Shall the Seller Pay the Freight Fee when Buyer Abandons the Goods under FOB?
Case Background
We recently received a request for help from a Client:
Hello lawyer, we are seller and shipper. Our company shipped out the good, however our client abandon the goods after goods arrived destination port. Shall we, as shipper, pay the freight fee if the customer abandoned 2 containers of goods? In this case, the forwarder communicated with the buyer directly about the cost of ocean freight before the delivery. We didn't know the specific price of ocean freight.
We communicated with the client to understand the facts of the case. The outline is as follows:
The Chinese company exported goods to the African buyer, and both of them choose FOB Qingdao Port. Before the goods shipped, the African buyer found a forwarder and directly communicated with the forwarder about the ocean freight. The Chinese company did not know the specific price of ocean freight. Then the forwarder provided to the Chinese company a B/L showing that the shipper was the Chinese company and the consignee and notify person was the African buyer. In addition, before the shipment, the Chinese company had signed the letter of guarantee provided by the forwarder. After the shipment, the Chinese company encountered rejection of the shipment, now the forwarder claimed the ocean freight from China Company. The Chinese company argued that the ocean freight should be borne by the buyer under FOB terms.
The African buyer directly communicated with the forwarder about the ocean freight and the Chinese company did not know the specific price of ocean freight.
Legal advice
The Chinese seller company shall pay the ocean freight. The reason is that:
According to Article 69 of the Maritime Code of the PRC, the shipper shall pay the freight to the carrier as agreed. The shipper and the carrier may reach an agreement that the freight shall be paid by the consignee. However, such an agreement shall be noted in the transport documents. In this case, the Chinese company is the consignor of the B/L, but there is no agreement that the freight shall be paid by the Egypt buyer as the consignee. Therefore, the ocean freight shall be borne by the consignor, namely the Chinese company.
In the meantime, although the Seller shall pay the ocean freight, as the non-defaulting party, the Seller may put pressure on the defaulting Buyer or contact new customers to resell the goods, and any losses caused thereby can be deducted from the prepayment made by the Buyer.
