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Abandoned cargo.

Byline: Ketaki

Due to increasing disputes between shippers and consignees, a number of ocean carriers have been facing incidents where the cargo remains abandoned at warehouses or yards. In such cases carriers remain responsible for the undelivered cargo. Yaman Al-Hawamdeh from Al Tamimi & Company advises on the options available for ocean carriers in dealing with the vacant time between cargo arrival and actual delivery.

In the August issue of Al TamimiEoACAOs Law UpdateEeA , Omar Omar (Senior Associate, Maritime, Aviation and Insurance) identified in his article, EoACA[pounds sterling]When Does Delivery OccurEoACA[yen], the time at which delivery of cargo actually occurs under the UAE Commercial Maritime Law No 26 of 1981 (the EoACA[pounds sterling]Maritime LawEoACA[yen]). The article concluded that delivery of cargo occurs only at the time the receiver takes actual possession of cargo. Prior to this the carrier remains responsible for the cargo even if it was safely discharged and in the possession of a third party such as port authorities or the carrierEoACAOs agents. Carriers are frequently misguided by the belief that their responsibility for the cargo ends once the delivery order is handed to the receiver and the cargo is discharged.

This is not the case. The carrier will remain liable for any damages sustained to the cargo until the receiver takes actual delivery and possession of such cargo.

This article aims to provide an overview on the options available for ocean carriers in dealing with the vacant time between cargo arrival and actual delivery. This is mostly significant in cases of abandoned cargo or consigneeEoACAOs claims of lost original Bill of Lading. It also highlights the carriersEoACAO chances to recover the expenses incurred as a result, and their right to lien on cargo.EeAaEeAa

Due to increasing disputes arising between shippers and consignees in the current world economic scenario and the instability of the prices of goods, a number of ocean carriers have been facing incidents where the named consignee of a Bill of Lading (B/L) ignores the carrierEoACAOs delivery order and the cargo remains abandoned at port warehouses or container yards. In these incidents carriers remain responsible for the undelivered cargo while it is waiting in the port. During such period, the carrier will be also incurring extra charges such as port storage, demurrage, reefer plugin and so on.

Accordingly, the carrier and its local agent should always assess the risk in dealing with abandoned cargo on a case-by-case basis and depending on the consignment value, portEoACAOs regulation and available legal options.

Under most portsEoACAO tariffs, such as Jebel Ali Port, the local authorities will either put the undelivered cargo to auction or proceed with destroying the cargo at the carrierEoACAOs expense after the lapse of a certain period of non-delivery. This raises the carrier and vesselEoACAOs Protection and Indemnity ClubEoACAOs concerns regarding potential liability and the appropriate legal action which needs to be taken to best protect their interests against any future claims by cargo interestsEoACAO parties.EeAa

Carriers need to carefully evaluate the possible legal actions in dealing with abandoned cargo and consigneeEoACAOs claims of lost original Bill of Lading. In these incidents the following should be considered:

Unclaimed cargo under the UAE Maritime Law Based on Article 269EeA of the UAE Maritime Law, if the party who has the right to take delivery of cargo (the EoACA[pounds sterling]consigneeEoACA[yen]) did not show or refused to take delivery, the carrier shall be entitled to request the competent court to deposit subject cargo under the custody of a trustee. This article suggests that the carrier will remain responsible for the cargo until it is either delivered to its rightful owner or until a trustee is appointed by the court. This article has been confirmed in several judgments passed by the Dubai Court of Cassation (the Supreme Court in Dubai).

The exception to this rule would be where the consignee surrendered original Bs/L, explicitly expressing his intention and confirmation that the cargo be abandoned. The consignee would also undertake to indemnify the carrier for any claims to be filed by any third party in relation to the consignment. Accordingly, in order to be relieved from liability for the undelivered or abandoned cargo, the carrier should seek one of the following:

EoACAoEeAaIn cases of abandoned cargo, the Carrier should seek to obtain an abandon and indemnification letter from the consignee together with original B/L confirming the consigneeEoACAOs intention to abandon the cargo, including its ownership. EoACAoEeAaIn cases of lost Bs/L, the carrier should seek to obtain an undertaking and indemnification letter from the consignee against delivery of cargo. Alternatively, if the carrier has concerns regarding the financial state of said consignee, a bank guarantee can be obtained representing the value of the cargo, valid for a period of 13 months from the date of delivery. This will indemnify the carrier against any legal action taken within the 12 months (i.e. the appropriate time bar) of delivering the cargo. EoACAoEeAaIf it was not possible for the carrier to achieve the above, an application should be filed to the competent court (i.e. Dubai Court for cargo arriving at Jebel Ali Port) requesting to deposit the cargo under the custody of a trustee appointed by the same court. EoACAoEeAaAt first glance, Article 269 appears to provide a solution for carriers to deal with abandoned cargo and/or lost Bs/L. However, in practice, applying the said article through the court faces several challenges. The judge hearing the matter will not know who can be appointed as a trustee. Also, an issue will be raised as to the party responsible for such trusteeEoACAOs expenses. EoACAoEeAaIn addition, the expected time frame for the court to deliver its decision associated with the possible legal expenses have pushed many carriers and their legal attorneys to deal with this matter under the local portEoACAOs regulations on unclaimed cargo.

Jebel Ali Port in Dubai has regulations which might assist the carrier in disposing the unclaimed cargo. Article 22EeA of the Jebel Ali Port Law No 4 of 1979 (the EoACA[pounds sterling]Jebel Ali Port LawEoACA[yen]) provides an option to sell any unclaimed cargo after the lapse of six months of its storage (i.e. arrival). The funds will be distributed to cover the governmental fees, customs duties, ports fees, freight and discharging fees. The remaining will be kept with the port for a period of 12 months and thereafter will be confiscated by local ports authorities if not claimed by the consignee.EeAa

Usually, the carrier, its agent or the cargo clearance agent would apply to the ports authority in Jebel Ali Port to have the unclaimed cargo auctioned after the lapse of six months of its arrival. However, the carrier will remain responsible for the cargo in cases of damage or destruction by ports authority during these six months.

Recovery of costs Another concern pertains to the recovery of the costs and expenses incurred by the carrier and its local agent due to the delay in clearing the cargo. Carriers always have a strong case in claiming the costs and expenses incurred as a result of the consigneeEoACAOs failure to properly take delivery of the consignment. These expenses usually include destruction fees or auction, demurrage, port storage and reefer plugin fees.EeAa

It should be noted that ArticleEeAa287 4 of the Maritime Law provides that all claims arising out of the Contract of Carriage by Sea shall be filed within one year from the date of delivery or from the date on which delivery should have occurred. It can be argued that the destruction, port storage and reefer plugin charges are all arising out of the consigneeEoACAOs default under the Contract of Carriage. Consequently, all claims relating to these costs are time barred with the lapse of one year from the date on which the cargo should have been delivered to the consignee (the date of delivery order).

There are few precedents pertaining to time bar in relation to similar claims before Dubai Courts. However, it is likely that the court will consider these claims (destruction, port storage and reefer plugin costs) as arising out of the Contract of Carriage and should be filed within one year.

Right of lien Many Bs/L provide a standard Lien Clause by which the carrier has the right to lien on cargo for all freights, demurrage and expenses incurred. Exercising the right of lien over cargo pursuant to such clause in the UAE will face several challenges:

EoACAoEeAaThere is no law, practice or custom in the UAE for exercising such lien. It might be argued that having this clause in the B/L does not relieve the carrier from approaching the court for permission to sell or dispose cargo as per Article 269 of the Maritime Law. In other words, if the carrier has reshipped the cargo and disposes it without approaching the court (as per Article 269 mentioned above) or without approaching Jebel Ali Port (as per Article 22 of Jebel Ali Port Law), the carrier will remain liable to the rightful owner if they filed legal proceedings for the undelivered cargo and argued that the carrier is not released from liability unless cargo is delivered or deposited with a trustee by the competent court, as per Article 269. EoACAoEeAaThe carrier will need to file legal action against the rightful owner, who is the consignee as per the B/L, and request the court to give permission to sell the unclaimed cargo in a public auction and award the carrier any claimed fright, demurrage and/or any costs and expenses incurred for storage or delay in taking delivery. EoACAoEeAaThe length of such legal action and the likely legal costs will depend on whether the consignee will attend the proceedings or not, and whether the consignee will deny being the rightful owner or not. EoACAoEeAaIn precedents, the UAE Courts considered clauses provided under the B/L in small letters, and therefore hard to read, as void. It is common for the courts in the UAE to ignore the terms and conditions on the reverse side of the B/L as these clauses are usually typed in small letters.

To conclude, the fate of a carrierEoACAOs right to recover its costs and expenses for non-delivered cargo, in the UAE, remains vague and subject to either a long judicial procedure or the carrierEoACAOs patience awaiting an auction at the Jebel Ali Port.

Footnotes 1 Law Update issue 221 of August 2009

2 Article 269 reads as follows (quoted translation) EoACA[pounds sterling]If the person having the right to take delivery of the goods does not attend or if he refuses to take delivery of the same it shall be permissible for the carrier to apply to the relevant court for leave to deposit the same with a trustee to be appointed by the court. The carrier may request permission to sell the goods in whole or in part to pay the freight.EoACA[yen]

3 Article 22 of Jebel Ali Law reads as follows (quoted translation):EeAa EoACA[pounds sterling]No claimed goods: a)EeAaThe goods may be sold at auction if they are not cleared from the customs and all fees and other charges paid within six months from the date of receipt. b)EeAaAll details relating to the goods to be sold at auction shall be published on the bulletin board in the lobby of the building of the management of the port authority at least two weeks prior to conducting the auction. The portEoACAOs authority shall not be required to publish another declaration for this auction. c)EeAaThe rightful owner of these goods has the right to receive his goods at any time before the auction, provided that all customs procedures are completed, and customs and other duties are paid as required. d)EeAaNotwithstanding any other provision in this article, the following goods may be sold on the expiry of the periods reduced as follows: 1)EeAaPerishable goods, after three days of receipt and by normal/direct sales by the port authority. 2)EeAaCanned food after four months and by auction.

In both cases (1), (2), the consignee may withdraw his goods from customs prior to the sale in a normal way or by public auction in accordance with paragraph (c) above.EoACA[yen]

4 Article 287 of the Maritime Law reads as follows (quoted translation): EoACA[pounds sterling]The following claims shall not be heard if opposed and in the absence of lawful excuse: 1- Claims arising out of a marine contract of affreightment after the expiry of a period of one year from the date of delivery of the goods or from the date on which the goods should have been delivered.EoACA[yen]

Yaman Al Hawamdeh is a lawyer in the Maritime, Aviation and Insurance practice having specialised in Maritime, Civil and Commercial Laws for five years. Before joining Al Tamimi & Company one year ago, Yaman worked for Nabulsi & Associates, one of the leading law firms in Jordan following his graduation in 2001. He specialised in Commercial Law. Yaman has advised clients on the operation of the new Insurance Law and the Consumer Protection Law in the UAE.

Al Tamimi & Company Advocates and Legal Consultants, originally established in 1989, is today one of the leading law firms in the Arabian Gulf region. It is the largest local, non-affiliated law firm in the United Arab Emirates with offices in the Emirates of Dubai, Abu Dhabi and Sharjah, Riyadh (KSA) and associate offices in Doha, Baghdad and Riyadh. Visit for more information.



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Publication:SMB Advisor Middle East
Geographic Code:7UNIT
Date:Jan 21, 2010
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