Shmuel Grossman, Roy Gilad, Grossman, Cordova, Gilad & Co, Israel

A company handling acquisition and marketing of metal waste contacted a client from England and agreed upon the exporting of an aluminium slag shipment to Spain.

In order to export the shipment, the company contacted a customs agent requesting a price offer for marine shipping of the shipment. The custom agent received a price offer from a ship’s agent in Israel on behalf of a shipping company and based on such price offer, the company guaranteed the client in England a shipment of 4 containers of aluminium slag to be shipped to Spain by sea carriage.

Later, the company contacted the customs agent and requested a booking with the shipping company, and a confirmation was indeed given by the shipping company, as well as a booking number. The company was given 4 empty containers by the shipping company in order to load the cargo; these were loaded with aluminium slag and transported to the port of Ashdod, so they would be available for loading on board the ship. Several days afterwards, the customs agent informed the company that the shipping company does not permit transportation of said cargo, attempts to solve the dispute did not succeed, and the company was forced to empty the containers of the aluminium slag and return them to the shipping company.

The company instituted legal proceedings for claimed damages against the ship’s agent in Israel. These damages are mainly the revenue differences between sale of the cargo to the English client and the revenues from the alternative sale of the cargo, at a reduced price, to a client in Israel. (Additionally, the company sued for a refund of the transport costs by land and subsequent costs.)

The company claims that the shipping company should have informed the company beforehand that it does not permit transport of the cargo, and should have done so at the order confirmation stage, before the company was allowed to take the empty containers to load the cargo. The shipping company’s refusal to transport the cargo at such a late stage, after loading the cargo into the containers, has caused the company great damages, including the cancellation of the business transaction with the English client and selling the cargo at a reduced price to a client in Israel.

The defendant (ship’s agent) has stated as a preliminary claim that there is no opponency with said company, since it isn’t the shipping company, but is only the shipping company’s representative in Israel. The Tel Aviv Magistrates Court has rejected this claim and ruled that all agreements and negotiations concerning transportation of the cargo are between the company and the defendant (with the customs agent acting as a middleman), a fact that demonstrates the direct involvement of the defendant and an indication of a direct opponency between it and the company. The defendant’s conduct deviated from an agent’s conduct alone, acting not as a mediating authority but as a communicator in itself.

The main issue that demanded the Court’s ruling was if the company was permitted to rely on the defendant’s price offer for transporting the cargo alone, a price offer after which a booking number and confirmation were given and empty containers were supplied to load the aluminium slag into them. The defendant claimed that when the price offer was given, several reservations were already stated: A confirmation of the shipping company was needed to load the cargo since the shipping company does not carry waste cargo, and before loading the cargo on board the ship, the shipping company must be given a declaration of hazardous materials. Since the cargo is defined as “waste cargo”, and since the declaration of hazardous materials was given only after the shipping company’s refusal, the company should have known that the price offer alone cannot be relied upon and that the shipping company would not approve loading of the cargo on board the ship.

The court accepts the shipping company’s statement and rejects the claim against it. Rejection of the claim is largely based on the involvement of the customs agent. The court consolidates the shipping company’s claim that the export procedure of hazardous materials in general, and of waste cargo specifically, is a complex procedure, with strict and complicated regulations, which must be taken care of by an expert professional. There is no disagreeing with the company not being an expert of freight shipping, the procedures involved and the terminology, which is why it hired the services of the customs agent specializing in international freight forwarding. The customs agent is updated in all the shipping company’s regulations and is well acquainted with the marine transport regulations of hazardous materials. He is the one who should have informed the company of them. In this case, the customs agent was well aware that the booking number and confirmation do not act as a certificate of approval, an approval which can only be given after declaring hazardous materials. The court rules that the custom agent’s knowledge acts as the company’s knowledge. Receiving the empty containers also does not act as proof of the shipping company’s approval to transport the cargo, since the international forwarders receive, beforehand, confirmations to use empty containers when needed.

The court expressed its surprise that the customs agent’s representatives weren’t summoned to give testimony. There is no doubt that their testimony could have clarified the case further, especially due to the criticism heard on both sides, of the customs agent’s conduct as a professional authority and as a “repeated actor” in the freight shipping field, whose duty was to mediate between both sides so that at least some of the company’s damage would have been prevented.

The court rejects the claim against the shipping company and rules that the company couldn’t have just relied on the price offer sent by the shipping company.

Two conclusions arise from the judgment:

First – the court’s ruling, rejecting the ship’s agent’s claim of non-opponency, is interesting. Ship’s agents tend to claim that they are not involved with the client (even though the entire procedure happened between the client and them), and that the client should sue the shipping company abroad for the inconvenience and costs entailed. Perhaps this verdict will reduce the Ship’s agents’ claim of non-opponency.

Second – it isn’t clear why the company avoided summoning the custom’s agent for testimony, or even adding it as an additional defendant. The customs agent is the professional authority whose duty is to instruct the client (exporter/importer) of the relevant regulations, especially when sensitive and complicated issues such as transporting hazardous materials are concerned. As a service provider to the exporter/importer, the customs agent’s knowledge – of professional matters relevant to international transportation – is considered as its client’s knowledge, even if one cannot determine if the client knew of it in actual fact. Since no appropriate instructions were given to the client, the customs agent could expose itself to a professional responsibility lawsuit by the client.

The above is general information and does not act as legal advice.