Testing times at South African ports thanks to Covid-19

Testing times at South African ports thanks to Covid-19

The Covid-19 lockdown regulations have found freight forwarding companies in South Africa stuck between a rock and a hard place. These companies are faced with the difficulty of balancing their customer relationships, while excluding their liability for demurrage costs

As a result of the coronavirus pandemic, a number of regulations were gazetted, which initially placed strict restrictions on the movement of non-essential cargo in and out of South African ports. While level 3 of the lockdown – which allows for movement of all cargoes – came as a relief to those involved in the freight forwarding industry, what cannot be ignored is that the initial restrictions on the movement of cargo has contributed hugely to an already significant backlog at South African ports and ancillary facilities.

In addition to congested ports, most container storage depots and warehouse facilities are at maximum capacity. The accumulated congestion has resulted in containers being retained in the ports or at the shipping line depots, which incur increasingly high demurrage costs per day.
While freight forwarders usually prioritise the collection of containers (especially those with higher storage costs), the situation, which some customers may not understand, is ultimately out of their control.

This Covid-19-related congestion at ports is testing the Standard Trading Terms (STCs) of freight forwarders. Why is this so?

It is common practice for freight forwarders to act as agents on behalf of their customers. Well-drafted STCs will always include the disclaimer that a freight forwarder has the option to act in the capacity as both agent and/or principal. This can be seen where the operation of the following generic clauses in STCs are at play:

The company is entitled to procure any or all of the services as an agent, or to provide those services as a principal.

Despite the acceptance by the company of instructions from the customer to collect freight, duties, charges, dues, or other expenses from the Consignee, or any other Person, on receipt of proper demand by the company for payment and in the absence of such payment, the customer shall remain solely responsible for such freight, duties, charges, or other expenses.

These types of clauses indicate that while the freight forwarder, as agent, may be responsible for the payment of additional demurrage or storage costs on the customer’s behalf, it is ultimately the customer who is liable for the additional demurrage or storage costs.

Freight forwarders are protected against liability of these charges by relying on the authorisation afforded to them by the customer by virtue of the standard trading terms.

Freight forwarders also have the protection of special and general liens and pledges, which are commonly specifically granted in the standard trading terms, over the cargo concerned.

Freight forwarders may want to bring these clauses to the attention of their customers, who, before the congestion caused by Covid-19, may never have had any negative experience in the operation of these clauses. By kindly reminding their customers of these clauses, freight forwarders may save themselves from experiencing complicated dealings later on.

Published by

Peter Lamb

Peter Lamb is a director in the Norton Rose Fulbright admiralty and shipping team, based in Durban. A qualified attorney, Lamb has an LLM in shipping law from the University of Cape Town. He focuses on shipping, logistics and marine insurance law. Lamb is also able to advise logistics service providers, and users, on numerous commercial aspects and risk management, with a focus on Africa. You can read more from Lamb on the Norton Rose Fulbright insideafricalaw.com blog.
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