What to do if the vessel arrives at destination port and freight is still unpaid?

• Transport & Logistics
• Ports and Terminals

Just for one and a half, year Ukraine has faced restrictions on transborder payments.

Apart from difficulties concerning vessel calls at the Ukrainian sea ports due to their blockade by russia, one more keystone is the issue of freight payment.

Although freight is a type of payment not covered by restrictions on transborder payments, there are some obstacles impeding both traders’ and shipowners’ business activity, namely financial monitoring and currency control over the Ukrainian bank transactions. Such procedures take a lot of time, even up to month.

Interlegal offers a tool that will make it easier to solve the issue of freight payment in international maritime transport, secure the Shipowner’s and the Charterer’s rights and help to avoid such costs as demurrage and related port dues.

We mean Cargo Lien Agreement aimed at security of the Charterer’s principal payment obligation.

How does it function? It is a short-term agreement, since payment freight is usually enrolled within one or two weeks from the moment of cargo arrival at destination port. As soon as the vessel calls at discharge port, the Parties will enter into Cargo Lien Agreement, having notified on cargo lien to whom it may concern, Therefore, it is prohibited to shift, to sell, to pledge cargo in favor of third parties, and many others the Parties will deem as necessary to set out in Lien Agreement.

Such an instrument guarantees both defense of the Shipowner’s rights on debt recovery and defense of the Charterer’s title on cargo. Certainly, in case of the Charterer’s failure to fulfill its principal obligation against the Shipowner, the latter will be entitled to charge debt on pledged property, i.e. on cargo.

Apart from principal obligation amount, the Charterer usually bears cargo storage costs for the lien validity term, as well as legal support costs. It is just a commercial issue to be settled by both Parties.

What to do if the vessel arrives at destination port and freight is not enrolled to beneficiary’s account? One should apply Cargo Lien Agreement, since such an instrument as a lien is not always effective and requires for additional costs.

If you intend to apply such an instrument as Cargo Lien Agreement and wish a correct procedure from the legal aspect, Interlegal law team is always ready to provide assistance and legal support at all the stages: drafting Lien Agreement, notifying to whom it may concern on termination of the Agreement due to fulfillment of principal payment obligation.

Irina Maltseva

maltseva@interlegal.com.ua