INSURANCE | eNEWSLETTER MARCH 2010

 
 
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Customs Inspection of Cargo

A NVOCC consolidator who appears as shipper in the main line bill of lading will likely be the party responsible for any irregularity found during customs inspection although the cause could be cargoes on which the consolidator has issued its house bills of lading. The consolidator should therefore be on alert to the need to recover against the shipper under its house bill of lading whose cargo has caused the action of the customs. Besides the cargo that caused the problem, other unrelated cargoes in the same container may be affected as there is a strong likelihood of delay in delivery.
Customs generally review cargo data submitted by the carrier to determine a risk profile appropriate to the trade, commodity and other features of the shipment. When a container is to be inspected, customs may instruct the carrier to deliver the container to an assigned warehouse (can be a commercial warehouse as well), which will then be unloaded for purpose of customs inspection. If the goods are found to be in good order, the warehouse will reload the container, have it resealed and delivered to the importer, in this case, the NVOCC consolidator’s delivery agent or container unloading warehouse. 
The principal concerns in such a situation are:

  1. In the process of the unloading and reloading for customs inspection, the goods could be damaged.
  2. While the goods may not be damaged, the reloading could likely be carried out without proper stowage/lashing resulting in cargo damage during transit to the importer.
  3. If a damage is subsequently determined upon unloading at the importer’s warehouse, is there a right of recovery and if so, from whom? The assigned customs warehouse that reloaded the container for the customs inspection could be blamed but what could prove the warehouse’s failure in exercising reasonable care in reloading the goods?

The consequence of the above situation will be claims against the house bill of lading carrier although there is clearly no fault on the carrier in causing damage to the goods which arose while in custody of a Customs Authority. Hence, in response to such claims the carrier will have to search for its defense as accorded in the terms of the house bill of lading.
Apart from the possibility of damage to the goods, there is also the risk of the goods being stolen while in the process of customs inspection before the container was delivered to the importer.
Determining liability for such situation will depend on various factors such as whether the container is an FCL with only one set of BL (the main line BL) or with an additional house bill of lading. Where the container consists of consolidated goods with multiple house bills of lading, the liability will likely be on the house bill of lading carrier.


Quoting an example of a case in USA involving a claim on a FCL container against the main shipping line, Hanjin:
This case involved the theft of the container while in the hands of the customs’ assigned terminal for custom inspection.
The circumstances were that customs directed the notify party, a forwarder representing the consignee, to make the container available for inspection. The forwarder selected one of several providers of this service and directed the carrier to deliver the container to the premises of the chosen service provider. Unfortunately, following the customs inspection, the container was stolen before it could be delivered to its final destination.


The court decided that the ocean carrier was not responsible, as it had delivered the container to a destination directed by the agent of the consignee, even though this was not the intended destination under the transport document.
The above position may be different if the customs had made the decision on where the container should be sent for inspection and accordingly the customs would be the party who instructed the carrier to deliver the container. Would the carrier then be deemed to have completed its delivery in such a situation? Is there a clause in the carrier bill of lading that governs such situation i.e. the carrier’s responsibility ends with delivery into the customs terminal for inspection?
There are indeed many issues to consider when loss or damage occurs during customs inspection.

Note – please seek professional advice with regard to the above situations. This article is not intended to replace professional advice.