Who pays for abandoned cargo?

Cargo abandonment can happen due to several reasons such as the consignee only finding out that he/she is not able to import the product only after the shipment has landed in the destination port. This could be due to missing licenses. In other cases, the shipping line may have lost or misplaced the entire container within a port. Sometimes the consignee is unwilling to pay import taxes and duties that they were not aware of at the time of rearranging for the shipment to happen. In other cases, the cargo may be stuck due to an unresolvable compliance issue like a dispute on the HS code to be used for import. Cargo can also remain unclaimed due to damages or other conflicts arising between the seller, buyer, freight forwarder, port operator and/or government authorities.

In many cases, the cargo remains unclaimed because the consignee is completely uncontactable.

Charges for abandoned cargo

Unclaimed cargo that is left sitting in a port will result in demurrage charges being levied by shipping lines who usually limit the free storage time at any port. But who is liable for these charges? Generally, the freight forwarder will hold the contracting party for carriage accountable. This may appear to be at odds with some trade agreements or even Incoterms, however it must be kept in mind that Incoterms are agreements between buyer and seller. The cargo carrier is not an obliging party to this agreement. If any unexpected charges are discovered, they will go to the contracting party for carriage.

Regardless of the Incoterms used, the importer will be held responsible by Customs authorities and any penalties or fees related to the abandoned cargo that Customs levies in most cases will go to the named consignee on the invoice.

Also, it must be noted that the shipping line may also charge penalties for holding back the container in which the shipment is packed. These charges are referred to as detention charges.

Port operators can also levy storage charges on customers for failing to take over the shipment. This is a separate charge from demurrage charges billed by shipping lines. This is because port operators also usually limit the number of days a container can be left unclaimed or uncleared. These charges are actually more accurately referred to as port storage charges. However in the industry these terms are used interchangeably.

If left unattended for long periods of time, these accumulating charges can exceed the cost of the goods in the container. In addition, other administration charges may still be levied on the shipment, but most would not be recurrent in nature.

Remedies to deal with abandoned cargo

Auction/Scrap

Shippers can officially abandon cargo to the shipping line or in some countries to Customs authorities. Some shipping lines may choose to declare themselves the importer and bring the shipment inland to avoid paying storage costs to the port operator or to free up space in their terminal warehouse. However, major freight forwarding companies rarely undertake this option, as internal policies and procedures make it almost impossible for them to follow through and act as a seller of the product. In some countries, the cargo will be treated as abandoned and seized by authorities after a specific time period. What happens after an official notice of abandonment is made is similar in both instances.

The party receiving the abandoned cargo will have full rights over the cargo, similar to the consignee. They can choose to scrap the cargo for parts, sell the products on auction or to simply destroy the products. Any costs recovered will go towards closing any outstanding amounts owed. Interested parties may attempt to stake a claim to recover any other amounts due. The shipper may still be taken to task for any shortfall in the amount recovered. When purchasing cargo through such auctions, prices of products are typically suppressed significantly since this is a “buyer beware” market. The seller of the auctioned products, which can be either the shipping line or Customs will make no guarantee to the condition of the cargo or quality. Moreover, some auctions will require the buyer to re-export the cargo within a specified period of time.

Reclaiming shipments

Once a shipper confirms that the consignee intends to abandon the cargo, the shipper can attempt to return the shipment to origin in order to safe the cargo. However, this is not possible in every country and very difficult in others especially if an import lodgement has already been filed for the cargo. In some countries, not claiming shipments leads to compliance issues for consignees, with Customs inspecting future imports more thoroughly.

Alternate buyer

If the shipper can find an alternate buyer for the product, they can attempt to reroute the shipment. Similar to the option of returning shipments, this option too may be extremely difficult or impossible to do in many countries. Even in countries where making such an arrangement is possible, the shipper will have to negotiate rates and transport costs quickly in order to minimize losses. Furthermore, the shipper will have to find a reliable means to guarantee the condition of the cargo that has been kept in storage beyond the originally planned period.

If the shipper has the ability to import the shipment in the destination, this may also be an option in case the consignee is not contactable. Importing the product will give the shipper time to trace the consignee and eventually make the delivery as planned. It will also give the shipper some breathing space as he/she will not be incurring increasing charges on a daily basis.

A final word…

Unfortunately, if you are a shipper, there is no easy solution to protect yourself against consignees who abandon shipments. This problem is particularly stressful for shippers who have to deal with Customs authorities and port operators overseas and make a decision and execute a solution in as short a time as possible. If you ever find yourself dealing with such a situation it is important to keep in mind that every delay in making a decision will result in additional costs. It is best to align these costs with the freight forwarder before executing a shipment in order to already have this information ready when a difficult decision has to be made.

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