Precautions to take against loss due to abandoned cargo
Abandoned cargo could be quite stressful for shipping lines, shippers, port authorities and forwarders alike and is considered to be a big headache for everyone concerned..
When a cargo is abandoned it causes severe financial losses to all parties concerned – seller, buyer, shipping line, freight forwarder, transporters, banks, Government etc etc..
It could also cause a rift in business relationships between a shipping line and their customer – whether it is an importer or a freight forwarder because it could create a blemish in the customer’s record with the shipping line..
When is a cargo considered to be abandoned..??
A cargo maybe considered to be abandoned
when the consignee of the bill of lading does not take delivery of the cargo even after repeated reminders and notifications and the cargo lies uncleared eventually forcing the shipping line to consider the cargo as abandoned ;
the consignee on the bill of lading is untraceable or non-responsive and the cargo lies uncleared eventually forcing the shipping line to consider the cargo as abandoned ;
the consignee could give notification to the shipping line and/or port about his/her intention to abandon the cargo due to various reasons mentioned below
Reasons for abandonment of cargo
There could be several reasons for someone abandoning a cargo that they brought in for a specific purpose.. But chief among these reasons are :
Consignee may be in financial difficulty rendering them unable to pay the duty, VAT, tax, port or other costs related to clearance of the cargo ;
Consignee hasn’t received the proper documents to release and clear the cargo in time
Cargo received is not the correct cargo and buyer does not want to pay the seller and doesn’t want to incur the additional cost of sending back the cargo
Consignee may have some dispute with the seller/shipper and doesn’t want to clear the cargo until that is sorted
If and when a cargo is abandoned, one of the first affected and most vulnerable party would be the shipping line as they are sitting with the liability of paying for the port handling costs, storage costs, demurrage and detention, transportation costs and possibly unpaid freights..
Unlike a consignee, a shipping line cannot feign ignorance of the fact that the cargo is sitting at the port or in some yard under their control..
The line uses the port and yard facilities every day and more often than not, the port authorities will directly bill the line and the line is liable to pay the storage costs whether there is anyone to clear the cargo or not.. A line’s services could be stopped if the line doesn’t pay the port..
If it is containerised cargo, the line may have to pay for the lease costs of the container to the leasing company.. Even if the container is their own container, the shipping line will still have an equipment operating cost associated with it..
Remember, much like a ship, a container generates revenue for the owner only when it is in circulation..
So what can be done to avoid losses due to abandoned cargo
Other than the true owner of the cargo, no one else has any control over cargo being abandoned.. It happens all the time across the world.. But the shipping line, forwarder and shipper/consignee can take some precautions in the early stages of the booking to limit the damage/losses due to cargo abandonment..
So the old adage “Prevention is better than cure” applies in this case as well and the best thing that can be done to avoid losses due to abandon cargo is to take precautions to avoid cargo being abandoned..
Some precautions to detect and avoid cargo abandonment would be
Shipping lines must ask the customer at the time of booking whether the cargo is going to be shipped as Freight Prepaid or Freight Collect (at destination or elsewhere).. If you are a shipping line and you don’t ask for this information at the time of booking, it would be in your best interest to do so..
If cargo is to be shipped as Freight Collect or Freight Payable elsewhere, the shipping line’s origin port agent may take the precaution of requesting the destination port agent to get a written confirmation from the consignee that they will settle the freight when the cargo arrives at destination, prior to delivery..
This will be all the more important if the shipper and/or consignee are not a regular customer of the shipping line..
If there are any issues or delays in receiving this confirmation, it will at least set off some alarm bells at the origin port and the shipping line can discuss this with the shipper and implement precautionary measures such as asking the shipper to prepay the freight at origin..
There are some early warning signs that a cargo could be abandoned and shipping lines need to watch for these signs..One such sign would be that, even after the shipping line sending the arrival notification to the consignee in time and after several weeks and months of notifications/reminders, the consignee has not made contact or made an attempt to clear the cargo..
From a shipping line’s perspective if the cargo has arrived and the consignee is not showing any signs of clearing it within the reasonable average time frame say 7-10 days, all concerned parties such as shipper, load port agent and the shipping line must be notified immediately and try to get the release done ASAP..
Load port agent will then try to contact the shipper to alert him to the fact that the cargo has not been cleared, just in case there are some disputes between shipper and consignee due to which consignee is not willing to clear the cargo..
In this depressed global economy, financial difficulties can hit anyone at anytime.. Therefore a shipping line and/or their agent at the importing country must be in close contact with their customers and market at all times and be aware of any changes in the company’s financial and personnel situation..
Do you have any tips or precautions on above or any live case studies that you would like to share..
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