Read the Bill of Lading!

A WARNING FOR AGENTS

ABC Agency Co were the agents in China for an NVOC based in Washington State, USA which operated a service between the USA and various Asian ports. The NVOC ceased trading through insolvency, and containers carried under their bills of lading remained stranded in various Asian ports. ABC Agency Co contacted the cargo interests involved with all the containers booked through them and offered to arrange for the containers to be forwarded to their final destination. Unfortunately the cargo interests had to pay additional freight even though they had already paid full freight to the NVOC. The cargo interests were fortunate that ABC Agency Co was professional enough to make sure their cargo reached its destination – in similar circumstances cargo has ended up being sold by ports and terminals to cover costs.

Imagine the agent’s surprise when, several months after the safe delivery of the containers, both they and an affiliated company in the USA were in receipt of a court summons from cargo interests in the US claiming a return of the additional freight paid and other damages resulting from delay in delivering the cargo. The basis of the claim by the US cargo interests on a company which was obviously acting as an agent was a clause on the reverse of the NVOC bill of lading. This clause stated:

Every servant or agent or subcontractor of the Carrier shall be entitled to the same rights, exemptions from liability, defenses and immunities to which the Carrier is entitled. For these purposes Carrier shall be deemed to be acting as agent or trustee for such servants or agents or subcontactors, who shall be deemed to be parties to the contract evidenced by the bill of lading.

A clause similar to this is incorporated in most bills of lading. It is commonly known as the “Himalaya“ clause (see the article“Ship Agents’ Liabilities – “Himalaya“ Clause or Standard Trading Conditions?“ in the February 1998 edition of The Intermediary which can be found on www.itic-insure.com) and is meant to confer on the carrier’s subcontractors and agents (who are not parties to the bill of lading contract) the same defences and limitations which the carrier enjoys under the bill of lading. The normal wording of a “Himalaya“ clause does not include the final sentence of the boxed clause. This clause has the effect of making the agent jointly and severally liable with the carrier for the carrier’s liabilities. It was felt by ITIC’s US lawyers that, whilst there were defences to the claim, the local courts, which were not maritime courts, were likely to interpret the clause at face value and find for the cargo interests. The claim was therefore settled. ABC Agency Co. had never read the reverse of the NVOC bill of lading, and did not realise that it contained this very unusual and damaging addition to the Himalaya clause. Have you read the bills of lading you sign?