2. FIATA Introduction to Freight Forwarding Module 1 2021

Welcome

FIATA Diploma – Module 1

An Introduction to Freight Forwarding
Class of 2022/23

1

Perspectives of Freight Forwarders & Logistics
Service Providers

• traditional Roles of the Freight Forwarder
- as ‘Agents’;

• evolving Roles of the Freight Forwarder
- as ‘Principal’ (Logistics Service Provider);

• common Types of Liability Exposures;
• what Insurance coverage does the LSP really need ?
• importance of the SLA Standard Trading Conditions;
• common issues faced in Claims…

2

Roles of a Freight Forwarder

Who is a “Forwarder” ?

• “Middleman”,
• Freight Forwarders,
• Forwarding Agents,
• Customs Broker,
• Freight Managers,
• Customs House Agents,
• OTIs, etc.

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Roles of a Freight Forwarder

• facilitating smooth flow of international trade
• the party who ensures that internationally traded goods are

move from point of origin to point of destination to arrive :

- at the RIGHT PLACE;
- at the RIGHT TIME;
- in Good ORDER & CONDITIONS;
- at the most Economical Costs

4

Roles of a Freight Forwarder

• traditionally, the freight forwarder was the link between the
owner of the goods and the carrier, and provided forwarding
or clearing services
(as an Agent)

• act as commission agent
performing on behalf of
the exporter/importer…

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Roles of a Freight Forwarder

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Roles of a Freight Forwarder

• routine tasks such as loading/unloading of goods, storage, arranging
local transport, obtaining payments for their customers, etc…

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Roles of a Freight Forwarder

• with the advent of containerisation, the expansion of international
trade and the development of different modes of transport over
the years that followed, the scope of the services is enlarged

• the forwarders undertook activities such as packing and cargo
consolidation on their own account (as a Principal)

• plays an important role in international trade & transport.

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Roles of a Freight Forwarder

The FIATA Definition of “Freight Forwarding & Logistics Services”

“means services of any kind relating to the carriage (performed
by single mode or multimodal transport means), consolidation,
storage, handling, packing or distribution of the Goods as well

as ancillary and advisory services in connection therewith,
including but not limited to customs and fiscal matters,

declaring the Goods for official purposes, procuring insurance of
the Goods and collecting or procuring payment or documents
relating to the Goods…”

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Roles of a Freight Forwarder

“freight forwarding services also include logistical services with
modern information & communication technology in connection with

the carriage, handling or storage of
the Goods, and de facto total supply chain management.

This services can be tailored to meet the
flexible application of the services provided”

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Roles of a Freight Forwarder

• Cargo Consolidation
• Transhipment (unimodal & multimodal)
• Packing, Warehousing, & Distribution
• Arranging cargo insurance
• Documentation and Customs clearance
• Payment of freight and local taxes
• Transport distribution analysis and

transportation arrangements

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Roles of a Freight Forwarder

The Freight Forwarding/MTO is expected to advise on:

• The most suitable mode/combination of transport (modes be road,
rail, sea, air or inland waterway) ;

• Compliance with any maritime, aviation or other statutory
requirements e.g., in relation to safety and dangerous goods.

• Customs procedures;
• Rates and Reliability of service;
• Cargo Insurance and Liability limitations;
• Practical and technical aspects of the job; and
• Any particular obligations mandatory at the load or discharge

port…

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Roles of a Freight Forwarder

Agent? Or Principal?

• The distinction between a freight forwarders
role as a principal and as an agent is important
because it determines the responsibility of the
freight forwarder.

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Roles of a Freight Forwarder

The Freight Forwarder as an Agent?

• The rule of thumb (although not conclusive), is that freight
forwarders are the agents for their paymaster. In other words, the
freight forwarder is often the agent of the party that pays the
charges. (invoices)

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Roles of a Freight Forwarder

The Forwarding Agent’s Duties?

• skill and care
• to act with reasonable dispatch
• to follow Principal’s instructions
• to preserve the Principal’s interests
• to select proper carrier and other service providers
• to advise on insurance

15

Roles of a Freight Forwarder

Forwarding Agent’s Liability
• Liability for :

– breach of duty
– damage to goods
– negligent advice and/or

misrepresentation
– personal liability of officers

and/or employees

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Roles of a Freight Forwarder

The Forwarder as a Principal

• At the risk of generalising, a freight forwarder will normally be held
to be a Principal if issues:

– a multi-modal transport bill of lading e.g., the FIATA Bill of Lading and the
Combicon bill (Combined Transport bill of lading published by BIMCO in 1995);
or

– a house bill of lading as an NVOCC

• The above forms of bills of lading impose a clear obligation on the
issuing freight forwarder as a Principal Carrier and where the
transport document holds the freight forwarder as a carrier, it will be
unlikely for the freight forwarder to only have the liability of an agent.

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Roles of a Freight Forwarder

Factors to be considered

• The method of charging the customer
• The extent to which freight forwarders hold

themselves as carriers
• The bill of lading
• Relations between the

freight forwarders and
their customers

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Roles of a Freight Forwarder

Liability as a Principal
• Freight Forwarders are subject to liability as Principal

not only when they actually perform the carriage by their
own means of transport (performing Carrier), but also if, by
issuing their own transport documents or otherwise, they
made an express or implied undertaking to assume Carrier
liability (contracting Carrier).

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Roles of a Freight Forwarder

Logistics Services Provider Functions (LSPs)

• arrange for transportation on behalf of the Clients;
- acts as an intermediary or agent between the
consignor/consignee and the carrier

• contract as the contracting carrier without actually
performing the carriage or;
- acts as an agent for the principal

• actually, performing the carriage, itself;
- provides total logistical services or ‘one-stop logistics shop’
Acts as a principal contractor in international transportation
& logistics services

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Roles of a Freight Forwarder

Liable in these circumstances:

1. In relation to Customer

- liable for acting as a professional, for their acts & omissions
and those of their employees, in terms of documentations &
handling of goods

2. In relation to handling of Customs Documentation

- liable for violations of Customs Regulations, etc.

3. In relation to 3rd Party

- liable for loss or damage to property, or for
delay in delivery, or for personal injuries, etc.

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Roles of a Freight Forwarder

Risks

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Roles of a Freight Forwarder

Risks

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Roles of a Freight Forwarder

Common Types of Liability

• loss or damage to cargo due to
negligence

• delay, misdirection or misdelivery of cargo
• failure or omission to follow

specific instruction
- e.g., storage of goods in

covered warehouse,
stating wrong carrying
temperature for
reefer cargo, etc.

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Roles of a Freight Forwarder

THIS COULD HAPPEN…

Mouldy Belts damp cartons

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Roles of a Freight Forwarder

THIS COULD HAPPEN…

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Roles of a Freight Forwarder

Common types of Risk

• improper release of goods
- e.g., release of cargo without production of
original B/Ls, release of cargo without proper
bank endorsement,

• issuing clean B/L in exchange for letter of
indemnity although cargo was damaged at time
of receipt by them

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Roles of a Freight Forwarder

Delivery of cargo without production of the Original
Bill of Lading

• In respect of negotiable “To Order” B/Ls, the freight
forwarder should never release cargo without production of
the Original B/L.

• To do so will amount to misdelivery and the freight forwarder
will be liable for the value of the goods to the lawful holder of
the B/L. They cannot limit liability..!

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Roles of a Freight Forwarder

Delivery of cargo without production of the Original Bill of
Lading

• Sometimes, in order to keep the customer happy, business
decision are made to release the cargo without the Original B/L; in
such circumstances, it would be prudent for a freight forwarder to:
a) Ask the carrier/principal for instructions;
b) Inform shipper and ask clarifications/instructions; and
c) Obtain a Letter of Indemnity and/or a Bank
Guarantee from the person claiming the cargo

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Roles of a Freight Forwarder

Letter of Indemnity (LOI) for issuing clean Bill of
Ladings

• Shippers may often offer to give the carrier an LOI in
return for issuing clean B/Ls (often because they would
otherwise not be paid by their buyer) even though
the goods may be in some way defective…

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Roles of a Freight Forwarder

Letter of Indemnity (LOI) for issuing clean Bill of Ladings
• Whilst the issuance of LOIs by the shipper to the carrier is not illegal

per se, the LOI will be unenforceable if the carriers had been deceitful
in that they knew the goods were not in good order and condition but
nonetheless issued a clean B/L…
• Courts have held that this is tantamount to fraud on the receiver and
the court may therefore not assist the carrier in enforcing the LOI
against the shipper.

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Roles of a Freight Forwarder

Common types of Liability

• lost of important documents such as B/Ls
• inappropriate or improper stowage

arrangements

- e.g. for containerised cargo

• mislabeling of cargo

- e.g. cross-labeling causing cargo to be lost or mis-shipped

• inappropriate or improper
preparations of Customs
documents

- e.g. wrong declaration of import/export values

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Roles of a Freight Forwarder

Common types of Liability

• negligent selection of sub-contractors

- e.g., selection of trucker who does not have experience
handling certain types of heavy machinery

• giving inappropriate/wrong instructions to
sub-contractors

- e.g., cross-labeling causing cargo to be lost or mis-shipped

• bodily injury or damage to 3rd Party when
handling cargo or equipment

- e.g., forklift collided with 3rd Party vehicle

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Roles of a Freight Forwarder

In Contracts:

• LSP may contract as “Principal”

- e.g., as MTO issuance of MTB/L, warehouse/logistics
management contracts, or waiver of STC Clauses, etc.

becomes liable to their customers
under the terms of contract…

34

Roles of a Freight Forwarder

In Bailment:

• the LSP entrusted with goods which they hold in their care, custody & control,
thus becomes ‘bailee’ (someone who voluntary takes property into their
custody, whether for reward or otherwise…), thus, they have the duty to
ensure safe-keeping of the goods.

• bailee must carry out their duty with reasonably care & skill
• answerable for negligence or intentional acts of their employees or of sub-

contractors or agents (vicarious liability)20

BAILMENT - A legal relationship created when a person gives property to someone
else for safekeeping.

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Roles of a Freight Forwarder

In Bailment:

• bailee cannot escape liability in relation
to the principal bailor, by delegating the
task or entrusting the goods to another

• a sub-bailee can be liable to the owners
of the goods although there is no direct
contractual relationship between them
and the owners

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Roles of a Freight Forwarder

In Tort:

• Negligent handling of goods

- whether or not there is a direct contractual relationship with the goods owner,
and owes the duty of care for the goods entrusted in their custody & control

• Negligent Error or Omission

- financial losses can result from mishandling of
documentations, misdelivery, misdirection, negligent
selection of carriers or packing contractors…

Tort : A negligent or intentional civil wrong not arising out of a
contract or statute.

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Roles of a Freight Forwarder

In Tort:

• Conversion

- a tort committed against the cargo owner by virtue of the
title in the goods, or their right of possession (e.g., wrongful
exercise of a lien by the LSP…)

- it occurs when property is wrongfully taken or parted with,
sold retained or dealt with in a manner inconsistent with
the owner’s title or rights to the goods

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Roles of a Freight Forwarder

In Tort:
• Liability towards a Party due to negligence/Public Liability

- liable to 3rd party who enter the premises

e.g., slippery floor causing 3rd party to fall & sustain
injuries…

- LSP negligent in goods/equipment handling causing
damage to 3rd party’s property or bodily injury

e.g., operation of forklift, crane, truck & container,
damaging public property, etc…

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Roles of a Freight Forwarder

Customs Fines & Duties:
• LSP may be levied with fines by respective authorities for

wrongful declarations of customs import, export or
transhipment

Cost:
• LSP may be liable for various Costs,

regardless of claim e.g., survey costs, costs incurred in

disposing damaged goods, re-packing costs, storage
costs arising from uncollected cargo, legal costs
incurred in defending claims, etc….

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Roles of a Freight Forwarder

General Liability for Negligence
- liable for lost or damage of cargo due to negligence…

• however, special conditions can be incorporated in the STC to protect
them…

e.g., “all liabilities are excluded for all loss due to negligence,
unless the negligence is willful whether caused by the
LSP, or be an agent or a sub-contractor…”

RESULT – they may be protected, unless the other party can prove fundamental breach of

contract;
– alternatively, the client can sue the sub- contractor directly…

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STCs provisions for Special Conditions

Liability for failure to follow Instructions

- liable for the resulting lost or damage of cargo due to non-
conformance of their principals’ instructions…

• however, STC can provide for these by giving the LSP
discretionary power to act…

e.g., “where the instructions are ambiguous or incomplete,
where the LSP has failed to transit instructions to a 3rd Party, they
may still be liable, and this will be subjected to the test of
‘reasonableness’…”

• the STC has placed the onus of giving proper instructions upon the
Shippers/Goods’ Owners…

42

STCs provisions for Special Conditions

In the event of Liability, what will be LSPs extent of Liability?

Common Law

- the LSP may be fully liable for any loss or damage caused by him
and may include not only the value and extent of the damage, but
also the further expense & costs incurred by the owner of the
goods including legal costs, interests, storage expenses, survey
costs, further transport costs, replacement value, etc…

43

STCs provisions for Special Conditions

In the event of Liability, what will be LSPs extent of Liability?
LSP’s Limitation of Liability

- very important for the LSP to put into
the contract, a specific clause, which
will limit liability and provides that they
will not have to pay, even if full liability is
proved, beyond the amount stated in the
contract…

44

The MTO’s Liability

Whenever goods are moved, they are prone to potential hazards!

• Understanding what happens when goods are damage,
who is at fault and how to claim from the responsible party
enables freight forwarders to safeguard them and their
client’s interests as well as handle claims expediently and
competently…

45

The MTO’s Liability

Minimise exposure to risks by:

• Train staff so that they are conversant with the
standard trading conditions, bill of lading terms, etc.,
and are able to handle claims & recoveries efficiently
and expeditiously…

• Ensure all documentation
is correct, legible and
appropriate for the purpose…

46

The MTO’s Liability

Minimise exposure to risks by:

• Make sure that the Standard Trading Conditions under which
they operate are understood and accepted by their
customers and subcontractors (e.g., shipowners,
warehousemen, road operators, etc.)

• Ensure the subcontractors to have adequate liability
insurance cover to cover them for their negligence.

• Make adequate security arrangements against theft,
pilferage, fire, etc.

47

The MTO’s Liability

Procedures capable of giving rise to potential claims…

• Collection of goods by MTO/subcontractor;
• Receipt of goods from the first carrier;
• Performance of formalities (customs, import or export);
• Booking cargo, preparation and lodging of Bills of Lading

(B/L), call forward, retrieval of B/L, distribution of
documentation;

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The MTO’s Liability

Potential Claims

• Neglecting to make reservations and safeguarding their
principal's interests;

• Neglecting to care for and watch over the goods between
two carriers;

• Wrong or incomplete writing of the Bs/L, etc.
• Damage incurred by installations such as

a crane in the port due to an incorrect declaration of weight.
• Omission to take cargo insurance in spite of instructions;

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The MTO’s Liability

Potential Claims

• Failure to exercise due diligence in the choice of
carriers, warehousemen and other agencies on
behalf of the customer;

• Failure to notify the consignee;
• Re-export of cargo without

compliance with the
necessary formalities for
drawback of duty, etc.;

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