* By Roy Gilad, Adv. (Grossman Singer Gilad & Co. Law Firm) and Mr. Barry Pintow
The freight forwarding sector in Israel is organized under three main chambers:
• IFFCCA Israeli Federation of Freight Forwarders & Customs Clearing Agents. The largest of the three organizations, consisting some 45 medium and large freight forwarders and customs clearing agents, representing FIATA in Israel.
• The Haifa & Northern Region Chamber of Freight Forwarders & Customs Clearing Agents.
• The Tel Aviv & Central region Chamber of Freight Forwarders & Customs Clearing Agents.
The three organizations operate at present under a national umbrella organization representing the interests of the industry vis-à-vis the government and service providers; ports, airports, land crossings, government ministries etc.
Services provided by Israeli Freight Forwarders- import & export
Freight forwarding services are provided both for air and sea shipments from every inland point, origin port or airport over the globe to Israel. Consolidations services, LCL or FCL, and pickup and handling at origin.
Air Import/Export most freight forwarders provide daily consolidation service from all major world gateways, top priority with all major airlines, direct/indirect flight services, advanced tracking system over the Internet allows complete door-to-door cargo control from its origin point to its final destination, EDI transmissions of on-hand & flight details – line item level, time sensitive shipments, utilizing special shipping arrangements such as expedited shipment handling and perishable cargo management with same day pickup and after-hours delivery and customs tariff and regulations worldwide.
Ocean Import/Export – most freight forwarders provide weekly Consolidation services from major world ports, service contracts with major maritime carriers, trace and track information system over the internet, on-hand and sailing confirmation via EDI and door to door free house delivery service/
Added value services- full chain of international logistics services, from vendor to consignee, combined with T.P.L. services.
Freight forwarding & Customs Clearance
Most freight forwarders directly or through subsidiaries, offer a broad range of customs clearing facilities. Such service requires the main office and branch offices to be connected On-Line directly to the central Israel Ports and Customs Authorities computerized system. This enables companies to clear any cargo within 24 hours after arrival. Same day clearance is also available. Customs clearance in Israel involves in the main three types of work: (1) Classification in accordance with the H.S. Code. (2) Obtaining the necessary import permits and or licenses. (3) Advisory services to importers & exporters on matters concerning import & export.
Some freight forwarders have elected not to enter the customs clearing services sector as it is regarded as a headache industry.
Trends in Israel are the same as in the Global Freight Forwarding Industry. The freight forwarding market has been a major beneficiary of an increasingly globalised world economy. The development of extended supply chains, integrating manufacturers, suppliers and retailers on a worldwide basis, has led to significant year-on-year growth in international trade volumes. Freight forwarders revenues – and profits – have surged and this has resulted in structural changes to what for many years was a conservative and stable industry.
These changes have included an unprecedented level of mergers and acquisitions from which a small number of global players has emerged. Many long standing brands in the world of freight forwarding have been subsumed. In their place have evolved mega-carriers such as DHL Global Forwarding, Schenker, UPS Supply Chain Solutions and Kuehne + Nagel. As with the rest of the logistics market, private equity is also starting to play a major role in the Israeli sectors development.
The levels of profitability in the market, its growth prospects and the asset light nature of freight forwarders business models have made the sector highly attractive to investors. The industrys attribute of counter-cyclicality – that is, its ability to increase margins in times of economic downturn – gives it an advantage over other segments of the logistics market. This is not to say that there are no clouds on the horizon.
A cooling US economy would have serious repercussions on trans-Pacific and trans-Atlantic trade as well as on Israeli exports to the USA, although the growth of intra-Asian volumes would go some way to mitigate this. Many Israeli freight forwarders have entered in recent years the “drop-shipment” market segment, offering transportation services from any world wide location to any world wide location, without having to transship goods in Israel. In addition, it must be noted that in some sectors freight forwarders have a poor reputation with some customers for being a low value adding resource, providing a range of commoditized, cost based services.
The Israeli maritime freight market is widely controlled by freight forwarders. Out of the 1.8 million TEU which will be passing through Israel´s maritime gateways, some 60% – 65% are thought to be controlled by freight forwarders.
Since no hard facts are available regarding the exact quantity of TEUs that are shipped under freight forwarders´ house bills, it is widely accepted that some 60%, or even slightly higher, of the total TEU imported to Israel is controlled by freight forwarders and almost 65% of the TEU exported by sea are controlled by freight forwarders.
The Israeli air freight market is almost entirely controlled by freight forwarders. Again, since no hard facts are available regarding the exact quantity that is shipped under freight forwarders´ air waybills, it is widely accepted that some 75%, or even slightly higher, of the total air cargo imported to Israel is controlled by freight forwarders and almost 90% of the goods exported by air are controlled by freight forwarders. Figures for the whole 2007 is expected to be 3% / 4% higher, compared to 2006.
Unlike in western countries where freight forwarders offer their services under legally approved sets of standard trading conditions which limit their liabilities, in Israel such standard trading conditions have not been approved by the courts, hence under certain conditions liability is unlimited.
Israeli law applies international norms to Actual Carriers, both sea and air, including limited liability clauses. Thus, the Marine Goods Transportation Ordinance applies the Hague Regulations to bills of lading issued by marine carriers which include limited liability clauses. Limited liability clauses also apply to air carriers, by virtue of the convention for the unification of certain rules concerning internal air transportation (Warsaw Convention), which was adopted in Israeli law by means of the Air Transportation Law, 5740 – 1980. While there has been a worldwide change in attitude to international freight forwarders, so that their legal duties and rights are equalized in certain circumstances to those of Actual Carriers, the liability of the Israeli freight forwarders is unclear and is not resolved by the Israeli legislation.
The Israeli courts ruling in recent years in such claims against international freight forwarders do not have uniform results. An analysis of courts judgments shows that despite of conflicting results, a general principle can be determined which, when implanted, under various circumstances leads to different results: The international freight forwarders liability is derived from the contents of the undertakings it has assumed in each particular case and from the manner such have been fulfilled (or have not been fulfilled) by it. The undertakings of the international freight forwarder may be given by any means whatsoever, in writing, by the issuing of a Bill of Lading, a letter of undertaking, a quotation, and so on – or verbally.
The international freight forwarder is liable for the contractual undertakings provided by it, regardless of whether such were reasonable undertakings relating to the operations of the freight forwarder with which the freight forwarder could comply, or whether they were undertakings within the framework of which, in effect, the freight forwarder assumed unreserved liability for the operations of the actual carriers. Freight forwarder acting as a common freight forwarder (and not as a contractual carrier), as co-ordinating between consignor and the actual carriers, does not bear liability for damage caused during the course of the transportation or for the actions and failures of the carrier, however it is liable for damages due to its own acts and omissions, on the basis of culpability.
The Israeli courts attribute considerable weight to the contractual undertakings of the international freight forwarders towards its customers. Freight forwarders who have assumed undertakings which are similar to those of the actual carrier or any other unreserved undertakings, will bear the consequences of these undertakings.
In comparison, international freight forwarders who have assumed only the ordering and coordinating operations with the carriers, and who have refrained from taking upon themselves independent undertakings to transport the cargo, shall bear liability for the order and coordination alone, and if they have executed the order and coordination in accordance with reasonable standards of measure, customary in the international freight forwarding sector, no liability cannot be imposed upon them for the failure of the cargo to reach its destination at the planned time and/or in sound condition.
It would appear that to some extent there is a blurring in the case law of the “traditional” distinction between an international freight forwarder acting as a common forwarder (an “Agent”) and serving as the proxy of the cargo owner for the purpose of transportation arrangements, and between an international freight forwarder acting as an independent contractor (a “Contractual Carrier/Principal”) and taking upon itself the liabilities of a actual carrier. For the purpose of examining the liability of an international freight forwarder, the courts do not necessarily categorise the freight forwarder into one of the two categories, but rather examine each case on a case by case basis, examining the nature and substance of the contractual ties between the freight forwarder and the customer and the nature of the undertakings assumed by the freight forwarder towards its customer. Even an international freight forwarder who has not issued a Bill of Lading but who has made an undertaking towards his customer, whether orally or in writing (in an agreement, quotation, exchange of e-mails or so on), will bear liability for the assuming of such an undertaking.
In several cases, the courts have founded the forwarder´s demand to equalize their status concerning its contractual liabilities vis-a-vis its clients in connection with the transport of cargo to that of the actual carriers, as a reasonable. The concern is to prevent a situation where the forwarder becomes liable for damage caused to the cargo which is in the possession of the actual carrier, although the prevention of such damage is the responsibility of the actual carrier and not the forwarder, and despite the fact that the actual carrier itself is exempt from liability for this damage (subject to the provisions of the conventions), and the forwarder has no recourse to the actual carrier.
Roy Gilad, Adv. Mr. Barry Pintow
*Mr. Barry Pintow is CEO of the Israeli Federation of Freight Forwarders & Customs Clearing Agents and an expert in the field of international freight forwarding