A recent decision of the Indian Supreme Court, The Chairman, Board of Trustees, Cochin Port Trust -v- M/S Arebee Star Maritime Agencies pvt Ltd & ors., has helpfully clarified conflicting national case law concerning which party is obliged to pay port storage fees incurred by abandoned cargoes. This is an issue frequently encountered in relation to off-spec recyclable materials, which were the cargoes abandoned in the concerned case.
The Indian Supreme Court held that, once the Indian port takes custody of the goods, and provides a receipt for the same to the shipowner (or their agent), the shipowner cannot be held liable for any further storage charges at the port. Rather, the port must seek to deliver the cargo to the consignee and, if it fails to do so, any attempt to recover storage costs or associated cargo related expenses must be directed at the consignee and not the shipowner.
The Indian Supreme Court also held that where the container does not form part of the goods to be delivered to the consignee, the port must de-stuff the container as soon as possible and return it to the shipowner. Where the container does form part of the goods to be delivered to the consignee, the container must be stored by the port with the goods and the storage costs recovered from the consignee.
Should the port decide to auction the cargo in an attempt to recover its costs, and should there be any deficit in the sale proceeds, the consignee will continue to be responsible for the balance of the storage costs at the port.
Importantly, the Indian Supreme Court held that the consignee's liability for storage and cargo related expenses exists irrespective of whether legal title for the goods has actually passed to him. As such, it is irrelevant whether the bill of lading has been endorsed, either by the shipowner to effect delivery or by the original owner of the goods to transfer title.
This is a favourable decision for shipowners and forwarders of cargo discharging in India, who often find themselves years down the line still trying to resolve claims in connection with abandoned cargoes and containers. Indeed this 2020 decision related to cargos discharged 22 years earlier in 1998. In the recyclables trades, where abandonment of off-spec cargos is relatively common, this decision will be especially welcome.
Although it remains to be seen how impactful the decision will be at operational level, in theory, the decision should leave shipowners free from being asked to pay storage charges for cargoes abandoned in Indian ports. Consequently, it should also leave forwarders free from the risk of having such charges passed to them by shipowners. The decision should also ensure shipowners have their containers returned promptly to them and that these do not become dead assets due to long detention ashore.
For shipowners, it is critical that port receipts for containers discharged in Indian ports are obtained, so as to evidence transfer of responsibility for cargo and cargo related charges from the shipowner to the consignee. Where shipowners in possession of such receipts are nonetheless confronted by ports with long stay container/cargo storage charges, it will be helpful to refer the port to this decision. This will be true also for freight forwarders confronted by shipowners passing such charges along the line.
As for shippers, whilst they are likely to experience some relief from abandoned cargo charges being passed to them via the shipping chain, shippers can expect that costs will ultimately be passed to them by the consignee via the contract of sale.
Pursuant to this decision, it will be more risky for consignees to abandon cargoes in Indian ports. Consequently, as they face a potentially heavy costs burden if cargos cannot be collected due to customs issues, consignees will likely look to strengthen their contractual rights of recourse against shippers. Perhaps by incorporating harsher penalties and indemnities for off-spec cargos in the contract of sale, and/or by looking to defer payment beyond successful customs clearance. The ultimate effect of this decision may therefore be to impose on shippers a stronger incentive to correctly grade and describe cargos shipping to India, which may go some way to address a long standing and problematic laxity in relation to the shipment of recyclables.
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