By David Gambrel
While it may not always be possible to find a totally independent agent, it is certainly in a shippers’ best interest to try. Double agency is so common in real estate and in ocean shipping it easily becomes accepted, but it can produce terrible consequences. It is so insidious it is often accepted without a thought.
Most coal companies have enjoyed protection from demurrage, ship owners’ damage claims, and other charter-related problems because their customers have chartered the ships that deliver their coal. However, there are marketing opportunities in which a coal company may be more competitive if it can bid on a “delivered” basis, so that company may be thinking about chartering a coal vessel. The typical vessel is Panamax class; it holds about 55,000-65,000 metric tons, or about six trainloads of coal.
If a coal company has not chartered a vessel before, it might think all there is to it is getting a good rate from a shipbroker and having its corporate attorney negotiate a charter party that favors them. This is an understandable approach, but naïve in at least two respects: (1) It overlooks the absolute need for the company’s hands-on participation during cargo transfers, and (2) It assumes their attorney will be able to protect them. In fact, most corporate coal attorneys know very little about the arcane language of charter parties, and would have little if any leverage to shift risk to the ship owner.
If the coal producer (shipper) is planning to charter ships involving many pairs of export-import terminals, it would be physically impossible for the transportation director to be at every terminal. It would be equally impossible to keep track of all port rules and procedures. They should also realize that no matter how much confidence their shipbroker inspires, it is not his job to protect them from every contingency in every port. In short, it is now the shipper’s job to make
sure nothing bad happens to the company’s coal while in port. That is why good agents must be hired whenever possible.
The coal company needs to select agents that have zero conflicts of interest. The problem frequently arises whenever the port agent for the shipping line contacts the shipper’s representative and offers his services for the loading of the vessel. If the “conflict of interest” subject is brought up, they will usually say they can represent both parties fairly. They may see this as an opportunity to charge both shipper and carrier for services rendered. Some ships’ agents will argue for it vigorously, but in many cases the shipper will not hear from the carriers’ agent.
An actual case involved an agent that represented a carrier who had hauled grain on a previous voyage. He offered his services to the coal shipper, even though he was already employed by the shipowner. The shipper refused the agent’s claim that he could represent both parties fairly. The shipper had chartered a vessel that had hauled grain on its previous voyage, and some of the ship’s holds had not been properly cleaned. If the terminal had loaded his coal on top of several tons of grain (or even worse, iron ore pellets) and if the export customer had rejected the shipment, whose side would the ship’s agent take? The coal shipper could have been left with a shipload of coal in a foreign port and not many viable options. His only option might have been to cut the price drastically and hope the customer would buy the coal. (He would not have taken it at any price if the coal had been mixed with iron ore pellets.)
In the event of a court dispute, would the ship’s agent favor the coal shipper, an occasional client, or would he favor the shipowner, a steady client? All we need to know is the ship’s agent probably represents this particular shipowner for every loading and unloading in this particular port. This coal shipper would be but a small piece of his business. One can easily see the ship’s agent would have a conflict of interest, because he would have to choose between which interest would better serve him long term. The coal shipper needs an agent of unquestionable allegiance.
This is not intended to be an indictment against ship’s agents in general. More often than not the shipper will seldom hear from the ship’s agent. However, there are agents who routinely offer to serve two or more masters, not realizing the seriousness of what they are doing. Until and unless they actually experience a serious conflict of interest, they may think it is really nothing to worry about.
The shipper must remember one thing: every ship-loading represents a very expensive cargo which he must protect. The shipper is better served to look in every port for an agent that can be trusted to serve his company independently, and to let that agent handle all of his business there. Dividing his business between two or more agents at any one port may engender anger and hostility, and will produce no good result. The shipper needs a cargo agent who works hard to protect his business, and feels he is part of the shipper’s team.
Hiring foreign agencies is certainly more complicated. Sometimes it may seem impossible to avoid conflicts of interest. There are foreign agents who do their jobs well, and who can be trusted as well as company employees. However, there are foreign agents who see nothing wrong with representing multiple interests, and who may even seek to make shippers part of their schemes. It can be miserable when the shipper has to watch his own agent an ocean away, but sometimes they have no choice.
A charterer should consider negotiating a contractual agreement with an agent that clarifies the agent’s sole responsibility to the charterer. The agent may say it is never done, or is a breach of some long-standing gentlemen’s agreement to even question his trustworthiness, but the shipper has to remember one key thing: every ship-loading of his company must be protected, and it will do no good in times of trouble to point fingers at an agent who turns out to be conflicted.
Gambrel is the president of Logisticon, a coal transportation consultancy. He was senior transportation executive for a major mining company for 15 years, and was also in charge of the company’s ocean shipping program. He was responsible for the chartering and port management of more than 50 Panamax and Capesize vessels. He has acted as advisor to the U.S. Coast Guard, and has helped IMO/SOLAS draft guidelines for the safe carriage of coal by sea. He may be reached at email@example.com or at firstname.lastname@example.org