EXPECTATIONS ON FREIGHT FORWARDERS AND CUSTOMS BROKERS
Disputes will arise between forwarders and their clients and sometimes those disputes end up before a Court of Tribunal. While painful for the parties involved, these cases do provide a valuable insight into what expectations Courts and Tribunals hold of logistics professionals.
Success Logistics v Fortune Imports
The Victorian Civil and Administrative Tribunal recently considered a dispute between a forwarder and importer regarding the delayed clearance of goods and a subsequent claim for storage costs. The case, Success Logistics Pty Ltd v Fortune Imports Pty Ltd involved a claim by Success against Fortune for the costs of storage, transport and other services in relation to an importation of toys. The claim was for $185K, most of which was storage incurred after the parties were in dispute.
The facts were very detailed, but the key elements are:
Fortune signed a letter of authority in 2015 under which it stated that it accepted Success’ T&Cs. Those T&Cs were not actually provided to Fortune.
Fortune claimed, and the Tribunal accepted, that Success verbally offered Fortune 60 day credit terms with a limit of $50,000.
On 29 June Success issued two invoices to Fortune in respect of the shipment and demanded immediate payment. If immediate payment was not received, it was stated that storage charges would apply. Only one of the invoices was immediately paid.
Over the next week, full payment was received. However, the goods were not released as a telex release had not been received from the overseas forwarder. Fortune claimed that this had never previously been required.
While Success received payment of the import GST from Fortune on 2 July, it did not make this payment to the Government until 13 July.
On 16 July the telex release was received. However, on that same day notice of an Australian Border Force (ABF) inspection was received.
On 16 July Success quoted that the goods would be stored as loose cargo at $50/cubic metre per day.
The ABF inspection took place on 21 July. On 27 July the ABF advised that part of the consignment was cleared. A further portion was cleared on 6 August and the goods were fully cleared on 13 August.
Success exercised a lien over the goods and they were only released in early October following an order of the Tribunal.
Success claimed claim Fortune owed it $185K in respect of the consignment, most of which was due to storage at the loose cargo rate.
The Tribunal ordered Fortune to pay storage and other charges in respect of the consignment of about $10K. The Tribunal made a number of interesting findings including that:
The forwarder’s T&Cs applied even though they had not been provided to Fortune.
The credit terms could not be immediately terminated. The forwarder needed to give reasonable notice. In the circumstances this was 4 weeks.
The contract contained an implied term to exercise services with due care and skill and that the forwarder breached this by waiting 11 days to make payment of the GST to the Government.
However, the delayed payment did not cause loss as the goods could not be released due to the fact that the shipper had not provided a telex release in respect of the goods.
Once the ABF stated that the goods were to be inspected, the forwarder had no option of moving the goods.
If the GST had been paid earlier, the goods would have been cleared and could had potentially been moved from underbond storage to cheaper storage pending the shipper’s release. However, given the transport costs associated with a move, it was reasonable for the forwarder not to immediately move the goods. The forwarder would have expected the shipper’s release any day.
While the forwarder was entitled to charge storage for losses resulting from a breach of contract, it needed to act reasonably to limit its losses. This meant non-charging the full consignment at the loose cargo rate and transferring the storage to cheaper third party storage providers.
Key takeaways for customs brokers and forwarders
Credit Terms - If you grant credit, understand your rights to cancel those credit terms. Often a forwarder will not have a right to immediately cancel credit. You may have to give notice or may only be able to immediately terminate where there has been a breach of contract. It is always good practice to have a signed credit agreement that sets out cancellation rights.
Liens - If credit has not been validly cancelled, you may not be able to exercise a lien over the goods. This is because if credit terms still apply, the invoices may not be overdue.
T&Cs - Clients can be bound by T&Cs even if they have not read those T&Cs. This will often be the case if the client signs a document agreeing to the T&Cs. Nevertheless, always provide the T&Cs and obtain signed acceptance – this way the issue will not be in dispute.
Reasonable Care - Each contract for services will contain an implied term that a service provider will exercise reasonable care and skill in performing the work. Of course, the T&Cs may contain express terms limiting liability for a breach of this implied term.
Prompt payment - If the client has given you the funds, don’t delay in making payment of GST and duty to the Government. In this case the 11 day delay constituted a breach of the obligation to provide professional service. In some cases, a delay in payment may result in container detention and storage which the forwarder/broker may be liable for.
Reasonable storage costs - If there is a dispute regarding goods which the forwarder is storing, it should store those goods in the most economical manner. If there is the ability to charge by container or pallet, this should be explored rather than charging a loose cargo rate. In addition, if third party storage is cheaper than your own storage, you should consider transferring the goods to that third party. In other words, a dispute with the consignee does not give you the right to charge the highest possible amount for storage.
Quotes and invoicing – Importantly in this case, the forwarder quoted in advance for all of its storage costs. It is much harder to enforce unexpected costs where a quotation has not been provided.
Invoice disputes are very common in international supply chains. It can quickly become the case that storage and detention charges end up being greater than the original issue in dispute. The key is to seek advice quickly. If you are in dispute with a carrier or customer, CGT Law will aim to quickly advise you on your legal position and help you resolve the dispute as economically as possible.