A consignor was fined by the maritime authorities for failing to declare flammable liquids dangerous for transportation when consigning their carriage. Then the logistics company consigned to carry those goods charged the consignor another 5,000 yuan of liquidated damages for the same reason. After that, the consignor sued the logistics company for a refund of the liquidated damages on the ground of "no punishment twice for the same offence." How should the people's court rule?

[Facts Review]

In May 2024, the consignor J Company booked cargo space with a logistics company for the carriage of one 20-foot equivalent unit (TEU) from Huai'an, Jiangsu to Zhaoqing, Guangdong, putting the cargo under the name of cement grinding aid. The contract between the two parties stipulates that if J Company gives false information about or fails to declare dangerous goods, it shall pay the punitive liquidated damages of 100,000 yuan per TEU. When the ship carrying the cargo passed through a wharf in Shanghai, maritime law enforcers found during the inspection that the actual cargo was unsaturated polyester resin. After sampling and testing, the cargo was confirmed to be class 3 flammable liquids dangerous for maritime transportation. Consequently, an administrative penalty of 60,000 yuan was imposed on J Company. The logistics company claimed, according to the contract, that J Company should pay it 100,000 yuan of liquidated damages for concealment of dangerous goods, 3,000 yuan of liquidated damages for the inconsistency between the goods and the name, and 200 yuan for the amendment charge. J Company admitted its concealment of those goods, but applied to adjust the liquidated damages due to high operation pressure. The two parties subsequently reached a solution, with J Company actually paying 5,000 yuan of liquidated damages. However, after making the payment, J Company went back on its word and sued the logistics company in the people's court for a refund of the liquidated damages of 5,000 yuan, claiming that it had already been fined by the maritime authorities and citing "no punishment twice for the same offence." After hearing the case, the people's court found that J Company's concealment of dangerous goods endangered many people's lives and properties at sea. The liquidated damages for this act agreed upon by both parties conform to the relevant legal principles regarding dangerous goods consignment, and help to urge consignors to make truthful declarations according to the law, thus ensuring transportation and public safety. And the amount of the liquidated damages is not significantly higher than the general standard in the shipping market. Therefore, the court determined the contract legal and valid. Fines imposed by maritime authorities are administrative penalties, which are different in nature from and do not conflict with the liquidated damages of a contract. Paying fines does not exempt one from the obligation to pay liquidated damages. Given that the amount of liquidated damages in this case is reasonable and the logistics company has significantly reduced the liquidated damages, the logistics company needn't return the money to J Company. In the end, the people's court dismissed J Company's claims. J Company refused to accept the first-instance judgment and lodged an appeal, but the second instance court affirmed the original judgment.

[Judge's Remarks]

1. It is a statutory obligation to truthfully declare dangerous goods. Whoever fails to fulfil the said obligation shall bear corresponding liabilities.

In maritime trial practice, cases arising from concealment of dangerous goods are common. From the legal perspective, it is a statutory obligation of the consignor to truthfully declare dangerous goods. If the consignor violates this obligation by concealment of dangerous goods, they must bear corresponding legal liabilities. In addition to administrative penalties, corresponding legal liabilities also include civil liabilities, and in serious circumstances, even criminal liabilities may be incurred. Specifically, in cases of maritime transportation relations like this one, concealment of dangerous goods is a serious breach of contract. Once such an act occurs, the carrier has the right to charge the consignor the agreed-upon liquidated damages, regardless of whether the act has actually caused property or life losses.

2. Concealment of dangerous goods poses numerous risks, the ruling on which reflects behavior guidance.

Some consignors deliberately misdeclare dangerous goods as ordinary goods in order to save on transportation costs and evade special regulatory requirements. Such acts are highly covert, but extremely harmful. Unreported dangerous goods, due to the lack of effective safety protection and supervision during transportation and storage, are extremely prone to causing serious accidents such as fires and explosions. It not only seriously threatens life and property safety at all stages of transportation and storage, but may also cause irreversible damage to the marine eco-environment. The ruling in this case clarified the behavior guidance that "whoever fails to make truthful declarations shall bear liabilities." It is aimed to curb the act of speculative businesses who attempt to cross the safety red line at "low costs," promote the formation of sound industry norms and security awareness, and strengthen the defense line of social public security.

[Deputy's Comments]

Ding Songbing, a deputy of the Shanghai Municipal People's Congress and General Manager of the Strategic Research Department of Shanghai International Port (Group) Co., Ltd.

Over the past five years, there have been multiple major accidents involving container ships carrying dangerous goods around the world. In particular, the serious explosion and fire that occurred on June 9 this year on the "WAN HAI 503" vessel near the coast of Kerala, India, has once again sounded the alarm for global shipping safety, especially the management of dangerous goods transportation. A recent report by the World Shipping Council (WSC) indicates that over 10% of containers inspected at ports have such defects as false declaration, improper packaging, or incorrect documentation  of dangerous goods, exposing systemic risks. In response, the WSC has launched an AI-based cargo safety program aimed at detecting and preventing the concealment or misdeclaration of dangerous goods.

This case is a typical dispute arising from a breach of contract due to the concealment of dangerous goods. The Shanghai Maritime Court determined after hearing the case that the concealment of dangerous goods is a serious breach of contract, regardless of whether the act has actually caused life or property losses. Although the amount involved in this case is small, the outcome is of profound significance. It is aimed to deter, regulate, and educate the consignor involved, warn the other consignors, make the entire industry fully aware of the serious consequences of concealment, foster sound industry norms and a safe environment, and reduce the occurrence of similar illegal acts.

[Link to Legal Provision]

1. Civil Code of the People's Republic of China

Article 119  A contract entered into in accordance with the law is legally binding on the parties concerned.

Article 176  A civil subject shall fulfill his or her civil obligations and bear civil liability in accordance with provisions of the law or agreements reached between the parties concerned.

Article 509  The parties shall perform their respective obligations in full accordance with the parties' agreement.

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Article 585  The parties may agree that if one party breaches the contract, it shall pay a certain sum of liquidated damages to the other party in light of the circumstances of the breach, and may also agree on a method for the calculation of the amount of compensation for the damages incurred as a result of the breach.

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Article 577  If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses.

Article 825  In undergoing the formalities for cargoes, the consignor shall precisely indicate to carrier the name of the consignee or the consignee by order, the name, nature, weight, quantity and the place for taking delivery of the cargoes, and other information necessary for cargo carriage.

Where a carrier suffers losses due to untrue declaration or omission of important information by the consignor, the consignor shall bear compensation liability.

Article 828  In consigning any dangerous articles which are inflammable, explosive, toxic, corrosive, or radioactive, the consignor shall, in accordance with the provisions of the State on the carriage of dangerous articles, properly pack the dangerous articles and affix thereon signs and labels for dangerous articles, and shall submit the written papers relating to the name and nature of the dangerous articles and the precautionary measures to the carrier.

Where the consignor violates the provisions of the preceding paragraph, the carrier may refuse to undertake the carriage, or take corresponding measures to avoid losses, and expenses thus caused shall be borne by the consignor.

2. Civil Procedure Law of the People¡¯s Republic of China

Article 67  It is the duty of a party to an action to provide evidence in support of its allegations.