FIATA’s Advisory Body on Legal Matters (ABLM), together with the input of the Customs Affairs Institute (CAI), have put together a Best Practice Guide on Abandoned Goods. The guide provides information on how to reduce the risk of being left with abandoned goods, including practical tips on management control. In the unfortunate event that a freight forwarder is in a situation of abandoned goods, the best practice guide also puts forth considerations that may help forwarders to more effectively manage the situation and prevent costs from skyrocketing.
Abandoned goods, or uncollected goods, are those which the consignee has manifested no intention to take delivery of after a reasonable period. This may include situations where the consignee cannot be found or has refused collection. Though not a new issue, such situations have been brought increasingly to the forefront in today’s challenging economic climate.
This poses substantial risk for the freight forwarder, who often becomes a central party against which to seek recourse for fees and associated costs. This can quickly lead to a hefty bill as such costs can rapidly outstrip the value of the goods themselves. Freight forwarders can mitigate their risks in such situations from the outset, by putting in place proper procedures that ensure appropriate due diligence and subsequent precautions are taken at the booking and contract drafting stage.
Reducing the risk: Prevention is key
Many risks can be mitigated substantially at the pre-contractual stage, simply by having proper due diligence procedures in place, to be able to identify any red flags in advance. Freight forwarders should ask themselves: do they truly know with whom they are contracting? Knowing counterparties, and whether they are a genuine, financially viable entity, is crucial and should be corroborated with reliable sources. In addition, knowing the type of cargo in question and knowing how to act accordingly will be important in understanding the freight forwarder’s corresponding obligations and whether there is a higher risk of abandonment.
Freight forwarders should also be mindful of the formulation of the contract and whether they are acting as principal or agent. Where the freight forwarder is named as the shipper on the ocean bill of lading, this establishes a direct contractual connection as a principal to the contract for carriage who would then have a contractual liability towards the shipping line for any associated costs. In other instances, carriers may try to recover from freight forwarders based on widely worded Merchant Clauses, a contentious practice which runs contrary to ordinary contract law principles. It should be noted that the latter practice is currently under investigation by the US Federal Maritime Commission (FMC), to which FIATA, through its ABLM and Working Group Sea Transport, has provided comment.
Proactive management control and good record keeping will help freight forwarders to quickly identify risks and ensure one can act quickly to minimize possible costs. Technology will likely play an increasingly important role in this.
Managing an abandoned goods situation: Speed is key
Taking quick action can drastically mitigate cost exposure. Situations concerning abandoned goods can often see the associated costs swiftly exceeding the commercial value of the goods themselves, increasing the likelihood that the shipment remains uncollected. The shipper and the consignee need to be contacted immediately, put on notice about the situation, and given a short deadline to collect the goods and settle any costs that have already accrued. Meanwhile, the freight forwarder should remain on full alert until the situation has been resolved. Detention and demurrage costs should be mitigated as far as reasonably practicable. Alternative storage solutions, for example, will often prove far less costly.
It is crucial that freight forwarders pay attention to the national procedures and legislation around dealing with cargo, as this varies on a country-by-country basis. This adds a further layer of complexity to the effective handling of this type of case for the freight forwarder/NVOCC, and means it is ever more important to maintain close dialogue across the chain and obtain an early legal opinion before proceeding. The ability and scope to dispose, sell or otherwise hold the goods as security depends on the specific jurisdiction, as well as the applicable contractual provisions. In addition, the freight forwarder remains responsible for the goods it is holding and should therefore take care to seek local advice and ensure it is adequately protected with all risks insurance cover in case of accidental loss or damage. In general, contractual terms are often particularly important in determining the scope and existence of such rights, demonstrating the importance of ensuring proper contract drafting. It is also important to consider standard trading terms and conditions, which will often provide for certain remedies.
In a nutshell
As the above demonstrates, early action is always best. FIATA, through its institutes and bodies, and in cooperation with other international actors, is committed to shaping policy and practice to aid freight forwarders and supply chain professionals to tackle such situations. FIATA members may also find ABLM’s other recent best practice guides of interest on the Prevention of Bribery and the Prevention of Cybercrime.