FEDERAL DISTRICT COURT NARROWS FORWARDER’S LIABILITY EXPOSURE

Ocean freight forwarders are skilled shipping professionals who often play an important role in U.S. international trade and commerce. The forwarder is licensed to operate by the Federal Maritime Commission and is regulated by the shipping acts of 1916 and 1984.

Congress defines an “ocean freight forwarder” as “one who (A) dispatches shipments from the United States via common carriers and books or otherwise arranges space for these shipments on behalf of shippers; and (B) processes the documentation or performs related activities incident to those shipments.” (46 U.S.C.A. 1702 (19) A and B)

The forwarder’s activities might include preparing export custom declarations, consular invoices, dock receipts, bills of lading and/or delivery orders; arranging for cargo insurance, cargo coordinating, inspection services, packaging and/or warehousing; and payment of freight charges and custom duties on behalf of the shipper.

By performing these duties, the forwarder permits many American companies with limited knowledge of the complexities of shipping and export laws, to participate in international trade.

The ocean freight forwarder generally performs the above services as an agent for the cargo shipper. The forwarder may undertake additional duties to aid in the shipment of goods, if the shipper specifically asks for and agrees to pay for additional services.

The recent case of John Brown Engineering Ltd., in the federal district court of South Carolina (1991 AMC 2540), now on appeal, illustrates that additional freight forwarding services should be set out in writing if they are to be unequivocally enforced by a court of law.

In the John Brown case, a Scottish cargo importer, contracted with an American freight forwarder to act on its behalf in conjunction with the transportation of its heavy industrial machinery from South Carolina to Scotland.

Some of the machinery arrived in Scotland damaged after ocean transit. Originally, the shipper had brought suit against the ocean carrier, loading stevedore and freight forwarder for $2.069 million for cargo damage and $4.299 million for consequential loss of profits.

The shipper settled with the other parties for $35,000 but continued the suit against the freight forwarder for the balance of the claim.

The shipper claimed the forwarder was responsible for the damage due to its failure to: (1) ensure proper packaging of the machinery; (2) select a vessel, master and crew suitable for carrying the cargo; and (3) ensure proper loading, lashing, stowing and securing of the cargo aboard the vessel.

The court held that the forwarder was bound only by what it explicitly or by implication agreed to do in the freight forwarding contract. The court stated that the litigation was a classic case of failed communications and misunderstandings. The contract was never reduced to writing, and its terms could only be gleaned from the actions of the individuals involved in the transaction.

During the trial, there was no evidence that the shipper ever asked, or the forwarder ever offered, to take responsibility for packing the shipment for export. The court found that the forwarder did have a contractual duty to retain a vessel, captain and crew qualified to carry the cargo.

It was determined that the ship, master and crew were all qualified to handle the cargo, and the forwarder was fully justified in relying on them to properly care for the shipment.

The case makes it clear that ocean freight forwarders must exercise reasonable care and skill while acting as agents for shippers.


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