Many times, the importer or exporter owes third parties a debt, such as storage or demurrage charges for a container, those third parties turn to the customs agent and ask him to pay the debt, and if the debt is not paid - they file a lawsuit against the customs agent.
In such a case, can the debt for storage or demurrage charges be imposed on the customs agent?
And is imposing the debt on the customs agent justified?
With regard to storage charges, customs agents tend to argue in their defense that they served as intermediaries between the client and the warehouse, and nothing more, and that their job was limited to customs brokerage activities. Is such a defense argument likely to be accepted?
This question has been discussed in court a number of times, and we will focus on the main points, after which we will note some pointers for the correct conduct of a customs agent in this context.
- 1. A recent case in which the customs agent succeeded in "minimizing the damage"
In a case that was decided in November 2014, a customs agent made arrangements with a bonded warehouse for the storage of scooter motorcycles imported by a Gazan importer, but no written agreement between the parties was signed.
The payment for the storage services was transferred to the bonded warehouse directly by the customs agent, except for one payment that was transferred directly by the importer.
After a certain amount of time, the customs agent ceased transferring payments to the bonded warehouse for the storage, and at the end of the day, the goods were declared to be unclaimed goods, and were put up for sale by the Israel Customs Authority and finally destroyed.
There remained a storage debt of approximately 275,000 NIS, and the bonded warehouse sued the customs agent, demanding that he pay the storage charges.
The customs agent argued in his defense that the arrangement with the bonded warehouse was made on behalf of the importer, and that the customs agent provides customs brokerage services only, and is not responsible for the storage of the goods or for paying for the storage.
The Court ruled that based on the conduct of the parties, a direct arrangement between the customs agent and the warehouse was proven, and rejected the customs agent's claim that the arrangement was between the importer and the warehouse.
The Court ruled that in fact this was a client of both parties, while the parties did not at any stage address the possibility that the importer would not pay his share, and therefore the majority of the damages should not be imposed on either one of the parties.
The Court criticized both parties for working with a client from the Palestinian Authority and for choosing not to require guarantees even though they were aware of the risk that the storage charges would not be paid.
For these reasons, the customs agent was obligated to pay 40 percent of the storage charges.
[Civil Suit (Herzliya Magistrates Court) 615-02-11. Verdict given by Justice Hanna Klugman on November 26, 2014.]
- 2. A case in which the customs agent's conduct was to his detriment
In another case that was heard by the Tel Aviv Magistrates Court, it ruled that there can be cases where the customs agent serves only as an intermediary between the importer and the bonded warehouse, which has implications for his liability, but this all depends on the circumstances.
In this case, the Court held that the bid was sent to the customs agent, was returned by him signed, and later on the customs agent even paid initial invoices. According to the Court, all these things refute the customs agent's claim that he served as an intermediary only.
The Court rejected the customs agent's claim that there was an agreement between him and the bonded warehouse according to which in the absence of payment on the part of the importer, the customs agent is not responsible for paying the warehouse.
In the end, the Court rejected the customs agent's objection and approved carrying on the suit at the Execution Office (Hotzaa Lapoal, Israel's Collection Agency).
[Collection Suit 1843-08-10, Verdict given on October 5, 2010.]
- 3. Signing a contract with the warehouse - held against the customs agent
In another case that was heard by the Rehovot Magistrates Court, it ruled that the storage contract was made directly between the shipping and brokerage company and the cold storage warehouse, which was to the company's detriment and led to the lawsuit against it being accepted, while the storage debt totaled 85,000.
[Civil Suit (Rehovot Magistrates Court) 1953-09 Verdict given by Justice Iria Mordechai on May 16, 2012.]
- 4. With no written agreement - a customs agent cannot be obligated to pay demurrage charges for a container
In a case that was discussed and decided in 2007, the Court rejected an international freight forwarder's claim against a customs agent for the payment of demurrage charges for a container, which were not paid by the importer.
The Court ruled that although the customs agent had signed a letter of undertaking, the letter of undertaking was not limited in amount and therefore was not sufficiently detailed in order to obligate the customs agent to pay the demurrage charges.
In addition, the Court ruled that even if the bill of lading was converted to the customs agent, this gives him possession of the goods (and not ownership) and therefore he cannot be obligated to pay the demurrage charges, without a clear agreement in writing.
Unlike in other cases, in this case the lack of a written agreement actually worked to the benefit of the customs agent and not to his detriment.
[Civil Suit (Haifa Magistrates Court) 17588/05. Verdict given on March 7, 2007.]
- 5. The risks the customs agent faces, and the way to avoid or at least minimize them
First of all, it is important to remember that a customs agent typically receives a commission of hundreds of NIS for each case, while the storage charge debt, for example, may reach even tens of thousands of NIS. Therefore, the risk the customs agent faces in connection with liability for paying storage charges, is a high one compared to the scope of his work.
Indeed, even if the Court obligates the customs agent to pay the storage charge debt, the customs agent may file a third party claim against the client and demand that he pay the debt. But in many cases the client has financial difficulties or the verdict cannot be enforced against him, which means that ultimately the debt falls to the customs agent.
- 6. In light of the above, how can a customs agent conduct himself correctly with regard to storage charges?
Problems of this nature arise largely when the parties involved - the importer or exporter, the customs agent and the warehouse - do not have a written agreement. In this kind of situation, the Court has to interpret, in retrospect, what the agreement between the parties was, and since there is no written agreement, the Court bases itself on the conduct of the parties over the years, as well as on additional tests.
So, first of all, the customs agent must strive for a signed written agreement with the warehouse, which will regularize the relationships with all the relevant entities, and make it clear that the entity that is responsible for the storage charge debt is the client and not the customs agent. The desired situation is that the entity that signs the agreement with the warehouse be the client - the importer or exporter, but if this is not practical, the customs agent can obtain power of attorney from the client and sign the agreement in his name.
When there is no written agreement and a written agreement with the warehouse cannot be reached, the customs agent's conduct in relation to the warehouse is critical. In such a situation, if possible, it is better that the importer pay the storage charges directly to the warehouse, since the courts have already held against customs agents the fact that they paid the warehouses themselves, and this has tipped the scale against customs agents at court.