Article

Note: Agrimax, Ltd. (Seller/Beneficiary/Shipper) contracted with Kuehne + Nagel Ltd. (Freight- Forwarder) to ship 22 containers of credo sulfur from Irricana, Alberta, Canada to Hindusthan Heavy Chemicals (Purchaser/Applicant) in Haldia, India. The cargo was to be transported by truck and rail from Irricana to Vancouver, British Columbia, where it was to be loaded on a marine vessel to Haldia. Purchaser/Applicant was to pay Seller/Beneficiary by commercial LC issued by HDFC Bank (Issuer) payable against presentation of an on board bill of lading. The LC provided that the last day for issuance of the bill of lading was 31 August 2008, (presumably the "latest date of shipment") because of Purchaser's concern that the containers may be left at Vancouver too long.

Freight-Forwarder, acting as an agent for the named carrier, issued a bill of lading stating that the cargo was "received for shipment in apparent good order and condition" at Irricana on 25 August 2008, and was shipped on 4 September 2008. When the bill of lading was presented, issuer refused to honor because the on board date was nonconforming. The cargo therefore remained at the destination port in Haldia incurring demurrage charges, which the Freight-Forwarder was obliged to pay, per its agreement with Seller. Because of Issuer's refusal to take up the bill of lading, Seller requested Freight- Forwarder to issue an altered bill of lading without the 4 September shipping date. Freight-Forwarder refused on the grounds that such an alteration to the bill of lading would be illegal.

Claiming that Freight-Forwarder was in breach of contract, Seller refused to pay the freight and demurrage charges. Freight-Forwarder sued Seller for US$108,790 in freight charges and US$61,388 for demurrage charges. The Canadian Federal Court, in an opinion by Harrington, J. granted Freight- Forwarder's motion for summary judgment in the amount US$212,310.15 plus costs of US$10,159.40.

Seller argued that the 4 September date on the bill of lading as issued was wrong in that it referred to when the cargo was loaded onto the carrying vessel as opposed to the date where the pre-ocean shipment began in Irricana. The Judge ruled that the Freight- Forwarder was correct in refusing to alter the bill of lading and that doing so would be improper. The Judge stated that Freight-Forwarder "was absolutely right in its refusal to amend the bill of lading. If, on behalf of the carrier, it issued a bill of lading showing the cargo was both received for shipment and on board under a single date, 25 August 2008, the only conclusion to draw would be that the cargo was loaded on board the ship in Vancouver that very day. That would be a lie.

Carriers are often pressured to issue false documents. The document may be false with respect to its date, or with respect to the apparent order and condition of the cargo. Some carriers have, at their folly, issued such documents against letters of indemnity."

Additionally, Seller argued that since the credit agreement assigned proceeds of the LC to Freight- Forwarder, the Freight-Forwarder is owed nothing from Seller because there were no proceeds. The Judge noted that under the terms of the Canadian International Freight Forwarders Association, which was incorporated into Seller's contract with Freight- Forwarder, a debt with respect to cargo cannot be used to set off a freight claim, and therefore, the assignment of the LC proceeds to the Freight- Forwarder is not a defense for the money owed.

Comment: Freight-Forwarders: The Judge stated that "the traditional role of a freight forwarder is to arrange for the carriage of goods on behalf of the shipper. It often has credit facilities with the carrier and pays freight and related charges on the shipper's behalf. That was done in this case. It frequently happens that the freight forwarder also acts as agent for the ocean carrier. In this case it held the pen of Transpac Container System Ltd., carrying on business as Blue Anchor Line, and was authorized to issue bills of lading on its behalf. Blue Anchor Line is a NVOCC (non-vessel operating common carrier)."

One wonders why, if the Freight-Forwarder was a NVOCC, it did not issue the bill of lading in its own name. If it were acting on behalf of the carrier, it would have been an agent and not an NVOCC.

[JEB/jes]

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