An accepted definition of a merchant in normal parlance is that “A merchant is a person who buys and sells goods in large quantities for profit“..
When it comes to shipping jargon, the term Merchant is defined on a carrier’s bill of lading as per below examples..
Maersk, CMA CGM, Hapag Lloyd, Evergreen define Merchant as
“Merchant” includes the Shipper, Holder, Consignee, Receiver of the Goods, any Person owning or entitled to the possession of the Goods or of this Bill of Lading and anyone acting on behalf of any such Person.
MSC defines Merchant as
“Merchant” includes the Shipper, Consignee, holder of this Bill of Lading, the receiver of the Goods and any Person owning, entitled to or claiming the possession of the Goods or of this Bill of Lading or anyone acting on behalf of this Person.
Cosco defines Merchant as
“Merchant” includes the consignor, the shipper, the receiver, the consignee, the owner of the Goods, the lawful holder or endorsee of this Bill of Lading, or any other person having any present or future interest in the Goods or this Bill of Lading, or anyone authorized to act on behalf of any of the foregoing.
This definition of the term “Merchant” has caught the attention of the Federal Maritime Commission (FMC) who is soliciting public comment as to
- How VOCCs apply the term “Merchant” in their bills of lading;
- Whether the definition, as applied, subjects third parties who are not in contractual privity with the carrier to joint or several liability; and
- Whether carriers have enforced the definition of merchant against third parties that have not consented to be bound by, or otherwise accept, the terms and conditions of the bill of lading.
In a notice of inquiry (Docket No. 20-16) issued on the 7th of October 2020, has solicited public comment on the practice of vessel operating common carriers (VOCCs or carrier) defining “Merchant” in their bills of lading to apply to persons and entities with whom the VOCCs may not be in contractual privity..
Interested parties have been asked to submit comments on or before the 6th of November 2020 to Rachel E. Dickon, Secretary, Federal Maritime Commission (firstname.lastname@example.org)..
The background to this inquiry seems to emanate from information that the FMC has received from the shipping industry practitioners that VOCCs have defined “merchant” in their respective bills of lading to include persons or entities who have no beneficial interest in the cargo, but rather are providing service as third parties on behalf of someone specifically identified on the bill of lading..
As per the FMC, the concerns that they have received indicates that carriers may be enforcing the terms of the bill of lading (including, without limitation, collection of freight rates and charges, equipment charges, demurrage and detention charges) against entities who are not party to, and have not agreed to be bound by the bill of lading..
The Commission has been advised by 3PLs, truckers, stevedores, customs brokers and freight forwarders that carriers are seeking payment from them on the basis of the terms and conditions of the bill of lading..
Their argument is that, besides providing a service to the BCO, they have no connection or contractual obligation to the cargo or the shipment and therefore they should not be held liable..
As per the FMC, the purpose of the inquiry is to “determine whether such carrier enforcement (i.e., seeking to collect freight and other charges) is unfairly or unjustly wielded against third parties who have not directly contracted with the VOCC nor assented to be bound by the contract of carriage.”
Accordingly The Commission has called upon all interested parties, including VOCCs, shippers, ports, maritime terminal operators, ocean transportation intermediaries, truckers, stevedores or customs brokers to submit comments or to identify information relevant to the manner in which VOCCs have applied their respective definitions of “Merchant”..
As part of this inquiry, the Commission will also be contacting certain carriers to provide information about the manner in which they have defined and applied their definition of a “Merchant”..
My “personal opinion” in this case is as below..
A BCO almost always never does all the work involved in shipping their goods themselves.. There are several contractors, sub-contractors and vendors involved in the process of sending and receiving the goods, documentation, transportation, packing, warehousing, distribution etc..
As far as I have seen (at least in the countries that I have worked in and dealt with), none of these contractors or vendors would voluntarily or willingly take responsibility of paying the carrier’s charges, whether freight, demurrage, detention, storage, handling charges etc..
They will only pay these charges to the carrier, based on instructions and/or confirmation or payment arrangements from their principal (BCO)..
Also as far as I have seen, a carrier does not invoice any one willy-nilly for any charge because there are several parties involved and carriers actually prefer to bill one party (either the BCO or their nominated agent/contractor) based on the contract of carriage or who undertakes to pay the charges..
Usually when a carrier issues a delivery order (on the import side) or a bill of lading (on the export side), they do so on the instruction of the BCO..
It is normal for a BCO to send the original bill of lading with their agent to the carrier’s office for release of the delivery order..
This is usually accompanied by a letter from the BCO stating that ABC company is their nominated agent to clear and deliver the cargo to them and the delivery order can be released to ABC on payment of all charges..
Some carriers and BCOs may also have a standard arrangement that their cargo will be released to ABC company as their main agent till further notice so that they BCO doesn’t have to give this letter each time if they are a regular customer..
Based on above practices, I am not sure what circumstances that the complainants may have faced and how many times they have faced this, that it led them to raise this issue with FMC as a serious issue that warrants an inquiry..
If you are one such contractor, vendor or service provider involved in handling cargo on behalf of the BCO, have you ever faced such a situation..?? Would like to hear your views/comments on this issue..
*** End of Article ***