If international trade were a relay race with interconnected links, freight forwarders would serve as the crucial baton-passing segment. However, when this handoff falters, the consequences range from operational inefficiencies to significant financial losses. A recent case involving a nearly $2,000 loss due to a freight forwarder's operational error has reignited discussions about risk management in cross-border logistics.
Case Background: Responsibility Under DAP Terms
The dispute involved Indonesian operator Company A and UK-based consignor Company B, centered around delayed MBL (Master Bill of Lading) telex release that incurred additional costs. The shipment, governed by DAP (Delivered at Place) terms from the UK to Indonesia, stipulated that Company A handled destination clearance and delivery while Company B managed MBL release and origin documentation.
DAP terms under Incoterms 2020 clearly assign to the seller (Company B) all risks and costs until goods reach the specified destination, including transportation and customs clearance—except import duties. The buyer assumes responsibility for unloading. This seemingly clear division of labor revealed critical vulnerabilities during the transaction.
Key Dispute Points
1. Ambiguous Direct Delivery Timeline: The special frame container shipment required "direct ship-to-truck" transfer per carrier policy to avoid double-handling and damage. However, the agreement vaguely stated "waiting fees beyond standard time shall be borne by consignee" without defining DO (Delivery Order) issuance timelines—the essential document for cargo retrieval.
2. Unspecified MBL Release Deadline: Company B's control over MBL telex release directly impacted DO procurement. On June 4, when the MBL status showed "Hold," customs brokers couldn't process the DO. Despite Company A's repeated requests, Company B delayed release by four days, missing the carrier's collection window.
3. Lack of Contingency Coordination: Company B later proposed that warehouse storage would have been cheaper, yet failed to communicate this alternative during the crisis or demonstrate its cost-effectiveness—violating the industry's "duty to mitigate" principle requiring reasonable loss-prevention measures.
Platform Arbitration and Liability Determination
The JCtrans mediation platform analyzed three dimensions:
- Contractual Obligations: Under Incoterms 2020 DAP terms, Company B breached its duty to ensure smooth delivery through timely MBL release.
- Causal Relationship: Evidence confirmed that MBL release delays directly caused DO processing delays, resulting in four days of demurrage and waiting fees.
- Expense Validation: Company A substantiated costs with carrier invoices ($320 demurrage + $1,600 truck waiting fees) and consignee confirmation refusing responsibility.
The platform ruled Company B fully liable for $3,015 in total costs ($1,095 base freight + $1,920 additional fees), rejecting its post-facto warehouse argument as inconsistent with mitigation obligations.
Risk Management Recommendations
This case offers critical lessons for cross-border logistics operators handling DAP/DDP shipments:
- Define Clear Timelines: Replace vague terms like "promptly" with specific deadlines (e.g., "MBL release 24 hours pre-arrival").
- Establish Emergency Protocols: Create escalation procedures and predefined alternatives (e.g., "warehouse activation if release delayed 4+ hours").
- Document Thoroughly: Maintain written records of all communications, third-party invoices, and consignee acknowledgments.
- Clarify Cost Allocation: Specify exceptions like "waiting fees exclude delays caused by consignor documentation issues."
- Consider Insurance: Evaluate freight liability coverage for operational errors.
In cross-border logistics, where operations form an interlocked chain, precise contracts and proactive communication form the foundation of risk control. The $1,920 loss in this case—potentially avoidable through clearer agreements—underscores that effective risk management begins with prevention.