When ports closed and sailings were blanked in early 2020, many outbound containers were stranded at quaysides and terminals around the world. As trade recovered, thousands more boxes were left behind due to ships being full or skipping port calls altogether.
Never slow to spot a pricing point, ports and terminal operators slapped daily storage fees on these idle containers, often amounting to several hundred dollars, as they waited sometimes weeks for the next sailing. But who should pay these unexpected costs? One unexpected lesson from the COVID-19 pandemic was the importance to shippers of their choice of Incoterms®, the contractual clauses intended to answer this question.
Most shippers of containerized goods favor the Free Carrier (FCA) Incoterm, under which buyers nominate the carrier but pick up the bill once the container is lifted from the seller’s vehicle delivering it. This would include those pesky storage charges if the container subsequently got rolled.
Other shippers persist with the obsolete Free on Board (FOB) terms, under which they supposedly take delivery of a container alongside a vessel at berth — in a modern container port? — but don’t take responsibility for costs until the container eventually crosses the nebulous “ship’s rail,” thereby avoiding any charges for delays caused by the carrier they chose.
Potentially good for buyers but legally suspect, FOB leaves exporters sore at paying the costs of a party with whom they have no commercial relationship or negotiating power. This prompted Sri Lanka back in 2016 and India as recently as last October to mandate the use of FCA terms for all export traffic, as the terms are purpose-built for containerized operations and align obligations with commercial benefits.
Shippers should look to sort this matter out among themselves in 2022, before other governments follow that lead.