Uncollected Containers and Liability Towards the Shipping Company

The lawyer Dr. jur. Nando Stauffer von May, specializing in transport and insurance law, describes in a professional article the dangers that await freight forwarders when containers remain in ports, as containers from the Far East have now reached ports in Europe, but the factories here are currently closed.

By Nando Stauffer von May

(Zurich) Numerous European companies ordered goods from China in the first months of this year. China was in the midst of the coronavirus crisis, and the measures taken by the government delayed the production and shipping of goods to such an extent that many goods are only now arriving in Europe in late spring. The local companies, in turn, have been affected by the measures imposed due to the Covid-19 virus. Many still have full warehouses or currently have no use for the ordered goods for other reasons. Many companies are also struggling with financial difficulties. Therefore, European ports expect that containers will remain in the port for longer periods. There is also a risk that goods will not be received at all.

Demurrage or Detention is Threatening

If goods remain in the port and in the container for longer, so-called Demurrage and Detention costs are incurred. Demurrage refers to the compensation for the time the container remains in the port until it is picked up. Detention, on the other hand, represents a delay fee for the late return of the unloaded container. Since the collapse of freight rates, Demurrage and Detention can represent a significant part of the transport costs. Both cost items are charged by the shipping company in addition to the freight, i.e., the actual fee for transport. If a company leaves the goods in the container in the port for an extended period, considerable costs accumulate.

In a so-called Freight Collect transport, the shipping company will collect the transport costs from the Consignee according to the B/L, i.e., from the recipient according to the freight document, upon collection of the goods. In a Freight Pre-Paid transport, the freight has already been paid by the sender or freight forwarder, or at least the obligation to pay has been assumed. Contractually, i.e., in the terms of carriage (Terms of Carriage), it is often agreed that both the sender (Shipper) and the recipient (Consignee) and often other parties are liable for Demurrage and Detention. The terms of carriage also stipulate the joint liability of the sender and client for the freight in a Freight Collect transport.

If the recipient, for example, due to bankruptcy or depreciation of the goods, does not pick up the containers at all, the sender will generally be liable to the shipping company for freight as well as Demurrage and Detention. If a freight forwarder acts as the sender, they are correspondingly liable for freight as well as Demurrage and Detention. The transported goods also “liability” under the carrier’s right of retention and possibly contractually agreed lien in favor of the carrier (shipping company) for transport costs.

As far as the freight forwarder is liable, they will generally be well advised to pick up the goods in the port to at least minimize Demurrage and Detention and possibly store the goods more cheaply in the interim. The freight forwarder also has a right of retention on the goods, which thus provides security for the freight forwarder’s claim.

Whoever ultimately had to bear the freight as well as Demurrage and Detention will have to examine whether they can recover these costs through recourse to another party.

Photo: © Pixabay

www.gbf-legal.ch

The Author

Nando Stauffer von May Dr. iur., Notary of the Canton of Bern Nando Stauffer von May is active in corporate and commercial law, data protection law, as well as transport and insurance law, both in advisory, notarizing, and litigation roles. He is a partner at gbf Rechtsanwälte AG https://www.gbf-legal.ch