provide containers and container seals of Maersk Company to Prime International (Xiamen) Co Ltd (Prime International). Therefore, Prime International instituted a lawsuit in the Xiamen Maritime Court on the grounds that Maersk Company did not accept the space-booking and consignment of Prime International on behalf of its consignors, which caused losses thereto, and requested the Court to order Maersk Company to provide Prime International with freight space-booking and relevant services, and that it could not refuse Prime International in accepting the commissioned handling of import and export container freight and land container transport business related to the Maersk Company. The legal authority for the claim was in the Contract Law, which provides that the carrier engaging in public transport may not reject normal and reasonable transport requests of passengers and consignors.24
6.11 The Xiamen Maritime Court rejected the claim and held that Maersk Company was not a public carrier. It was pointed out that a public carrier must have the characteristic of a non-profit public service and have a welfare nature. However, Maersk Company as a liner carrier was a profit-making company and not a public carrier. Therefore, Maersk Company was not compulsorily obliged to conclude contracts with Prime International.25 In the appeal of this case, the Fujian High People’s Court reversed the judgment of the court of first instance and held that Maersk Company was a public carrier because it opened its business to the public although it was a profit-making company.26 In the retrial of this case, the SPC pointed out that the public transport in the Contract Law refers to transport that provides utility services for the public and has a monopoly position. However, international liner shipping is a commercial business activity that serves international trade, which is not public utility, and has no characteristics of public welfare, monopoly, or strict control over price. Therefore, Maersk Company was not a public carrier and did not bear any compulsory contracting obligation.27
The shipper
6.12 “Shipper” in the CMC 1992 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; or (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.28 The first kind of shipper is the contractual shipper and the second is the “actual shipper”, although it is not so named in the CMC 1992. This concept of shipping originated from the similar concept of shipper in the Hamburg Rules.29 It aims to protect the interests of FOB sellers who are not the contractual party to the contract of carriage of goods by sea. The actual shipper is still named as a shipper in the CMC 1992 in order to give the same rights of a contractual shipper, especially the right to request the delivery of the bill of lading from the carrier as an important security for the payment of the price of goods from the buyer.30 The actual shipper is not only entitled to the rights as the shipper, but also responsible for obligations as the shipper, e.g. pay the freight for carriage,31 or charge for container detention even though it is the contractual shipper who is identified on the bill of lading.32
6.13 Although the carrier can choose either the contractual shipper or the actual shipper for compensation, it may not easily decide to whom the bill of lading should be issued. When both the contractual shipper and the actual shipper request the delivery of bill of lading, it is believed that the actual shipper has priority, albeit that there is no clear authority for this point in the CMC 1992.33 Although the carrier should deliver the bill of lading to the contractual party, namely the contractual shipper, the actual shipper may request the bill of lading and obtain the bill of lading through the maritime injunction.34 If the actual shipper obtains an order bill of lading but is not named as the shipper on the order bill of lading, it is entitled to claim against the carrier for delivery of goods without a bill of lading.356.14 Another dilemma of the carrier is to whom goods should be delivered if it receives instructions from both the contractual shipper and the actual shipper. In Shanghai Robinson International Transport Co Ltd v Shanghai Huayifang Import & Export Co Ltd,36 the carrier agreed for telex release according to the contractual shipper but later agreed to deliver goods according to the actual shipper’s instruction because it requested the actual shipper to pay the freight. The carrier finally did not deliver the goods according to the actual shipper’s instructions, and was held liable for the losses of the actual shipper due to the breach of the agreement. In China Auto CAIEC Ltd v Qingdao Zhongshun International Logistics Co Ltd,37 the carrier, after receiving the letter of indemnity from the actual shipper, agreed to deliver the goods according to the actual shipper’s instruction, but actually delivered the goods according to the contractual shipper’s instruction. The SPC held that the carrier was entitled to deliver the goods according to the contractual shipper’s instruction, but was also liable for the loss of the actual carrier due to the non-delivery of the goods. It is unknown whether the carrier has the same obligation for delivery of goods according to the actual carrier’s instruction if the actual shipper does not agree to pay freight or provide letters of indemnity.
Right of control of the shipper
6.15 The Contract Law provides that, before the carrier delivers the goods to the consignee, the shipper may request the carrier to stop the transportation, return the goods, change the place of destination, or deliver the goods to another consignee. However, the shipper shall compensate for the losses thus caused to the carrier.38 The shipper’s right to stop the carriage, return the goods, change the destination and the consignee is called the right of control of the shipper in Chinese judicial practice. In shipping practice, the main reason that the shipper exercises the right of control is the dispute in trade transactions, e.g. the buyer refuses or fails to pay the price of goods. However, whether the right of control from the Contract Law can apply to the carriage of goods by sea is questionable.
6.16 The landmark case concerning the right of control of the shipper is Shaoxing Mingxing Plastics & Leather Co Ltd v Wan Hai Lines Ltd (Shaoxing Mingxing v Wan Hai
Lines).39 In this case, because the buyer failed to pay the price of the goods, the seller – as the shipper – requested the carrier to return the goods but was rejected. The shipper claimed against the carrier for the return of the goods or the loss of the price of the goods. The carrier contended that, because the consignee refused to take delivery of the goods, the goods had been sold at auction by the local customs. Although the shipper requested to return the goods, it was to amend the contract of carriage and the carrier was entitled to reject the amendment. The core issue was how to construe and apply the right of control from the Contract Law to the carriage of goods by sea.
6.17 The Shanghai Maritime Court in Shaoxing Mingxing v Wan Hai Lines pointed out that, as a general principle, when the CMC 1992 as a special law does not provide rules for certain issues about contract, the Contract Law as a general law may apply. It was noted that, for the purpose of the right of control, the shipper “may request” the carrier to follow its instructions. The words “may request” means an intention of negotiation. Whether the shipper’s request can be satisfied depends on the intention of the carrier. It was believed that the right of control might be designed for general carriage of goods, but not suitable for carriage of goods by sea. Therefore, it was held that the carrier had no obligation to return the goods once the shipper raised such a request. It has been clarified in Shaoxing Mingxing v Wan Hai Lines that the right of control is not a real right of the shipper in the carriage of goods by sea, but a request that needs the consent from the carrier for execution. The Shanghai Maritime Court also clarified in Shaoxing Mingxing v Wan Hai Lines that the request for return delivery is not an amendment to the contract, but an offer of a new contract of return carriage, which also requires the consent of the carrier for performance of the return carriage.
6.18 In Chinese judicial practice, if the carrier rejects the shipper’s request for return carriage, the shipper can take delivery of the goods if the goods have not been delivered, but cannot claim against the carrier for infringement of the shipper’s right of control.40 The carrier may reject the request for the return of goods even if the shipper agrees to pay the freight for the return carriage.41 If the carrier accepts the shipper’s request under the right of control, e.g. delivery of goods to another consignee, the shipper shall compensate for the loss thus caused to the carrier, e.g. the storage charge. If the carrier agrees to return the goods to the shipper, the carrier may always request the return of the issued bill of lading from the shipper and the payment for the return freight.42 Unless otherwise agreed, the carrier may have a lien on the goods carried for security of the storage charge. If the shipper or the new consignee has provided security, the carrier shall not have a lien on the goods.43 The judicial practice has been reaffirmed by the SPC in Anhui Only Electronic Co Ltd v Lvyun International Freight Forwarding (Shenzhen) Co Ltd Shanghai Branch,
Voyage Logistics Ltd.44 However, it must be noted that a few Chinese courts still insist on the right of control as a legal right of the shipper in the carriage of goods by sea and will hold that the carrier is obliged to follow the shipper’s instruction under the right of control.45
Consignee and bill of lading holder
6.19 The consignee and bill of lading holder are not parties to the contract of carriage of goods by sea evidenced by the bill of lading, but their relationship with the carrier is governed by the terms of the bill of lading.46 “Consignee” in the CMC 1992 means the person who is entitled to take delivery of the goods.47 There is no definition of bill of lading holder in the CMC 1992. If a person obtains a bill of lading in good faith, that person becomes the lawful holder of the bill of lading who is entitled to take delivery of the goods. It seems that the definition of consignee in the CMC 1992 includes both the consignee on the bill of lading and the lawful holder of the bill of lading.
The consignee
6.20 In shipping practice, if the seller and the buyer agree to use a straight bill of lading, the buyer will be named on the bill of lading as the consignee. Then the consignee has the obligation to take delivery of goods from the carrier and is responsible for relevant expenses if it refuses or delays in taking delivery of the goods. In a special circumstance, the consignee may not be obliged to do so. In Henan Tongxu Jin’ao Commodities Co Ltd v A. P. Moller-Maersk A/S (Jin’ao Commodities v A. P. Moller-Maersk),48 the Chinese seller exported goods to Australia but was ordered to return the goods by the Australian Inspection and Quarantine authority. The buyer requested the carrier to return the goods to the seller. The carrier issued a sea waybill for the return carriage on which the seller was named as the consignee. The seller was not informed about the return and the container for the goods was detained at the port of discharge. The carrier claimed against the seller for the charges for container detention. The sellers denied its status as the consignee on the sea way-bill. The Shanghai Maritime Court held that the seller was not the consignee on the sea way-bill because it never agreed to be the consignee for the return carriage, and, therefore, the seller was not bound by the sea waybill and was not liable for the container detention.
6.21 The legal authority in Jin’ao Commodities v A. P. Moller-Maersk is based on privity of contract. The Shanghai Maritime Court pointed out that the seller was not a party to the contract evidenced by the sea waybill. Therefore, if the parties to the sea waybill wanted to impose obligations, e.g. taking delivery of goods on the seller, they needed to obtain the consent of the seller. In other words, in order to name the seller as the valid consignee on
the sea waybill, it was necessary for the seller to accept such a designation as the consignee. This requirement reflects the relationship between the sale of goods contract and the carriage of goods contract. In shipping practice, when parties to a sale of goods contract agree to use a non-negotiable shipping document, e.g. the straight bill of lading or the sea waybill, they will agree to put the buyer’s name as the consignee on the shipping document. The consignee’s consent is from the sale of goods contract, not the contract evidenced by the shipping document. Because there was no sale of goods contract in which the buyer agreed to sell goods to the seller, there was no basis for the return carriage in Jin’ao Commodities v A. P. Moller-Maersk. Thus if the sea waybill names the seller as the consignee this will not bind the seller. In fact, the return carriage should be a dispute between the seller and the carrier based on the contract of carriage between them. The carrier should contact and negotiate with the seller for the return carriage, instead of following instructions from the buyer, and then the carrier can legally claim against the seller based on the contract between them, and not the contract between the buyer and the carrier.
Bill of lading holder
6.22 The bill of lading holder is defined as a lawful bill of lading holder. In other words, the bill of lading holder means a person who obtains the bill of lading in good faith. A bill of lading holder is not a lawful holder if the bill of lading is not legally transferred. The transferability of a bill of lading depends on the character of the bill. Under the CMC 1992, the bill of lading includes the straight bill of lading that is not negotiable, the order bill of lading that may be negotiated with endorsement to order or endorsement in blank and the bearer bill of lading that is negotiable without endorsement.49 If an order bill of lading is transferred without appropriate endorsement, the bill of lading holder is not a lawful holder and its rights of suit may be affected unless the carrier accepts the bill. In PICC P&C Co Ltd Dalian Branch v Tarsus Shipping Ltd,50 the carrier denied the rights of suit of the bill of lading holder because the order bill of lading was not legally transferred. The Qingdao Maritime Court pointed out that the bill of lading was not a lawful holder and should not be entitled to sue the carrier. However, it was found that the carrier examined the bill of lading presented by the bill of lading holders and accordingly delivered the goods to them. Therefore, it was held that the bill of lading holders were entitled to sue the carrier because the carrier had recognised the legal status of the bill of lading holders through its performance, namely the delivery of goods to the holders.
Incorporation of charterparty into bill of lading
6.23 The consignee or bill of lading holder may be affected not only by the terms of the bill of lading, but also the terms of the charterparty under which the bill of lading is issued if the charterparty is incorporated into the bill of lading. Under the CMC 1992, when the clauses of a voyage charter are incorporated into a bill of lading issued under the voyage
charter, the relevant clauses of the voyage charter shall apply to the bill of lading governing the contractual relation between the carrier and the holder of the bill of lading rather than the charterer.51 However, the CMC 1992 does not clarify how a charterparty can be effectively incorporated into a bill of lading. The Chinese courts have restricted the incorporation of the charterparty into the bill of lading in judicial practice, particularly in the incorporation of arbitration clauses.
6.24 In 1995, the SPC established a reporting system for such issues as the acceptance of foreign-related economic dispute cases by a Chinese court, refusal to execute foreign-related arbitral awards, denial of and refusal to implement foreign arbitral awards, etc.52 According to the reporting system, with respect to any foreign-related, or Hong Kong, Macau or Taiwan-related economic or maritime dispute cases filed to a Chinese court, if the parties involved have included an arbitration clause in the contract or have concluded an arbitration agreement afterwards, and if the Chinese court considers the arbitration clause or the arbitration agreement null, void or unclear to the extent of being non-executable, the Chinese court, before deciding to accept the lawsuit filed by a party concerned, must report to the higher level court that covers its jurisdiction for examination; if the higher level court agrees to the acceptance, it shall report to the SPC on its examination opinions. Before the SPC gives its reply, the Chinese court may dismiss the lawsuit on an interim basis.53 Therefore, the cases in which the claims were dismissed because of the existence of arbitration agreements are not discussed and only the special cases in which the incorporation was not recognised under the reporting system will be discussed below.
Incorporation of law and arbitration clause
6.25 In shipping practice, the carrier can in certain instances neglect to state the names of parties to the charterparty or the date of the charterparty for incorporation even though the incorporation clause provides that “all terms and conditions of the charterparty, dated as overleaf, are incorporated”. In the view of the SPC, no charterparty can be incorporated in such situations because no charterparty can be identified without the information of the parties and the date of the charterparty.54 If the charterparty can be identified, the general words of an incorporation clause in the bill of lading are required for incorporation purposes. For example, “all terms and conditions of the charterparty are incorporated”. However, for incorporation of some special clauses, e.g. law and arbitration clauses as ancillary provisions, the general words of incorporation clause may not be sufficient for incorporation of them. Unless the incorporation clause expressly states that the arbitration clause, jurisdiction clause and applicable law clause of a charterparty shall be incorporated into the bill
of lading, those clauses shall not bind the holder of the bill of lading.55 This requirement has been applied to Chinese judicial practice.56 When the arbitration clause, in the view of Chinese courts, has not been incorporated into the bill of lading, Chinese courts may obtain the jurisdiction of the case.576.26 In judicial practice, the SPC requires that the arbitration clause in a charterparty shall be stated on the face of the bill of lading, not the reverse side, otherwise the arbitration clause cannot be incorporated.58 Furthermore, the SPC pointed out that an arbitration clause should be stated on the face of bill of lading and must be in a notable form different from other clauses so as to remind the bill of lading holder of the incorporation of the arbitration clause.59 Some maritime courts required the consensus of parties for incorporation of the arbitration clauses of the charterparty into the bill of lading. The incorporation of an arbitration clause may be denied because the bill of lading holder was not a contracting party to a charterparty, nor was he involved in the negotiation for the conclusion of the arbitration clause of the charterparty, so the arbitration clause was not the real intention of the bill of lading holder. The SPC has not given any clear answer to this point.60 However, the SPC has clarified that, even if the bill of lading holder was not involved in the conclusion of the arbitration agreement in the charterparty, if it expressly accepts the incorporation of clauses of the charterparty including the law and arbitration clause, the arbitration clause of the charterparty is effectively incorporated into the bill of lading.61 The SPC has also clarified that the arbitration clause incorporated into the bill of lading shall not bind the insurer who has obtained the subrogation right from the bill of lading holder.62
6.27 The CMC 1992 does not provide the same rule for incorporation of time charters into the bill of lading. In Shenzhen Cereals Group Co Ltd v Future E. N. E. (Shenzhen Cereals v Future),63 the Qingdao Maritime Court denied the incorporation of the time charter into the bill of lading. First, the Qingdao Maritime Court pointed out that whether the arbitration clause of the time charter had been incorporated into the bill of lading was a question of procedure. Chinese courts shall apply Chinese law for disputes over procedure. Therefore, it was held that Chinese law should apply to the issue of incorporation of the time charter into the bill of lading. Second, the time charter should not be incorporated into the bill of lading. In the view of the Qingdao Maritime Court, the time charter is a contract of employment of a ship. Its nature is entirely different from the voyage charter, which is a contract of carriage of goods by sea. The bill of lading is evidence of the contract of carriage of goods by sea. Therefore, the time charter as a contract of a different nature should not be incorporated into the bill of lading. Furthermore, it was pointed out that the arbitration clause in the time charter was a dispute resolution clause for any dispute of the employment of ship. This arbitration clause should not be used for any dispute arising from the contract of carriage of goods by sea evidenced by the bill of lading.646.28 Although the Qingdao Maritime Court in Shenzhen Cereals v Future gave a definite answer to the question on the incorporation of the time charter into the bill of lading, it may not have given appropriate reasoning. First, whether the arbitration clause of the time charter has been incorporated into the bill of lading is a question of fact, it does not relate to any procedural question. Arbitration or litigation is a question of choice of procedures, but not a question of procedure itself. It may be appropriate to apply the applicable law of the bill of lading to examine the validity of incorporation. If there is no agreement of applicable law, the court should identify the appropriate applicable law first. Second, the nature of the time charter has no relation to the question of incorporation. It is the parties’ freedom to incorporate any kind of contract into any other kind of contract if it is not prohibited by law.65 There is no such prohibition in the CMC 1992 or other Chinese laws. Therefore, like the incorporation of the voyage charter into the bill of lading,66 when a person accepts a bill of lading that is to be used with a time charter without any objection, the time charter should be incorporated into the bill of lading.