In the liner trade, carriers purport to bind a wide range of parties to the terms and conditions of their Bills of Lading by defining the “Merchant” with whom they purport to contract very broadly. It is safe to assume that the shippers, consignees and endorsees listed on Bills of Lading are parties to the contract of carriage, but what about a freight forwarder identified solely as a “forwarding agent”?

Based on the definition of the term “Merchant” in the terms and conditions, steamship lines typically take the position that as holder of the Bill of Lading or as the party acting on behalf of the shipper or consignee, the freight forwarder is jointly and severally liable   with the other parties for any charges owed to the Line. Freight forwarders often respond that they act solely as agents, are not a party to the Bill of Lading and incur no direct liability towards the Line.

This is the problem that arose between DHL and CMA CGM in a recent Canadian case.

DHL had booked with CMA CGM’s Canadian agent the carriage of 68 containers between Montréal and Ho Chi Minh City in Vietnam. Booking Confirmations were issued by CMA CGM to DHL. In its Bill of  Lading Instructions, DHL named its client, HSB, as the shipper, Tan Mai as consignee and itself as a “Forwarding Agent”. The Bills of Lading were issued and released to DHL. DHL paid the freight to CMA CGM and the 68 containers were carried to destination where they were discharged.

Unfortunately, the shipper did not pay DHL. DHL,  in turn, invoked a freight forwarder’s lien and refused to release the CMA CGM Bills of Lading to the shipper without payment. As a result, the containers sat in Vietnam accumulating demurrage and storage charges.

CMA CGM took proceedings in France against the shipper, consignee and DHL (as “Forwarding Agent”). DHL responded with an action in Canada seeking a declaration of non-liability. In the context of a motion for a stay of the Canadian proceedings in favour of the French proceedings, the Court had to determine whether DHL was a party to the CMA CGM Bills of Lading and thus bound by the jurisdiction clause in that contract.

The Court considered both the terms of the Booking Confirmations and the definitions of “Merchant” and “Holder” under the CMA CGM Bills of Lading and concluded that DHL was bound by the terms of the CMA CGM Bills of Lading.

The Booking Confirmations identified DHL as CMA CGM’s client. In addition, the Booking Confirmations incorporated by reference the CMA CGM Bill of Lading terms and conditions. The Court concluded that the objective of this incorporation was to ensure that the same rights, obligations and liabilities applied from the time the booking was made until delivery. As DHL was the only party identified at the time of the booking, the reference to the “customer” in the Booking Confirmations could only refer to DHL, who was thus bound to the terms and conditions of the CMA CGM Bill of Lading.

The Court then considered the terms of the Bills of Lading. It concluded that when DHL exercised its freight forwarder’s lien on the Bills of Lading, DHL became a “holder” of the Bills of Lading and thus was caught by the definition of “Merchant”. Alternatively,   if the Bills of Lading were held by DHL as agent of the shipper only, DHL was “a person acting on behalf of the shipper”, and was caught by the same definition of “Merchant”. In either case, the freight forwarder was deemed to have acquiesced to be bound by  those terms through its actions.

The decision has been appealed and the appeal should be heard this summer. For the time being,  it clarifies the obligations and exposure of freight forwarders who exercise a lien on the carrier’s Bill of Lading as well as the rights and recourses of steamship lines when caught in the same situation.