The Quest
Inside this issue:

Help us with our Hurricane Sandy relief efforts; Risk management tips to help your business

What you need to know about the 2012 Transportation Bill

NVOCC China rider increase effective Nov. 23

New provisions regarding legal disputes for freight forwarders in China

New Jersey seeks to ban companies classifying truck drivers as independent contractors

Customs brokers face increased liability risks under food safety act

CARB Update: Clarification of regulations applicability to customs brokers, freight forwarders and NVOCCs nationwide; new SmartWay regulations

CBP updates ACEopedia
(click here to access)


New provisions regarding legal disputes for freight forwarders in China

This year, the Supreme People’s Court of China released new provisions regarding trials concerning ocean freight forwarding disputes. The provisions are the result of growth in China’s freight forwarding industry and the perceived need to establish regulation and oversight.

Forwarder or Carrier Authority
In China, forwarders are typically considered agents with less liability and obligations than the carrier. As a result, the court outlined distinguishing factors to identify whether the forwarder is acting as an agent or carrier, which include: understanding the nature of any contracts involved, evaluating how the forwarder invoices its services, what items are billed, and whether the forwarder is issuing transport documents in its own name and if such authority was granted by the carrier.

Many disputes arise from “sub-entrustment,” where a forwarder sub-contracts specific tasks to another party. Chinese law states that if a forwarder engages in sub-entrustment, it should be contractually agreed to by all parties beforehand.

Exercising Liens
There has been some question under Chinese law on whether freight forwarders can detain transportation documents if payment has not been received. The new provisions confirm that freight forwarders can exercise liens, but they must be specifically agreed to by contract, in advance.

Delivery of Transport Documents
To eliminate confusion when FOB terms are used, the provisions clarify two types of shippers: the contractual shipper (buyer) and actual shipper (seller). The freight forwarder is required to provide transportation documents to the actual shipper upon request.

Limited Strict Liability
Chinese maritime law operates under the doctrine of limited strict liability. Forwarders are considered liable for loss or damage, unless they can prove they are not at fault.

Non-compliant NVOCCs
NVOCCs operating in China are required to register their bills of lading and post applicable financial security with the government. The new provisions state that if a freight forwarder works with a non-compliant NVOCC whose bill of lading is not registered, the forwarding company is liable, jointly and severally, with the NVOCC in the event of any loss or damage. The forwarder may then attempt to recover damages from the non-compliant NVOCC.

Logistics companies with offices located in China should understand these new regulations to ensure their compliance. We recommend that freight forwarders doing any business in China consult with a transportation attorney to understand any new liabilities their companies will be exposed to under these new provisions.

For more information, please contact your local Avalon office or Andriana Davis at (847) 700-8087 or at adavis@avalonrisk.com. A list of our offices may be found at www.avalonrisk.com/contact.html

Avalon Risk Management


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