Arrastre Operator's Duty of Care: Liability for Lost Cargo After Delivery

Asian Terminals, Inc. v. Daehan Fire and Marine Insurance Co., Ltd., G.R. No. 171194, February 4, 2010, clarifies the standard of care required of arrastre operators in the Philippines. The case involves a shipment of printed aluminum sheets that arrived in Manila with 14 of 26 boxes missing. The Supreme Court ruled that an arrastre operator cannot escape liability simply because a customs broker signed an equipment interchange receipt (EIR) acknowledging receipt of goods in good order. The decision also explains when the P5,000.00 per package limitation of liability under a Management Contract with the Philippine Ports Authority (PPA) does not apply.

The Facts of the Case

Doosan Corporation shipped 26 boxes of printed aluminum sheets from Korea to Manila on board the vessel Heung-A Dragon. The shipment was consigned to Access International and insured under an all-risk marine cargo policy with Daehan Fire and Marine Insurance Co., Ltd.

The vessel arrived on July 12, 2000, and the container van was discharged and stored in the Container Yard of the port under the custody of Asian Terminals, Inc. (ATI), the arrastre operator. On July 18, Access International requested a joint survey of the shipment at the place of storage, but no inspection was conducted. The next day, the customs broker withdrew the shipment and delivered it to Access International's warehouse in Binondo, Manila.

Upon inspection at the warehouse, only 12 boxes were accounted for—14 boxes were missing. Access International filed a claim, and the insurer paid the claim, then sued ATI and the customs broker as subrogee.

The Issue

The central question was whether ATI, as arrastre operator, was liable for the loss of the shipment despite the broker's acknowledgment in the EIR that the goods were received in good order and without exception. A related issue was the extent of ATI's liability—whether it could invoke the P5,000.00 per package limitation under its Management Contract with the PPA.

The Ruling: Arrastre Operators Must Exercise Extraordinary Diligence

The Supreme Court denied ATI's petition and affirmed the Court of Appeals' ruling that ATI was liable for the loss.

The Court held that the relationship between a consignee and an arrastre operator is akin to that between a depositor and a warehouseman. In performing its obligations, an arrastre operator must observe the same degree of diligence required of a common carrier and a warehouseman. Being the custodian of goods discharged from a vessel, its duty is to take good care of the goods and to turn them over to the party entitled to their possession.

The Court rejected ATI's defense based on the EIR. The signature of the broker's representative merely signifies that the representative frees the arrastre operator from liability for loss or damage while the goods were in the representative's custody after withdrawal. It does not foreclose the consignee's right to prove that loss or damage occurred while the goods were under the arrastre operator's custody, control, and possession.

Significantly, the consignee had requested a joint survey while the goods were still in ATI's custody. ATI and the broker ignored this request, and the broker withdrew the shipment the very next day without acting on it. The Court also noted a survey report showing that the broker's representative noticed a broken padlock on the container before withdrawal and requested an inventory, but ATI denied the request.

The burden of proof fell on ATI to show compliance with its obligation to deliver the goods. It had to prove that the losses were not due to its negligence or that of its employees. Merely showing that another party could be responsible was insufficient.

The P5,000.00 Limitation Did Not Apply

ATI argued that its liability should be limited to P5,000.00 per package under Section 7.01 of its Management Contract with the PPA. The Court disagreed.

The provision states that the limitation does not apply if the value of the cargo shipment is otherwise specified or manifested or communicated in writing together with the declared Bill of Lading value and supported by a certified packing list before the discharge or loading of the goods. The Court found that Access International had declared the shipment for taxation purposes and for the assessment of arrastre charges. The invoice, packing list, and other shipping documents were presented to the Bureau of Customs and to ATI for proper assessment. This satisfied the condition of declaring the actual invoice value of the goods.

The Court reasoned that what is essential is knowledge beforehand of the extent of the risk to be undertaken by the arrastre operator, as determined by the value of the property committed to its care. Having been duly informed of the actual invoice value and having received payment of arrastre charges based on that value, ATI could not insist on a lower limitation of liability.

Practical Takeaways

• Arrastre operators are held to the standard of care of common carriers and warehousemen. They must take good care of goods in their custody and deliver them to the proper party.
• An EIR signed without exception is not a blanket release. It only frees the arrastre operator from liability for loss or damage occurring after the goods leave its custody.
• The burden of proof is on the arrastre operator. It must prove that loss or damage was not due to its negligence or that of its employees.
• A consignee's written request for a joint survey is significant evidence. Ignoring such a request can weigh heavily against the arrastre operator in litigation.
• The P5,000.00 per package limitation does not apply where the cargo's value is declared. Presenting invoices and packing lists to customs and the arrastre operator for assessment of charges satisfies the requirement of communicating the value.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.