Freight forwarding

Carrier or freight forwarder? That is a question that faces shipping companies and other parties that provide logistical services on a regular basis.

The answer to this question is not always easy. It is often said that a freight forwarder arranges for the transportation or carriage of a cargo (by another party) and that a carrier actually performs the transport, i.e. moves the cargo from point A to point B. However, a party does not always have to actually perform the carriage in order to qualify as a carrier. For example, this applies to a so-called ‘paper’ or contractual carrier. The roles of the freight forwarder and the (paper and/or contractual) carrier appear to be similar, however the legal consequences for the difference between transport and freight forwarding are substantial indeed.

Why is this distinction so important?
An important legal consequence for the difference between the position of the forwarder and the position of the carrier follows for example from the following situation. If, during transportation, the cargo is damaged or stolen, the freight forwarder is, in principle, not liable towards the cargo interested party. After all, on the basis of the agreement with his principal, he was (only) required to arrange for transport, and not perform the same. This is different for the carrier, who is liable for damage to cargo in principle, except in the event of 'force majeure' or another exclusion of liability provided by the applicable regime. A forwarder however may be liable if he makes an error, for instance if he accidentally switches container numbers as a consequence of which the container carrying a cargo of (by then perished) butter ends up in Hong Kong instead of England.

Another important difference between freight forwarding and transport is that the rules governing the forwarder’s liability are usually matters of non-mandatory law. This means that parties can make their own arrangements regarding the liability of the forwarder, for example by agreeing on the applicability of a specific set of general terms and conditions that include provisions relating to limitation of liability (such as, for instance, the FENEX general terms and conditions). Under the FENEX general terms and conditions, the limit of liability for cargo damage is (in principle) a maximum of 10,000 SDR, which converts to approximately EUR 12,500.

In the event that the freight forwarder does not apply (general terms and) conditions and is considered to be liable after all, the liability is in principle unlimited. This clearly poses a big risk.

Furthermore, the interpretation of the term ‘freight forwarder’ may differ per country. There is no uniform legal framework, such as a treaty or convention, with regard to freight forwarding (as is the case for various means of transportation, such as the CMR Convention, Hague (Visby) Rules, CMNI, COTIF-CIM and Montreal Convention). In cases where a Dutch judge considers a party to be a freight forwarder, a German court may judge the same case differently and conclude that the party is liable as a carrier. This is often a case of the independent development of national case law. We regularly come across these problems in our daily practice.

In short, the answer to the question of whether a party should be deemed a (contractual/paper) carrier or a freight forwarder is a matter of interpretation. All facts and circumstances need to be taken into account in such an assessment. This tricky matter has therefore resulted in a lot of case law.

The lawyers at Van Traa have a lot of experience in the assessment of the question ‘freight forwarding or transport?’. Should you appreciate further advice on which role is best suited for your business, how to present yourself towards third parties or about the question of whether it is advisable to apply general terms and conditions to your contractual relationships, please don’t hesitate to contact the team.

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