general guideline of idling cargo management

General Guideline of Idling Cargo Management

(Ver. 1.0)

Container Service Supporting Team

Revenue Creation Part

Contents

1. Purpose………………………………………………….……………14 - 1

2. Definition …………………………………………………………… 14 - 1

3. Role and Responsibilities ..……………………………….……….….14 - 1

4. Idling cargo handling procedure …...….………………..……….….. 14 - 2

5. Cost Recovery .…………..………….…………………………,.…... 14 - 6

6. Preventive Action …………………...…………………………….….14 - 8

Attachment)

Useful Tips 1. Tips for handling bad idling cargo…………..………… 14 - 9

Useful Tips 2. Sending a Claim Letter…………………....……...…… 14 - 10

Useful Tips 3. Checkpoint of cargo disposal……………….…….…… 14 - 10

1. Flow Chart of Long Idling Cargo Handling ……………………… 14 - 12

2. Work flow with scenarios ………………………………….……... 14 - 13

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1. Purpose

This procedure is to enhance the settlement of idling cargo that is foreseeing no progress in the near

future. The procedure will be providing the general and essential directions & steps for local office’s

easy reference only, the detailed work flow can be different by cases & local situation.

2. Definition

A. Long Idling cargo

- Long idling cargo means goods in a container which have been unclaimed at CY or ODCY by

Consignee (or Notify) from DF (Discharge Full) or TI (Gate in Inland CY) status over free time.

B. Bad idling cargo

- Among idling cargos, a cargo which is applied to one of below criteria is considered as bad

idling cargo.

(1) In case of cargo abandonment, uncontactable customer, customer’s bankruptcy, fraud

shipment or customs seizure.

(2) Except above cases, when the cargo interests (shipper, consignee and notify party) do not

respond to final notice for the cargo exceeding 100 days from the date of discharging.

※ Overall cargos above 100 idling days are not determined as bad idling cargo. When cargo

interests are willing to clear the cargo, it should be regarded as sound idling cargo.

3. Role and Responsibilities

Role Responsible Office

● Responsible office to clear long idling case

▶ 1st : Handling office

(Destination)

▶ 2nd : Relevant office

(Origin)

● Supervise and control the handling office to clear long

idling case.

● Support handling office to choose the best way to solve

long idling case (ship-back, disposal, auction, private

sale or donation, etc.)

▶ Traffic & Documentation

Part in RHQ

● Assist the handling office to solve long idling case

(contacting the shipper or other cargo interests and urge

them to clear the cargo in writing).

▶ Relevant office (Origin)

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A. Handling Office

Local office that governs the area where the long idling cargo is located. Destination office

will mainly be a handling office.

B. Relevant Office

The office that handles the cargo for booking, documentation (B/L, Seaway bill, LOI or other

documents). Origin office will mainly be a relevant office.

C. Regional Headquarter (RHQ)

Monitoring the long idling cargo in region and assist to handling office to clear long idling

case. If legal action is necessary, then consult with HQ Container service supporting team and

legal team.

D. Legal team

Shall give a guidance for legal related matters and P&I club assistance for cost recovery.

E. HQ Container service supporting team

Shall manage and control the overall status of long idling cargo, i.e. establish the company

policy on the long idling cargo control, set up preventive action plans.

If RHQ needs guidance on a specific case from HQ, HQ Container service supporting team

may review the case and give RHQ the guidance or direction on it.

4. Idling cargo handling procedure

A. Basic procedure

All offices shall follow the below work procedure to clear long & bad idling cargo.

Time Frame Actions to Be Taken

■ Immediately after elapse of the

10 days after DF or TI (7 days in

case of Reefer, Special Cargo)

without any contact from the

consignee / notify party or the

cargo proves to be unclaimed.

▶ Handling office should send “Long Idilng Container

Notice” to cargo interests by email or using ‘Idling Full

Cntr Notice’ (#5040) menu

▶ Handling office should inform Origin office (or Booking

office) of the idling status. Then, Origin office contacts

the shipper and let him know the unclaimed event to clear

the cargo.

- When handling office sends notice to origin office,

branch manager and sales manager should be

included as ‘CC’ for their attention

- Ask more contact details of consignee, if consignee is

unreachable

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- Ask shipper to find a new buyer or return, if

consignee rejects the cargo

- Ask shipper to send the relevant documents in case of

documental insufficiency

■ On every 7 days

(5 days for Reefer, Special Cargo) ▶ Send reminder to cargo interests

(shipper, consignee and notify party)

(1) Handling office should advise RHQ immediately when cargo is idling under the following

circumstances.

a. Cargo abandonment (should acquire the standard format of abandonment)

b. Uncontactable customer

c. Customer’s bankruptcy, out of business or financial problem (should try to acquire the

evidence)

d. Fraud/Illegal/Smuggling shipment by shipper without valid consignee

e. Customs’ seizure or return order

f. Documental insufficiency (lack of import license/certificate, etc.)

g. Dispute between shipper & consignee

h. Low value cargo (scrap, used commodity, etc.), reefer or special cargo, non-regular

shipment (spot contract), lot cargo (more than 10 containers under 1 B/L) or unaware of

cargo with little possibility of cargo clearance

(2) For the settlement of long idling cargo or bad idling cargo, the following methods can be

taken.

a. Customer’s office visiting

b. Delivery plan : Ask consignee to provide cargo pick up schedule especially for low value

cargo, non-regular shipment and lot cargo (more than 10 containers).

c. Commercial deduction of Demurrage/Detention for VIP A/C (below 100 days) from origin

office (mainly)

d. Operational deduction of Demurrage/Detention (more than 100 days) from destination

office (mainly)

e. Ship-back, return or re-export to origin or 3rd country under shipper’s responsibility

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f. Cargo disposal :

• Check the possibility of cost recovery from customer or P&I

• Check the possibility to move the cargo to 3rd country where the cost is lower.

g. Searching new buyer and resale

h. Donation

i. Cargo devanning / Destuffing

j. Auction (Public or Private)

k. Legal Action (Demand Letter by lawyer, Lawsuit, etc.)

(3) For the cost saving, Handling office should consider the followings.

a. Trying to get a discount for the storage from the terminal (where carrier pays storage cost

to terminal), etc. and minimize the other expenses

b. Moving the cargo to ODCY if the storage charge of ODCY is lower than that of CY.

c. Failing to persuade customer and HMM should bear terminal storage and cargo disposal

cost, then it should be thoroughly reviewed whether incurred cost can be covered by P&I

Club or not.

d. The method of Disposal (expense), public Auction (lengthy process period before empty

container return, rental cost during auction process) or Lawsuit (lengthy process period,

expense, possibility matter of revenue/expense recovery) should be the final option.

So, Handling office pay keen attention to clear long idling cargo prior to facing worst phase

like as auction, disposal or lawsuit.

(4) Reporting to RHQ

a. RHQ should regularly monitor the status of long idling cargo and, if necessary, instruct

local offices to take necessary actions to clear the long idling cargo.

b. Handling office reports idling cargo status to RHQ to get the necessary advice.

When handling office send an email regarding long idling cargo settlement, use ‘Email

request form for idling cargo settlement’.

c. If any HQ’s approval is needed to solve the idling case. (Deduction/Disposal/Re-

export/Customs issue, etc.) PIC of idling cargo in handling office should fill in the form of

‘Idling cargo settlement report’ and get pre-approval from both branch manager and

head of RHQ. (If handling office is not under RHQ, received an approval only from branch

manager.)

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d. ‘Check point of idling cargo settlement’ should always be attached together when local

office requests HQ’s approval for clearing long idling.

e. Any related documents should be uploaded on #5178 as evidence.

B. Legal actions for bad idling cargo

Along with the basic procedure, the below legal action procedure for bad idling cargo should be

taken.

(1) Over 30 days but less than 100 days from DF or TI


■ Above 30 days ~ below 100 days

from DF or TI

▶ Handling office should enroll as bad idling cargo

in ‘Long idling case management’ (#5178)’ after

30 days of DF or TI when the cargo is supposed

to be bad idling.

a. All the notices to the cargo interests should be reported to or copied to the Relevant offices

and check the applicable settlement method.



■ On the 100th day (60th day in

case of Reefer, Special Cargo)

▶ Send a Final Notice to cargo interests

■ Above 100 days ~ below 150

days from DF or TI

(60 ~ 100 days for Reefer, Special

cargo)

■ No response received after final

notice sending

▶ Handling office should input the details of idling

information on ‘Long idling case management’

(#5178) and enroll as bad idling cargo if there’s no

response from cargo interests.

▶ Send a Claim Letter to cargo interests.

a. All the notices to the cargo interests should be reported to or copied to the Relevant offices

and also check the applicable settlement method. The considerable amount of

Demurrage/Detention deduction also can be taken.

b. If the shipper or consignee fails to respond to the Claim Letter, actual lawsuit should be

considered and commenced by HQ / RHQ Legal Department after consulting with RHQ

and HQ Container service supporting team.

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In order to recover the costs and charges in connection with idling cargo, legal action against

shipper or consignee also should be considered at this stage.


■ Above 150 days ~ below 300

days of DF or TI (Above 100

days for Reefer, Special cargo)

▶ File a lawsuit after legal review

(Contact RHQ and HQ for further guidance)

▶ Fact Sheet and related documents have to be

updated in #5178 and report to RHQ and HQ

▶ Focus on saving cost & empty container return

and consider the maximum deduction of

Demurrage/Detention for customer to pick up the

cargo when the customer wants amicable

settlement

a. If filing lawsuit against consignee is not an available as per the local rules and regulation,

the Handling office needs to contact HQ Container service supporting team for requesting

the Origin office to take legal action against shipper and provide Fact Sheet of Long idling

cargo.

b. The legal action against shipper or consignee shall be filed within 1 year from discharging.

(4) Over 300 days


■ Above 300 days ~

▶ Focus on saving cost & empty container return

and consider the maximum deduction of

Demurrage/Detention for customer to pick up the

cargo

5. Cost Recovery

A. Demurrage / Detention deduction request

- High amount of DEM/DET charge is one of the main reasons that liable parties are unwilling to

take the long idling cargo. As follow the below table, deduction request should be reported to

correct party as per deduction amount.

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● Approval party per deduction amount & reason (General)

a. Before request HQ deduction approval, Head of RHQ or Branch offices’ pre-approval have

to be received

▶ Local PIC of idling cargo > Head of Branch office approval > Head of RHQ approval >

Request H/Q deduction approval

b. Each region and office deduction approval line can be different. For more detail procedure

regarding the deduction request, please refer to the deduction guideline

c. Inform RHQ and HQ if the security deposit for DEM/DET is already collected from

consignee at time of sending deduction request

d. After get HQ’s approval, deduction request has always been made by GAUS #5021 and

inform HQ when the incurred DEM/DET are completely cleared.

B. Cargo abandonment by shipper or consignee

- Cargo abandonment does not relieve shipper or consignee from their liability for the payment

of DEM/DET and other costs.

- Even if both shipper and consignee formally abandon cargo by a letter of abandonment, they

remain responsible for the payment of the outstanding charges in accordance to HMM B/L Terms

and Conditions.

- In order to get recovery from the liable parties timely and efficiently, both the Origin and

Destination offices are required to collect all the outstanding charges.

- Apparently, most offices are concentrate on collection of abandonment letter only but not asking

liable parties to pay outstanding charges. At the final stage, most of idling cargos should be under

the disposal process. At that time of cargo disposal, it is difficult to recover additional cost from

liable parties. Therefore, at least, collect DEM/DET which incurred until the day of

abandonment letter collection in order to minimize any unnecessary cost in future.

C. Disposal related cost collection

- The costs & charges incurred during staying in the yard and any related cost in the disposal

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processes and cargo return should be fully recovered from liable parties.

- Liable parties shall not be limited to the shipper, consignee & notify, but including all related

parties involved in the shipments, such as shipper/consignee agent, actual cargo owners. If no

recovery is possible from liable parties, P&I insurance recovery should be considered.

D. P&I Club Involvement

- If the disposal is decided, disposal cost will be eligible for P&I insurance coverage subject to

deductible per vessel. (Deductible is normally USD 30,000 or more depending on the vessel)

- Handling office evaluate the disposal cost, and if it is estimated to exceed the deductible cost

(USD 30,000 per vessel) the case must be reported to P&I Club for their confirmation before

arrangement. The notification to P&I club should be done within 1 year after container

discharging.

- Principally, P&I insurance covers disposal costs, including storage, cargo destruction, legal

consultation fee and any other out-of-pocket expense approved by P&I Clubs. DEM/DET and

freight will not be covered by P&I insurance. To review P&I insurance recovery, formal request

with supporting evidence of costs should be sent to RHQ, HQ Container service supporting team

and Legal team

6. Preventive Action

A. Weekly long idling analysis Report : RHQ report weekly long idling analysis result to HQ

Container service supporting team. Preventive action plan, newly counted long idling case and

cleared long idling case should contain on weekly report to minimize the bad idling cases.

B. Register black list accounts on system (#G023) : When the certain type of cargo is repeatedly

to be long idling. Handling office should notify the origin office and RHQ of concerned shipper

and consignee to constrain their new booking. When shipper or consignee is considered as bad

customer, request RHQ and HQ Container service supporting team to register black list on

GAUS (#G023) to prevent another long idling case.

▶ Booking blocked when the shipper or consignee code is registered on #G023

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Useful Tips 1. Tips for handling bad idling cargo

1. Notices In many cases, the shipper and the consignee (or the notify party) are very

hesitant to give us an abandonment letter. In this case, the fact that we

have sent them (final) notices would strengthen our position later in case

of a court action. A claim letter to the shipper or the consignee should

include the relevant contents of our tariff regarding demurrage/detention

charges. In a final notice, we should warn them that if they do not clear

the cargo within the assigned period we will dispose of/return the cargo

on their account.

2. Invoice Value

If a cargo becomes long idling cargo, the relevant office should check the

invoice value of the cargo. And, before the incurred cost and charges

reach the invoice value of the cargo, the Handling Office should consider

re-sale/auction of the cargo in order to mitigate the company loss.

3. B/L Holder

In many cases, cargos get uncollected since the relevant B/L holder does

not appear. In these cases, please urgently contact and urge the shipper to

solve the problem and hold them liable for our company loss.

4. Request for cargo

inspection before

Delivery

The destination office should not accept such a request from the

consignee. They should urge the consignee to take delivery of the cargo

first and then raise a claim against the carrier or the shipper if needed.

5. Party liable for the

outstanding charges Article 1(F) of HMM B/L Terms and Conditions provides:

"Merchant" includes the shipper, consignor, consignee, owner, and

receiver of the Goods, and the holder of this Bill of Lading, all of whom

shall be jointly and severally liable to the Carrier for the payment of all

freight, demurrage, damages for detention, and for the performance of the

obligations of any of them under this Bill of Lading or any charter party

described in the face of this Bill of Lading.

Based on this Article, HMM as a carrier has the right to recover all costs,

expenses, damages, or losses incurred when shipments are uncollected,

undeliverable or unclaimed and remains as DF (Discharge Full) in our

system beyond free time from Shipper(s) as well as Consignee(s).

6. Party liable in case

of Seaway Bill The definition of the Merchant in HMM B/L Terms and Conditions is

applicable even when Seaway Bill was issued for long idling cargo.

In the event HMM B/L was never issued, Shipper, as the owner of the

cargo, will be responsible for the payment of any costs incurred by long

idling cargo.

Based on HMM B/L Terms and Conditions, HMM is entitled to recover

all costs and charges in connection with long idling cargo including, but

not limited to, demurrage, detention, storage, and the costs for returning

or disposal long idling cargo if necessary.

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7. Return Shipment

When it is necessary to return the cargo to the origin or re-ship the cargo

to another port upon the customer’s request, Handling Office should

collect all the outstanding charges/costs before they arrange it.

8. Helpful Information

on (#5175)/(#W999)

From ‘Idling guide management’ on GAUS (#5175), there are lots of

helpful information available such as each country’s import regulation,

restrict goods and salvage & disposal company information. In addition,

to check out the latest notice and guideline refer to the GAUS (#W999),

‘Trf & Doc Guideline’.

Useful Tips 2. Sending a Claim Letter

(1) Send Claims letter to both Shipper and Consignee to demand the payment of all outstanding

charges and take the prompt action to resolve the idling cargo situation, giving a warning that HMM

will take a legal action to recover the costs/charges, plus interests and attorneys’ fees if the shipper

or consignee fails to comply with the demand(s).

(2) Claims letter to shipper must be sent by sales representative in the Origin office.

(3) Claims letter to consignee must be sent by the Import Document Team at the Handling office.

(4) Cargo idling over 100 days from DF, Import Team at the Handling office must notify the sale

office at the Origin to immediately send Claim Letter to the Shipper.

(5) State accurate amount of the costs/charges in Claim Letter including Outstanding Freight,

Demurrage/Detention charges, cargo disposal cost, if applicable.

Useful Tips 3. Checkpoint of cargo disposal

(1) Document Checklist The following documents/ information shall be obtained/ checked in

advance for preparation of disposal arrangement.

○ Abandon letters from cargo interests, or disposal confirmations

from cargo interests

○ OB/L return

○ Any notice from local authorities

○ Local rule and regulation (if any) regarding proceeding

disposal

○ Packing list & commercial invoice

○ Survey report if any

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(2) Checklist for the

essential steps before

proceeding disposal

arrangement

○ Check who holds Original B/L

○ Whether Notices to cargo interests and liable parties or not.

○ Find out all available disposal options, compare the costs &

feasibility

○ Arrange a surveyor to inspect and evaluate the cargo before

destruction or auction if necessary

○ Check all related cost

- Demurrage/detention, Freight, other charges, disposal related cost,

penalty, etc.

○ Compare cost with invoice or salvage value of the cargo

○ Report the case to P&I Club if disposal cost is most likely to exceed

the deductible per vessel

○ Ensure the disposal not causing infringement of any local

regulation & get approval from the competent authorities.

○ Hold all liable parties for subsequent cost recovery

○ Coordinate with all disposal related offices for the feasibility of

your disposal action

○ Secure all essential documents for disposal as well as subsequent

cost recovery activity

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1. Flow Chart of Long Idling Cargo Handling

RHQ

1. To support & instruct Branch Office

2. To perform weekly analysis of trend &

performance

3. To report to Head Office

HQ Container Service Supporting Team

1.To support & guide RHQ & Branch

Office

2. To perform analysis and evaluation of

activities

Handling (Destination) Office

Relevant (Origin) office

1. To monitor over 10 days(RF,SP over 7 days)

container

2. To encourage CNEE to take delivery

3. To notify Origin Office of idling containers

4. If uncollected, take action as per the Idling

cargo management

1. To receive idling information from

Destination Office

2. To notify SHPR of idling container

3. To encourage SHPR to liaise with CNEE

to solve idling case

4. To feed back to Destination Office

1. Notice to CNEE

Over 10 days(RF,SP- 7 days) : 1st notice

Over 17 days(RF,SP- 12 days) : Reminder

- Send a weekly notice (RF, SP every 5 days)

2. Input #5178 for over 100 days container

(Input after 30 days if it is bad idling case)

3. Report to RHQ and Origin Office

4. Final notice to CNEE for over 100 days

containers (RF,SP 60 days)

5. Send claim letter during 100 ~ 150 days

(RF,SP- 60~100 days)

5. Preparing action plan/Reviewing disposal plan

with RHQ/HQ.

1. When send an email request to RHQ for clearing long idling cargo, using the

“Email request form for idling cargo settlement’

2. When request to get a HQ’s approval for clearing long idling cargo, fill in

the form ‘Idling cargo settlement report’ and get branch manager and Head

of RHQ’s pre-approval

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2. Work flow with scenarios

Cargo auction

Private auction Public auction

Cargo return/re-export

Confirmation from origin office

or/and other location for

effective disposal

Empty return to HMM

Release cargo

by authorities to

winner

Carry out bidding with

at least two inviting

company

Confirmation from RHQ or HQ

that bidding winner takes cargo.

Vessel loading/discharge

Disposal handling at destination

office

Cargo pick up by the winner

Freight quotation Vessel

loading/discharge

Collecting all outstanding

charges/costs before cargo

return

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Cost recovery actions against

liable parties

Destruction New buyer

Signing agreement with the new buyer

of the cargo

Empty return to HMM

Cargo delivery to new buyer

Donation

Seek approval from RHQ and HQ

Total Loss Declaration

Apply TL request to HQ to stop rental

cost when there will be no other cost

involved in terminal and no liability in

HMM in future

Cost recovery actions against

liable parties

Cargo destruction according to local

regulations (no bleaching of law must

be ensured)

Empty return to HMM

Clarify the cargo destruction is

possible in region

Destruction

possible and

affordable cost

to destruct the

cargo

Destruction

impossible in

region

or high cost to

destruct the cargo

Search the 3rd

country where

possible to destruct

the cargo

general guideline of idling cargo management

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