TT Talk - Ship it, bill it and forget it?
- Date: 17/12/2004
- Source: TT Talk 59
An increasingly regular occurrence in the Club's mail bag is the arrival of tales of woe from members who have found themselves faced with enormous bills for container detention or demurrage charges, quay rent and other similar costs. The background is generally the same: several years ago the member sent a container-load of cargo to some distant destination. He booked the cargo with the line, issued the bills of lading, alerted the agent at destination, invoiced the freight, filed the job away and forgot all about it. Then out of the blue, the shipping line writes to him to say that the containers have, unknown to him, been on the terminal at destination ever since they got there. Nobody has shown the slightest interest in them. In the meantime detention charges have been incurred, which now amount to several thousand dollars, and would the member kindly send a cheque for this amount?
Investigations then show that the consignee has gone into liquidation and probably so has the shipper. The cargo is effectively worthless and certainly is not enough to meet the accumulated charges. The administrators running the bankrupt companies have, of course, no interest in taking on additional liabilities. The member can perhaps negotiate with the line to achieve a reduction in the detention charges, but is still faced with the costs of disposing of the cargo. The member is looking into a substantial black hole and, while the Club may be able to offer some assistance under the heading of "uncollected cargo costs" this is usually limited to USD 25,000 in any year.
While this scenario can happen with all sorts of customers, the Club's experience is that it is more likely with "one-off" shippers, and also with movements to areas where the member is not particularly specialised. It may be that the member has had previous dealings with the agent at destination, but often the name is picked almost at random, so there is no continuing relationship between the two companies. Although the agent has probably breached his obligation to protect his principal’s rights, there is often very little that can be done to pursue him through the courts of his home country.
The Club suggests that the key to avoiding these disputes arising is pro-active management of shipments. There are simple measures that can be introduced:
a. It is not really sufficient to think that the job has been completed when the ship has disappeared over the horizon and the freight invoices sent out. Monitoring should be extended to the port of arrival. You should maintain a record of each NVOC bill that you issue and insist that your agents report back to you when the bills have been surrendered to them. Anything that is still open a certain time (say, about four weeks) after the consignment has reached destination should be followed up. Keeping these records in electronic format will ensure that you automatically get a reminder for any overdue reports. Simple routine action now by a junior member of staff will avoid a lot of expensive management time being tied up some time in the future, dealing with a major problem.
If you are alerted by your agent (or your client) to a potential problem, work together with them to find a solution. Some of the bigger claims have been made much worse by the two sides bickering endlessly with each other about fault, rather than taking the sensible step of collaborating to resolve the problem. Even worse, some of these arguments have been between companies in the same group, but their misguided attempts to protect their individual profit centres led inevitably to a huge bill for the organisation as a whole.
Remember that the Club's local representative may be able to help by carrying out investigations or giving advice to the parties concerned.
b. If you are acting as an agent, you must monitor the flow of paperwork, and ensure that the consignees are coming forward with their documents reasonably quickly after the notice of arrival has been sent out. If nothing has been heard from the consignee within say two weeks, give them a call to find out what the problem is. Remember that you have responsibilities to your principal, and that if you do not act to protect his interests you could end up being fully liable for the costs incurred.
If there are particular reasons why the consignee cannot produce the bills (perhaps they are still held by the seller), keep the situation under close control, and tell your principal what is happening. Send regular reminders!
c. Shipping lines, too, can help by more regular billing of container demurrage costs. An invoice is a most potent form of reminder, and billing costs on a monthly basis does draw people's attention to a problem and concentrate their minds on finding a solution. Many of the current claims have arisen because nothing has been billed for a year or more, by which time the costs are so enormous that an argument is inevitable.