In guidance released August 28, 2017, U.S. Customs and Border Protection (CBP) reminded carriers whose ocean vessels have been diverted from their intended port of unlading by Hurricane Harvey to amend their manifests to reflect the new port of unlading. Amending the manifests ensures that the automated terminals at the new port of discharge will receive the appropriate notifications. But who must pay the additional costs that are incurred when cargo is rerouted because of extreme weather?
Shippers Usually Bear Disaster Expense
Hurricane Harvey has disrupted shipping in Texas and Louisiana, forcing carriers to divert vessels to alternate ports. This raises the question of whether shippers must assume the risk and additional costs of receiving cargo at a port to which it was not destined and for on-carriage to get the cargo to its ultimate destination. Additionally, shippers that intended to export cargo from ports impacted by Hurricane Harvey may face terminal demurrage charges for containers that were delivered before the hurricane but have not been shipped.
Carriers have traditionally claimed force majeure to circumvent their transport obligations to a specific port or point. Typical bill of lading clauses contain language that allows carriers, if the carriage is likely to be affected by “any risk, danger, delay, difficulty or disadvantage of any kind,” to abandon “the carriage of the goods at any place or port which the carrier deems safe and convenient.” These provisions typically indicate that the “merchant” (the shipper) shall pay additional costs of the carriage due to the delivery and storage of the goods at the port or place where the cargo was discharged. If cargo is unladen at one of these ports, it could incur serious demurrage costs if it is not picked up quickly.
While the above scenario is not common, the Shipping Act of 1998, as amended, contains a provision (46 U.S. Code § 41102) that requires common carriers, marine terminal operators and ocean transportation intermediaries to “establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”
Shippers should take all steps to ensure that cargo is picked up immediately when available to avert further damages. The first simultaneous step would be to negotiate a solution with the involved ocean carriers. If this fails, the next step would be to review the individual circumstances and evaluate whether remedies are available pursuant to the above provision. For example, did the carrier provide the shipper with sufficient notice of the discharge of cargo at a different port for the shipper to make timely alternate plans for pickup? Was the alternate port the most convenient alternative?
Shippers can also use the alternative dispute resolution services of the Federal Maritime Commission’s Office of Consumer Affairs and Dispute Resolution Services (CADRS). At no cost, CADRS offers ombuds assistance, mediation, facilitation and arbitration to resolve challenges and disputes involving cargo issues.
For more information about weather-related business disruptions, contact Carlos Rodriguez or another member of Husch Blackwell’s International Trade & Supply Chain team.