Independent freight forwarders with considerable experience in this industry have surely had to deal with abandoned cargo at some point in their careers. Every year, almost hundreds of thousands of containers are abandoned globally. Although cargo abandonment by the consignee can be a stressful situation for all the stakeholders of the shipping process, it can be a huge headache for the freight forwarding companies. The port authorities have also created a guide for legitimately channelizing these abandoned cargoes for the recovery of demurrage and detention charges on behalf of the consignee.
Before talking about the tips for handling abandoned goods, let’s take a quick look at how this industry defines abandoned cargo.
Defining abandoned cargo
As per the FIATA, a cargo is called abandoned when “it becomes apparent that the consignee has manifested no intention to take delivery before the expiry of the free period.” However, this free period can differ from one country to another. For instance, in the US, the free period is 6 months after unloading at the dock while in China the free period is just 60 days.
Factors leading to cargo abandonment
Since the pandemic, countries around the world were shutting down their ports and airports. As a result, several consignees abandoned their goods to bypass the additional expenses. Moreover, the last minute changes in regulations that prohibit the importation of certain commodities can also be a factor behind cargo abandonment.
There are also instances where the consignee doesn’t pick up the cargo because of disputes regarding the quality or quantity. In addition, some unscrupulous people abandon the cargo to get rid of illegal goods or even garbage. At times, the consignee abandons the cargo in the case of bankruptcy or because they are unable to bear the customs expenses. When the authorities confiscate a shipment because of a violation of shipping regulations it could also become abandoned cargo.
In any case, as an independent freight forwarder, you will get stuck in a sticky situation with abandoned cargo. This is because the ‘Merchant Clause’ of the shipping lines will make you liable for any outstanding monies. Moreover, if you have directly contracted the carrier and appear as the shipper on the Master Bill of Lading instead of ‘agent’ then you will also have to pay for demurrage, detention, warehousing, and any other related charges applicable to the shipment. Even though the cargo owner or consignee is actually responsible for these charges, you as the forwarder will be responsible since you are manifested as the shipper in the Master Bill of Lading.
How can independent freight forwarders avoid loses due to abandoned cargo?
Do not manifest yourself as the consignee or shipper in the Bill of Lading
Firstly, you need to take special care of your status in the BoL. For example, you need to avoid the status of the ‘principal party’ at all costs. When you have the status of ‘agent’ you will be able to avoid the liability of the abandoned goods. This will put the shipper in a direct agreement with the shipping line and you as the independent freight forwarder will have zero or limited liabilities. Additionally, if possible you can also go for a liability insurance to further safeguard yourself from any additional costs.
Identify the ‘force majeure’ clauses in the agreement
You need to take special care and recognize any ‘force majeure’ clauses in the agreement. In case of a ‘force majure’ clause, you need to promptly send notices to the clients invoking their ‘force majeure’ rights to discharge themselves of any obligation.
Stay in touch with your customers
Make sure to constantly communicate with your customers and be clear about the exact status of the shipment. You should promptly communicate even the slightest problem experienced by any of the stakeholders including the supplier, carrier, port authorities, agents, terminals and so on. Also, make sure to communicate any changes or last-minute delays. Clear communication will help you keep the situation under control and ensure that any mishaps were beyond your capacity as the agent.
Be mindful of the warning signs
Apart from communicating closely with your customers, you also need to pay close attention to any warning signs of cargo abandonment. For example, when a consignee receives the arrival notice but doesn’t make any contact. then. chances are high that they are going to abandon the cargo. If you get a prior sign of cargo abandonment, make sure to keep the cargo in a bonded facility. This will help you bypass the high storage charge and select your disposal option in the meantime.
Carefully record your communications
Keeping a written record of your communications with the customers can help you in this regard. The maintenance of a paper trail will keep the risk of claims to a minimum.
Talk to the consignee beforehand
You should talk to the shipper or consignee beforehand and explain to them that abandoning the shipment will involve substantial monetary implications for them. Let them know that you, as the freight forwarder, will be passing all costs claimed by the carriers onto the customers and, therefore, they need to take responsibility.
Promptly communicate with the carrier
When the consignee refuses to pick up the cargo, you need to contact the shipping line ASAP or else the demurrage and storage costs will escalate. As the forwarding agent, you need to act on time and come to a commercially viable agreement with the carrier. It is also a good idea to talk to the insurance company and check the level of coverage provided.