Uncollectible Freight Collect Charges
Interlink編集部Overview
"Freight Collect" refers to the terms where maritime freight and related charges are collected at the destination side. In import shipments, the consignee often pays the freight, D/O fee, and local charges before exchanging the Delivery Order and picking up the cargo.
However, if the consignee does not pay, cannot be contacted, refuses to pick up the cargo, becomes insolvent, or the cargo value is low so they do not claim the cargo, there arises a risk that the Freight Collect charges cannot be recovered.
This article organizes how freight forwarders and NVOCCs should respond when Freight Collect charges are irrecoverable, focusing on D/O release, billing the shipper, cargo detention, Demurrage/Detention charges, abandoned cargo handling, and settlement with overseas agents.
Scope Covered in This Article
This article addresses Freight Collect irrecoverability as a practical logistics issue where freight and related charges planned to be collected at the destination side cannot be recovered from the consignee. Specifically, it deals with whether to withhold D/O release, the possibility of billing the shipper, how to manage increased charges, and how to handle refusal of cargo pick-up or abandoned cargo.
| Item | Content Covered in This Article | Content Covered Separately or Requires Further Confirmation |
|---|---|---|
| Freight Collect Non-Recovery | Practical responses when freight, D/O fees, and local charges cannot be collected from the consignee. | Whether legal claims can be made in individual cases, litigation response, and debt collection procedures require consultation with specialists. |
| Unknown Consignee Cargo | Situations where recovery is impossible due to inability to contact the consignee, insolvency, or cargo pick-up refusal. | Determination of D/O, disposal, reloading, and destruction of unknown consignee cargo in general are covered in separate articles. |
| Demurrage & Detention | Risks of charge increases due to delays in D/O exchange caused by unpaid Freight Collect charges. | Free time, daily rates, waiver negotiations, and specific calculation methods vary by shipping company and NVOCC, so need to be confirmed. |
| D/O Release | Judgment on whether D/O should be issued before payment confirmation or withheld. | General rules on D/O fee pricing and exchange procedures are treated in separate articles. |
| Freight Forwarder Contract | Grounds for billing the shipper in case of non-recovery, importance of quotations, order emails, and standard trading terms. | Overall responsibility limitations, disclaimers, governing law, and jurisdiction under freight forwarder contracts are covered separately. |
| Cargo Insurance | Clarifies that unrecovered Freight Collect charges are typically not resolved by standard marine cargo insurance. | Whether costs associated with cargo accidents and insurance claims are payable should be confirmed with the insurance company or specialized agents. |
Freight Collect Is Convenient but Carries Significant Risks
Freight Collect terms are convenient in transactions where the importer is responsible for freight charges. The exporter does not have to advance freight, and the importer pays necessary charges at the destination to collect the cargo.
On the other hand, if charges cannot be collected at the destination side, the freight forwarder or NVOCC may have a payment obligation to the shipping company, overseas agents, warehouse, CFS, or local operators, while being unable to recover those amounts from the consignee.
This issue becomes more complex if the NVOCC issues a House B/L, as relationships with the shipper and consignee, payments to the shipping company under the Master B/L, and settlements with overseas agents are involved, making it more than a simple “unpaid freight collect” problem.
Key Points to Check First
When Freight Collect charges become irrecoverable, the first point to confirm is who promised to pay what. Decisions should not be made based on assumptions like "consignee pays" or "shipper pays" but on the actual B/L terms, quotation conditions, order emails, and inter-agent settlement agreements.
| Item to Confirm | Purpose of Confirmation | Practical Notes |
|---|---|---|
| Freight Notation on B/L | Confirm whether the freight terms are Freight Collect or Prepaid. | Conditions may differ between House B/L and Master B/L. |
| House B/L and Master B/L Terms | Confirm on which side the NVOCC has payment obligations. | Even if the House B/L is collect, the Master B/L may be prepaid or have different terms. |
| Charges Stated in the Arrival Notice | Verify who is charged which fees and by when. | Includes D/O Fees, CFS charges, storage, etc. |
| Relationship Between Consignee, Notify Party, and Importer | Confirm that the party who should pay matches the party who picks up the cargo. | The notify party is not necessarily the payer or the cargo claimant. |
| Quotation and Order Conditions with Shipper | Check for grounds to bill the shipper if the consignee fails to pay. | A mere notation of Freight Collect is usually insufficient for non-payment handling. |
| Settlement Terms with Overseas Agents | Confirm if the overseas agent or the Japan side bears any advance charges. | Ambiguous rules between agents can lead to settlement disputes. |
| D/O Release Conditions | Confirm whether release is conditional upon payment confirmation. | Releasing D/O before payment increases the risk of non-recovery. |
| Unpaid Amounts and Estimated Cost Increases | Understand amounts due for freight, D/O fees, local charges, Demurrage, Detention, and storage. | Warn all parties before charges exceed cargo value. |
Main Causes of Freight Collect Non-Recovery
Non-recovery of Freight Collect charges cannot be explained simply by the consignee’s refusal to pay. Multiple factors often overlap, such as trade disputes, credit instability, cargo value, customs issues, refusal to pick up, and discrepancies between agent agreements.
| Cause | Common Situation | Documents to Check | Practical Notes |
|---|---|---|---|
| Consignee refuses payment | Payment is refused due to sales disputes over cargo price or quality. | Arrival Notice, invoice, communications between trading parties, payment reminder records | Separate issues of unpaid transport charges and sales disputes for clarity. |
| Cannot contact Consignee | Phone and email do not connect, and D/O exchange cannot proceed. | Contact records, email error logs, registration information, Notify Party details | Notify Shipper and overseas agents promptly. |
| Consignee bankruptcy or credit uncertainty | Bankruptcy or suspension of business operations is discovered after arrival. | Registration information, credit reports, contact records, Arrival Notice, cost details | Manage outstanding receivables and increased storage fees simultaneously. |
| Cargo value is low | Freight and storage fees exceed cargo value, leading to refusal of pickup. | Invoice, cargo value, estimated storage charges, return or disposal estimates | This often escalates into issues with abandoned cargo or disposal costs. |
| Customs clearance impossible | Clearance cannot be completed due to lack of permits, incomplete compliance with other laws, or unknown importer. | Customs documents, other regulatory materials, customs broker opinions, customs confirmation records | Clarify whether the cause of clearance failure lies with the Shipper or Consignee. |
| Unclear settlement terms between agents | Responsibility for Collect failure risks is not decided. | Agent contracts, booking emails, settlement rules, House B/L, Master B/L | Predefine who bears the risk in case of Collect failure. |
Should D/O Release Be Stopped?
When Freight Collect charges are unpaid, deciding whether to stop D/O Release is a critical judgment. Since a D/O directly enables cargo pickup, releasing it before cost collection can leave only unpaid charges outstanding.
As a rule, if payment of Freight Collect charges is a condition for D/O Release, the D/O should not be issued before payment confirmation. Particularly with first-time transactions, Consignees with credit concerns, high freight charges, or low cargo value cases, handle the situation carefully.
However, stopping D/O Release could increase Demurrage, Detention, and Storage fees. Therefore, at the time of deciding to stop D/O, the risk of increased costs should be communicated to the Shipper, Consignee, and overseas agents.
| Action | Advantages | Risks | Points to Confirm |
|---|---|---|---|
| Stop D/O Release | Avoids the risk of releasing cargo before collecting freight, D/O fees, and local charges. | Cargo may remain at port or yard, increasing Demurrage, Detention, and Storage fees. | Check Free Time, daily fees, outstanding amounts, cargo value, and Shipper notification status. |
| Proceed with D/O Release | Avoids cargo stagnation and may prevent additional storage charges. | There is a possibility of failing to collect charges from Consignee after Release, leaving unpaid amounts. | Confirm payment guarantees, Shipper or agent guarantees, company approval, and collectability. |
| Release after partial payment | Secures a partial collection while potentially minimizing further cost increases. | Risks remain for unpaid balance and unclear responsibility for additional charges. | Confirm conditions for remaining payment, responsibility for extra costs, and any guarantees. |
| Release after obtaining guarantee or payment commitment | May balance practical Release and preservation of claims. | Guarantee validity, signature authority, and actual collectability may still pose issues. | Verify signatory authority, company seal, guarantee scope, and payment deadlines. |
Checking House B/L Collect and Master B/L Terms
In Freight Collect cases, the terms of House B/L and Master B/L do not always match. Even if the House B/L is Collect, the Master B/L might be treated as Prepaid. Conversely, the Master B/L may also carry Collect terms, resulting in billing from the shipping line or agent to the destination side.
| Combination | Practical Meaning | Risks for NVOCC | Points to Check |
|---|---|---|---|
| House B/L Collect ・ Master B/L Prepaid | The NVOCC has paid the shipping line and is structurally responsible for collecting from the Consignee. | If the Consignee fails to pay, the NVOCC carries the risk of unpaid receivables. | Check Consignee credit, D/O Release conditions, and basis for reverse billing the Shipper. |
| House B/L Collect ・ Master B/L Collect | There may be overlapping billing between shipping line, NVOCC, and agents at the destination. | Payment timing mismatches between shipping line and Consignee can cause funding burdens. | Confirm who pays the shipping line and who collects from the Consignee. |
| House B/L Prepaid ・ Master B/L Collect | Even if collection is completed on the House side, the Master side may still have destination claims outstanding. | Term mismatches can cause agent settlement issues or missed billing. | Cross-check House and Master freight terms and agent settlement conditions. |
| Different charge items listed on House and Master B/L | Items like Ocean Freight, D/O Fee, THC, CFS Charge may display differently. | This creates ambiguity over which charges are collected and by whom. | Confirm per charge item whether it is Prepaid or Collect. |
When the Consignee Does Not Pay
A common Freight Collect issue is the Consignee's refusal or failure to pay charges. Reasons vary and can include sales disputes over cargo price, dissatisfaction with cargo quality, the importer's cash flow problems, delays in import permits, internal approval delays, or simple refusal to pay.
In this case, freight forwarders should not release the D/O lightly. Once the D/O is issued and the cargo is picked up, there is a risk of losing means to recover freight charges and local expenses.
First, clearly communicate to the consignee the outstanding amount, payment deadline, and conditions for D/O release. At the same time, share the situation with the shipper and overseas agents, and confirm who will bear the costs and the future course of action.
Can charges be invoiced to the Shipper?
If freight collect charges cannot be recovered from the consignee, the issue arises of whether billing the shipper is possible. This depends on the contract terms with the shipper, B/L conditions, quotation terms, standard trading conditions, and agreements with overseas agents.
In actual logistics practice, even with freight collect, there may be clauses allowing payment to be requested from the shipper if the consignee does not pay. Especially when the shipper is the party who requested transport from the freight forwarder, it is important to establish conditions upfront where the shipper bears final responsibility in case of consignee non-payment.
However, if such conditions were not made clear in advance, the shipper may object, arguing that since it was a collect arrangement, the consignee should bear the cost. Therefore, in freight collect cases, it is necessary to explicitly specify how unpaid charges by the consignee will be handled at the time of quotation or order confirmation.
| Check Items | When it is easier to invoice the Shipper | When the Shipper is likely to object | Practical Notes |
|---|---|---|---|
| Quotation terms | When it clearly states that charges can be invoiced to the shipper if consignee does not pay. | When it only states "Freight Collect" with no instructions on handling unpaid charges. | Disclose unpaid risk when confirming the order. |
| Order confirmation email | When there is a record that the shipper agreed to bear costs if charges are unpaid. | When the shipper only understands it as "buyer-side responsibility." | It is important to keep conditions in writing by email. |
| Standard trading conditions | When there are clauses assigning payer responsibility for third-party fees, unpaid charges, abandoned cargo expenses to the shipper. | When linkage with standard terms is unclear. | Link quotations or FCR with standard trading conditions. |
| Shipper involvement | When the shipper requested transportation and should understand consignee credit and intent to accept delivery. | When the contract with the shipper is weak, such as through an overseas agent. | Clarify who the contracting party is. |
| Agent contracts | When the overseas agent has procedures to collect from the shipper. | When the agent claims to be only a mere intermediary. | Confirm settlement rules among agents. |
The importance of specifying in quotations and order confirmation emails
To prevent unpaid freight collect risks, it is essential to clarify conditions in the quotation or order confirmation email. Simply stating “Freight Collect” is insufficient.
At the very least, specify the range of costs subject to freight collect, that the payer is the consignee, that D/O release will be made only after payment is confirmed, that the shipper will bear costs if the consignee does not pay, that Demurrage, Detention, and Storage fees arising from non-payment will be borne, and who will bear costs if cargo is refused or abandoned.
An example wording might be:
Under freight collect terms, freight, D/O fees, local charges, and other related costs at the destination will be released upon confirmation of payment by the consignee. If the consignee does not remit payment or refuses to take delivery, the shipper may be held responsible for unpaid charges, Demurrage, Detention, Storage, disposal fees, and other incurred expenses.
Including such wording facilitates explanation to the shipper should the consignee default.
Risks of increased Demurrage and Detention
If freight collect is not collected, D/O exchange may stall, leaving cargo lingering at the port or CY, resulting in Demurrage charges. Additionally, if the empty container is not returned after the cargo is withdrawn, Detention fees will apply.
If left unpaid, Demurrage, Detention, and Storage fees will accumulate daily beyond just unpaid freight. These charges can sometimes exceed the cargo’s value.
Therefore, when unpaid freight collect occurs, it is necessary to promptly notify stakeholders of the Free Time expiry date, daily fees, and expected future accruals. Waiting until fees increase before invoicing could result in complaints from the shipper or consignee about lack of timely notice.
When cargo is refused or abandoned
If the consignee declines to pick up the cargo or cannot be reached, the cargo may be considered abandoned. This is particularly common when cargo has low value, customs issues arise, or the importer loses its sales channel.
In this situation, freight forwarders or NVOCCs cannot dispose of cargo arbitrarily. They must verify relationships with the shipping company, warehouse, customs, shipper, consignee, and overseas agents and respond based on laws and contract terms.
Abandoned cargo may incur costs such as Storage, Demurrage, Detention, return shipping, disposal, and customs-related charges. Early discussions with the shipper and overseas agents regarding who bears these costs are necessary.
Settlement risks with overseas agents
In freight collect cases, settlement terms with overseas agents are also critical. It must be clarified whether the overseas agent collects charges from the shipper, whether the Japanese forwarder collects from the consignee, and which party pays the shipping company.
When an overseas agent requests, “Please collect in Japan,” there is a risk the Japanese forwarder assumes collection risk. Do not release D/O or advance payments without credit verification simply because the agent requested it.
The parties should confirm in advance arrangements for burden in case of collection failure, reimbursement to the shipper, costs for abandoned cargo, timing of remittance, and fees.
Freight Collect and NVOCC Liability
When an NVOCC issues a House B/L, unpaid Freight Collect charges are not just sales receivables but may be linked to contractual liabilities or cost responsibilities under the carriage contract.
Even if costs cannot be collected from the consignee listed on the House B/L, the NVOCC may still be required to pay the shipping company or its agent named on the Master B/L. The NVOCC may also face claims for responsibility from the consignee or shipper regarding the delivery of cargo.
Therefore, NVOCCs need to manage credit control, D/O release, and payment conditions more cautiously for Freight Collect shipments compared to regular Prepaid shipments.
Not an Issue Covered by Insurance
Non-recovery of Freight Collect charges is a risk related to unpaid freight and charges, not physical damage to the cargo itself. Therefore, it is generally not covered by regular cargo insurance.
Cargo insurance principally covers physical damage or loss to the cargo and does not cover the consignee’s failure to pay freight or D/O fees.
Hence, risks of unpaid Freight Collect charges should be mitigated through quotation terms, transaction conditions, D/O release controls, billing terms to the shipper, and agreements between agents — not through insurance claims.
Internal Rules That Should Be Established
Leaving Freight Collect cases to the discretion of individual staff members can be risky. In particular, internal rules are necessary for first-time transactions, high freight charges, low cargo value shipments, or consignees with doubtful credit.
| Internal Rule | Purpose | Practical Points |
|---|---|---|
| Credit Check Standards | Avoid Collect transactions with consignees who have credit concerns. | Exercise caution with first-time trades, high freight, or low cargo value cases. |
| Payment Confirmation Before D/O Release | Prevent non-payment after cargo delivery. | Require management approval before release without payment confirmation. |
| D/O Suspension Criteria for Non-Payment | Prevent delivering cargo without recovering payment. | Also manage demurrage increases caused by suspension simultaneously. |
| Review of Billing Terms to Shipper | Secure collection avenues when consignee fails to pay. | Maintain documentation in quotations, order emails, and standard trade terms. |
| Notification Rules to Overseas Agents | Prevent settlement disputes due to unpaid fees. | Issue written notifications promptly upon non-payment occurrence. |
| Demurrage and Detention Warning Rules | Provide early warnings to stakeholders about potential cost increases. | Notify daily rates and deadlines before Free Time expires. |
| Escalation for Abandoned Cargo | Prevent staff from independently making disposal or advance payment decisions. | Share with management, legal, overseas agents, and shipper. |
| Advance Payment Approval Standards | Prevent advance payments with no realistic collection prospect. | Verify amounts, collection targets, guarantees, and internal approvals. |
Scope of Involvement for Freight Forwarders and NVOCCs
Regarding unpaid Freight Collect charges, it is important to distinguish between what freight forwarders and NVOCCs can facilitate and what conclusions should not be definitively made. In particular, permission to release D/O, ability to charge the shipper, rights to dispose of cargo, and recovery via insurance depend on contractual terms and factual circumstances, so conclusions can vary.
| Situation | What Can Be Supported | What Should Not Be Definitively Stated | Practical Notes |
|---|---|---|---|
| Confirming Unpaid Amounts | Organizing unpaid amounts for freight, D/O fees, local charges, storage, etc. | Do not conclusively identify the final liable party before reviewing all documentation. | Check the basis for billing each cost item. |
| D/O Release Decisions | Verify payment status, release conditions, and Bill of Lading clauses. | Do not definitively approve release without payment guarantee. | Prioritize payment confirmation or obtaining guarantees. |
| Communication to the Shipper | Notify about consignee non-payment, cost increases, and response deadlines. | Do not state definitively that the shipper is always liable without contractual basis. | Confirm quotation terms, order emails, and standard trade conditions. |
| Demurrage and Detention Warnings | Inform stakeholders of Free Time, daily charges, and expected cost increases. | Cannot guarantee that waivers or reductions will be granted. | Retain warning emails as records. |
| Settlement with Overseas Agents | Help clarify unpaid fees, advances, and remittance conditions between agents. | Do not assume agents must always bear unpaid costs. | Verify agent contracts and historical settlement practices. |
| Handling Abandoned Cargo | Organize cargo condition, storage charges, and options for return or disposal. | Do not conclude that freight forwarders or NVOCCs can freely dispose of cargo. | Consult authorities, customs, warehouses, and customs brokers. |
| Insurance Confirmation | Guide checking with insurers or specialized agents as needed. | Do not assert that unpaid Freight Collect charges can be recovered by marine cargo insurance. | Separate unpaid receivables risks from cargo damage risks. |
Common Misunderstandings
| Common Misunderstandings | Actual Considerations | Practical Points to Note |
|---|---|---|
| If the condition is Freight Collect, the freight is always collectible from the Consignee. | The Consignee may refuse to pay, go bankrupt, or become unreachable. | Confirm in advance the basis for claiming from the Shipper if collection fails. |
| Since it is Collect terms, there is absolutely no claim possible against the Shipper. | Depending on the contract terms, you may be able to claim the Shipper if the Consignee defaults. | Clearly state this in quotations, order confirmation emails, and standard trading conditions. |
| Issuing the D/O will move the cargo and solve the problem. | Release before payment carries the risk of outstanding receivables. | Confirm payment receipt, guarantees, and internal approvals before Release. |
| Stopping the D/O means no additional costs will occur. | Stopping the D/O can increase Demurrage, Detention, and Storage charges. | Notify related parties of potential cost increases simultaneously with the stop decision. |
| If the cargo is not picked up, the forwarder can simply dispose of it. | Freight forwarders or NVOCCs do not have the right to unilaterally dispose of cargo. | Check with the owner, authorized parties, customs, warehouse, and customs brokers. |
| Uncollected Freight Collect amounts can be recovered through marine cargo insurance. | Standard marine cargo insurance typically does not cover unpaid freight or D/O fees. | Prevent this via contract terms and D/O Release management, not insurance. |
| If an overseas agent requests a Collect shipment, the agent naturally bears the cost. | Without agent-to-agent agreements or settlement rules, disputes arise over who bears the cost. | Confirm settlement terms in advance for failed Collect cases. |
| Because the cargo has value, someone will eventually pay. | If the cargo value is low or there is a sales dispute, sometimes no one takes delivery. | Compare cargo value, storage fees, return costs, and disposal costs. |
Common Problematic Cases in Practice
| Case | Typical Issues | Documents to Check | Practical Points to Note |
|---|---|---|---|
| Consignee does not pay freight | D/O exchange stalls, and cargo is left in storage. | Arrival Notice, Invoice, Payment Reminder Records, B/L Terms | Clearly notify outstanding amounts and Release conditions. |
| Cannot contact Consignee | Neither freight nor local charges can be collected and cargo remains abandoned. | Contact Records, Email Bounce Notices, Registration Info, Notify Party Info | Send early written notice to the Shipper and overseas agent. |
| Refusal to pick up cargo occurs | Storage fees, return shipping costs, and disposal fees increase. | Refusal Emails, Cost Details, Cargo Value, Disposal Estimates | Do not dispose arbitrarily; confirm authority and cost responsibility. |
| Demurrage incurred due to unpaid Freight Collect | In addition to unpaid freight, Free Time overage charges accumulate. | Free Time, Daily Rates, D/O Terms, Unpaid Records, Carrier Invoices | Send warning emails before Free Time expires. |
| Shipper refuses payment | Claims that “Since it’s Collect terms, the Consignee should pay.” | Quotations, Order Confirmation Emails, Standard Trading Conditions, B/L, Agent Records | Check if there are Shipper liability clauses in case of unpaid charges. |
| Overseas agent claims payment for advances | Disputes arise as to which agent bears uncollected risk. | Agent Contracts, Settlement Rules, Email Records, Cost Details | Have clear rules in place in advance for failed Collect cases. |
| House B/L and Master B/L terms differ | Even if House terms are Collect, the NVOCC under the Master may bear payment obligations. | House B/L, Master B/L, Carrier Invoices, Agent Settlement Records | Check House and Master terms separately. |
| Cargo value is low and disposal is being considered | Disposal costs can be high and cause disputes over who shall bear them. | Cargo Value, Disposal Estimates, Owner Consent, Customs Confirmation, Warehouse Records | Confirm authority, procedure, and cost responsibility before disposal. |
Decision-Making Checklist
| Check Point | Contact Party | Items to Confirm | Actions if Issues Arise |
|---|---|---|---|
| Order Receipt | Shipper, Overseas Agent, Sales Staff | Scope of Freight Collect, Responsible Party for Unpaid Charges, D/O Release Conditions | Clearly state conditions in the quotation or order confirmation email. |
| Issuance of Arrival Notice | Consignee, Notify Party, Overseas Agent | Billing Amount, Payment Deadline, D/O Fee, Local Charges, Payment Method | Clearly communicate conditions for withholding D/O in case of non-payment. |
| Payment Delay | Consignee, Shipper, Overseas Agent | Reason for Non-Payment, Planned Payment Date, Intention to Pick Up Cargo, Any Sales Disputes | Set a response deadline and notify of risk of increased charges. |
| D/O Release Decision | NVOCC, Shipping Company, Manager, Overseas Agent | Payment Confirmation, Release Conditions, Guarantees, Internal Approval, Uncollected Risk | Withhold Release if payment or guarantee is not confirmed. |
| Before Demurrage or Detention Occurs | Shipper, Consignee, Overseas Agent, Shipping Company | Free Time End Date, Daily Rate, Expected Charge Increase, Storage Status | Send warning email and document communication. |
| Considering Shipper Billing | Shipper, Overseas Agent, Internal Manager | Quotation Terms, Order Confirmation Email, Standard Trading Conditions, Agency Contract | Organize billing basis before providing explanation. |
| Refusal to Pick Up Cargo | Shipper, Consignee, Warehouse, Customs Broker, Customs | Intent to Refuse Acceptance, Cargo Condition, Storage Charges, Possibility of Return or Disposal | Do not dispose without authorization; confirm authority and procedures. |
| Settlement with Overseas Agent | Overseas Agent, Accounting, Manager | Advanced Charges, Uncollected Amounts, Remittance Terms, Agency Contract, Settlement Rules | Also review conditions for future Collect cases. |
Example 1: Case Where Consignee Did Not Pay Freight Collect and Could Not Exchange for D/O
For an imported cargo, the freight term on the B/L was Freight Collect. The Japan-based freight forwarder sent an Arrival Notice to the Consignee requesting payment of ocean freight, D/O Fee, and local charges.
However, the Consignee was in dispute with the Shipper over the cargo price and withheld payment, stating "It is uncertain whether the cargo will be picked up." The Japan-based freight forwarder withheld the D/O Release and informed the Shipper and overseas agent of the situation.
Afterwards, the Free Time was exceeded and Demurrage charges occurred. The Shipper insisted, "Since it is Collect terms, the Consignee should bear the charges," while the Consignee argued, "We have not picked up the cargo, so we will not pay."
In this case, although the term was Freight Collect, because responsibility for Consignee non-payment and treatment of Demurrage and Storage charges incurred due to non-payment were not clarified in advance, a dispute over who should bear the costs arose.
Example 2: Settlement Dispute with Overseas Agent
An overseas agent requested the Japan side to collect Freight Collect charges, and the Japan-based NVOCC issued an Arrival Notice based on the House B/L. However, the Consignee refused payment after arrival and withheld cargo pickup.
The Japan side stopped D/O Release, during which time Storage, Demurrage, and CFS Charges increased. The overseas agent claimed, "The Shipper has already released the cargo, so the Japan side should recover the charges." On the other hand, the Japan side believed, "The Consignee’s credit check should have been done at the export location."
This case’s issue was that prior agreement was not made between agents concerning the responsible party for failed collection, reverse billing Shipper, and settlement of advanced charges.
For Freight Collect cases, it is necessary to clarify in advance with overseas agents who checks the Consignee’s credit, who bears advanced charges if collection fails, and who invoices the Shipper if applicable.
Example 3: Case Where Refusal to Pick Up Cargo Led to Disposal Charges
For low-value imported cargo, the Consignee refused to pick up, stating, "It’s not profitable to import." Freight Collect freight, D/O Fee, and Storage were unpaid and increased while the cargo remained at the CFS.
The Shipper maintained, "The buyer should pick up the cargo. Our company will not bear the costs." However, disposal costs exceeded the cargo’s value, and return was not a realistic option. Therefore, disposal was considered.
In this situation, the freight forwarder or NVOCC cannot dispose of cargo arbitrarily. Consent from the cargo owner or authorized party, CFS or warehouse procedures, customs processes, acceptance by disposal contractors, and confirmation of who bears disposal charges are required.
Uncollected Freight Collect is not merely an unpaid freight issue but can escalate to abandoned cargo, disposal costs, customs procedures, and overseas agent settlement problems.
Practical Points to Note
If collection failure occurs in Freight Collect cases, the freight forwarder needs to notify stakeholders early. Share the situation not only with the Consignee, but also the Shipper, overseas agents, shipping companies, warehouse, and internal managers as needed.
In addition, organize and document unpaid amounts, incurred charges, expected future charges, D/O Release conditions, and cargo storage status. It is important to organize facts clearly by timeline and amounts rather than emotionally thinking "They won’t pay."
In Freight Collect cases, the strongest negotiation leverage is before handing over the cargo. Once the cargo is handed over, collection means become much weaker. Therefore, managing D/O Release and charge collection together is essential.
Summary
Freight Collect is a convenient term for cash collection at the destination side, but it carries significant risk of non-collection when the Consignee does not pay.
It is especially important to clarify payment confirmation before D/O Release, Shipper’s liability in case of Consignee non-payment, handling of Demurrage, Detention, and Storage, responses to cargo pickup refusal, and settlement conditions with overseas agents.
The inability to collect Freight Collect charges is not an issue that marine cargo insurance can resolve. Managing cost collection and cargo delivery through quotes, order confirmation emails, standard trading terms, agency agreements, and internal rules is fundamental to protecting freight forwarders and NVOCCs.
