Precautions to take against loss due to abandoned cargo

I dont want you anymore

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

  1. 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 ;
  2. 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 ;
  3. 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

  1. 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..
  2. 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..
  3. This will be all the more important if the shipper and/or consignee are not a regular customer of the shipping line..
  4. Image for precautionIf 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..
  5. 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..
  6. 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..
  7. 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..
  8. 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..

Do you have any tips or precautions on above or any live case studies that you would like to share..

*** End of Article ***

15 thoughts on “Precautions to take against loss due to abandoned cargo”

  1. Hello sir,

    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.

    Regards
    Aman Shukla

    Reply
    • Hello,

      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”

      Regards
      Aman

    • 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..??

  2. 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.

    Reply
  3. 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??

    Reply
    • 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.

  4. 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.

    Reply
  5. Dear Mr Hariesh

    who have authorization to clear the cargo or back the cargo where its origin . the shipper or consignee or shipping line ?

    Thanks

    Hassan

    Reply
  6. 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.

    Reply

Leave a Comment


This site uses Akismet to reduce spam. Learn how your comment data is processed.

Share