How to minimize an uncollected cargo risk and what to do if it’s already happen – Peregrine Storrs-Fox, Risk Management Director at TT Club Mutual Insurance and Kirill Berezov, Managing Director at Panditrans (TT Club Network Partner in CIS & Baltic States) are speaking.
The problem of uncollected cargo is a perennial problem for NVOCC operators, often resulting in considerable bills on warehousing, container demurrage, and disposal costs. Apart from anything else, there is a significant drain on management resource to bring resolution.
Uncollected cargo is not a new challenge to NVOCC, but in many parts of the world (including Russian and Ukraine) appears to be an increasing problem. The NVOCC is particularly exposed to liability to costs that arise rapidly where house bills have been issued and it acts as carrier. But recently even general freight forwarders and agents with standard transport contracts meet uncollected cargo cases quite often.
There may not be a ‘silver bullet’ that can be applied generally, but there are clearly controls that can be implemented to assist in identifying the risk early and in mitigating the consequences. While TT Club provides insurance cover and global claims assistance that mitigate the costs that arise due to a consignee’s failure to collect cargoes, the more effective route is to maintain procedures to avoid the problem in the first place.
Avoiding the problem
In part this is simply good record keeping and management control over shipments in transit. It might be expected that any freight intermediary maintains electronic systems to monitor arrival dates and the like; it is simple to build management information (MI) around such data in order to see the status of key related events, such as surrender of bills of lading.
Inevitably, there are certain commodities that are more prone to be abandoned, which may be due to trade fluctuations or even sanctions issues.
Recently, importers have been unable to sell goods delivered to ports, due to customs, veterinary, sanctions, and even just commercial problems, leaving freight forwarders and line agents facing dozens of containers of sanctioned meat and vegetables in Russia, chicken headed in Vietnam, used shoes from Turkey, useless lumber in China and, even several 40-foot containers of condoms in Ukraine. The decline of national currencies has played a role, stimulating sellers lacking experience and responsibility to begin exports.
Furthermore, political concerns over scrap/waste cargoes add complexity to the process and may leave those in the transport chain exposed. Cases related to the export of scrap tire rubber from the United States and old desktop computers from the United Kingdom to Pakistan and India have been widely covered in the press. In both situations, it turned out that well-organized criminal groups were earning significant sums for recycling, but were instead shipping containers with this cargo to fake companies, at the expense of gullible NVOCCs.
Similarly, counterfeit products can be left unclaimed when the import outlet fails or the traffic has caught the attention of authorities. Systems and processes should be established in order to identify such commodities or routings/destinations that experience suggests should flagged, either for increased operational attention or indeed to decline at the point of sale/booking.
A shipment is deemed to be ‘unclaimed’ when the intended consignee has manifested no intention to demand for or take delivery after a reasonable period of time. This may well be after some ‘free’ period, which emphasises the need to be proactive since by that point stakeholders are likely exposed to ‘demurrage’ or other costs. Close and effective monitoring of MI may preclude such a result.
It is worth noting that under a bill of lading contract, even though the shipment has commenced, the shipper retains certain contractual responsibilities, including payment for freight and general indemnity to the carrier. As a result, the shipper should always be contacted when seeking solutions or redress, even if in addition to the consignee.
When there is an alert (preferably before the expiry of the free period), it is important to take action without delay.
- Talk to both the shipper and consignee, calling on them to come forward and pay any outstanding charges, and to clear the cargo;
- In the absence of action, communicate again with the shipper and consignee, demanding immediate instructions either to change consignee or destination, or to arrange for re-shipment, or even to abandon it, while being clear about any outstanding or continuing charges. Alert the parties to their contractual obligations and the carrier’s rights;
- Ensure that any agent or branch maintains full and clear records of all costs that are incurred in relation to the unclaimed shipment, keeping the shipper and consignee fully informed.
It is very important to take action without delay!
While this is ongoing, seek to mitigate costs or demurrage and storage as far as possible. Consult and arrange with the local agent, as appropriate, for a more economical alternative storage if possible. Keep close attention on any responses and progress to resolution, giving a second formal notice no later than 45 days after the date of discharge.
A final notice must be issued within three months (in some jurisdictions it could vary up to six months) from the date of discharge. At this point, be explicit that inaction will leave no option but for the NVOCC/carrier to notify the relevant Port Authority requesting it to take the necessary measures, that may include sale or disposal, and that any and all costs incurred in this regard will also be to the customer’s account.
In some jurisdictions, there may be an obligation on the NVOCC to notify the authorities after the expiry of 30 days that the concerned parties have not come or are unlikely to come forward to clear the cargo. After the final notice is sent, it will generally be necessary to issue to the authorities a ‘Letter of Abandonment of Cargo’ on behalf of the shipper and/or consignee, requesting the authorities to allocate a date for disposal or auction the cargo.
In general, do not sell any unclaimed cargo without the approval of the shipper or consignee – and always consult with your liability insurer. If the shipper and/or consignee agree to abandon the unclaimed cargoes, ensure that this intention is in writing with specific agreement on full indemnity, and that the original bill of lading is returned. It’s also very important to be in a permanent contact with your liability insurer who might have more experience how to handle such cases and could instruct you respectively and provide reasonable advices where and when necessary, also reimbursing your costs if it’s covered by your insurance policy. We recommend you to approach your local TT Club office to get more information about our insurance products for transport operators which also include cover for costs related to uncollected cargo.
We hope that you will have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you
Peregrine Storrs-Fox, Risk Management Director, TT Club Mutual Insurance Ltd.
Kirill Berezov, Managing Director, Panditrans (TT Club Network Partner – CIS & Baltic States)