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  • QA 025
    Question:
    Who is liable for extra costs caused by transit delays, for example if transhipment cargo is left behind in an intermediary port?'
    Background:
    Our buyer complains about transhipment delays between our port and New York, at times resulting in a total transit time of as much as 40 to 45 days. Some goods are transhipped not once but twice! Some miss the main or mother vessel altogether. This makes it difficult for buyers to guarantee on time delivery to roasters and causes additional costs they want to recoup.
    Asked by:
    Exporter - Indonesia
     
    Answer:

    Most if not nearly all green coffee shipped from origin is sold basis FOB (Free On Board). This means that for most maritime shipments the exporter's responsibility ends when the goods cross the ship's rail. Naturally this presupposes that shipment is made in accordance with the terms and conditions of the contract, those stipulated by the buyer, and those that form part of the under-lying standard form of contract, and that the shipping documents are correctly and timely presented to the buyer. Of course, quality claims always remain a possibility. Go to 04 Contracts, for more on standard forms of contract.

    Even though selection of the carrying vessels is sometimes left up to the exporter, especially FOB buyers should also engage with the process, by being well informed about shipping opportunities from a particular port and by insisting that the most suitable options are chosen. Once the goods are on board ship they have become the buyer's responsibility in the sense that he has to ensure the goods are insured, he will have to settle the freight and, of course, he will have to take delivery. If any claims arise after loading due to delays and/or damage then it is for the buyer to lodge these with the shipping company if he thinks there is a case for doing so.

    However, the exporter is duty-bound to make sure that he keeps the buyer informed of all and any changes to the shipping process, also when information reaches him about changes in transhipment dates, vessels or schedules after the goods were shipped. Remember, all parties to a transaction must always exercise due diligence: that is, they must be able to prove that at all times they acted correctly…

    And of course the shipping agents should monitor transhipment cargo and keep their principals fully informed - this is not always the case though. 

    Nevertheless, in the vast majority of cases it is the buyer who, at least initially, is liable to cover any extra costs although, where appropriate, an exporter might perhaps be asked to assist with the lodging of claims etc. And it would make good sense to assist where possible. However, once a buyer realises that shipping delays are becoming a more or less regular occurrence for goods shipped from a particular port, then he will adjust his cost calculation from fob original port of shipment to ex dock port destination accordingly. On a case-by-case basis then, usually it is the buyer who suffers the consequences but, in the longer run, it is always the exporter who will bear the cost because he will receive lower bid prices. Which of course are passed on to the grower.

    Go to 05 Logistics, for a review of shipping matters generally. Visit www.inttra.com for information on cargo tracking and tracing internationally. Other useful links: www.cargosystems.net (international shipping press articles), www.ponl.com (P&O NedLloyd website), www.maersk.com (Maersk Shipping Line website).

    Posted 14 June 2005.

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