Abandoned cargo could be quite stressful for shipping lines, shippers, port authorities and forwarders alike and is considered to be a big headache for everyone concerned..
When a cargo is abandoned it causes severe financial losses to all parties concerned – seller, buyer, shipping line, freight forwarder, transporters, banks, Government etc etc..
It could also cause a rift in business relationships between a shipping line and their customer – whether it is an importer or a freight forwarder because it could create a blemish in the customer’s record with the shipping line..
When is a cargo considered to be abandoned..??
A cargo maybe considered to be abandoned
- when the consignee of the bill of lading does not take delivery of the cargo even after repeated reminders and notifications and the cargo lies uncleared eventually forcing the shipping line to consider the cargo as abandoned ;
- the consignee on the bill of lading is untraceable or non-responsive and the cargo lies uncleared eventually forcing the shipping line to consider the cargo as abandoned ;
- the consignee could give notification to the shipping line and/or port about his/her intention to abandon the cargo due to various reasons mentioned below
Reasons for abandonment of cargo
There could be several reasons for someone abandoning a cargo that they brought in for a specific purpose.. But chief among these reasons are :
- Consignee may be in financial difficulty rendering them unable to pay the duty, VAT, tax, port or other costs related to clearance of the cargo ;
- Consignee hasn’t received the proper documents to release and clear the cargo in time
- Cargo received is not the correct cargo and buyer does not want to pay the seller and doesn’t want to incur the additional cost of sending back the cargo
- Consignee may have some dispute with the seller/shipper and doesn’t want to clear the cargo until that is sorted
If and when a cargo is abandoned, one of the first affected and most vulnerable party would be the shipping line as they are sitting with the liability of paying for the port handling costs, storage costs, demurrage and detention, transportation costs and possibly unpaid freights..
Unlike a consignee, a shipping line cannot feign ignorance of the fact that the cargo is sitting at the port or in some yard under their control..
The line uses the port and yard facilities every day and more often than not, the port authorities will directly bill the line and the line is liable to pay the storage costs whether there is anyone to clear the cargo or not.. A line’s services could be stopped if the line doesn’t pay the port..
If it is containerised cargo, the line may have to pay for the lease costs of the container to the leasing company.. Even if the container is their own container, the shipping line will still have an equipment operating cost associated with it..
Remember, much like a ship, a container generates revenue for the owner only when it is in circulation..
So what can be done to avoid losses due to abandoned cargo
Other than the true owner of the cargo, no one else has any control over cargo being abandoned.. It happens all the time across the world.. But the shipping line, forwarder and shipper/consignee can take some precautions in the early stages of the booking to limit the damage/losses due to cargo abandonment..
So the old adage “Prevention is better than cure” applies in this case as well and the best thing that can be done to avoid losses due to abandon cargo is to take precautions to avoid cargo being abandoned..
Some precautions to detect and avoid cargo abandonment would be
- Shipping lines must ask the customer at the time of booking whether the cargo is going to be shipped as Freight Prepaid or Freight Collect (at destination or elsewhere).. If you are a shipping line and you don’t ask for this information at the time of booking, it would be in your best interest to do so..
- If cargo is to be shipped as Freight Collect or Freight Payable elsewhere, the shipping line’s origin port agent may take the precaution of requesting the destination port agent to get a written confirmation from the consignee that they will settle the freight when the cargo arrives at destination, prior to delivery..
- This will be all the more important if the shipper and/or consignee are not a regular customer of the shipping line..
- If there are any issues or delays in receiving this confirmation, it will at least set off some alarm bells at the origin port and the shipping line can discuss this with the shipper and implement precautionary measures such as asking the shipper to prepay the freight at origin..
- There are some early warning signs that a cargo could be abandoned and shipping lines need to watch for these signs..One such sign would be that, even after the shipping line sending the arrival notification to the consignee in time and after several weeks and months of notifications/reminders, the consignee has not made contact or made an attempt to clear the cargo..
- From a shipping line’s perspective if the cargo has arrived and the consignee is not showing any signs of clearing it within the reasonable average time frame say 7-10 days, all concerned parties such as shipper, load port agent and the shipping line must be notified immediately and try to get the release done ASAP..
- Load port agent will then try to contact the shipper to alert him to the fact that the cargo has not been cleared, just in case there are some disputes between shipper and consignee due to which consignee is not willing to clear the cargo..
- In this depressed global economy, financial difficulties can hit anyone at anytime.. Therefore a shipping line and/or their agent at the importing country must be in close contact with their customers and market at all times and be aware of any changes in the company’s financial and personnel situation..
We had sent CIF LCL Cargo to Miami (Florida) of approx 1000 USD, We ask buyer that shall we send you Invoices, Packing List and BL but at that time buyer refuse by saying that the shipment value is less than 25000 USD so all these documents are not needed by us. But after arrival of the shipment to the port clearing agent started asking for OBL and on immediate basis we send OBL via courier which has arrived to the buyer approx 30 days ago. From 30 days ago till now shipping lines has sent several mails and notifications to the buyer but buyer was not responding at all. Now from yesterday Buyer started conversation by saying I don’t need these goods so we are going to issue abandon letter to the shipping line because the demurrage charges is more than shipment value.
So now tell us what to do, who is responsible for all this issue Buyer or Seller, Seller has all proof to prove it’s legitimate how buyer has started making all these mess.
Kindly provide us Idea.
Once again, thanks Hariesh for this digest.
As someone who has assisted several shippers with cases of abandoned cargo,_(In Ghana, Mombasa, Chittagong) I see a few common threads.
Cargo abandonment occurs more in less developed countries and with traded cargo (as opposed to regular supply contracts).
Pacific Islands, East and west Africa and Bangladesh are the more common areas of this conundrum.
Caveat emptor. You as shipper really do need to follow good due diligence practices to avoid this fate.
The faster you deal with it the lower your loss.
Generally, your first knock is your lowest knock.
It may pay you in the end to get government-to-government diplomatic intervention to any impasse where authorities refuse to allow auction of cargo, destruction of cargo or repatriation of cargo.
Most cases arose from documentation issues- delays, incorrect, late framing etc.
Which meant the destination penalty charges of detention and demurrage and port storages escalated higher than the importer could still make a profit on the consignment and thus ‘disappeared’.
Every case I assisted with, the signs and symptoms were there before arrival at destination, but were overlooked, not seen or simply ignored in the hope they would be solved.
Which also means I have helped shippers retain on board and repatriate at costs that would prove, prevention is far better than the cure,
If you think return to shipper is costly, try curing abandonment!
Thanks for your useful insights as usual Andy.. All of what you have said is absolutely true.. Diligence is the name of the game..
I just have a quick question; if we are a freight forwarding at destination got nominated to release only D/O for consignee. Consignee decided to abandon the cargoes due to complication of L/C and quality of the cargo and could not agree on terms. Now dummerrag and Detention is so high, we as a freight on Master would we be charged back Dumerrage or Detention?? As shipping line cannot get from consignee? Freight was prepaid. This customer is not even us. It was nominated by my agent would this charge go back to original country?
This is Aman shukla
We are manufacturer of PP woven sacks and exporters of the same.
Duplicitous trade deal with a UK based company
The buyer has originally agreed to 100% payment against CIF Mombasa port as per Proforma Invoice. But the Buyer has repeatedly tried to side track and evade the payment as per agreed terms in Proforma Invoice despite our reminding him and despite container reaching the port. So we have waited for 40 days and we have sent many reminders regarding payment but they still did not pay us.
Now since it is past three months and the buyer is not making payment yet and not accepting the container of goods. we asked them if they can’t buy this Container they can provide NOC letter. but they didn’t respond on that as well. We also want inform you that we have got a new buyer But without NOC letter we can’t resell this container to new buyer because we haven’t got NOC letter from old buyer.
As the detention and demurrage charges are increasing day by day, so it has become a liability to us
So please help us and suggest us suitable course of action.
Who holds the original bill of lading, who is it consigned to and who is the current owner of the goods..??
We would like to inform you that we have surrendered original BL to Shipping company for BL amendment to New buyer. We have even made the payment of amendment charges to shipping company for the same. and the BL is “TO ORDER”
If the bill of lading is TO ORDER it is under your control and who you want to sell it to.. Why do you need an NOC from the original buyer, if they are not interested..??
I’ve also experienced the same thing with you and even once the buyer signed the NOC ,he has to submit the NOC to custom and this has truly become an obstacle when the old buyer is not cooperating.
Did you manage to solve your problem?
My advice is collect each and every piece of correspondence that has nay bearing on this consignment, no matter who form or to and arrange in chronological order and study for clues and leverage points. and roll up your sleeves and sit face to face.
The longer you leave this, the higher the costs rack up.
Myself spent almost 4 decades in this field and can vouch that there was no time left without the hassle of cargo abandonment.
To minimise the impact, we created a department only to follow up on the cargo which the release getting delayed / abandoned. Close follow up with shipper ( through POL) and consignee made some impact.
Also prior loading low value cargo, we used to take precaution such as obtain a written confirmation from the consignee that the cargo will be released up on arrival.
Simultaneously, pushing the port and custom authority to have the cargo get auctioned at the earliest after the allotted time of 3 months resulted some difference.
Once the cargo get auctioned seldom the shipping lines get any residue of the auction proceeds but will be relieved that the boxes will be in our hands for further use .
As Hariesh rightly stated, we make money only when the ship and containers are on move. The moment it started resting….lines will start loosing. Close follow up with the parties concerned can certainly reduce the impact of this menace.
Thanks for your tips Manoharan.. Quite helpful..
we are into consolidation biz and at time we face such problem because cnee finds destination charges are on the higher side. We provide all the charges at the time of booking however at destination cnee refuses to pay. If the invoice value is less than the destination and storage charges then Cnee will definitely not clear the cargo. Do you have any solution for this??
One way for collect shipment is to get a written confirmation from consignee that they will pay the freight once the cargo is arrived and ready to get cleared. if your loss is substantial you may approach the Chamber of Commerce, Though they are not directly involved, they may assist us to push the customer.
As a business that deals solely in the Pacific Islands, the biggest issue I found with abandonment stemmed from the dodgy collection charges from origin to pay for negative freight rates & rebates. I saw a lot of people in the Pacific hurt by this & a lot of cargo abandoned. As a result my terms & conditions on the back of our B/L have a specific clause that all costs of abandonment or destruction will be invoiced back to the shipper. Also, we never accept Frt collects unless we get prior approval from my destination agent. Lastly, I am very wary to carry personal effects & get payment first.
Thank you for your tips Paul.. Appreciate it and seems prudent.. 🙂 How do the shipping lines deal with abandoned cargo in the Pacific Islands or New Zealand..??
Dear Mr Hariesh
who have authorization to clear the cargo or back the cargo where its origin . the shipper or consignee or shipping line ?
Often when Customs detain a shipment the goods are left uncleared as the “importer” had intentions not declare the contents correctly for Customs purposes. Review the information that is declared on the Bill of Lading to verify that the consignee / shipper / notify party are displayed clearly and that you have contact details if there is a need to trace parties.
Thanks for this tip Shane..
Great as usual, thanks for this page.
Welcome Thales.. 🙂