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HomeCase StudiesCan a shipper put a hold on a container under CIF terms..??

Can a shipper put a hold on a container under CIF terms..??

Can a shipper put a hold on a container under CIF terms..??

Question from a reader (Shetty):

Image for opinion about CIF Terms

Under CIF terms can a shipper put a hold on a container at transhipment port till an alternative buyer can be found as he fears that the original consignee might not accept goods..??


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Hariesh Manaadiar
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  1. I concur with Balaji. As long as the OBL is still with the shipper, then he has hold on the cargo. However not call carriers will agree to hold back the container at a transhipment port. But holding the container at the POD is possible.

  2. Muhammed, the shipper can only do that if he still holds the original Bs/L. If the consignee has the originals, the ship must release the cargo, plus if the shipper is delaying the delivery, those cost will be for his account. If the shipper stops delivery, why must the consignee pay the charges if the consignee has the documents of title?

  3. Whenever two companies make an agreement to sell and buy, there are three different contracts into which the parties enter. The first is the seller buyer scenario where the seller agrees to provide/manufacture a commodity at a set price with place of delivery agreed. Then there is the payment agreement, how the buyer is going to pay the seller for the product and finally the insurance of the product once it is being transported. All three need to be in place.

    When agreeing the provision of the product, the parties agree under which Incoterms rule the contract will be put in place. In the case in question, the seller agreed to provide the commodity, appoint and pay for the carriage to the agreed port plus pay for the insurance, this insurance having to be at a minimum of CIF value plus 10% under ICC “C” or the equivalent, with a reputable insurance company.

    Under CIF Incoterms rules, the cargo is under the risk of the buyer when it has been stowed and secured on board the ship. Although the seller has appointed the carrier and is responsible to ensure the cargo is delivered to the port of destination, he has no more risk in the cargo and has in effect handed over the cargo to the risk of the buyer.

    Depending on the payment terms agreed upon, the seller is at liberty of holding the original bill of lading until he has been paid. Ownership passes on payment for the cargo although risk transfers when the cargo is loaded and secure on board the ship.

    When the seller contracted the ship to carry the cargo, it was to transport it from port A to port B. Any interference of this contract of carriage by the seller can be a breach of contract between the seller and the buyer. As the seller in all probability is still holding the original bill of lading and is the party that contracted the ship to carry the cargo, he is at liberty to instruct the ship how he pleases, but there will be consequences.

    The cargo should be shipped to the final port of discharge as per the bill of lading and the cargo held there pending payment and acceptance of the cargo by the buyer and should the buyer not take delivery within a reasonable time, the seller can then do what he please with the cargo, taking into consideration the fact that any diversion to any other port will require permission from customs noting that customs are aware of the cargo due to it being on the ship’s manifest.

    The insurance taken out by the seller will cease, there being elected storage even at a place prior to the destination port. Should any damages occur to the cargo, it will be at the risk and expense of the seller. Even if the insurance did not lapse, it was taken out on behalf of the buyer giving the seller no insurable interest in the cargo from the time it was loaded and stowed on board the ship, even though the seller has taken the action which he elected due to non payment.

    Remember also it was a fear of non acceptance, not an actual non acceptance. Sellers should take out credit guarantee insurance to cover fears of this type.

    A final point is that CIF is not an Incoterms rule applicable to containerised cargo, only break bulk or bulk on a port to port basis. When you look at the rules, it states not applicable for containerised cargo and suggests a more suitable rule by used which in this instance will be CIP.

    As can be seen, this is a very complicated subject and each case needs to be studied on its own merits.

  4. Yes, because he holds the rights and obligations of the shipment under the terms os sale until the shipment arrive to the destination port ans is claimed showing his rights by the consignee

  5. if the bl is under original, yes the shipper have the right to on hold the container of the shipment maybe due to the consignee do not pay the goods value to the shipper. if the shipment is under telex release, then will
    not be able to on hold the container anymore.

  6. I would request that the issue is explained in more detail which will help us to decipher the actual issue. Normally if it is an L/C transaction where Bank is guaranteeing payment, I don’t think there will be any issue of default provided the documents are proper as per the Banks requirement but if this transaction is not financed by Documentary credit or alternatively document against payment / Document against collection / cash payment is involved where there is no bank guarantee and the B/L is To order and not straight it should be possible.

  7. Assuming its a straight Bills of lading not involving any l/c or bankx and in the event of the shipper still in possession of OBL’s , guess he can still ask the containers to be held at T/S port , while taking responsibility for all cost and consequences. !!!

  8. Yes shipper can ask shipping line to hold the consignment at transhipment port. Shipper may have to pay storage charges, if any, to hold containers at transhipment port.

    Ramana Murthy RSV


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