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Judicial Suggestions on Effectiveness of Sub-contracting and Obligation of Documents Delivery under FOB Term under a Freight Forwarding Contract

2012-08-21

The Provisions of Several Issues on the Trial of Cases of Disputes over Freight Forwarding, issued by the Supreme People's Court of P.R.C, had been released on February 27, 2012, and entered into force as of May 1, 2012.

With a view to protecting and supporting the ocean freight forwarding industry and standardizing and guiding its practice, the Provisions set out clear rules on several important issues over disputes involving freight forwarding and thus rights and obligations of the relevant parties have changed greatly. The Provisions has a retrospective effect on old disputes.

In order to avoid legal risks, guide forwarders’ practice and protect their legitimate rights and interests, Shanghai Maritime Court recently issued to Shanghai International Freight Forwarders Association judicial suggestions as follows:

1. When the freight forwarder accepts a booking note and signs the agreement, it is suggested that the power of sub-contracting and limits of power be clearly stated----if the freight forwarder has a clear sub-contracting power, it should be responsible for sub-contractor’s qualification only and would not be responsible for the sub-contractor’s fault----so as to avoid legal risks.

2. When the freight forwarder involved in FOB trade obtains bills of lading and other documents from the carrier, it should timely report this to the domestic cargo owner, as the actual shipper, and ask the actual shipper how to deal with the documents, and obtain written authorization from the actual shipper, and furthermore use proper ways to preserve evidence of reporting so as to protect its own legitimate rights and interests and avoid being dragged into a trade dispute.

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