Is a customs agent liable for payment of storage fees that were not collected from the importer?
An interesting judgment issued several days ago, discusses the relationship between the bonded warehouse, the customs agent and the importer, when it transpires that the storage fees cannot be collected from the importer.
The bonded warehouse demanded the full scope of charges relating to the storage from the customs agent, claiming that the engagement in the setting of which the storage services were provided, was one between the bonded warehouse and the customs agent. The bonded warehouse claimed that the customs agent was the party which contacted the bonded warehouse to obtain a price quote for the storage services on behalf of the customs agent’s client (the importer). The price quote was conveyed to the customs agent, and all the discussions regarding the details of the goods, the type of services and the prices, were all carried out by and between the bonded warehouse and the customs agent. Moreover, also the payments to the bonded warehouse were paid, over the years, by the customs agent (excepting a one-time payment which was conveyed directly by the importer to the bonded warehouse), the customs agent then collecting the payments from his client the importer. The bonded warehouse’s invoices were issued to the customs agent, despite the fact that the end customer’s name was noted on them, and the customs agent received a 10% credit as a commission from the bonded warehouse.
The customs agent claimed that there was no privity between the bonded warehouse and the customs agent, since the engagement for provision of the storage services was by and between the bonded warehouse and the importer directly. The customs agent claimed that the bonded warehouse was fishing for “deep pockets” with the design of being repaid for the damages caused to him as a result of his difficulties in collecting the storage fees from the importer, who was the party who received the storage services from the bonded warehouse, and the attempt to roll over the importer’s debt to the doorstep of the customs agent should not be accepted.
The court rejected the claim of lack of privity between the bonded warehouse and the customs agent. The court held that in principle, there were two models for engagement: the first, an engagement between the bonded warehouse and the customs agent for provision of storage services to the customs agent’s clients; and the second, a direct engagement between the bonded warehouse and the importer. In the circumstances, it was apparent that the first model existed, especially in light of the direct settling of accounts and direct payments between the customs agent and the bonded warehouse on account of the storage services for the importer. The bonded warehouse’s bookkeeping index was in the customs agent’s name, the names of the customs agent’s clients being comments on the index card.
The court held that the bonded warehouse and the customs agent had a binding agreement between them, the subject matter of which was storing the importer’s goods, and therefore the claim of lack of privity raised by the customs agent vis-à-vis the bonded warehouse was to be rejected.
Supposedly, one could expect the court to continue and hold that the customs agent was fully liable for the unpaid storage fees, but the court did not go down that route. “Both parties were aware that the payment was effected by the end customer” a joint client of theirs, a client who was receiving customs agency services from the customs agent and storage services from the bonded warehouse. Under these circumstances, there was no scope to impose absolute liability on the customs agent to effect the payment. “Such absolute liability must be expressly written, which it was not”.
The court thus concludes that since it was a joint customer, there was scope to determine a division of liability which was just and equitable in the circumstances, for joint bearing of the damages suffered as a result of the inability to collect the storage fees from the client. This division of liability could have been effected in the setting of the agreement between the bonded warehouse and the customs agent, and had the parties expressly, clearly, stipulated, that the customs agent would be absolutely liable for the importer’s debts, such determination would be effective and binding. However, such determination should not be accepted as automatic in the circumstances.
The court held that the customs agent was not the owner of the goods and had no control over the payment of the monies which the importer was obligated to pay. The 10% commission which the customs agent receives, was no justification to impose absolute liability for payment of the debt, so that the customs agent becomes a form of “insurance company” for the importer.
Both parties knew that under the circumstances difficulties in collecting the payment from importer could materialise. They both knowingly assumed the risk, without taking any real guarantees, and they are both under a duty to behave to one another in good faith and with commercial decency.
In light of all which, the court held that the liability for the failure to collect the storage fees is common to the bonded warehouse and the customs agent, and the division of liability between them was held to be that the customs agent bear 40% of the unpaid storage fees, setting off the 10% commission due to him. The bonded warehouse would suffer the balance of the unpaid storage fees.
The significance of this judgement is in directing attention to the way that importer bankruptcy is to be related to. It is not at all obvious that the risk should fall on one party or the other. It is important to refer to the division of risk, and even more important, to ensure obtaining securities in those instances in which there is a risk that the value of the goods will not cover the costs of the storage services.
Ref: Tel Aviv 615-02-11 Logisticare Bonded (1998) Ltd. v. Haim Nathaniel Ltd.