Abandoned cargo poses a persistent and costly challenge for transport and logistics operators globally. These issues arise from various factors, including commercial disputes, consignee insolvency, or complex regulatory hurdles. Unclaimed cargo can lead to mounting storage costs, legal liabilities, safety concerns, and reputational damage. To mitigate these risks, proactive measures, thorough due diligence, clear communication, and swift action are essential.
Assessing Cargo Abandonment Risk
To effectively manage and prevent abandoned cargo, operators must first develop robust controls to identify and monitor shipments that carry a high risk of abandonment. Key indicators to watch out for include:
- Low-value or waste cargoes: Be particularly cautious with shipments of low-value goods such as waste, scrap, or recycling materials, as the cost of handling and disposing of these can quickly exceed their worth, making abandonment more likely.
- High-value or perishable goods: While seemingly contradictory, these cargoes require close monitoring due to their potential for significant financial loss if compromised or delayed.
- Import restrictions: Be aware of countries with known restrictions on the import of certain goods, as these can lead to customs complications and abandonment.
- High-risk jurisdictions: Exercise extra caution with shipments destined for jurisdictions known for their complex regulations, political instability, or a history of cargo abandonment issues.
- Incomplete sales contracts: Ensure sales contracts are fully finalized and avoid terms like “shipped to the order of…” as this can create ambiguity regarding ownership and responsibility.
Knowing Your Customer (KYC)
Thorough due diligence on both shippers and consignees is paramount to avoid assuming responsibility for abandoned cargo. This involves:
- Careful vetting: Rigorously vet both the shipper and the consignee.
- Identity and resource verification: Verify their identity, financial resources, and operational capabilities, cross-checking information for validity.
- Authority confirmation: Confirm the authority of individuals you are communicating with to ensure they can make binding decisions.
- Beware of suspicious approaches: Be wary of unexpected approaches from unknown service providers or new customers offering unusually low-value or waste shipments.
- Decline suspicious business: Be prepared to decline business that appears suspicious or presents an unusually high risk.
- Request security for high-risk shipments: For shipments deemed high risk, request security from the shipper, such as a cash deposit or a Letter of Indemnity (LOI).
Communicating Clearly
Clear and consistent communication throughout the supply chain is critical for preventing and resolving abandonment issues:
- Define responsibilities in contracts: Ensure that contract terms and conditions explicitly define the responsibilities of all parties involved.
- Specify timeframes and consequences: Clearly state timeframes for cargo collection and outline the consequences of non-compliance.
- Regular contact and prompt notification: Maintain regular contact with consignees and notify them promptly of cargo arrival.
- Formal collection demands: If collection is delayed, issue a formal collection demand to both the shipper and consignee. The timing of these communications should be dependent on the nature and value of the cargo.
- Follow-up demands: Repeat collection demands within 45 days.
- Final warning: Send a final collection demand within 90 days, explicitly warning of cargo sale or disposal at their cost.
- Record all communications: Ensure all communications, especially formal demands, are thoroughly recorded for legal and reference purposes.
Acting Quickly
Once a landed cargo appears unlikely to be claimed, swift action is crucial to minimize costs and liabilities:
- Notify insurer and authorities: If cargo remains unclaimed after the period specified by local regulations or port tariffs, immediately notify your liability insurer and relevant authorities.
- Seek lower-cost storage: Urgently explore lower-cost storage options for the cargo to minimize container demurrage and detention costs. Always consult with a lawyer before unstuffing a container, as this can have legal implications for ownership and liability.
- Secure abandonment and indemnity letters: If the shipper and consignee instruct the sale or disposal of the cargo, quickly obtain signed Letters of Abandonment and Letters of Indemnity from both parties.
- Initiate sale or disposal procedures: Engage legal counsel and local agents without delay to initiate sale or disposal procedures in accordance with local laws.
- Recover outstanding costs: Promptly seek to recover any outstanding costs from the shipper and/or consignee.
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Source: TT Club
