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How to Exercise a Lien in International Freight

How does a carrier of an international ocean cargo exercise a lien?

A lien on goods under a bill of lading arises from the terms of the bill of lading and legal provisions. Usually there is a clause on the back of the bill of lading for the carrier to lien the goods, that is, in the case of arrears of freight, demurrage, loss of freight or other debts, the carrier has the right to lien the goods, that is, refuse to release the goods to guarantee its claims. realization.

Article 87 of China’s Maritime Law makes corresponding provisions on the carrier’s lien. According to this provision, the carrier may, within a reasonable limit, lien the debtor’s goods for international ocean freight, general average apportionment, demurrage charges, and expenses advanced by the carrier, provided that the debtor has not provided proper guarantees. The new “Contract Law” also has similar provisions.

What should I pay attention to when exercising the lien on the goods under the bill of lading? There are mainly the following aspects. One is that the subject exercising the lien is the “carrier” and not any other person. The Maritime Law does not even clarify whether the “actual carrier” also has the right to exercise a lien on the goods. So, does the actual carrier have the right to lien the goods? It depends on the provisions of the bill of lading.

The second is the limit for exercising the lien, which is only a “reasonable limit”. The so-called “reasonable limit” means that no loss can be caused to the other party due to the exercise of the lien. For example, if the demurrage incurred is estimated to be USD 100,000, it is unreasonable for the carrier to make the value of the lien goods worth USD 1 million in order to force the cargo owner to pay the demurrage as soon as possible. The responsibility for the loss of the cargo owner to stop production or breach of contract to a third party as a result shall be borne by the carrier.

The third is that the subject of liability or debt is the owner of the lien goods. That is, the owner of the lien goods is the debtor. Because the cargo on board in international trade is liquid and transferable, it is entirely possible that, before the lien is exercised, the title to the cargo on board has been transferred to a bona fide third party rather than a debtor to the carrier, such as the shipper or charterers etc.

Otherwise, the carrier will have to bear the compensation liability for the loss of the third party caused by the wrong exercise of the lien. The reason is: the multimodal transport operator issues the multimodal transport bill of lading to the shipper, and at the same time obtains the ocean bill of lading from the actual carrier. The terms and applicable laws of ocean bills of lading and multimodal bills of lading may differ. Fourth, there is no legal regulation on the form of exercising the lien. Usually, the carrier should notify the cargo party, that is, the debtor, that a lien has occurred. However, under the Maritime Law, another precondition for the carrier to exercise the lien is that the debtor has not provided “proper security”.

If the owner of an international sea freight encounters the carrier exercising the lien, it can review its rationality according to law. The usual response should be to provide the carrier with an appropriate guarantee, rather than rushing to determine the amount of compensation. The provision of warranties does not imply an admission of liability and a waiver of rights. Rushing to determine the amount of compensation may have legal consequences of estoppel or waiver of rights. Laws are the “rules of the game” in a “civilized society”.

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