- Time and again, we come across Carriers or Cargo interests pursuing a Freight Forwarder (“FF”) for container detention and storage charges accrued due to the Shipper / Consignee:
- unable to load at load port within the time allowed
- not being returned to the empty stack within the free period allowed at the discharge port / destination (both delivered and undelivered cargo).
This is understandable given that the FF may be the closest party available and/or may be a better target than the shipper or consignee (especially when the shipper or consignee are facing financial difficulties while the FF remains a going concern).
- A FFi&ii generally act as agents and facilitate the movement of cargo for their clients (who may be cargo interests and / or other Carriers / Intermediaries). Some FF’s may also act in a dual capacity in that they may be acting as Principals for some specific parts of the carriageiii and for the others as Agents. Our article will focus on the FF’s in their role solely as agents.
- Absent any contractual provisioniv, the responsibility of a FF is very limited. This has been well described in the English case of Jones v. General Express as “willing to forward goods for you to the utmost ends of the earth. They do not undertake to carry you, and they are not undertaking to do it either themselves or by their agent. They are simply undertaking to get somebody to do the work, and as long as they exercise reasonable care in choosing the person to do the work they have performed the contract …”. Accordingly, a FF would generally not be liable for any losses arising either due to the fault or negligence of the cargo interests and/or the performing carrier. The FF could however be pursued if they were negligent, say by choosing the wrong contractor/carrier, or deliberately withholding information which they should have shared with their principals, etc.
- We now take each of the scenarios stated in 1 above:
- Load port detention/demurrage: Unless specific terms have been imposed by the Carrier and / or are applicable by the customv of the trade, a FF cannot be held liable for the actions of the Shipper. Accordingly, if pursued by a Carrier for unpaid detention or other charges, the FF is entitled to deny the claim and instead direct the Carriers / claimants to claim directly from the Shipper.
- Discharge port detention / demurrage: This could arise in the following situations:
- FF acting as delivery agent:
- When delivery order has been issued: It would depend on the custom of the trade including whether the FF’s delivery order is recognised in the jurisdiction allowing for delivery (in some jurisdictions only Container Operators can provide a delivery order to the consignee). If the FF’s delivery order is a valid document and if they (FF), in turn, sought a delivery order from the OC, we submit that they (FF) would be liable for the accrued detention/demurrage to the OC as they have a contractual relationship with the OC. The FF can similarly look at the actual consignee for the payment of these charges and should this not be possible (consignee is missing or unwilling to pay), they should then seek an indemnity from their instructing principal, and which should be available either under common law and or the agency agreement in place.
- When delivery order is yet to be issued: The FF although listed in the OC’s BL as the consignee, does not become the contractual party till they (FF) come forth to take delivery. In the majority of cases, the document issued by the OC would either be a Seaway B/L or a surrendered B/L (also known as Telex Release). This being the case, if the DO trigger is yet to take place, a FF may be entitled to deny liability given that they have still not declared their interest in the cargo. An argument can however be made that the FF is the correct contractual party if they (FF) had filed documents with the relevant authorities (say the customs) for the inward shipment (there is a requirement in many jurisdictions that the manifest needs to be filed prior to the vessel arrival and some FF file this directly with the custom authorities or request the OC to file them by providing the relevant details).
- FF acting as booking agent:
- Before delivery: Given that the OC’s Bills of Lading were issued for the shipment, absent contractual incorporation of terms (see 3 above), the FF bears no liability and therefore should direct the Carrier to claim from the contractual parties listed in the Bill of Lading.
- After delivery: In this case, once the Bills of Lading are surrendered for delivery or for a Delivery Order, the Bills of Lading become accomplished. This being the case, the Carrier should have ensured to collect the accrued detention charges prior to delivery or at least secured their interests by taking a deposit for the accrued and anticipated detention. Hence, it does appear to us that a FF is entitled to defend such claims given that they appear to have arisen solely due to the failure of the Carrier in taking adequate precautions. An argument could also be made that when the BL is accomplished, the original contract has been fulfilled and therefore FF bears no subsequent liability.
- FF acting as delivery agent:
- Risk Management:
- FF’s must be always on caution for any onerous terms imposed by Carriers/Principals . If pressured, it would be best for the FF’s raise this at the appropriate fora (FF Associations such as SLA, BIFA, FFFAI) so that this can be collectively dealt by the industry as a whole.
- FF’s must always have systems in place to conduct regular background searches of their customers (“KYC”) and prior to accepting any bookings from new customers or new engagements from Principals, have a system to onboard them. This should allow the FF to ascertain their counter party risks such that if they are pursued by OC, they can confidently pursue their counter parties (Principals or Shippers) for recovery.
- FF’s must also consider taking an appropriate liability cover for their role as agents and/or Principals with appropriate limitsvi so that in the event they are pursued, they have appropriate assistance from their liability insurers both in the defence and payment of any claims.
- Conclusion:
- Parties including OC’s will look at the weakest link and which in most cases would be the FF. That does not mean that they are the correct party being pursued and which would depend on the FF terms of engagement. Accordingly, a FF may not be the correct punching bag!
- FF’s should best deal with their exposures by understanding their counterparties (by onboarding new clients and conducting regular KYC’s).
- FF’s must also have in place an appropriate liability policy to assist them to defend such claims.
i. See article by Paul Budgen, Forwarding Agent or Carrier? Types of Forwarding Contracts (I).
ii. See also See also write up on Ocean Logistics by Catherine Emsellem-Rope and in particular buying from Freightfowarder in page 45.
iii. For instance, if the FF is involved in Trucking/Barging the container by themselves of if they issue their Transport Document as Contractual Carrier.
iv. It may be a term of the offer that the FF is jointly and severally liable as is provided in various Standard Terms and Conditions used by various Freight Forwarding Associations (Singapore Logistics Association Standard Terms and Conditions Cl 5, 18 and 26 and British International Freight Forwarding Association Standard Trading Conditions Clause 3, 19 and 20).
v. The author understands that there is a custom in some jurisdictions for the FF being responsible for the payment of freight with the Carriers.
vi. The limits provided for uncleared cargo are generally low (say USD 25,000 to USD 50,000 any one incident or occurrence and in the aggregate for the policy year) as Insurers do not appear to be comfortable to these risks. This being the case, it is best for FF to be pro-active so as to limit their exposures to be within their policy limits.