As many readers would be aware, from 1 August 2012, several
container shipping lines have reduced the "free"
container time from 10 days to 7 days. The CBFCA and the VTA have
already expressed their significant concern regarding the move and
the likely associated costs for the entire supply chain. The move
by the lines comes after their "winning" outcome in a
recent decision ("Cosco Decision") by
the District Court of NSW in March 2012, whereby it was held that
container detention fees charged by Cosco Shipping
("Cosco") and its Australian agent, Five
Star Shipping and Agency Company ("Five
Star") were enforceable as against a freight
forwarding company. An article regarding the Cosco Decision was
recently published in the Shipping Australia Journal for Winter
2012 ("Journal"). The editorial in the
same edition of the Journal welcomed the Cosco Decision in a way
which suggested that the issue of the enforceability of such
container detention fees had been conclusively determined and would
be welcomed by all parties.
However, to declare that the issue of container detention
charges is now fully settled in Australia after this decision may
not be entirely accurate. Indeed the substantive article on the
Cosco Decision in the Journal acknowledged that the decision
depended on the specific facts of the case and that whether certain
fees will be enforceable depends on the individual contracts
governing the relationship between the parties.
It must also be emphasised that the decision would not
necessarily be welcomed by all parties in the
industry - including those who pay such fees which represent
significant and often unexpected additional costs in the supply
chain. Such fees also represent a significant risk for freight
forwarders and customs brokers who bear the fees in the first
instance where the fees arise from the failure by their customers
to return the containers in the permitted "free" time and
where customers will not or cannot pay the fees. In those cases it
is predominantly the freight forwarders and customs brokers (named
as consignees on the Ocean Bill of Lading/Sea Waybills) who bear
the fees pursuant to their shipping and other agreements with the
shipping companies and their Australian agents.
It needs also to be remembered that the prevailing practices and
levels of the detention fees have yet to be subject to a specific
independent review. Such a review of the practices and the fees
would be intriguing. Australia's biggest exports are empty
containers being returned overseas and empty container parks are
notoriously full - which suggests that there are readily available
replacements for any that are returned "late". At the
same time, the availability and size of empty container parks,
their ownership and relationship to their lines would also be
relevant to any such inquiry. All of those factors feed into
consideration whether the quantum of fees and their collection are
reasonable (even if enforceable)
Whilst the Costco Decision was referred to in an earlier Update
as well as discussed during recent CBFCA State Conventions, given
the subsequent commentary and the recent development of the issue,
it may be worth revisiting the Cosco Decision.
The background to the Cosco Decision is one which will be fairly
common to those in industry. The freight forwarder had at some time
earlier entered into an agreement (known as the "ImportNet
Agreement") with Cosco and Five Star governing the loan and
use of Cosco's containers. The ImportNet Agreement incorporated
the terms and conditions of Cosco's standard Bill of Lading/Sea
Waybill Agreement as well as its Equipment Handover Agreement.
Pursuant to the ImportNet Agreement, Cosco agreed to loan
containers to the freight forwarder on terms which included the
payment of container detention charges by the freight forwarder....
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