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Lessons learned from a dispute on forwarding & transport

During the implementation of the contract, the parties may agree to change the terms of the contract but do not know whether it is necessary to make an annex to the contract or not. Enterprises can render service to each other but do not know whether it is a contractual obligation or just an assistance. When collecting a debt, may it be different from the contractual provisions on kinds and contents of documents or not. Failing to study carefully the Standard Trading Conditions of logistics businesses (specified clearly on the documents of the transaction) may result in the adverse outcome during the implementation of the contract.

Summary of the dispute

A logistics service provider (Claimant) signed a Contract of Carriage (Contract) with an import-export company (Respondent) to transport equipment and machinery stuffed in containers by sea and road from a European port to Respondent’s factory in Quang Ninh (Factory). Before and after signing the Contract, the Respondent always sent emails requesting the Claimant to quote freight rates from the above seaport to the Factory. The Claimant had quoted sea freight rate from the loading port to Hai Phong port (Container Yard - CY) and Respondent accepted the quotation without any comment.

The two parties signed the annex of contract specifying the quantity of goods for the first shipment was 03 containers with freight rates, surcharges, haulage charge from Hai Phong to the Factory, customs clearance fees. The two parties negotiated to carry all of 13 shipments in the following way: Respondent sent enquiries and Claimant returned with its quotations. The contents of 13 quotations are clearly stated that the carriage was from the loading port to Hai Phong port which were fully accepted by the Respondent. After completing 13 shipments, with many requests for payment of freight and customs service costs of VND 2,168,382,175 and late payment interest of VND 197,187,653 but Respondent only paid VND 544,820,950 for shipments 1, 2 and 3, remaining 10 shipment unpaid, the Claimant sued the Respondent at the Arbitration demanding the remaining amount of VND 1,623,561,225 and interest due to late payment of VND 197,187,653.

Analysis of the arbitral tribunal and lessons learned

The Respondent held that the Contract and Annex did not apply to all of 13 shipments, but only to the shipment stated in the Annex, that was, only to three containers of the first shipment; for other shipments, a new contract was required, although the Respondent had accepted all of 13 quotations. In fact, the Respondent paid the Claimant VND 544,820,950 for international freight and customs service charges of the first, second and third shipment. By this action, the Respondent acknowledged the Contract and the Annex applied to all subsequent shipments after the first one. Pursuant to Clause 2, Article 408 of the 2005 Civil Code, 13 quotations (offering sea freight rates only) fully accepted by the Respondent were considered as Annex to the Contract.

The Respondent claimed that the Claimant had to carry the shipments by sea and road to the Factory according to the Contract. Therefore, they (Respondent) did not pay for the road leg. In fact, the Respondent had contracted with another company to carry by road (haul) to the Factory despite asking for the Claimant’s quotation. So, in accordance with Clause 2, Article 408 of the 2005 Civil Code, the road transport (haulage) service had been mutually agreed to amend in comparison with the Contract as well as the Annex. The Respondent had no claims on damage, loss and delay of the 13 shipments after their arrival in Hai Phong port. Therefore, in accordance with Article 96 of the 2005 Vietnam Maritime Code the Respondent already received rightly and fully the 13 shipments, so there is no basis to refuse the payment for the remaining sea freight and service charges.

The Respondent said that the signing of work acceptance and collation of debts had not been done for each month, so there is no penalty for late payment. According to Article 4 of the Contract, the Claimant had to send documents for payment and late payment penalty amount monthly but the Claimant only had a Debit Note for each shipment, there was no amount of late payment penalty and it still had not been confirmed by the Respondent. The Claimant had only 03 official letters demanding payment of freight for 13 shipments and a list of total debt of VND 2,168,382,175. However, the Respondent previously paid the Claimant VND 544,820,950, therefore, the debt amount was only VND 1,623,561,225. Therefrom, the Arbitral Tribunal (“the Tribunal”) held that the Claimant did not have enough documents to ask for the payment of VND 197,187,653 as penalty under Clause 2, Article 6 of the Contract.

The Respondent claimed that the Claimant was authorized to act as a customs broker and to register the list of imported goods but there was no evidence of this authorization. In 13 quotations, the Claimant only quoted the fees and charges for customs services, not acting as a customs broker. According to Clause 7, Article 4 of the 2005 Law on Customs and Clause 1, Article 2 of Circular No. 80/2011/TT-BTC dated 9 June 2011, in case the Claimant was authorized to act as a customs broker, the customs declarant in the customs declarations had been in the name of Claimant. The fact was that the customs declarants mentioned in 13 customs declarations were the Respondent, the Respondent still issued letters of introduction confirming that the Claimant’s employee was the Respondent’s person to clear the goods. Therefrom, the Tribunal realized that the Claimant was not a customs broker but only a servant of Respondent to clear the customs. Furthermore, according to Article I.3 of the “Standard Trading Conditions of Vietnam Logistics Business Association”, which the two Parties accepted (in the Contract and quotations by email), when carrying out customs procedures, permission etc., the Claimant was only considered as the performer on behalf of the Respondent in line with the Respondent’s Letter of Introduction, not the customs broker. Therefore, the delay in customs clearance resulting in container demurrage and detention were entirely due to the Respondent’s fault.

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