Demurrage and Detention — Charges on Exported Containers

Demurrage and Detention — Charges on Exported Containers

Q: I thought the Aug. 23-30 column interesting enough to offer a comment. As a freight forwarder, I’ve been in the same situation as the party asking your advice.

(Editor’s Note: That column dealt with a maritime forwarder who was being dunned by an ocean carrier for destination detention charges accrued abroad on goods sold by its shipper “ex-works” California, with the original forwarder nevertheless paying shipping and destination terminal charges. I found the terms of sale inconsistent, but was unable to determine whether the forwarder was actually liable.)

I think the key bit of information missing is whether the forwarder also is acting as a non-vessel-operating common carrier.

If the forwarder is just a forwarder, providing booking and documentation services, than the carrier has no legal right to come to the forwarder for detention. The forwarder is in fact not a party on the carrier’s bill of lading, because it is a direct bill on behalf of the actual shipper. Normal bill of lading terms would allow the carrier to collect detention from either the shipper or the consignee, regardless of terms, but the forwarder making the booking is in the clear. He should simply refer the carrier to the shipper.

If, however, the forwarder is also the NVO — which seems likely here — the forwarder would be the shipper on the master bill and, depending on the terms on the back of the bill, potentially would be liable for detention.

This was the case in my experience and we ended up having to settle the amount with the carrier and pursue recourse with the shipper. I’m led to believe the forwarder in question also was acting as an NVO because of the comment about the forwarder’s payment of freight; it is common for the master bill of lading with the carrier to be prepaid by the forwarder/NVO while the forwarder/NVO’s house bill would be collect reflecting the Incoterms of the buyer and seller.

From my perspective. there are two lessons here: Have a trusted agent partner at destination that will effectively manage detention issues and ensure the forwarder/NVO’s own terms and credit policy guard against such circumstances. For example, if there is a house bill in this circumstance, then the terms on the back of the house bill should protect the NVO and provide for recourse with the shipper under these circumstances.

A: A useful point of view. About halfway through my original response I lost track of the fact that my original correspondent was a forwarder acting on behalf of a shipper, not the shipper itself. My confusion didn’t make much never-mind so far as my original response went, but it now becomes important.

On an “ex-works” sale under Incoterms, the seller’s responsibility ends at the time the seller places the goods available for pickup at the named point — here, in California. I couldn’t understand why the seller would be paying shipping and terminal charges beyond that point; and the same would be true for his agent, the maritime forwarder he hired, whose duties would encompass no more than brokerage of the beyond movement.

For that reason, I disagree emphatically with your remark that the ocean carrier could collect destination detention charges “from either the shipper or the consignee.” Not so: The shipper under ex-works terms is out of the picture by the time the goods get to destination, and the carrier may not look back to it.

But if you’re right, and the forwarder in my original question also acted as NVO, the original question makes a lot more sense.

As an NVO, my correspondent would have been party to the bill of lading as of the time the detention charges were incurred — it would have been the shipper in its relationship to the ocean carrier, while being the carrier in its relationship to the actual shipper and its maritime forwarder — and therefore could have been held liable.

And that’s the point. In an ordinary ex-works sale, the consignee would have been the one to arrange (and pay for) the ocean transportation, and therefore alone (or with its agents) would have been liable for charges accruing along the way.

If, however, the shipper’s forwarder was on the ocean carrier’s bill of lading as an NVO, it, too, could have been held liable.

In that case, your suggestions make sense. Otherwise, though, both the shipper and its ocean forwarder, having shut themselves of the shipment by the time destination detention became an issue, are immune from a claim for those charges.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.