A freight forwarder’s liability on uncleared cargo – live case study

Here is a live case study about a freight forwarder’s liability on uncleared cargo for which the reader is seeking your opinion.. Since this is a current situation, the reader has not disclosed names etc..

Below are the salient details of the case..

  • Master bill of lading of shipping line consigned to freight forwarder
  • House bill of lading of freight forwarder consigned to actual receiver
  • Freight forwarder collects their monies due and their original House bill of lading from actual receiver
  • Freight forwarder pays shipping line their monies and surrenders original Master bill of lading to shipping line
  • Freight forwarder issues release letter to shipping line to grant release to actual receiver
  • Actual receiver collects Delivery Order from shipping line

After taking delivery order, the actual receiver has gone AWOL and has not taken release of cargo and container(s) have gone into serious demurrage and storage situation.. Cargo is perishable and may have become unusable..

Shipping line is claiming the demurrage, storage charges from the freight forwarder and holding them liable.. Actual receiver is considered absconding..

What is your opinion in this case..??

  • Is the shipping line justified in holding the freight forwarder liable, even though the shipping line issued the Delivery order to the actual receiver..??
  • Does the freight forwarder have a case to waive their liability..??
  • What options does the freight forwarder have to avoid this liability..??

Do share in the comments below..

Coincidentally I received this question hot on the heels of my recent article on Risks and Liabilities of a Freight Forwarder..


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40 comments on “A freight forwarder’s liability on uncleared cargo – live case study”

  1. By David Ball Reply

    Based on the details above.
    The contract of affreightment is between the shipping line and the freight forwarder. This is the legally binding contract under which the consignment is made.
    That the line issued a delivery order to the actual receiver is beside the point.
    The shipping line will chase the freight forwarder, as they may have money and assets.
    The I hope that the freight forwarder has his liability insurance well in place, unrestricted cover, and paid up.

  2. By Ricky Reply

    As per practice, international F/F can not release their liabilities even all doc were cleared both ends,
    the only way to do is rushing shipper/exporter at origin, see the HBL terms, please

  3. By Ricky Reply

    Please consider what is International F/F.
    If base on your idea to put the actual consignee in MBL w/o HBL issue,
    then you are not the F/F, only a local forwarding agent, as you are selling S/line services not y our own networks services.

  4. By Satnam Singh Grover Reply

    Consignee must have done custom declaration and applicable import duty must have been paid.
    Final consignee must have realized the damages while processing / taking final delivery from customs / port authorities, in this case they must file the insurance claim and arrange immediate survey and lodge the claim on carrier.
    Claim should be processed per HBL and then to carrier.
    Since container is damaged Shipping line should not inflict any demurrage etc. they need to exhibit accountability as well, Carrier is responsible for safe and sound delivery of goods to consignee and in case of any in-transit damages, Insurance claim to be processed as per Inco Terms and all stake-holders must support to recover the loss.

  5. By Irshad kalim Reply

    As per practice the freight forwarderis not responsible for demurrage nor container charges because freight forwarder has already surrender master OBL to shipping line, collecct house OBL from actual receiver , issued released letter to shipping company in favor of actual receiver and the actual receiver has already collected the dlivery order from shipping lines.

  6. By Rameshwar Singh Reply

    From the above it appears that DO is issued to consignee and the containers are in the Custody of port authority who is Custodian of goods on behalf of Customs and if this cargo is not lifted by actual consignee within specified time frame it will be auctioned as per Customs and port rules to recover the dues. This is general procedure.

    The main question is how FF can avoid this risk of detention and demurrages claimed by S/line from him? Logically the S/line and FF both are rendering service to shipper and consignee and they are not the owners of goods. In such situations FF (s/line in case of direct contract) must have proper clause in contract with shipper/receiver that in case receiver fails to take delivery of consignment or delay in taking delivery and demurrage detentions caused, will be paid by shipper.

    The point that s/line asking F/F to pay damages may be logical only if they have such contract otherwise both are on same page. Also one need to see the occurrence of activity in whose hands and when to clearly hold the concerned party responsible.

    This is a practical problem but it is important to take care and avoid this risk at the time of signing the contract as these are results of inactions of the receiver of goods not the FF/Sline.

  7. By Abraham Billa Reply

    – Yes,Yes… shipping line should put the liability on Freight Forwarder if Freight Forwarder name appears in the Mater Bill as Shipper and Consignee. Actual Consignee at the destination port has nothing to involve with Shipping Line,
    -Kindly,The freight forwarder has the right to wave the liability
    -for future/coming shipment the FF should avoid to address the shipment to his name,and also avoid to be the notifying parties….

  8. By Maria L. Reply

    Even in the case where freight forwarder is not mentioned on BL, shipping line eventually has the right to turn against us as the entity who has engaged the booking.
    Actual case, still ongoing:
    – MBL issued (no HBL), with merchandise supplier as shipper and actual importer as consignee
    – MBL forwarded to consignee in due time
    – the CEO and owner of consignee company dies quite suddenly
    we are told his accounts are frozen by judicial order until succession matters are settled
    Time goes by, demurrage and storage costs pile up to several tens of thousands USD.
    Local customs at POD have the right to seize the merchandise after 40 days but they are rarely compliant. It is more often 6 months before they take action. Then merchandise is then auctioned and proceeds are used to cover customs costs. The shipping line does not see a penny of it and therefore keeps knocking at consignee’s door until they realize they are not getting anything from them and then…they come knocking on the forwarder’s door.
    We are in this situation with two major shipping lines now. Our legal services admit they do have the right to do this. Our efforts now are to:
    – prove that shipping line has not sufficiently informed / approached consignee to make him take delivery of the merchandise and settle its demurrage invoices
    – prove that consignee is currently a functioning entity able to face the charges
    – prepare for the very likely final negotiation where we will end up paying part of these demurrages

  9. By ML Reply

    Even in the case where freight forwarder is not mentioned on BL, shipping line eventually has the right to turn against us as the entity who has engaged the booking.
    Actual case, still ongoing:
    – MBL issued (no HBL), with merchandise supplier as shipper and actual importer as consignee
    – MBL forwarded to consignee in due time
    – the CEO and owner of consignee company dies quite suddenly
    we are told his accounts are frozen by judicial order until succession matters are settled
    Time goes by, demurrage and storage costs pile up to several tens of thousands USD.
    Local customs at POD have the right to seize the merchandise after 40 days but they are rarely compliant. It is more often 6 months before they take action. Then merchandise is then auctioned and proceeds are used to cover customs costs. The shipping line does not see a penny of it and therefore keeps knocking at consignee’s door until they realize they are not getting anything from them and then…they come knocking on the forwarder’s door.
    We are in this situation with two major shipping lines now. Our legal services admit they do have the right to do this. Our efforts now are to:
    – prove that shipping line has not sufficiently informed / approached consignee to make him take delivery of the merchandise and settle its demurrage invoices
    – prove that consignee is currently a functioning entity able to face the charges
    – prepare for the very likely final negotiation where we will end up paying part of these demurrages
    So, watch out, freight forwarder is not free of danger just by not being mentioned on the BL.

  10. By moses Reply

    what prompts the shipping line issue MBL to forwarder instead of shipper/receiver directly?

  11. By Ugochukwu Reply

    Hi Hariesh,

    I align with your view on this issue totally.

    What would you advise in a case where the Actual Receiver of a shipment has an agreement of 21days free demmurage concession. Now at the POD the shipping line says only 5days free is applicable for the OBL, noting that the shipper did not trigger the 21days concession from Origin. Can this be reverted and yes where should the resolution be sort.

    Ugochukwu

  12. By TITH sela Reply

    1) Yes, shipping line should put the liability on Freight Forwarder if Freight Forwarder name appears in the Mater Bill as Shipper and Consignee. Actual Consignee at the destination port has not thing to involve with Shipping Line, this case. Even Freight Forwarder has released the container to Actual Consignee and Actual Consignee has got Delivery Order from Shipping Line, The Contract of Carriage is between Freight Forward and Shipping Line, not between Shipping Line and Actual Consignee. Shipping has issued Delivery Order to Actual Consignee by following Freight Forwarder’s instruction only , it doesn’t mean Shipping Line agreed accept the shifting of Liability from Freight Forwarder to Actual Consignee, in the contrary, name Freight Forwarder as Shipper and Consignee is still appears in the Mater Bill Lading.

    2) Freight Forwarder has no case to Waive their liability since the contract of carriage is between Shipping Line and Freight Forwarder, not between Shipping Line Actual Consignee.

    3) To avoid liability like this case, Freight Forwarder should consigns Actual Receiver as Consignee in Master Bill Of Lading. Freight Forward should hold the OBL until Actual Receiver has paid all charges at POD before lease OBL to Consignee at POD.

    4) Freight Forwarder should has collected all due and charges from customer, Freight Forwarder should clear the container and keep it in their custody to avoid storage and demurrage charges from Shipping Line. Freight Forwarder should inform Consignee and to charge them all extra expenses when they take their container.

    • By ML

      Hi Tith,

      On point 3 you state:

      QUOTE
      To avoid liability like this case, Freight Forwarder should consigns Actual Receiver as Consignee in Master Bill Of Lading. Freight Forward should hold the OBL until Actual Receiver has paid all charges at POD before lease OBL to Consignee at POD.
      QUOTE

      How is this feasible? The BL is needed to go through customs procedures, and only once cleared can the consignee take delivery of the container and stop the counter.
      Let’s admit that consignee can clear the merchandise without the BL….he will still not be able to pay demurrages and storage in full until he shows up at shipping line with the BL. Am I wrong? Please advise.

  13. By Andrew Reply

    The liability of the forwarder is very much engaged, due to the fact that they are consignee on the master Bill of Lading. To avoid such liability, forwarder could have issued regular Bill of Lading with real shipper and real consignee. Isn’t it a case of “you cannot have your cake and eat it”? When a forwarder declares himself as shipper and receiver on a B/L, they expose themselves to this sort of event. Just need to be aware of the risks and accept them or not, based on the level of trust that they have in their customer or final receiver

  14. By Farai Reply

    In my opinion the Master and House Bills of lading relate to the contract of carriage of which both the freight forwarder and the consignee fulfilled their obligations, that is, payment for the freight charge.
    The issuance of the Delivery Order to the consignee by the freight forwarder means the forwarder has executed his duties up to where the contract ends and it is now the consignee’s responsibility and obligation to get the goods customs cleared and collected from the CFS.

  15. By James Reply

    The liability rests with the forwarder as they are the consignee on the Master B/L. However, the shipping line has a lien on the cargo which they should exercise in the event of uncollected cargo once it has been uncollected beyond a set period.

    Overall this is an increasing problem as shipping lines cannot be bothered to exercise their lien on the cargo and they see such container demurrage as a cash cow against forwarders.

  16. By ALPHEUS NAMINDO Reply

    Interesting topic, indeed, thank you Hariesh and everyone.

    1. “uncleared goods” would mean goods not Customs cleared, if I’m not mistaken – Now, one won’t get a release (Delivery Order) from the shipping line, if one don’t have a release from or complied with Customs and Port Authority formalities (i.e., no D/O would be issued if the goods were not cleared) – This is the practice at our port.

    2. Normally, it is the forwarder’s duty to collect/remove cargo from the Port/Terminal so Customs cleared/released or to book a transport to collect the cargo from the Port before dispatch to or collection by the consignee from the forwarder.

    3. If the “actual receiver” was intending to collect the cargo from the Port him or herself after taking Delivery Order, would the forwarder be held liable – the question is, what was the stipulation of “clearing & forwarding instructions or agreement between the “actual receiver” and forwarder with regard to this?

    4. It seems everyone was paid (Customs, Port, Shipping line and forwarder), why was the goods abandoned or neglected by the actual receiver?

  17. By Mario Reply

    Fact: Freight forwarder paid shipping line their monies, surrenders Master BL to shipping line and issues release letter to shipping line to grant release to actual receiver. The contract between FF and shipping line seeems to be therefore completed, finished.
    Fact: Actual receiver collects Delivery Order from shipping line.
    Conclusion: Actual receiver (owner of cargo, now in posession of DO) has now assumed responsibility over the cargo and clearance process. Actual receiver is now accountable for collecting the cargo, therefore is also responsible for potential consequence for not doing so.
    Note: There are other players like customs, port, that may end up mixed up in a legal discussion.

  18. By Tom Boven Reply

    Whether the shipping line has issued the delivery order or not, is not relevant. If forwarder has placed the booking in their own name (not as agent of actual shipper) and if the forwarder appears on Master B/L as shipper, they are undoubtedly “Merchant” and, according to most common B/L terms, Merchant shall be jointly and severally liable.

    See “MERCHANT’S RESPONSIBILITY AND INDEMNIFICATION” mentioned in B/L Terms.

    NB extra cost may occur including return shipment, customs penalties, auction or destruction cost etc, which can also be charged to Merchant (in this case, the forwarder).
    NB 2 – if forwarder is a professional and has issued his own House B/L, terms and conditions will be similar to Master B/L. So, in turn, forwarder could hold his customer liable, who appears as shipper on the House B/L.

    • By Sophia

      Hi Tom,

      I have a question regarding below part,

      *Q*
      If forwarder has placed the booking in their own name (not as agent of actual shipper)
      *UQ*

      Do you mean that if the shipper/consignee on the MB/L reads as [As agent of the actual shipper/consignee company], the agent (forwarder) can avoid the liability?

  19. By Daniel Altah Reply

    Yes, I think the shipping line can hold the freight forwarder liable as it has contract with the freight forwarder who is responsible for paying demurrage or storage charges on behalf of the actual receiver. The freight forwarder shall pay the fee and request reimbursement of the fee from the actual receiver.

  20. By ADIL Reply

    Hi Dear,

    Thanks for the below topic which is of great importance that FFww are facing especially that the ffww is not the owner of the cargo even if his the cnee in MBL.
    The common practice in our country that the delivery order is issued to the ffww and on his names which is afterwards delivered to the real cnee after endorsement.

    Whenever the cargo is uncleared ou having delay to pick up from the terminal, the lines warn the ffww about demurrage payment and liabilities.

    There is another case, when the cnee decides to abandon the cargo. Then, you can imagine the headache that ffww is facing with all the parties involved.

    Therefore, in my opinion we are only a part of the shipping process and the cnee who is the owner of the cargo and to whom destinated ned to be the first responsaible of any uncleared or adandan cargo.
    And, need to be issued directly by lines and ffww.

    Pls let us know more views accly.

    Best regards
    AT

  21. By Ochen Roger Ochora Reply

    The freight forwarder pass the cost over to the actual receiver. But over all the freight forwarder is liable. The freight forwarder has to make a payment towards the demurrage accruing any further, needs to strip container of its content and find other means of storage.

  22. By Anup Reply

    if the shipping line and the receiver have no contract and the freight forward booked the freight, then the freight forwarder is liable to the shipping line as those 2 parties are involved in an agreement not the end user. the forwarder must now pursue the customer to recover the charges incurred. best for the forwarder to contact their lawyers.

    if the shipping line has an agreement with the customer ie the customer booked the freight direct then the customer is liable and not the forwarder.

    from reading the above it seems that the forwarder acted as a line and sold freight to the customer therefore the forwarder is consigned on the BL and the customer only received a house BL. so then the forward is liable for all charges and needs to recover from the customer by whichever means

    in my opinion

  23. By Khairnar Reply

    Dear reader , your case is in incomplete manner for missing of following information
    1. Does actual user has granted for any addition free period apart from std. 5 days thru his freight forwarder to avoid the demurrage / storage charges against said container from shipping co.
    2. Time period has taken by freight forwarder to pay shipping line .
    3. Time period when issued DO to actual user by shipping line.
    Causes -A ) In case if the freight forwarder failed to pay monies dues in time to shipping line and shipping line delayed to issue DO to actual user in time then the freight forwarder is liable to pay the liabilities occurred .
    B ) If the DO received in time by actual user but he failed to login to file BOE due to any of the reason then the actual user is liable to pay …

  24. By Ahmed Esmail Reply

    That is not happening in actual because the stores in inside the port of the customs zone will release the cargo upon the date of delivery order; so that if the final receiver has delayed in releasing the cargo after the day of the delivery order, the store keeper will ask him to pay for the new day/days. Same as what will happen with containers. the handling company will review the date of the delivery order.

  25. By Sam PRETAT Reply

    Dear All,
    •Is the shipping line justified in holding the freight forwarder liable, even though the shipping line issued the Delivery order to the actual receiver..??
    In my view, and depending on local practice, yes! I experienced the same case in a recent past. The FFW even tried to get a signed letter from us (carrier) stating they were not to be held liable…
    As long as other parties are not reacting, the FFW is the only liable party for the carrier. Besides, as the transport organizer, the FFW is responsible for finding a solution. By all means, the shipping line cannot decide anything without one of the BL parties involved.

    •Does the freight forwarder have a case to waive their liability..??
    They may claim their responsibility is only limited to the Incoterm negotiated by the shipper. But if they are shipper on the master BL, little chance they can convince the shipping line.

    •What options does the freight forwarder have to avoid this liability..??
    Is it really in the interest of the shipping line to cut the only liability line they have… ?
    Anyway, they must either find a new consignee (who will accept the running costs at destination on behalf of the former, but if they are not reacting…), organize the return of the cargo at origin to avoid uncontrolled cost escalation, or nominate a local agent who will take over at POD pending new ownership of the cargo… again, that depends on the local possibilities.
    Hope this helps, and really interested to read further comments.
    Sam

    • By Chacko Mathew

      Shipping line consider all relevant charge’s on Ffw , till empties are returned by consignee or actual receiver to shipping line. Once empties are returned the shipping line, the Ffw or any party involved in this consignment will be free. The Ffw receives empty for export is liable for all relevant charge’s till empties returned in sound condition to shipping line.

  26. By Tin Reply

    Hi to all, responsibility falls to freight forwarder as they present Contracted party thru Bill of lading, i.e. Contract (Master BL) was made between shipping line and freight forwarder.

  27. By Vikas Arya Reply

    I have been in Freight Forwarding Industry and handled such case for one of the renowned company Dealing in Food and Beverage,

    The case Study : The counterpart in Europe has sent the material to Indian counterpart as part of the raw material (Some Emulsifiers) Shelf life of 60 Days ,

    The cargo Pre-Alert was sent to the Importing office with all the details as part of Freight Forwarding Job, After Arriving of the Cargo , the Delivery Order was released, This was LCL Shipment, so the cargo was Lying in CFS , Now after getting the intimation from the CFS Operations teams on the uncleared cargo for more than 20 days, brought us into action to avoid any liability and dispute from customs on us.

    We learnt from the Indian Office of the Company that the cargo was not moved with pre- approval and in that case they refused to take the custody of the material,

    Action Taken: Sent Written Letter to the Importing Party (Consignee) for the Arrival Notice / Three : Cargo Arrival Notice were sent // Also copy to CFS Custodians for moving the cargo to quarantine area, Further if the material is in sell able form , it is auctioned with the prior Notice from customs authority.
    In this case the product can not be auctioned (Due to Less Shelf Life), so with the Customs approval this has to be safely disposed with all precautions to safe guard the environment.

    The letter was issued by customs for the disposal of the cargo under Seaway B/L details and other documents, the same were shared with Consignee.

  28. By Nazeer Ahamed Reply

    Once the BL is endorsed the risk and liability passes to the beneficiary ie the actual cnee.

    my question is if the bank endorse the OBL to actual cnee/receiver, do you think that the shipping line will lodge claim against bank ?
    freight forwarders being SME with limited knowledge the shipping line use to start play around them. If it is an MNC like Kunhe Nagel, Shcenker, Panalpina the line would kneel to them

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  30. By Indrajit Moulik Reply

    As the MBL has been consigned to the agent technically for the Shipping line the actual Consignee is the agent and not the party mentioned in the HBL.

    The Shipping line only gives DO to the actual receiver only after getting the NOC from the agent.

    The shipping line is well within its right to claim the detention /demmurage from the agent /notify party mentioned on the Shipping bill

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  34. By Kathryn Reply

    1. Shipping line is not justified to hold freight forwader liable.
    2. Yes
    3. specify clearly in the contract with the shipping line in terms of role and responsibility.

  35. By Zakaria Kadir Reply

    It is justified to hold freight forwarder for all costs and consequences. Although they have grant release of cargo to actual receiver, they are the party contracting with shipping lines they hold ownership of the cargo as master BL was issued to them.

    My advise never surrender ownership to freight forwarder and always insist to Liner BL.

  36. By Muhammad Rosli Reply

    The shipping line has no cause to hold the freight forwarder or shipper for demurrages in dest port. Cnee paying for the D/O charges already indicates they are aware of the consignment and in so doing releases the shipper or the freight forwarder from demurrage liabilities. The time limit for disposing of goods is 120 days from ETA and will be the responsibility of the port as all D/O charges were already paid by cnee.

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