How to mitigate risks against negligent behavior by a freight forwarder

Here is an actual case study from a reader seeking advise on how to mitigate risks against negligent behavior by a freight forwarder regarding their import shipment from China to South Africa..

We recently ran afoul of a shipping delay that resulted in the cancellation of one of our orders with our principal client because of our failure to deliver the goods on time.

Image for negligenceWe could not deliver the cargo on time because our container did not arrive as booked and was ultimately delivered 20 days behind schedule. Added to that we could not get any credible information from the shipping line or the freight forwarder appointed by us.

Here’s what happened :-

  1. The arrival notification issued by the carrier to the freight forwarder at the destination port noted that our container was on board, except that it was not.
  2. We then sent clearing instructions to the freight forwarder to clear our container that was ‘not on board’.
  3. We followed up with freight forwarder repeatedly (right up until the day that the container should have been delivered to our warehouse) as to the progress made about clearing our container (that was not on board).
  4. The freight forwarder consistently informed us that all was according to plan and that the container would be delivered shortly, except that our container was not on board.
  5. Eventually 11 days after receiving the arrival notification from the carrier, on the actual day that the container should have been delivered to our warehouse, the penny finally dropped for our freight forwarder and we were informed that our container was: you’ve guessed correctly “not on board”, and had been delayed.
  6. We then followed up with the freight forwarder as to the revised ETA for our container.
  7. The freight forwarder then provided us with 4 new arrival dates in as little as 3 working days, on the third working day the vessel arrived.
  8. This constant misinformation provided us by the freight forwarder, from informing us that our container was originally on track, to the day of delivery to only then inform us our container was not on board, to providing 4 new arrival dates in 3 days made it absolutely impossible for us to communicate an effective delivery date or redelivery strategy to our customer – in fact we looked like complete idiots given all the useless information provided to us by the freight forwarder.

Now comes the cherry on top.

We submit a reasonable claim, without mark up, for the loss of our order (cancellation) only to be advised that per the Bill of Lading and the freight forwarders terms and conditions, that they do not entertain any claim for whatsoever reason, no matter if due to neglect or other.

My question(s) are these:

  1. Does a freight forwarder have no responsibility for acts of neglect such as above ?
  2. How can insurance companies assist importers to mitigate against these risks ?
  3. Is ‘neglectful responsibility’ the new accepted norm for responsible ?
  4. Does this mean that no matter the circumstances, in the end, the customer must pay for negligent service and not be able to hold anyone responsible ?

Image for opinion about CIF termsWhat is your opinion on options available to the customer to mitigate against such risks of negligent behavior by a freight forwarder (or for that matter any of the other service providers)..

 

What did you think of the above article..?? Comment below..

27 comments on “How to mitigate risks against negligent behavior by a freight forwarder

  1. Co-incidentally came across 10 tips on how to Mitigate Supply Chain Risk on Inland Logistics website..

  2. David Wang says:

    Right Hariesh . . . . the thrust of the question, amid all the allegations of “negligence” of the freight forwarder and the ability of ANYONE to actually track a container that is purportedly on a ship per a “shipped on board” bill of lading . . . And it must be kept in mind that the person posing the original question is the seller, the shipper, and the party that is looking to be paid, or compensated, or reimbursed for a loss they themselves should have predicted if they were a savvy international shipper.

    This discussion has let to certain undeniable conclusions:

    FIRST: The Freight Forwarder was NOT negligent as a matter of law, They were not negligent, because the forwarder “reasonably relied” – a term of legal art – on the “shipped on board” Master Bill of Lading issued by the shipping line. The forward had no practical way of knowing the container was not in fact aboard the ship, because the document said it was. THIS alone is paramount to at least part of the question, but does not answer the question you posed in your response to Jitendra, “. . . how to mitigate such risks that maybe caused either by the FF or a Shipping Line or anyone else that may cause a loss to the exporter, seller, shipper or importer, buyer, consignee. However, the question itself is flawed, since in this instance neither the freight forwarder was not negligent and the shipping line is most likely protected against this type of occurrence through their Standard Terms and Conditions, clause 20 and 21. While it may have been courteous of the shipping line to amend their MBL, it is not required under the Contract of Carriage.

    SECOND: The shipping company’s web site tracking service will show the container on board, whether or not it physically on board, because that’s how the system works. The system is flawed, but that’s the way it is.

    THIRD: If a cargo surveyor had been engaged to stand there and verify that the container had indeed been “shipped on board” this could have been avoided. However, this would be costly and in the case of one container would not be cost effective, even though this would “mitigate” any damage.

    FOURTH: Shipping lines are protected per Clauses 20 & 21 of their Standard Terms and Conditions. Same goes for NVOCCs if they have proper standard terms in their House B/L.

    FIFTH: While most maritime insurance companies may not be willing to insure against this type of business loss (extra from the regularly insured maritime claims, laws of general average, etc., Lloyds of London will insure just about anything – from a movie star’s legs and face to whether or not a comet will fall out of the sky and ruin your child’s 5th birthday party . . . for a price. But to go to this extreme would not be cost effective for one container. However, some sort of general business loss insurance may mitigate the seller’s loss and an insurance expert would need to be consulted about that and nobody in this discussion has provided any specific answer as to this issue.

    SIXTH: A well-drafted Contract of Sale could effectively mitigate the seller’s loss and disclaim this type of liability, but few small companies go to the trouble or expense of paying a qualified lawyer who is familiar with shipping law and international trade to draft such a contract, but merely ship the goods based on a Purchase Order or some other type of emailed correspondence. That would certainly mitigate in theory, but may end up in a lawsuit over the contract.

    SEVENTH: While it goes far beyond “mitigation”, had the seller demanded payment prior to shipment, he would have suffered no economic loss. If instead he dealt on other terms, even a letter of credit that contained a “delivery by” date, he does so at his own peril. In mitigation using a letter of credit, the LC could be worded so that the window of delivery was within a 30 or more day period, but as a practical matter, the buyer would probably not agree to this, especially in this case where it seemed time was of the essence.

    CONCLUSION: In some instances, both shipping lines and freight forwarders can be held liable for their own negligence. However, this type of situation is not one of them and is protected by the shipping line and NVOCC’s standard terms. It must understood that in this instance negligence and “fraudulent” shipped on board bills of lading are not the issue. There was no negligence by the freight forwarder and the MBL was not fraudulent, it was incorrect . . . let’s not even go there -fraud is a very complex area of the law . . . bottom line, being incorrect does not equal fraud, but it may be negligent misrepresentation – back to the issues of negligence again and protection in this instance by the shipping line’s standard terms. Kind of like a cat chasing its own tail, huh? That’s life, there ain’t no denying.

    There is substantial international case law that may, to one degree or another, deal with circumstances such as this, for instance the Hague-Visby Rules, the Convention on International Shipment of Goods, UN Convention on Contracts for the International Sale of Goods, and other such international conventions and rules, along with various Sale of Goods Acts drafted by many countries such as India, USA, UK and Australia. But only the lawyers dwell on these and the average freight forwarder is not even aware that there is well-settled law on these types of issues, but instead shoot right of where the sun don’t shine in expressing opinions that should more rightly be answered by a knowledgeable lawyer.

    But the best take away after all this is, “seller beware” unless you get your money up front . . . that’s the best mitigation I know of in this case. And remember what it says on the US currency, “IN GOD WE TRUST” . . . all others pay cash.

    1. David, while I thank you for the elaborate comments you have given about how the client can mitigate such risks, it seems you may have misread the article as you are referring to the affected client as a seller, but he is in reality an importer/buyer..

      I agree with what CK Wong has said below “If you didn’t check what happen to the shipment after the ETA 1 or 2 days it may be forgiven, but brothers, after 11 days, could we tell our clients if the inaccurate info stated in the BL mean they won’t give a thing to follow up with POL/Port authority & liner?“..

  3. Jitendra says:

    Hi Hariesh,
    I would suggest that you remove comments which give incorrect information (like the importer being able to find out the actual status of he had checked the container status online). Reason being, such advise confuses a lot of readers and add to the overall chain of correspondence/ comments significantly, leading to other readers wasting a lot of time.
    One question I had was – is it possible for the shipping line to issue a B/L with a shipped on board date if the container had not been loaded at the original load port? And if the container was rolled over at a transhipment port, doesn’t the shipping line have the responsibility of informing the parties involved?

    Thanks in advance.

    Jitendra.

    1. Hello Jitendra.. Can you explain how you say “comments which give incorrect information (like the importer being able to find out the actual status of he had checked the container status online)“..?? There is nothing incorrect about this..

      Anyone can check the status of their containers once it has landed.. Most of the modernised ports have their tracking system which is able to give this information.. So there is no reason for anyone to be confused about this..

      Regarding your question, yes it is possible and has happened that the shipping line issued a SOB B/L but the container is not actually on board.. As FF Charles mentioned in his comments “It is a sorry fact of shipping. Mistakes happen. We are humans and there will always be some form of error.“..

      What we are discussing here is how to mitigate such risks that maybe caused either by the FF or a Shipping Line or anyone else that may cause a loss to the exporter, seller, shipper or importer, buyer, consignee..

  4. Phil says:

    I’ve found it’s often better, particularly for small businesses, to work with smaller freight-fowarders. The needs of small to medium sized businesses can often be forgotten in the midst of larger contracts with big multinationals I feel. The reason I say this is that I recently started using a freight forwarder and their approach, being a small, family freight forwarding company, matches that of my own business’ far better.

    1. David Wang says:

      I agree with you Phil. I have used large companies in the past and am treated like a number. We don’t ship much compared to the big corporations and we are put on last priority with the big freight forwarders. We now use Cathay Ocean Global Shipping Line, Ltd., a NVOCC freight forwarder located in southern California and have had flawless personalized service ever since on our shipments to and from all the China ports. The staff speaks Mandarin and operates on “Chinese time”, which is one day and four hours ahead of the USA, so things get done while the USA freight forwarders are still in bed or on weekend or US holiday.

  5. Thanks to everyone that has commented here..

    As John mentioned the conversation has digressed from the original issue with many involving General Average, Incoterms, buyer/seller etc..

    Let’s see if I can put it in to proper perspective

    There are two major players here that affect John’s business and that is the Shipping Line and the FF..

    Let us look at a few questions relating to this topic :

    1) Was the shipping line right in issuing an SOB B/L..??
    a. Probably.. It is possible that the container was actually shipped on board the mainline vessel (for transhipment somewhere) but was missed out at T/S port.. So on paper, this container is on board and the shipping line is correct in issuing a SOB B/L..

    2) Is it possible that the shipping line’s office at destination sent out the ANF without verifying if the containers are actually on board..??
    a. Yes it is possible as it would be a mammoth task owing to the volumes, and in some ports it may be the norm as the ANF is a service from the shipping line to the customer and not an obligation..

    3) When he receives the ANF does the FF have the opportunity to verify if the container is on board..??
    a. No.. The FF will get an opportunity to verify if the container is actually on board only once the ship discharges..

    4) So he waits…………………….in eager anticipation

    5) Once discharge is completed does the FF have an opportunity to verify if the container is actually on the ground in the port..??
    a. Yes, the FF can verify this from the port system or can also request the shipping line to verify this

    6) In this case, did the FF do that..??
    a. Probably not till the 11th day when the proverbial hit the fan.. So this is where the FF may be considered to have been negligent but only to the extent that he didn’t check it.. But remember, the damage (the fact that the container was not on board) has already happened, and the FF could not have prevented it from happening..

    7) Is it normal for people not to realise that the container is not on board..??
    a. It is not normal, but such issues have been known to happen and will happen again..

    8) Could the FF have been more attentive to his client’s requirements..??
    a. Yes he definitely could have, especially in light of the repeated reminders that John sent him

    So here we have established that the delay happened from the shipping line’s side..

    But a shipping line is protected or covered under their Liability Provisions for delays which may state (for example CMA-CGM)

    Delay

    The Carrier does not undertake that the Goods shall arrive at the port of discharge or place of delivery at any particular time or to meet any particular market or use and the Carrier shall in no circumstances whatsoever, and however arising be liable for direct, indirect or consequential loss or damage caused by delay. If notwithstanding the foregoing the Carrier is held responsible of any delay, it is hereby expressly agreed that the Carrier’s liability shall be limited to the ocean freight paid under this Bill of Lading for the delayed Goods, exclusive of local charges and/or demurrage.”

    So, in my opinion, the FF cannot be held responsible for the delay, but surely should be responsible for not being thorough in his actions to check the whereabouts of the container and keep his employer (in this case John) “properly informed”..

    This is also what John is stating..

    John, to answer the question, “How do you mitigate against such risks if it happens again..??”, I would go with Carlos’s statement

    As for insurance, yes, there is coverage for this kind of contingency: loss of revenue due to non-performance of third party. Please note that even with insurance coverage the complainant will end up losing some money (deductible) as well as having to sell the product to another customer or a salvage sale. Proceeds from any secondary or salvage sale are deducted from the insurance settlement.

    All of the above of course is the legal and technical side of it.. Commercially however, if John’s business is that valuable to the shipping line and/or the forwarder, they may make some adjustments to see how John can be compensated, but probably in the long run..

    1. David Wang says:

      Sorry to have to disagree with you Hariesh, but there are not “two major players here” . . . . . there is a very important third player and that is . . . . THE LAW. And in this instance, the law of negligence takes over and according to the law of negligence, at least under Common Law principles, in my humble opinion, the freight forwarder was NOT negligent because they “reasonably relied” on the Master Bill of Lading provided by the shipping line. There is no way the freight forwarder could have known the container was not on board the vessel until it reached its destination. If they had tracked the container, the shipping line’s web site would have shown the container on board, because the MBL said it was on board.

      Alexander Robertson nailed the point, and as far as I’m concerned this discussion should be ended on that note. As other commenters have requested, I would like to know how this customer resolves this situation, but I doubt we will ever find that out and it will just fall down the deep hole of customer complaints, blame laying and failure to fully understand the international shipping business. If he is smart, he will have a lawyer draw up a Contract of Sale that he uses with all his international shipments, and that contract can protect him ten ways to Sunday. But wait, that would cost money . . . . something most exporters want to make, not to spend. As the old saying goes, “You get what you pay for.”

    2. Hello David Murray, you say that the FF “reasonably relied” on the information provided by the SL.. Absolutely agree with that and as I have said in my comment

      3) When he receives the ANF does the FF have the opportunity to verify if the container is on board..??
      a. No.. The FF will get an opportunity to verify if the container is actually on board only once the ship discharges..

      4) So he waits…………………….in eager anticipation

      But could the FF have been more proactive in protecting the interests of this client..?? Absolutely yes.. Because once discharge is completed, the FF does have the opportunity to verify if the container is actually on the ground in the port.. He can verify this from the port system or can also request the shipping line..

      But his he doesn’t seem to have done and hence the frustration of the importer..

  6. I have read the comments with interest.

    Basically the shipping line/carrier has issued a fraudulent on board bill of lading. Surely they should have realised something was amiss at the port of load when the loading of containers into the slots did not correspond to the load plan. The whole purpose of a carrier sending out the ANF is to inform importers that their cargo is definitely on board the ship thus preventing the unnecessary customs clearance of cargo which is not on board a ship, thus saving the costs. The carrier sending out the ANF is not a legal requirement but is done as a service to the importer. Yes, the importer could have gone onto the carrier’s website to track the container but that would have yielded the same information as the ANF.

    When containers are stacked for export in the terminal, all containers for a particular ship are block stacked together. Was this container in the correct export stack at the port of load? If it was, why did it take so long to notice it had not been loaded with the other containers?

    As for insurance, this type of loss will not be covered under a cargo policy but can be covered under a credit guarantee type policy.

    This whole question of responsibility goes back to an importer not having a tight enough sales agreement with his end buyer whereby the actual end buyer can pull out of the agreement and preventing the importer from selling the imported cargo in order to mitigate the loss.

    As for the reference to Incoterms rules, I do not see where they would come in. The importer had appointed the clearing agent thus this was not what can be considered a string sale, but a sale which the importer entered into with the seller with the sole purpose of selling to the end buyer once he had received the cargo. I do realise that Incoterms can be used for local sales but this does not appear to have been the case in this instance. In a fashion, the buyer was acting as an agent on behalf of the end buyer with the “agent” landing up with the goods which the end buyer then refused to take delivery.

    It is my opinion that the carrier should at the least be held liable for the additional costs of the various VOCs which would be necessary to pass with the correct ship’s name. As for the amount, only cargo to or from the USA has liability linked to the US dollar. All other cargo will be subject to the Hague-Visby or Hamburg rules, all of which refer to the SDR (Special Drawing Rights). The Rotterdam rules are not as yet ratified nor in operation. Claims for delay may be limited to the freight amount paid.

    Chris, should there have been an engine failure and GA declared, the cost of repairs would not form part of the GA award, only the salvage costs. Engine repairs would have to be claimed by the ship from their hull and machinery policy. Should there have been damages to the ship resulting from the engine failure, those cost ill be added to the award.

    1. Hello Alexander, thank you for your comments as usual.. As I am not very au fait on the insurance side, can you clarify if this “credit guarantee type policy” can form part of a sales contract..??

      You also mentioned “This whole question of responsibility goes back to an importer not having a tight enough sales agreement with his end buyer whereby the actual end buyer can pull out of the agreement and preventing the importer from selling the imported cargo in order to mitigate the loss.

      In this case, the buyer and importer are the same.. Are such risks usually covered in a sales agreement..??

  7. John says:

    So it is us again the complainant, we think the conversation is getting a bit side tracked. We think that our case is grounded in neglect. Generally it appears that T&C’s related to freight forwarders and shipping lines may cover neglect in some form or another. In our opinion the question is: was the freight forwarder neglectful.

    Separate to this is the importers responsibility to meet the customer demands of getting their product to the market on time or other time as may be agreed upon. A whole industry exists after container delivery, which is complex and runs to agreed time schedules.

    It is common cause that variations in shipping occur and shipping lines provide for this in their T&C’s. However, if after asking repeatedly from date of receiving the arrival notification up until the day of actual container delivery (not vessel docking) the importer is repeatedly informed that delivery will occur as booked – but by now the readers know the outcome – then in my book someone has made a monumental clanger, just what on earth was this freight forwarder doing. In my book that is neglect.

    We are part of a responsible supply chain and like all responsible businesses we require credible information to exist. Business cannot exist in a vacuum and be held hostage by spurious information – there needs to be accountability for false and concealed information and the law, shippers and freight forwarders T&C’s recognize this to various degrees.

    Forget about the actual delay, it was the lack of proper conduct by an experienced freight forwarder who is paid a fee to perform their job responsibly that in providing us false information, not once but many times, resulted in the cancellation of our order, and this can be easily proven.

  8. Chris Scott says:

    Hi Hariesh, This opens up a huge debate because it is common in the industry to hold the agent liable for everything.

    This incident again points to the level of ignorance of importers and exporters as to their risks, responsibilities and what happens in the real world of international trade.

    I agree with most of what has already been said in comments already posted. In the absence of facts and details not included in the readers letter, just on the face of it, the freight forwarder performed no action that caused the delay. For the agent to be found negligent there needs to be factual evidence that his actions actually caused the delay. My assessment is that there was an error at load port (and this happens often) where the shipping lines’ records showed the container as having been loaded. Bills of Lading were signed, ANF issued and, no doubt, the container was manifested, so even the destination port would show the container on board. The only way the error could be discovered would be by the load port doing a physical sweep of the container yard and docks. The error was not discovered by the load port so it remains that only on discharge of the vessel at destination port, the error would be discovered. As suggested by one of the comments the agent should have referred to online tracking…. it would not have helped because all the info would still show the container on board. So my conclusion is that the forwarder is not negligent or liable.

    My comment on misinformation is that this is also not the agents fault. ETA means Estimated Time of Arrival. This is not fixed and firm. This ETA can change more than once in a day due to weather conditions in port and at sea, congestion in port, wind, strikes and equipment failure etc. The agent can only give information that is fed to him by the shipping line, ports and transporters and only acts as a messenger. There is no indication here that the agent willfully passed on incorrect information. This info can and does change frequently and the agent is not to blame.

    Agents revenue is miniscule against the value of shipments so it is accepted that there is no way an agent can be held liable for unrealistic amounts. Agents do try and mitigate their risk by purchasing liability insurance but their negligence or breach must be ruled first in a court of law. So it remains that the first line of protection for an agent are the standard trading terms and conditions.

    By its very nature, international movement of cargo carries inherited risk. Ships sink, catch fire, cargo gets lost, errors are made, shipping lines overbook, cargo is dropped, containers are offloaded at incorrect ports, containers fall off ships at sea, customs stop cargo, shipping lines never guarantee sailings, lines change schedules, skip ports, ports go on strike, ports are congested, trucks have accidents, get hijacked, truckers go on strike….. BUT, THE COMMON PERCEPTION IS “IT MUST BE THE AGENTS (WHO MAKE THE LEAST IN THE WHOLE CHAIN) MUST CARRY LIABILITY

    My advice to the reader is to gain more information from reliable sources, plan correctly, make provision for realistic time margins, set up proper sales contracts and always cover yourself and prepare customers to understand that your delivery dates can never be guaranteed….. ever!

    Do not assume that a forwarder is automatically to blame for every thing that goes wrong. Every importer/exporter is responsible to become familiar and accept the inherent risks and consequences associated to them. Speak to your agent and registered insurance provider and cover yourself for as many eventualities as possible.

    Just to end, what if the delay was not caused by an error but say engine failure at sea? NoT only would your reader have suffered the loss of his order BUT the shipping line would probably declare a general average and the reader would then have to pay the shipping for his share of repair and salvage costs of the vessel. Marine insurance mitigates this risk but many traders choose not to cover insurance, to save costs

  9. Kuldip says:

    In this case if Shipper needs to check online by him self that container was loaded on board or not. If online checking is not possible, he can also ask for the mail of on board confirmation of Shipping line from the forwarder. Also Freight Forwarder have to continuously track the shipper’s shipment and if there is any problem with the container loading same have to informed to shipper. With this Freight Forwarder and shipper both have correct situation of shipment and they can ask a valid reason for container not loaded on board. And shipper can provide that reason to his customer.

    This kind of problem occurs in many shipment, right way to handle this problem is to track the shipment on continuous basis and inform the situation to all concerned parties involved in it.

  10. John says:

    We penned the original article that Hariesh posted on his blog, thank you to everyone for their comments so far.

    Our experience with many insurance companies approached is that they do not offer insurance for this event, many an attorney claim they do but we have yet to see this. As to selling the cancelled goods on, as stock or otherwise, this unfortunately is not possible because we are bound under our customer standard T&C’s of contract that cancelled goods cannot be sold on for 36 months after a cancellation – But that’s that.

    Our shipment was confirmed to us with a booking confirmation, the number of which is the same as the MBL, my understanding is this is the start of the contract. The first breech was the failure to deliver as agreed (and yes we accept that there are all the Hobson choice T&C’s against this).

    We still had room to avoid a cancellation of our order by providing our customer with a credible delivery date that they could work with – a credible timeline/programme that they could incorporate into their scheduling. This was impossible to achieve because all information (delivery dates) repeatedly requested by us from the freight forwarder were incorrect. Our orders are generally all governed by ‘time is of the essence’.

    As a freight forwarder to rely on just a written date on a BOL or other and not question this appears to smack of negligence (in our opinion). As CK Wong notes why could the Freight Forwarder not check the credibility of dates, given that they, more than most, should know that delays and other variances can and do happen.

    The freight forwarder oversaw the clearance, they should have known that something was amiss when the container did not clear. We asked them repeatedly after this clearance date the status of our container but they maintained our container was on track – were they lying or just negligent. The other arrival dates provided again smack of shoddy and/or negligent service.

    This continual misinformation provided made it impossible to offer a credible revised delivery programme to our customer, which resulted in the order cancellation. Whether fault is with the shipping line or freight forwarder our contract is with the freight forwarder. The freight forwarder subcontracts to the shipping line. As such our frustration and request for redress is against the freight forwarder.

    The arrival notification (ANF) issued remains with the freight forwarder & shipping line and has not been surrendered to us, we wonder why not. Either way the freight forwarder maintains that the container was on board per the ANF. Either it was or was not, if the latter then somebody was lying from the start, which we think is worse than negligent.

    Thank you to Carlos, FF Charles and CK Wong for your comments. Sebastian as an unaffected commentator you appear a little hot under the collar…

    1. FFCharles says:

      Hi John,

      I agree that the situation is very frustrating. I can assure you, your freight forwarder is also very frustrated. When it comes down to it, sometimes shipping lines make mistakes.

      They load a wrong container under your container number and until the cargo is physically discharged, no one has any way of knowing any different. Online tracking would show your container moving, customs would show your container clearing, your freight forwarder would have zero knowledge of anything wrong until a truck arrives at the port to recover the container and it is not physically there. At that point, the shipping line will do a manual sweep to find where the container is at every port it could have been mistakenly discharged at or never shipped at all.

      I don’t think your forwarder is purposely making your life difficult or trying to disregard your cargo and customer. This is their job, this is why they are in business.

      It is a sorry fact of shipping. Mistakes happen. We are humans and there will always be some form of error. Unfortunately, this time it was with your cargo. I have been in the exact same position. It is the most frustrating thing that can happen. In our case, the container was never found, the cargo was reordered and our customer lost a client. The best we could do was keep our customer in copy with the emails to the shipping line to show them that we were actively searching for a solution to what happened. In the end, you have to account for these losses and move on.

      I really would like to hear the final verdict on this case. All of the opinions below are very interesting to read.

  11. Delan Premawardena says:

    I am not surprised of the delay, however I am surprised as to how this situation have been handled by all parties, firstly the Freight Forwarder is the responsible party to the shipper / consignee, who ever made the contract with them, as such the shipper has no direct contact with the carrier, Hence it his his responsibility to ensure that the container is on board the scheduled vessel, but in practical terms it is not always possible for a Freight Forwarder to guarantee that the container was loaded on board, However surely they should be able to check and get a confirmation as to whether it was loaded, there is no excuse to not knowing the details, the carrier cannot issue a BL with a false on board date, if they do you could take legal action with the carrier for false information and in-correct information, however this does not happen, (I have not experienced it in my career)

    A normal professional Freight Forwarder would always keep its client posted of changes that are beyond its control (such as this) and then they would submit the best next option to the client, in such instances the client cannot HOLD the Freight Forwarder responsible for delays, still if the client is adamant in making a claim such claims would be directed to the carrier by Freight Forwarder.

    The point that I don’t understand is ” The arrival notification issued by the carrier to the freight forwarder at the destination port noted that our container was on board, except that it was not” this is strange, under normal conditions arrival notices are sent only for cargo that is certain to be on board the arriving vessel.

    In conclusion, the clients case against the Forwarder is not strong enough, considering the way the Forwarder have handled the situation, I dont think in claim against them will make any good.

    My advise, ensure that you work with a reputed Forwarder, there is enough and more good Forwarders who would provide value added professional services.

  12. Carlos says:

    Hi Hariesh, I believe that additional elements are needed to properly evaluate this case. From the narrative I cannot be sure who was the contracting party of the freight service: the shipper, the freight forwarder, the consignee, other? Also, who received the original bill of lading? What does it say? It is clear that the complainant hired the FF but, is there a contract or offer/quote of services between the complainant and the FF?

    If so, then the claim against the FF can be guided by that document. A settlement, if any, will be, in the best case, for up to the value of the hired services, certainly not for the total lost revenue. Unfortunately for the complainant, ocean shipping is one of the oldest businesses in human civilization and, therefore, one of the endeavours with most case law experience making sure it is fully protected from just about every liability.

    In my experience, I’ve been more successful pursuing commercial settlements rather than outright claims but that is a benefit that comes from building a relationship with the shipping lines. You develop a rapport with someone within the shipping line who can guide the claim through the proper channels; otherwise, it sits at the customer service desk until your patience wears out.

    As for insurance, yes, there is coverage for this kind of contingency: loss of revenue due to non-performance of third party. Please note that even with insurance coverage the complainant will end up losing some money (deductible) as well as having to sell the product to another customer or a salvage sale. Proceeds from any secondary or salvage sale are deducted from the insurance settlement.

    1. David Wang says:

      The problem with this question is that it ASSUMES that the Freight Forwarder has been negligent. I disagree with this hypothesis and if one approaches this problem with the preconceived idea of holding the Freight Forwarder liable, they will ultimately fail on legal grounds, not the least of which is the forwarder’s and shipping line’s Standard Terms & Conditions.

      But let’s see what Shipping and Freight Resource had to say on a similar topic back a couple of years ago, And, after cleaning up some of the wording, here essentially what Hariesh said:

      ……………………………..,,,,,,,,,,,,,,,,,,,,,

      How Does a Buyer Verify Goods Were Actually Shipped?

      What happens if the nominated bank sends forged papers based on which the issuing bank releases payment to the nominated bank? If there was no actual shipment (with fake papers sent to the Issuing Bank), or if the goods shipped actually does not match the agreed specification of the goods?

      As the buyer, do I have any guarantee that:

      (1) The goods are actually shipped
      (2) The goods match agreed specification and quantity?

      If they do not match, as the buyer, what remedy does the buyer have?

      To answer the first part of the question about forged documents being sent to/by the bank – if the shipment involves a Letter of Credit (LC), after the shipment is effected, the documents as per the LC are to be submitted to the nominated bank for verification. The verification by the bank consists of only checking that the documents as required by the LC are submitted properly. The bank is not expected to verify if the cargo was actually shipped on the vessel mentioned in the bill of lading.
      The reasoning could be that, the bill of lading submitted to the bank is issued by a shipping line which is allowed to issue it only after verifying that:

      1) The container has been cleared by customs;
      2) The container has been physically loaded on the vessel/voyage and load port mentioned on the bill of lading.

      The bank is taking the bill of lading issued by the shipping line to be authentic and proceeds with the verification of the other documents (like the Commercial Invoice, Packing List, Certificate of Origin etc.) submitted as per the LC requirements.
      With regard to the specification of the goods, the bank does not see the cargo physically, therefore, they cannot and will not verify if the cargo specifications mentioned in the bill of lading or commercial invoice are physically correct. They will merely check if the description of the goods mentioned in the bill of lading and commercial invoice and other documents submitted match the description of the good mentioned in the LC. If there is a variance between these two descriptions, they will reject the wrong document.

      For the second part of the question, does the buyer have any guarantee that:

      1. The goods are actually shipped;
      2. The goods match agreed specification and quantity.

      How does a buyer ensure the above?

      If the buyer is unsure of the shipper, you can employ an independent cargo surveyor who can fulfill the services of being present while the cargo is being packed into the container, verify the quantity and specification of the goods and present that survey report to you, along with pictures.

      With regards to the cargo being actually shipped, you can also ask your surveyor to track the container from the time it is packed and enters the port and the surveyor can liaise with the shipping line to get you a confirmation that the container has been loaded on board. If until this stage everything has been above board, then the shipping line’s bill of lading showing that the container has been shipped is proof enough.

      If you still want to check further, you can track the container or bill of lading on the shipping line’s tracking system where, if you have the master bill of lading or container number, it will bring up the details of where the container/vessel is currently located.
      As you can see, things like this could be quite tricky and that is one of the main reasons many of the customers employ the services of a Freight Forwarder, as these are some of the services that a freight forwarder can provide.

      …………………………………………….

      My comment: There are extra charges for the use of a cargo surveyor, if he is to verify that the goods are loaded into the container, but that the container is actually loaded onto the ship. Few shippers are willing to bear this expense.

      Cheers, David Wang

  13. FFCharles says:

    It may not be the freight forwarders fault. If the forwarder received a bill of lading with a shipped on board date, they have no reason to not believe or question that the container was not on board. If you received a copy of the BOL, with the shipped on board date, you can not hold the forwarder responsible. Remember, they are the party in the middle. They are not the shipowner (in most cases), nor are they physically on the vessel to oversee your cargo. The only thing they can do is pass the information given to them to you once the cargo is loaded.

    In this case, you may have a claim with the ocean carrier. However, if you look at the terms on the first page of the bill of lading, points 20 and 21 state that as long as the cargo is delivered and no claim is filed within three days, the goods are considered delivered and any claim to damaged cargo is limited to $500. Keep in mind, this is on MOST bills of lading. Most bills also state once the ocean freight is paid, you will not receive a refund.

    Unless the forwarder is acting as an NVOCC and passed you a house bill of lading with a shipped on board date, you have no real claim with the forwarder in my opinion. I know it is probably not the answer you wanted to hear, but most forwarders are greatly protected against these instances. They have no real monetary gain from the cargo, only the transportation of it.

    If the forwarder is an NVOCC, at most you can refuse to pay the ocean freight charges and claim up to $500 in the value of the cargo for the cancelled goods. If you are in good standing and you are a large client, some may offer to pay for the value of the goods. However, this is completely subject to their own business practices and morals.

    I hope this was able to shed some light on the role of a freight forwarder. Much luck to your claim! Please update us on how this turns out.

    1. Sebastian says:

      FFCharles, . . . . . I agree with you. First, the freight forwarder was NOT negligent. The freight forwarder, who is a middle man in the transaction, is not negligent when they rely on the shipping line’s Master Bill of Lading that says “Shipped on Board”, The freight forwarder, even if an NVOCC issuing its House Bill of Lading, must take what is written on the Master Bill as the truth, since only the shipping line actually knows which containers have, and have not, been loaded on board. Of course, the shipping line limits its liability in their Standard Terms and Conditions, and so should an NVOCC, as FFCharles point out, usually in paragraphs 20 and 21.

      The bottom line is that this is not a perfect world and this sort of thing sometimes happens. Freight forwarders get caught in the middle of these sorts of things and are blamed for everything, even when it is not their fault. It is not their fault if there is a storm at sea, mechanical breakdown of the vessel, if the vessel is detained in an on-the-way or transloading port, or if the crew mutinies and takes the ship to Timbucktoo. Yet, the customer will always blame the freight forwarder. The customer can provide for this type of contingency in their Contract of Sale and by choosing the proper Incoterms® 2010 rule.

      The writer did not tell us which Incoterms® 2010 rule was used, so we don’t know when risk of loss and delivery occur. Also, he did not tell us what the payment terms were, but we can assume it was either Letter of Credit or some other form of COD payment . . . . . Not a good idea in shipments of small amounts of goods, which this must have been, because the writer references only one container. The writer also did not tell us what were the payment terms in the Contract of sale with the buyer.

      The seller in this instance will just have to find another buyer to whom to sell the goods and they must just write if off to the cost of doing business and blame themselves for not having a proper Contract of Sale that would have had a provision in it that protected them from this sort of thing.

      So stop beating on the head of the freight forwarder, or even the shipping line, and understand that this frequently happens in the real world and that the way to guard against loss is by having a well drafter Contract of Sale and perhaps a good insurance policy that would cover this sort of thing.

      It is time for the writer to accept responsibility for his OWN mistakes and naivety, for he will get no sympathy here.

      In direct answer to the writers questions:

      My question(s) are these:

      1. Does a freight forwarder have no responsibility for acts of neglect such as above?
      SINCE THERE WAS NO NEGLIGENCE, THERE IS NO “RESPONSIBILITY”, OTHERWISE KNOWN AS “LIABILITY”.
      THE LEGAL ELEMENTS OF NEGLIGENCE, ARE (1) DUTY; (2) BREACH OF DUTY; (3) CAUSATION; AND (4)
      DAMAGES. THE ELEMENT LACKING IN THE ABOVE SCENARIO IS “CAUSATION”. THE FREIGHT FORWARDER
      DID NOT DO ANYTHING THAT CAUSED THE DAMAGES. FURTHER, ANY “CAUSATION” WOULD BE LIMITED
      TO THE STANDARD TERMS AND CONDITIONS OF THE SHIPPING LINE AND THE NVOCC.

      2. How can insurance companies assist importers to mitigate against these risks?

      THIS QUESTION IS TOO BROAD TO ANSWER, INSURANCE COMPANIES DO NOT “ASSIST”, THEY INSURE
      AGAINST STATED LOSS. FOR A LARGE ENOUGH PREMIUM, INSURANCE COMPANIES WILL INSURE AGAINST
      MOST ANY TYPE OF RISK. THE QUESTION OF THE SELLER IS, HOW MUCH OF AN INSURANCE PREMIUM ARE
      YOU WILLING TO PAY TO INSURE AGAINST THIS TYPE OF OCCURENCE?

      3, Is ‘neglectful responsibility’ the new accepted norm for responsible?

      THIS QUESTION IS VAGUE, AMBIGUOUS AND UNINTELLIGIBLE. THERE IS NO “NEGLECTFUL RESPONSIBILITY”,
      WHATEVER THE WRITER MEANS BY THAT TERM, AS IT IS NOT A LEGAL TERM THAT CAN BE DEFINED.

      4. Does this mean that no matter the circumstances, in the end, the customer must pay for negligent service
      and not be able to hold anyone responsible ?

      THIS QUESTION MISTAKENLY PRESUPPOSES THE FREIGHT FORWARDER’S NEGLIGENCE.
      SINCE THE FREIGHT FORWARDER WAS NOT NEGLIGENT, SO “UNDER THE CIRCUMSTANCES”,
      THE QUESTION IS MOOT.

    2. CK Wong says:

      Freight Forwarder should online to track the container status and forward the schedule to their client instead of sitting there and wait for information from the liner until they found out the container was not loaded on the vessel. If your forwarding agent is the one who did not do the above job, you may get rid of them & I can introduce many good ones for you, in any country.

    3. Alex says:

      I tend to agree with FFCharles, unfortunately the statement below is very vital to your story, the freight forwarder is not the responsible party, the carrier may have booked the container in incorrectly at load port. As an importer/exporter there are risks you take, and unfortunately this is a rare occasion where it has gone against you. Good luck in the future!

      “The arrival notification issued by the carrier to the freight forwarder at the destination port noted that our container was on board, except that it was not.”

    4. CK Wong says:

      Those forwarders said that it is not negligent is equal to their service level has not reach the standard requirement yet & simply don’t follow any SOP, same to the liner. If you didn’t check what happen to the shipment after the ETA 1 or 2 days it may be forgiven, but brothers, after 11 days, could we tell our clients if the inaccurate info stated in the BL mean they won’t give a thing to follow up with POL/Port authority & liner? Even the container will not be coming in your whole life? Again, do something Bro instead of sitting there & just push all the job back to the one piece of paper. Shipper & consignee don’t need any forwarder if they able to ship their cargo by their own. Forgive me if you think that my message is harsh.

    5. David Wang says:

      Mr. Wong, you seem to have missed the point others have made, and that once the MBL states “shipped on board” there is no way for anyone to know the container is not actually on board until it reaches the destination port and there is no record of that container number being off loaded. There simply was no “negligence” of the freight forwarder. It is as simple as that.

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