Rights and responsibilities of a forwarding agent and a client

Nowadays transport and forwarding services in Ukraine are regulated by the following documents:

  • Law dated July 01, 2004 No. 1955-IV “On Transport and Forwarding Services in Ukraine”;
  • Convention on the Contract for the International Carriage of Goods by Road (CMR Convention);
  • Requirements for documents processing (DSTU 4163-2003).

On some issues, these documents partially copy or complement each other. Thus, in order to have a complete picture, you must carefully read all the documents in complex.

For your convenience, we offer a consolidated article, which contains the main thesis statements structured into sense groups.

Please note that both the forwarding agent and the client have rights and obligations. That is, not only the forwarding agent's obligations to provide freight forwarding services are determined, but also the client's obligations, such as the obligation to provide complete and accurate information about the goods and the obligation to pay for the forwarding agent’s services and expenditure.

At the same time, the rights of the forwarding agent are also determined, such as the right of the forwarding agent to derive from the client’s instructions, including the right of the forwarding agent to change the route and transportation scheme (in certain cases and in behalf of the client) and the right of the forwarding agent to detain goods until payment from the client is received.

 

  1. Obligations and functions of a forwarding agent.

The forwarding agent undertakes, on fee basis and account of the other party (client), to perform or arrange forwarding services completion, specified in the agreement concerning the carriage of goods.

Freight forwarding agreement may stipulate the following duties of a forwarding agent:

  • to arrange the transportation of goods by a transportation mode and along the route chosen by the forwarding agent or client;
  • to set up a contract for the carriage of goods on behalf of the client or on his own behalf;
  • to ensure shipping and receipt of goods;
  • to obtain documents required for export or import;
  • fulfillment of customs and other formalities;
  • examination of cargo quantity and condition;
  • loading and unloading of cargo;
  • payment of fess, dues and other expenses laid upon the client;
  • cargo storage;
  • receipt of cargo at point of destination and relevant documents processing;
  • other duties related to transportation.

Unless stated otherwise, when arranging the transportation of goods, the forwarding agent, if necessary is responsible for:

  • agreeing with carriers on terms of cargo transportation and its storage, the time of cargo transshipment from one mode of transport to other and other issues necessary for cargo carrying;
  • customs clearing and other procedures required during transportation;
  • settling an invoice with the carrier for the carriage of goods on behalf of the client as well as on his own behalf.

 

  1. Information that the forwarding agent must provide to the client:

Upon the request of the client, the forwarding agent provides him with the following information:

  • full company name and location (for legal entity), name and place of residence (for individual entrepreneur);
  • information as for the confirmation of freight forwarding services compliance with statutory requirements;
  • a list of freight forwarding services provided by the forwarding agent, and their cost;
  • terms and form of payment for the freight forwarding services;
  • information on tariffs of cargo carriage by various modes of transport, on rules and conditions of such transportation;
  • other information related to arrangement and cargo carrying of particular types of cargo by various types of transport mode.

 

  1. Documents
    • Freight forwarding agreement

The forwarding agent is obliged to provide services in accordance with the forwarding contract.

The forwarding contract is set up in writing.

 

  • Freight forwarding document.

Forwarding documents are: - letter of instruction given to the forwarding agent (it determines the list, terms and conditions according to which the forwarding agent provides the client with freight forwarding services under the forwarding contact);- forwarding receipt (confirms the fact that the forwarding agent has received the client’s or shipper’s goods indicated by the former for their transportation);- warehousing receipt (confirms the fact that the forwarding agent has accepted the client’s goods for the warehousing);Depending on the nature of the freight forwarding services, including transporting of goods on international traffic, the parties concerned may determine the possibility of use of non-specified forwarding documents.Forwarding documents are set off written in writing and are an integral part of the forwarding contract. 3.3. The procedure for issuing documents to the client by the forwarding agent: Upon receipt of the cargo, the forwarding agent is obliged to issue the forwarding document to the client, as well as to present the originals of the agreement set off by the forwarding agent in accordance with the forwarding contract on behalf of the client and on the basis of attorney issued by him.

3.4. Letter of attorney, given to the forwarding agent by the client

The client must issue a letter of attorney to the forwarding agent if it is necessary to perform his duties.

  1. The procedure of the assigning services to the forwarding and cargo receipt.

To provide freight forwarding services, the client issues a completed and signed order to the forwarding agent on paper. The procedure and conditions of use of facsimile or electronic communications is determined by the forwarding contract.

The forwarding agent considers the order and sends it to the client with a mark of approval or with refusal.

The instruction given to the forwarding agent is subject to execution from the moment the client receives written confirmation of its approval by the forwarding agent.

The client at any stage of the execution of the forwarding contract has the right to withdraw the previously issued instruction given the forwarding agent with the obligatory indemnification of the actual expenses associated with its execution.

  1. Cargo insurance.

The forwarding agent has no right to conclude a cargo insurance contract on behalf of the client, unless provided otherwise by the forwarding contract.

  1. Acquisition of external parties by the forwarding agent.

The forwarding agent may engage the external party to carry out his duties unless provided otherwise by the forwarding contract.

If the forwarding agent entrusts the performance of an obligation with a third party, it does not relieve him of liability to the client for the execution of the contract.

 

  1. Cargo information:

7.1. Client's duty to provide cargo information:

The client is obliged to provide the forwarding agent with complete, accurate and reliable information about the cargo peculiarities, conditions of its transportation and other information necessary to the forwarding agent to perform his duties, and documents necessary for customs, sanitary control and other types of state control.

7.2. Responsibility of the client for the cargo information provided:

The client is liable for losses incurred by the forwarding agent in connection with the violation of the obligation to provide information.

7.3. The order of receiving cargo information from the client by the forwarding agent:

The forwarding agent has a right to inform the client about the lack of information received and request additional data required.

The forwarding agent has the right to verify necessary documents provided by the client, as well as information about the cargo characteristics, conditions of its transportation and other information necessary for the fulfillment of the forwarding agent’s duties.

The forwarding agent has the right not to commence his duties until the client provides necessary documents, information as for the cargo characteristics, conditions of its transportation and other information necessary for the forwarding agent to perform his duties.

7.4. Information as for the goods that require specific conditions of transportation: Dangerous, perishable and other goods requiring specific conditions of transportation are accepted by the forwarding agent only if the client provides information about the conditions of their transportation in writing.

 

  1. Routing and change of transportation route and mode of transport:

 

8.1. Client has a right to:

- choose the cargo route and the type of transport mode;

- ask the forwarding agent, if it is stated in the forwarding contract, to provide information on the process of transportation of goods;

- give instructions to the forwarding agent in accordance with the forwarding contract.

 

8.2. Rights and duties of the forwarding agent:

When proving freight forwarding services specified in the forwarding contract, the forwarding agent is obliged to follow the instructions given by the client:

The forwarding agent has the right to withdraw from the client’s instructions, only if it is necessary in behalf of the client and in case the forwarding agent for reasons beyond his control could not previously ask the client in the manner specified by the agreement as for his agreeing for such withdrawing or receive a response to his request within 24 hours.

If the customer’s instructions are inaccurate or incomplete or do not comply with the forwarding contract and the forwarding for any circumstances beyond his control could not clarify the customer’s instructions, the forwarding agent provides freight forwarding services in behalf of the client.

The forwarding agent is obliged to notify the client of any departures from instructions made as soon as notification becomes possible.

  1. Freight forwarding services quality:

The quality of the freight forwarding services provided by the forwarding agent must meet the requirements of national standards, freight forwarding services’ statutes, as well as the terms of the forwarding contract.

  1. Forwarding agent’s liability

10.1. Responsibility of the forwarding agent for the performance of his duties:

If the forwarding agent proves that the violation of the obligations is caused by improper fulfillment of terms and conditions of the forwarding contract, the forwarding agent’s liability to the customer is determined according to the same rules that determine the carrier’s liability to forwarding agent.

10.2. Forwarding agent’s liability for violation of the delivery date:

The forwarding agent shall compensate losses to the client caused by the violation of the deadline given to fulfil obligations under the forwarding contract, unless stated otherwise and the forwarding agent proves that the violation of the terms and conditions occurred due to Act of God or the client’s fault.

10.3. Responsibility of the forwarding agent for the loss and damage to cargo:

A cargo is considered to be lost if it wasn’t delivered upon expiration of thirty days from the expiry date of the delivery period determined by the forwarding contract, or, if such a period wasn’t determined by the contract, within a reasonable period necessary for the delivery of the goods, which commences from the date the forwarding agent accepted the goods for transportation.

Cargo that was delivered but not handed over to the consignee, specified in the forwarding contract or to an authorized person due to failure to pay the fees to the forwarding agent, is not considered to be lost if the forwarding agent notified the client in ample time about the forwarding services provided in the manner stated in the forwarding contract.

The forwarding agent is liable to the client for compensation of loss, shortage or damage to cargo after it was accepted by the forwarding agent and till the delivery to the consignee, specified in the forwarding contract or to an authorized person, unless he proves that the loss, shortage or damage was caused by circumstances that the forwarding agent could not prevent and the elimination of which did not depend on him.

The forwarding contract may state that, along with compensation for actual damage caused by loss, shortage or damage to the goods, the forwarding agent shall refund fee previously paid by the client if it is not included in the price of the goods, in the amount proportional to the value of the lost, missing or damaged cargo.

Along with compensation for actual damage and the refund of the client’s money paid to the forwarding agent, the latter is obliged to compensate the client for loss of profits due to the loss, shortage or damage to the cargo caused by the forwarding agent.

10.4. Forwarding agent’s extent of liability

The actual value of cargo is determined on the basis of price indicated in the contract or the seller’s invoice, and if it is stated, on the basis of the average price for a similar product that existed at the place of goods’ issue, on the date of voluntary filling of such a demand or, if there was no demand of voluntarily filling, on the date of judgment delivery.

When providing freight forwarding services related to the carriage of goods in international traffic, and using the appropriate forwarding documents, the limits of forwarding agent’s liability for failure to perform or improper performance of duties stipulated by the forwarding contract may not exceed 666.67 payment unit per piece of freight or any other unit of shipment, excluding forwarding agent’s liability. By the payment unit is understood the unit of specific drawing right defined by the International Monetary Fund.

When providing freight forwarding services related to the transportation of goods in international traffic, the forwarding agent’s liability for loss, shortage or damage to the cargo may not exceed two units of payment per kilogram of the total weight of the lost, missing or damaged cargo, if a higher amount is not compensated by the person whom the forwarding agent is responsible for.

The rules of limiting the liability are not applicable if the forwarding agent does not prove that the loss, shortage or damage to the goods accepted for forwarding was caused not by his own action or his default committed intentionally or through gross negligence.

  1. The procedure of holding demands and claims against the forwarding agent:

Prior to holding a claim against the forwarding agent, arising from the forwarding contract, it is necessary to hold a demand against the forwarding agent, with the exception of the claim when providing freight forwarding services for personal, family and any other needs not related to the client’s performance of entrepreneurial activities.

The client or his representative, consignee, specified in the forwarding contract, as well as the insurer who has the subrogation right is entitled to hold a claim against the forwarding agent.

The claim is held in writing. The claim for loss, shortage or damage to cargo must be accompanied by documents confirming the right to hold a claim, and documents confirming the quantity and cost of the cargo shipped, in the original or their copies certified in the appropriate manner.

Claims against the forwarding agent may be held within six months from the date the right to hold the claim was entitled. For calculation of time limits, please refer to.

The forwarding agent has the right to accept the claim at play after expiration of a prescribed period, if he admits the reason for missing claim submission period to be valid.

The forwarding agent is obliged to accept the claim at play and notify the applicant party in writing as for the allowance or rejection of the claim within thirty days from the date of its receipt.

  1. Procedure of manifesting the damage or loss of cargo by the consignee

If, at the time of cargo delivery the consignee specified in the forwarding contract or an authorized person did not notify the forwarding agent in writing about the loss, shortage or damage to the cargo and did not indicate the overall character of the shortage or damage, it is considered that they received goods in sound condition unless proved otherwise.

If the loss, shortage or damage to the cargo could not be detected upon receipt of the cargo in a regular manner, such a notification to the forwarding can be made no later than within thirty consecutive days from the date of cargo receipt. The date of notification shall be the date the forwarding agent receives such notification.

  1. Refusal to execute a forwarding contract

Any of the parties concerned has the right to refuse to execute the forwarding contract if it notifies the other party within a reasonable period of time.

In case of a repudiation to execute the forwarding contract, the client or the forwarding agent compensates the other party for losses caused by termination of the contract and pays a fine in the amount of ten percent of the expenses incurred on the part of the forwarding agent or the client.

  1. Client’s obligation to pay the forwarding agent

The client, in the manner prescribed by the forwarding contract, is obliged to pay the reward due to the forwarding agent’s services, as well as to compensate the expenses incurred by him in behalf of the client. If it is proved that the client without a reasonable basis refuses to pay the expenses incurred by the forwarding agent in order to execute the obligations stipulated by the forwarding contract, the client shall pay the forwarding agent, in addition to the indicated expenses, a fine in the amount of ten percent of the sum of these expenses.

The client is responsible for late payment of reward to the forwarding agent and reimbursement of expenses incurred by him in behalf of the client as a penalty payment in the amount of one tenth of percent of reward paid to the forwarding agent and expenses incurred by him in behalf of the client for each day of detention, but not more than in the amount of reward paid to the forwarding agent and expenses incurred by him in behalf of the client.

15. The right of the forwarding agent to detain goods until payment is received. The forwarding agent, if provided for by the forwarding contract, has the right to detain cargo at his disposal until payment of reward and reimbursement of expenses incurred in the behalf of the client is received or until the client provides proper execution of his obligations regarding payment of reward and reimbursement of expenses incurred by him. In this case, the client also pays the costs associated with the detention of property.

The client is responsible for any damage to the cargo due to its detention by the forwarding agent in all cases specified by the contractual clause.

Cargo that was delivered but not handed over to the consignee specified in the forwarding contract or to an authorized person due to failure to pay forwarding agent the reward is not considered to be lost if the forwarding agent notifies the client about the execution of the forwarding services in ample time and in the manner prescribed by the forwarding contract.