Sydney Congestion Surcharges, delays and discharge in Melbourne – where does the Port Botany Industrial dispute leave freight forwarders and traders?
Over the past week we went from delays in discharging goods in Sydney, to massive congestion surcharges to lastly, vessels skipping Sydney and discharging cargo in Melbourne. All of these measures are another blow to freight forwarders and importers already struggling with the hardest of economic and logistic environments. Below we take a legal look at the actions of the shipping lines and how this impacts on other parties in the supply chain.
Can the shipping lines do this?
No one ever looks at the terms of the bill of lading until things go wrong. When you read over the terms you wonder what the shipping line is actually agreeing to perform. Shipping lines basically promise that if everything goes perfectly, the goods will be delivered from A to B at the agreed price. However, if anything happens to make that carriage more difficult or more expensive, the shipping line can fundamentally change the carriage and/or charge increased costs.
While you should always review the specific bill of lading, it is standard for carriers to have the right to delay delivery, discharge goods at a different port and charge additional costs if the carriage is affected by any hinderance, delay, difficult or disadvantage of whatsoever kind. Port congestion caused by industrial action is one of the main reasons these types of clauses are included in bills of lading.
The position of importers is no better when it comes to surcharges. It is standard for bills of lading to include a term that the parties agree to be bound by the carrier's "tariff". The tariff is usually available online and lists the surcharges that may be payable. A port congestion surcharge is a commonly listed surcharge.
For shippers with goods already on the water, you are entitled to ask the carrier to prove that the bill of lading incorporated their "tariff" and that their tariff specifically lists a congestion surcharge. For future shippers, the carrier has notified you of its surcharges and they are entitled to set their rates as they please.
What about conventions and consumer law - First of all, Australia made the decision that its consumer law provisions do not apply to international carriage by sea. This is because there are conventions that govern the liability of the carrier. The Hague-Visby rules comes to the rescue of the shipping lines in the case of industrial action.
At the end of the day, if the shipping lines can establish that it has been impacted by industrial action then delays, skipping ports and surcharges are usually within their rights.
Who is liable for the additional charges?
This is where it gets trickier. The first question is "who has the contract with the shipping line"? Is it the freight forwarder or the trader? If the freight forwarder was acting merely as an agent for the trader, the contract will be between the trader and the shipping line and the trader will be directly liable for the additional costs. Whether the freight forwarder is acting as agent or principal comes down to a mixture of facts and law. As a general rule, if the freight forwarder offers a holistic door to door service, issues a house BOL and does not disclose the carrier's fee, they are likely to be acting as principal.
However, if the trader is named on the ocean bill and the freight forwarder merely charges a commission, there are better arguments that the freight forwarder is acting as agent.
If the freight forwarder is not acting as agent, there are two contracts (1) the contract between the forwarder and the shipping line and (2) the contract between the forwarder and the trader. The freight forwarder's ability to pass on the additional costs will depend on the terms of that second contract. Often freight forwarders use house bills of lading that give them similar rights to the shipping lines. If there is a gap between the terms of the carrier's bill of lading and the house bill of lading, there will be difficult legal issues as to what costs can be passed on.
If the freight forwarder is deemed to be the carrier, it will likely be protected under the terms of the Hague-Visby rules.
Even in the absence of a house bill of lading, the freight forwarder should review its trading terms and conditions. For instance, the Freight and Trade Alliance template terms include a clause allowing increases in third party disbursements to be passed on. Additionally, the freight forwarder is not liable for an inability to perform the contract (such as discharge in Sydney) caused by events beyond its control.
What about prepaid freight
A question that has been raised a number of times is what happens where freight has been prepaid. The overseas shipper is unlikely to pay the surcharge and the Australian consignee did not select the carrier and is not expecting any charges. While the Australian consignee did not select the carrier, to obtain the goods the consignee will need to present a bill of lading and in doing so will have transferred to it the obligations under the bill of lading. One of those obligations will be to pay the carrier's tariff. Naturally, if the consignee does not present the bill of lading, they will not receive the goods and surcharges will be the least of their concerns. Ultimately, if the Australian consignee refuses to pay the surcharge, the carrier may withhold the release of their cargo.
What now?
The shipping lines are unlikely to change their practices and it becomes a case of managing costs. This has a number of elements:
1. freight forwarders immediately advising existing customers with goods on the water of the increased costs, delays and discharge at Melbourne (if applicable). This should be done as early as possible to allow all parties to manage delays and the extra transport from Melbourne to Sydney;
2. customers seeking new bookings with a Sydney discharge port should be made aware of the known surcharges and the risk of the port being skipped;
3. if disputes are likely, forwarders should review the terms of their house bill of lading and terms and conditions of trade;
4. traders need to manage issues at both ends of their supply chains. Where the supplier was responsible for shipment, regard will need to be had as to whether the supplier is liable for the additional costs. Additionally, the importer will need to consider the relationship with its customers. Will there be liability for delay, is there any scope to pass on the increased costs, does the Australian customer have the right to cancel orders where they have been delayed; and
5. manage the return of containers. There may be disputes that delay the unpacking and return of containers, there will also be the additional challenge of returning containers to Melbourne for cargo originally intended for Sydney. However, it is crucial that, despite any dispute, the parties at least work together to have container returned within the free period. A failure to do so will not help resolve the underlying dispute and will only see the amount in dispute greatly increase.
If you need help managing any of the issues arising out of the Sydney Port congestion and the resulting acts by shipping lines, please contact Russell Wiese at Hunt & Hunt Lawyers on (03) 8602 9231 or at rwiese@huntvic.com.au