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Navigating the maze of shipping terms and conditions BY GUY M. TOMBS

have been working as an international with the guidance of the shipper’s corporate freight forwarder and shipbroker for lawyers, on future RFQs. Ialmost 40 years, and would like to share I hope you agree we are now entering several reflections based on what I am now a maze (think back to that age-hold seeing in the market, hoping that some of labyrinth on the island of Crete), where what I say will be useful to you. You may or things are not always as they seem. I try to may not agree – if you laugh in recognition, navigate this maze. I work in it, so I am not well – I am fine with that. trying to emerge from it or to enter into it International freight forwarders now – I live in it. I am now coming across ener - live in an RFQ World, with RFQ standing gized and ingenious maritime lawyers, for Request for quotation . The expression insurance underwriters and brokers, SCM RFP for Request for proposal is also used, as professionals, sometimes mystified ocean is ITT, which stands for Invitation to tender. carriers, jostling in the maze’s dimly lit pas - They all mean the same thing. We spend a sageways. lot of time preparing bids, much more than What can emerge in our relationship in the past. with the customer is an agreement with a Years ago a customer or shipper often set of contractual terms and conditions that GUY TOMBS had a preferred freight forwarder and stayed look very different from the with this firm loyally – but some felt these terms and conditions (or T&Cs, as they are relationships were too cosy – the customer’s called), that are largely pulled over from shareholders may have demanded more procurement norms for other goods and We act as both international freight for - transparency and accountability, and more services that the customer is purchasing. warders and shipbrokers. I am convinced, sophisticated procurement systems We may be asked to agree that these RFQ from my experience, that at a certain point emerged. A science called supply chain T&Cs take precedence , where they differ, on some very complex or large shipments, it management or SCM began. Shippers over our firm’s T&Cs or standard trading is much better for the shipper to contract shared information and techniques within conditions and over those on the Bill of the ocean portion of the movement directly SCM circles to strengthen their hands in Lading. A freight forwarder’s underwriters with the ocean carrier via a shipbroker in a negotiations with freight forwarders and are naturally curious about our undertak - transparent manner, rather than via an inter - carriers. On larger cargoes or shipping con - ings with both customer and ocean carrier national freight forwarder – and for the tracts, customers and shippers have on large contracts. Is this a netherworld? shipper or customer to be the charterer in developed substantial and complex RFQs – My reflex, honed in a less litigious and these instances. It is in my view very much and with the aid of email they can send less adversarial era, is to approach cus - in the interest of the customer to consider these out to many pre-qualified forwarders tomers as an agent — a servant, really — this, in certain cases. To be crude, a large at the click of a mouse. The RFQ may be and to offer them counsel as to the best and complex shipment can sometimes turn downloadable from a website if you already structure for their shipping contracts, in a into a mess if you don’t proceed in this have a username and password. An interna - way that best serves their interests. direction. That would be like confronting tional freight forwarder wants to be on There are basic differences between the Minotaur in that ancient labyrinth! many bid lists – without it, the firm cannot liner bookings and charter parties or book - If things ‘go south’ during a large - ‘participate’ in the bid process. ing notes that are best not glossed over. ment, as a charterer you will have more At the beginning of my career, the We may present ourselves to the cus - tools at your disposal than if you simply play terms and conditions governing an interna - tomer as an agent, not a principal – the the card of ‘the freight forwarder is the con - tional transport movement, and the customer can in turn insist that we are a tractor’ and try to beat up on the freight relationship with our client, would be those ‘contractor’ or a principal. Also we may be forwarder. I know that some corporations or on the transport document, the Bill of asked by the customer not to represent our - even government departments may find it Lading (B/L), whose format and terms and selves as the agent of the customer to the difficult seeing themselves as charterers – conditions would be pretty familiar. But in ocean carrier or other suppliers – when the they may be outside of their comfort zone as recent years, in asking for pricing from so ocean carrier considers us exactly and only charterers – but taking the time to master many freight forwarders, on the larger con - that. The ocean carrier may go a step fur - the terms of is well worth it tracts the shipper is now dealing with many ther than the customer and insist, in certain when the stakes are high, and millions of firms never before dealt with, and whose circumstances, that for contractual pur - dollars are at stake. There is a tipping point , likely performance for the project at hand is poses, the freight forwarder is the in my view, on certain large movements, unknown. So the RFQs nowadays may add merchant, and the actual customer or ship - where it should be patently obvious that a whole new slate of mandatory terms and per is not relevant to them. Is this what chartering makes better sense than forward - conditions, additional to, and even taking psychologists call cognitive dissonance ? We ing. precedence over, the ultimate B/L terms, to may speak one language to the shippers or But the customer or supply chain man - protect the shipper from the unknown, and customers and another quite different lan - ager may not want to think of herself or from the party they are awarding the con - guage to the carriers. himself as a ‘charterer’, not a term often tract to. If the shipper has a misadventure On large projects, an international used in SCM. So who then becomes the with a big movement – these RFQ terms freight forwarder may be asked to sign a charterer? Enter the international freight and conditions may well balloon still fur - form of contract, embedded in the RFQ, forwarder. One recognizes and respects the ther, in ways specific to the misadventure, that virtually no ocean carrier would sign. quandary the customer is in – where the 36 • Canadian Sailings • August 24, 2015 sailings1066 2015-08-25 6:51 AM Page 37

customer has a strong desire to have just one contract on a large them in a conversationally clear form. But because of the contractual door-to-door job. But considerable analysis and expert counsel may interplay amongst the various parties, there can be a temptation or be needed before making a determination of the best way to contract tendency to gloss over any dramatic differences between the manda- these jobs – as one contract with one party, as more than one with tory SCM terms and conditions and the actual vessel charter terms this party, or as more than one contract with more than one party. – which can leave the customer needlessly exposed. One of the procurement rationales of SCM is that it is designed From the freight forwarder’s and shipbroker’s perspectives, the to drive prices down – but where the international freight forwarder best approach, in my view, is simply to operate with commercial is being asked to take on further risk, even considerable risk, to savvy and integrity: to advise the client of the risks entered into, to secure the contract, it can hardly drive prices down as a rule. The avoid mystification, to clarify chartering terms, and to be transparent customer may not have visibility of the vessel charter undertakings with respect to what is actually happening with the shipment, and of the international freight forwarder — the vessel operator in turn its schedule, from the time before the ‘fixture’, and throughout, with may not have a view of the mandatory customer SCM ‘terms and valid information on vessel positions, and as the movement pro- conditions’. The international freight forwarder effectively is being gresses – with good on-the-ground information. Operational required to ‘bridge’ any differences, in liability, in payment terms, excellence and tight management control are key to the success of a potentially a whole gamut of special conditions. The terms in the large movement – whether acting as an international freight for- ‘back-to-back’ contracts may not mirror each other at all – apart from warder or shipbroker, one must insist upon that. The sun will shine, details, place names and dates. There may be a mandatory when all goes well, and one is free of the maze of overlapping, some- ‘purchase order’ to sign with the customer. times dissonant shipping terms and conditions – and like Theseus on The parties in supply chain management may be unfamiliar Crete, I can emerge and relax for a while and head back to the main- with vessel chartering or part chartering or booking notes and so will land. be relieved that the international freight forwarder, either directly or Guy M. Tombs is the President of Guy Tombs Limited, Montreal via a shipbroker, actually does grasp the concepts, and can convey freight forwarders and shipbrokers, established in 1921

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