In any normal year, hundreds of thousands of containers filled with cargo are abandoned all over the world.
While abandoned cargo could be quite stressful and considered to be a big headache for everyone concerned, a freight forwarder may be especially affected by cargo abandonment.
WHEN IS CARGO CONSIDERED TO BE ABANDONED…?
There are many reasons for cargo abandonment ranging from perfectly legitimate causes such as consignees going bankrupt, cargo discrepancies in quality or quantity, or other commercial disagreements.
This leads to the rejection of cargo at the destination port. These rejections may be caused by changes in regulations – often introduced at short notice, prohibiting the importation of certain goods together with regulatory checks or identifying non-compliant goods which cannot be imported.
Additionally, you may be faced with unscrupulous people using it as a means to get rid of garbage or illegitimate cargo too. Rather often, this is the case with low-value cargo such as used cars.
In either scenario, you, as a freight forwarder, may find yourself in a difficult position, and under the shipping lines “Merchant Clause”, the carrier is likely to pursue you for outstanding monies.
If you contracted directly with the shipping line and you are manifested as the shipper on the Master Bill of Lading and not as an “Agent“, the shipping line will be within their legal rights to claim for demurrage, storage, destruction and other charges of any uncollected cargo from you.
Do not assume that the shipping line will not have cause against you because you do not own the cargo or because you have been given reassurances by the shipper/consignee that the cargo will be cleared and that they will cover these costs.
Whilst the cargo owner is ultimately liable, you are responsible for these charges in the first instance in the same way that you are responsible for your clients’ cargo whilst under your care.
As the cargoes are often held at the terminal for several months, this can include high amounts of detention and demurrage. And it is not uncommon for shipping lines to pursue freight forwarders such as you for amounts in excess of $10,000…
WHY IT IS SO IMPORTANT NOW…?
The global economic shock has resulted in a sharp increase in the number of abandoned containers. This is only going to increase in the coming weeks and months as many consignees become unwilling or are unable to take delivery of the cargo.
And on the top of the slow down in international trade and income, you are at the risk of facing hundreds of thousands of $$ in losses!
The carriers are well aware of the implications and legal repercussions in dealing with this, so perhaps it is prudent to raise a warning to freight forwarders.
Dealing with abandoned cargoes can be both difficult, costly, and time-consuming. And you have to keep in mind that shipping lines have whole departments dealing with such situations.
SO WHAT YOU CAN DO …?
Luckily there are proven ways to prevent losses and defend freight forwarders’ interests. The majority of all abandoned cargo cases would only be a fraction of what is eventually paid if handled correctly.
A common mistake freight forwarders make is to not take immediate action, ignore carriers’ notices, and/or accept merchants’ reassurances. This will leave you exposed to some of the biggest claims there are. Time is crucial in these situations and each day that passes makes the cargo less collectable.
These 10 tips will help avoid losses due to abandoned cargo
1. It is imperative to review all contracts for ocean-related services and identify the obligations on the exporter to perform in contexts such as the coronavirus.
2. Do take the precaution to avoid being named as the “shipper/consignee” on the Master Bill of Lading. If you are named “as Agent”, it puts the shipper in a direct contractual agreement with the shipping line, who acknowledges this mutual arrangement via their booking form, email or similar. Then, the forwarder may have limited or no liability. In such cases, if in place, Liability Insurance cover can be invoked to cover the associated costs.
3. Forwarders should identify any “force majeure” clauses in their agreements, and preemptively send notices to customers invoking their force majeure right to be discharged from their obligations to perform.
4. Freight forwarders should always keep their customers up to date concerning any problems experienced by other stakeholders in the given supply chain, such as vendors, hauliers, lines, agents, and terminals. An open line of communication helps to keep the pulse on the status, make sure that customer’s losses and any failure to perform were caused by matters genuinely and reasonably outside its control.
5. Make the shipper/consignee aware they cannot abandon the cargo without any impact against them. You as a freight forwarder will want to pass all costs payable to the line onto the customer, that’s why you should keep the customer informed about all detention and hold the customer responsible for it.
6. Keep written records of communications and send regular notices holding importer and exporter to their contractual obligations. You need to maintain a paper trail to minimise the risk of claims and to evidence that you did everything reasonable to avoid the customer’s losses.
7. Pay close attention to any container overdue and incurring charges. Stay in close contact with your customers. The sign that the consignee received arrival notification but was not contacted for 1-2 weeks may be an early warning sign.
8. Do not delay. Most cases can be resolved quickly before costs escalate with pressure on the shipper/consignee. Remember that merchants rarely cooperate once costs mount and exceed the value of the goods! Our best advice in this situation is is to act quickly and contact the carrier, often, they are willing to come to a more commercially viable settlement. At the same time, contact insurers to see the extent of the cover provided.
9. Try to have the cargo unstuffed and placed in a bonded warehouse to save costs. Faced with abandonment, there are three most common options: to re-export the goods (which may include returning them to the original shipper), sell the goods to another party, or destroy/ donate/ auction them. It is important to identify a party who has the local knowledge to assist in dealing with abandoned goods.
10. Most importantly, avoid the temptation of doing nothing in the hope that the problem will resolve itself and you as freight forwarder will be kept harmless just because it is not your cargo.
About the Author
Lina Jasutiene is an entrepreneur, international shipping lawyer, an expert in marine insurance, and cargo claims with strong business acumen.
Prior to founding Recoupex to fix the cargo claims refund experience in global trade, Lina worked with one of the biggest shipping lines, where she witnessed first hand the implications of unrecovered claims for cargo owners and insurers.
Lina is passionate about merging technology and industry expertise to create a radically better customer experience and to substantially reduce losses for marine insurers and cargo owners.
Recoupex is a technology company helping customers globally to obtain the compensation they are entitled to when cargo is lost or damaged in transit.