In December 2008, we shipped one FCL to Sudan against advance payment on CFR Sudan basis. After we recived 100% payment through our bank, we shipped the FCL to sudan. The FCL reached sudan in Janaury 2009. Meanwhile we did send all the required dcouments to the buyer throught he bank. After that buyer did not come up to claim the custody of Cargo. From February 2009 the shipping line started sending us Debit note for Demurrage/Detention. At present the FCL is sailing somewhere else after auction. We took the stand that under CFR term our responsibility ceases once the cargo is on board, except freight that is to be paid by shipper. As shipper are we responsible to pay the demurrage?
Pan is correct, unless you have booked the shipment ‘as agents’ for another party, then you (the named SHIPPER) must carry ultimate responsibility for these charges.
The commercial term (in this case CFR) regulates the relationship between the SELLER and BUYER – note the names, this is the sales contract: the commercial term has no bearing on the SHIPPER or CARRIER, this is the transport contract.
If/when the line invoice you as SHIPPER, you will still have the right as SELLER to claim this back from your BUYER, but you can’t use these private rights to direct the shipping line to claim off the CONSIGNEE. Note that if your client has done nothing at destination e.g. no clearance, no communication etc, then technically (and legally) they are not the CONSIGNEE anyway.
When you were first notified of the problem, you should have either abandoned your cargo interest (difficult but not impossible) or arranged for the cargo to return to you at your cost – and with hindsight, that may have been a better option.
After a set period (often 28-days) uncleared cargo is sent to a State Warehouse (or held in a bonded area under State control, pending State Auction for duties taxes and other third party disbursements (such as the line’s demurrage). There may be relief for you there – who received the proceeds of the auction? Anything secured over and above the state’s duties and taxes may be distributed to other parties – yourself as owner being no exception (provided of course you notified the auctioneer of your interest in the goods).
Anyway, if you have more detail, I could give you a better formed opinion; but in essence, the SHIPPER is the principal and has liability for ALL unpaid amounts.
Big Note: Be aware too that the debt you now have with the line may be recoverable under the line’s ‘general lien’ meaning that ANY shipment you hand to them or which they control on your behalf may be seized against this debt e.g. an import on the way to you now – where nothing is owed – may become subject to a lien which arises from this unpaid debt – so I would suggest you consider the merit of not handing over any further export traffic to them until you have resolved this.
...thus: another step on the road to mercantile enlightenment...
Thank you for your feedback. i have few points:
1. But under incoterm CFR, shipper's responsibility is over once the cargo is on board. The shipper is to pay the freight only.
2. Shipper cannot evaluate the buyer, as shipperhas many customers worldwide. Shipper needs to be concerned about his payment and freight payment to the shippingline (if not FOB term)
3. THe shipping line auctioned the cargo without any intimation to the shipper. Consider that the cost of material is USD 100 per MT and total cargo value is USD 2000 (as 1 FCL=20 MTs). If the shipping line auctioned it at lower value, then how shipper is liable to pay the charges. They shuold first consult the shipper for the value of the goods.
Look at the names:
These are not the same thing. The commercial term is only what the SELLER has agreed with the buyer. It has no bearing on what the SHIPPER is liable for in the separate relationship they have with the carrier.
So under CFR Incoterms the SELLER’s risk end at the ship’s rail, but in terms of the contract of carriage, the SHIPPER’s risks only end when the consignee joins the contract and takes delivery; if that never happens, the SHIPPER remains at risk.
The carrier, the shipping line in this example, will not have auctioned the goods. If they have been auctioned, the state – i.e. the country where the cargo is – will have auctioned them. The carrier may have the right to recover their charges through the auction but only AFTER the state have recovered theirs. The value of the sale is not fixed, the only measure of value is for the sate to recover their charges plus any third party claims – such as the carrier’s – if made known to them prior to the auction etc.
SELLERS who wish to sell with no risk beyond the country of origin can elect to use FCA or even FAS/FOB – provided they avoid being named as the SHIPPER on the transport document (which is why both FCA and FAS/FOB work WITHOUT bills of lading or carrier documents at the SELLER’s discretion).
I understand you may feel this is ‘unfair’ but having chosen to get involved in the freight you must carry the risks of a SHIPPER and it is on you to see that these are at odds with your intentions as a SELLER. Accordingly, you must position yourself to manage the risk (sell on D-terms) OR avoid selling on terms which exceed your risk-expectations.
I hope this helps you. I know it is no comfort but the position you are in happens from time to time and always proves a great learning curve for those involved in it – "...all education is expensive, the more you spend, the more you learn..."
...thus: another step on the road to mercantile enlightenment...
Just a thought, but in countries where there is virtually no commercial law or business ethics, and I think this might describe Sudan, buyers can play games! They can refuse to clear the goods and pay charges etc, then buy the goods for a much-reduced value at the eventual Customs auction or even by private arrangements with unscrupulous Customs officials! And frankly dealing with countries such as this often likely to end up with dramas.
When the seller entered into the contract with the carrier he should have checked and understood their terms and conditions of carriage. Caveat emptor = buyer beware, and he was the buyer of that carriage.
In the main question, Shreya Shah said that, "In December 2008, we shipped one FCL to Sudan against advance payment on CFR Sudan basis. After we recived 100% payment through our bank, we shipped the FCL to sudan. "
IF, full advance payment has been received by the shipper, is there any reason why the consignee should "...buy the goods for a much-reduced value at the eventual Customs auction or even by private arrangements with unscrupulous Customs officials!" ?
Just a thought.
Have a great day!
I think that who is indicated in box Shipper of the bill of lading is responsible for any charges arising due to the cargo. Please check in the bill of lading if you are indicated as shipper.
Please let me(us) know.