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Article: Cargo abandonment
News & Insights 18 August 2021
Cargo abandonment occurs when cargo interests fail to collect the cargo or the take the delivery order, most commonly at the port of discharge. The reasons behind abandonment of cargo may vary, for example, it may be a result...
Cargo abandonment occurs when cargo interests fail to collect the cargo or the take the delivery order, most commonly at the port of discharge. The reasons behind abandonment of cargo may vary, for example, it may be a result of the receiver’s insolvency, damage or delay to the cargo, or issues under the sales contract. The increase of cargo abandonment during COVID-19 is largely attributed to the various lockdowns imposed worldwide and the recessions experienced by global economies.
In cases of cargo abandonment, members may find themselves faced with various expenses and risks. The risks can be considerable for cargoes that are prone to self-heat or ignite. In August-2020, several lives were lost, and many people were injured in the Lebanese capital of Beirut due to a massive explosion involving ammonium nitrate fertiliser that was abandoned and neglected for several years. For Further details on this, please refer to the club’s article on the topic.
Due to factors such as trade fluctuation, regulatory change or sanctions related issues, certain commodities are more prone to be abandoned. Similarly, counterfeit products can be left unclaimed when the regulations change, or the traffic has caught attention of local authorities. There have been a number of cases where scrap and/or waste cargoes were rejected at the discharge port either due to misdeclaration or because appropriate permits were not obtained in accordance with the provisions of Basel Convention.
In such cases, having systems and processes to identify such commodities or trade routes would assist in flagging risky bookings. Even though, not all cases of abandoned cargo involve a deceiving party, it is recommended to due diligence checks and know-your-customer (KYC) procedures in the booking process so that a careful approach is ascertained. More details on KYC process is provided in the club’s publication on better box booking.
Members in the container trade may incur storage costs and the loss of containers’ use. Other expenses can include the costs of keeping the cargo on board, for example bunkers if the cargo cannot be readily discharged, alternatively, the costs of discharge, freight to ship the cargo elsewhere (e.g. back to the shipper), the costs of disposing the cargo if it is perishable or the costs of keeping the cargo (and vessel) safe, for example, in relation to coal. The difficulty with perishable cargoes lies with the fact that the cargo condition may deteriorate due to its inherent condition while being held up for extended periods, but it can be very difficult to ascertain whether such loss or damage is caused through the abandonment or by negligence in cargo care or in its handling.
The above expenses could all be incurred by members trading in bulk as well as containers. If reefer containers are involved, members may find themselves faced with additional costs in keeping the refrigerated containers plugged into power. The costs associated with the cargo abandonment can very quickly accumulate and it is strongly recommended that members act promptly in such cases.
Cargo abandonment claims are handled on a case by case basis and heavily depend on the jurisdiction involved. Under English law, the carrier will have to rely on the contract of carriage and implied duties under the bill of lading to recover costs incurred in respect to the abandoned cargo from the shipper/consignee or other interested parties.
In most cases, the law of the jurisdiction where the cargo has been abandoned must be carefully considered. From the club’s experience, we found that in Tunisia, the carrier may be unable to dispose of the cargo or sell the cargo to a new buyer without the authorities’ consent, which has to be obtained through a court order. Similarly in the UAE, the carrier must make an application to the court to assign the custody of the cargo to a court appointed trustee, in order to allow the carrier to sell the goods. In some other jurisdictions, the authorities may be inclined to seize the cargo and auction it to cover custom dues or outstanding charges. This is the case in Ghana.
Given the divergence of approach adopted in different jurisdictions, the use of the club’s global network of local correspondents is crucial in the handling of cargo abandonment claims.
In terms of club cover, under the rule 3.13.2, the costs incurred in disposing of the cargo, storage costs and costs of, say, keeping reefer containers powered would be covered by the club provided that the member has no recourse against a third party and to the extent that these costs exceed the proceeds of sale in cases where the cargo is sold to a new buyer.
We strongly recommend our members to promptly notify the club of new cases of abandoned cargo claims so that with the assistance of the local correspondents and/or local lawyers, available options can assessed and considered, important evidence is collated and the matter is resolved on the best possible terms before the accumulation of above mentioned costs.