Quay rent, demurrage and storage charges
Since the UK lockdown caused by Covid-19, BIFA has received many enquiries regarding the continued charging of quay rent, demurrage and storage charges, during the current crisis.
Due to competition law BIFA cannot comment on this topic as it is a commercial matter between the contracting parties, and even in these difficult times commercial activity is continuing. However, we have raised the matter at Ministerial level with the Department for Transport (DfT), on the 26th March, and are awaiting feedback.
The supply chain is still functioning and many in the transport sector are classified as key workers, a point confirmed by the DfT. Increasingly, BIFA Members are reporting that the final delivery point is closed, the system is breaking down and log jams are appearing.
BIFA has spoken to four major UK ports and some of the main ocean carriers. All parties advise that as commercial activity continues there is no Force Majeure and they will continue to charge both quay rent and demurrage, where applicable.
With aviation, BIFA has consulted with both airline sheds and airlines and a similar picture has emerged. For both modes the argument is that they believe importers will simply use the quays/sheds etc. to provide free storage.
Regrettably the situation is going to get worse, Chinese manufacturers are now returning to normal and volumes have increased with cargo arriving in the UK soon.
What should BIFA Members do to protect themselves?
Our first piece of guidance is to make sure that the BIFA Standard Trading Conditions (STC) are incorporated in all and any contracts with customers. This will give Members the legal basis to protect themselves, to exercise a lien, to ensure payment is made and to take action to recover outstanding debts. In other words, BIFA has given its Membership the necessary ‘levers’ to secure payment from companies that remain trading.
Generally, prevention is better than cure and we would suggest that Members consider procedures to ensure that their clients still want and have the capability to meet their liabilities.
The suggested steps include, but are not limited to:
- Reviewing credit terms and adjusting as required, including the maximum that you are willing to advance on behalf of clients for individual shipments.
- With ongoing storage, devise a payment plan to avoid a large debt accumulating.
- Introducing procedures whereby overseas agents only ship goods to the UK after receipt of the UK import agents express instructions.
- We would also suggest Members do not enter goods to Customs for consignments shipped under a negotiable bill of lading until there is clear evidence that the importer has title to the goods in the form of either a correctly endorsed bill of lading being submitted or similar.
- Do not accept shipments directly from other parties including shipping lines without checking that the client will accept and pay for the cargo.
We are aware that importers are abandoning or rejecting cargo and there are two basic scenarios
- If the goods have been cleared and the importer rejects them, we would suggest that you exercise a lien and after the required number of days sell the goods.
- Where goods are rejected prior to clearance instructions should be sought from the sender if ownership has not passed to the buyer. There could be three options:
- return them to the shipper.
- Abandon the goods to the Crown.
- Find a new buyer.
Regarding the first point, it is most important that the carrier is not paid and thus the cargo is not accepted by the import agent until it is confirmed that their client definitely wants, and more importantly can pay for, the goods.
Where cargo is rejected or abandoned by an importer, it is essential to communicate with the originating agent and/or shippers to ensure that the issues are quickly resolved, and additional costs are minimised. It is essential to keep accurate records of all discussions, including confirming wherever possible everything in writing. In many ways we are experiencing the worst possible situation, business is severely disrupted, but it is still continuing, and careful consideration must be given to protecting commercial interests.
Our final two points are that:-
- Members should communicate their policies to clients, posting information on their websites.
- Professional guidance should be sought covering a wider range of issues, from exercising a lien, ensuring that the correct insurance policies are in place to understanding which of the Governments support packages may be accessible to individual Members.
In many ways what is being suggested is merely a review and tightening up of good commercial practices. For many years BIFA has urged Members to “Know their Customer” and this is probably truer than ever before.