Container demurrage: agents beware

Shipping agents often incorrectly believe that they are protected by “being agents” acting for an undisclosed principal…

Shipping agents prefer to be reflected as the shippers, or receivers, under the main bill of lading contracts with the shipping line in order to protect the identity of their customers, not realising their exposure to container demurrage.

When an agent is reflected as a shipper (or consignee) under a bill of lading (or waybill) without reference to the customer, the agent takes on all the responsibilities of the shipper or consignee. These include the receiving, unpacking and returning of a container within the free time, failing which the agent will attract liability for demurrage.

Demurrage is an amount of “free” time given to a cargo interest to load or discharge a cargo – or collect and redeliver a container that has been discharged by the shipping line.

In the case of a container, if that time is exceeded, the shipping line is entitled to claim damages for the non-use of that container. The damages are agreed upon up front as a daily rate and are usually set out in a tariff in the bill of lading.

In the case of MSC Mediterranean Shipping Co SA versus Cotton Anstalt [2016], MSC Mediterranean Shipping Co SA (the carrier) entered into a contract with Cottonex Anstalt (the shipper) for the carriage of cotton from Bandar Abbas and Jebel Ali to Chittagong.

The bills of lading allowed the carrier free time for the use of the containers at the ports of loading and discharge. The free time commenced from the day the containers were collected by the shipper, or discharged from the vessel, or delivered.

The bills of lading also required the shipper to redeliver the containers to a place nominated by the carrier and to take delivery of the goods within the time period allowed, failing which, the carrier would be entitled to unpack the goods or store them ashore, at the shipper’s sole risk.

On delivery at Chittagong, and due to a significant decrease in the price of raw cotton, a dispute ensued between the shipper and consignee, resulting in the consignee refusing to take delivery of the goods. The shipper presented the bills to the bank, obtained payment and refused to take delivery.

Eventually, the court allowed the carrier demurrage in full up to the date when the contract ended, and to claim the value of the containers.

Under the circumstances:

• Agents that are reflected as shippers in a contract of carriage should be clear as to what their liabilities are under the contract, especially the conditions contained in the carrier’s tariff;

• The document should reflect the fact that the agent acts as an agent for the principal;

• Where a large demurrage bill is in the offing, agents should act with alacrity in resolving the position and involving the customer in these discussions;

• Agents must arrange their affairs so that they can claim back any amounts due to the carrier; and

• If any demurrage claim is settled with the carrier, the terms of that settlement must be made clear.