Therefore, both parties in international trade transactions must thoroughly understand and evaluate each other’s creditworthiness, as well as verify whether the import or export of the contracted goods is subject to restrictions in either country. Proper preventive measures should be taken in advance to avoid trade disputes and substantial financial losses.
Bill of Lading Clauses Granting Carrier the Right to Recover Costs from the Shipper
Freight and Charges
The Shipper, Consignee, and the Owner of the Goods shall be jointly and severally liable to the Carrier for all freight, charges, demurrage, detention, and other related costs, whether incurred at the port of loading, the port of discharge, or elsewhere.
Recourse in Case of Consignee’s Default
If the Consignee refuses to take delivery of the goods or fails to pay the amounts due, the Carrier shall have the right to recover such costs and expenses from the Shipper.
Carrier’s Lien
The Carrier shall have a lien on the Goods and any related documents for all sums payable under this contract. The Carrier may exercise such lien at any time and place at its discretion and may sell the goods privately or by public auction without prior notice.
Prohibited or Restricted Goods
If the Goods are found to be contraband, prohibited, or restricted by the laws of the importing country, all expenses, fines, penalties, and costs arising therefrom shall be borne by the Shipper.
Clarifying a Common Misconception: Transfer of Title vs. Liability for Charges
A frequent misunderstanding is that once the consignee has obtained the Delivery Order (D/O), the title to the goods has been transferred, and therefore the shipper should no longer bear responsibility for related costs. This is incorrect.
Transfer of Title and Liability Are Distinct Issues
Title to goods concerns ownership and arises from the sales contract, letter of credit, or endorsement/transfer of the Bill of Lading.
Liability for freight, demurrage, detention, storage charges, fines, etc., arises from the contract of carriage.
Even if title has transferred, if the Bill of Lading provides that the shipper and consignee are jointly and severally liable, the carrier may still recover costs from the shipper.
Legal Consequences of Consignee’s Refusal
In practice, even if the consignee has already obtained the Delivery Order, if the goods are prohibited from import, the consignee cannot complete customs clearance and will refuse to pay the charges.
In such circumstances, the carrier retains the right to seek reimbursement from the shipper, because it was the shipper who delivered “prohibited goods” to the carrier for transportation, thereby causing the carrier to incur additional costs and risks.
Most shipping lines’ Bills of Lading explicitly provide: “If the Consignee fails to pay, the Shipper shall be liable.”
International Practice and Precedents
Under the Hague Rules and the standard Bills of Lading issued by major carriers (e.g., Maersk, COSCO, Evergreen), the consignee is the primary party responsible for charges (since it has obtained the D/O).
However, if the consignee refuses to pay, refuses delivery, or fails to clear customs, the carrier may still pursue the shipper.
In other words, even though the shipper has relinquished title to the goods, it remains a party to the contract of carriage, and its liability does not automatically extinguish.
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