Even as the world of shipping and trade continues to battle with exceptionally high freight rates, cargo rollovers, container and space shortages, fraudulent freight forwarders and their scams seems to be raging on..
Below is a live case study from the USA which I received from a reader, which I am opening up to my readers to comment on..
I am dealing with an issue which isn’t within my normal purview and was hoping you had some quick and easy insight for me.
I have a client that was utilizing a freight forwarder (licensed as NVOCC in the U.S.) to bring goods over from Korea to Mississippi.
As I understand the situation, the forwarder was arranging for transport at all points and retained an over the road carrier to haul the goods from a rail yard in Memphis, TN to the ultimate location in Mississippi.
After 22 shipments it came to light that the forwarder never paid the carrier and now the carrier has sued both my client (the consignee/buyer) and the forwarder who appears to have flaked.
My client has paid the forwarder for the shipments including the road haul costs.
The questions are
- Assuming a contract which dictates that the forwarder would be responsible for payment to all intermediary carriers, is the forwarder still the liable party or is there exposure for the consignee?
- If there is exposure for the consignee then is there recourse against the forwarder’s bond?
We all know that there are certain risks and liabilities faced by a freight forwarder in this business but we also know that the liability of a freight forwarder is an extremely complex issue to discuss purely on paper as each case could be different..
The liability of a freight forwarder is intrinsically related to the role of the freight forwarder towards their principal and the third party in the obligation..
What is your opinion of the above case and how should this be handled..
It depends on the role the freight forwarder played in the case. If the forwarder acted as the consignee’s agent to arrange the transportation on behalf of the consignee with the carrier whose bill of lading showing the freight forwarder only as Notify Party, then the carrier could sue against both the consignee and freight forwarder, and the consignee can bring the freight forwarder to the court in the same action. But however, if the freight forward acted as NVOCC issued its own bill of lading and then contracted with another NOVCC or a vessel carrier. Even though in the rear case that the carrier’s bill of lading shows the consignee as the actual cargo recipient, instead of the freight forwarder in most cases, the carrier can only hold the undelivered cargo for the payment but not be able to claim the consignee either for the uncollected freight or the cargo that has been delivered.
Freight Forwarder is responsible for all payments to the Carriers, now shipper can hold the Freight forwarder only in case if they have done proper leagle agreement with Freight Forwarder for his services.
Liability towards payment of ocean freight to ocean carrier, to a large extent depends on who has issued bills of lading for these shipments. If BLs are issued by forwarder – HBLs (and MBLs are in the name of the forwarder). In this case the contract of carriage is between carrier and forwarder and carrier can not hold recievres of cargo (ultimate consignee) responsible for payment.
The freight forwarder is responsible for all the costs and fines by the shipping line. The end client has done all the payments. Understand that the role of freight forwarder is a complex one however always there should be a written proof of all the things with both the parties. So that there is no case as such in future.