Freight Forwarding Agreement: What To Check Before Signing

What should you check before signing a freight forwarding agreement? The reassuring answer is: you don't need to become a shipping expert, but you do need to know which clauses can cost your business money if something goes wrong.

If you import stock for an ecommerce store, wholesale business or retail brand, freight forwarder terms can feel like routine paperwork. But those terms often decide who pays when goods are delayed, damaged, held at the port, misdeclared or hit with extra storage charges.

The good news is that a careful review can usually spot the big risks early. Once you know what to look for, you can negotiate the key points or make sure you're covered in another way.

What Does A Freight Forwarding Agreement Actually Cover?

A freight forwarding agreement usually covers how the forwarder will arrange transport, clearance and related logistics for your goods, but the exact role can vary a lot.

Some freight forwarders act mainly as your agent. This means they arrange carriers, customs brokers, warehouses and other providers on your behalf. Others may contract as a principal, where they take on more direct responsibility for the movement of goods. The wording matters because it affects who you can claim against if there's a loss, delay or extra cost.

Before you sign, check all the documents that make up the deal. Your freight forwarding contract in Australia might include:

• the quote or rate sheet
• standard freight forwarder terms and conditions
• a credit application or account form
• a customs broker agreement, authority or appointment
• booking confirmations and shipping instructions
• any service level agreement or operating procedure

Don't assume the quote is the whole contract. Many quotes say they're subject to separate standard terms, and those standard terms often contain the most important risk clauses.

You should also check how the agreement lines up with your terms of sale, sale contract and Incoterms. For example, if your supplier sells on FOB terms, your business may be responsible for the main international freight from the port of loading. If your freight contract says something different, you can end up with gaps or double handling.

How Do Liability Limits Work If Cargo Is Lost Or Damaged?

Freight forwarder terms often limit liability, so you usually won't automatically recover the full invoice value of your stock if goods are lost or damaged.

This is one of the biggest surprises for importers. You might think that if you paid $40,000 for stock, the forwarder must pay $40,000 if it goes missing. In practice, many logistics agreements cap liability to a much lower amount, such as a set amount per kilogram, per package, per consignment, or the amount of fees the forwarder earned on the job.

Some movements may also be affected by international carriage rules, such as the Hague-Visby Rules for sea carriage or the Montreal Convention for air carriage. These rules can set limits based on units like kilograms or Special Drawing Rights. The exact result depends on the route, documents and role of each party, so it's worth getting the clause checked if the shipment is valuable.

Also look for exclusions. Many freight terms exclude:

• loss of profit
• missed sale opportunities
• marketplace penalties
• damage caused by poor packaging
• loss caused by delay
• claims not notified within a short timeframe

Say Mia runs an online electronics store in Melbourne and imports 500 speakers costing $40,000. The forwarder charges $3,000 for the shipment, but the terms cap liability at $500 per consignment unless Mia buys cargo insurance. If the goods are damaged in transit, Mia may be limited to $500 from the forwarder, even though her commercial loss is far higher.

That doesn't mean you can't work with that forwarder. It means you need to know the cap and decide whether insurance, a higher declared value or a negotiated liability clause is needed.

Who Is Responsible For Delays, Customs And Clearance?

You're usually responsible for giving accurate customs and product information, while the forwarder is usually responsible for using reasonable care to arrange the logistics services they agreed to provide.

For Australian imports, customs and biosecurity issues can be a major source of delay and cost. The Australian Border Force administers customs laws under the Customs Act 1901, while biosecurity risks are managed under the Biosecurity Act 2015 by the Department of Agriculture, Fisheries and Forestry.

Your freight forwarder or customs broker may help with entries, tariff classifications, permits and clearance steps. But the agreement may still say your business is responsible for the accuracy of information, including:

• product descriptions
• country of origin
• supplier invoices and packing lists
• tariff codes and valuation information
• import permits, if required
• biosecurity declarations

If the information is wrong, your goods may be delayed, inspected, treated, exported or destroyed. You may also face extra charges. The contract should be clear about who does what, and what documents the forwarder needs from you before the shipment moves.

Delay clauses also deserve close attention. Most forwarders won't guarantee delivery dates unless the contract clearly says so. Many terms say estimated transit times aren't binding and that the forwarder isn't liable for delays caused by port congestion, weather, strikes, customs holds, carrier issues or government action.

If timing is critical, ask for the delivery commitments to be written clearly. For example, you might need a latest dispatch date, escalation contact, reporting obligations and a plan for time-sensitive goods.

What Fees Can The Freight Forwarder Charge After You Sign?

A freight forwarder can often charge more than the original quote if the agreement allows pass-through costs, extra services or third-party charges.

A low headline quote can become expensive if the terms give the forwarder broad rights to add costs later. Some extra charges are normal in international shipping, but you should still know when they can be charged and whether you get approval first.

Look carefully for:

• storage fees after free time expires
• demurrage and detention charges for containers
• port, terminal and airline handling charges
• customs exam, quarantine, fumigation or treatment fees
• fuel, currency or congestion surcharges
• redelivery, waiting time and failed delivery fees
• administration fees for disbursements

Also check payment terms. If you're on a credit account, the forwarder may be able to suspend services, charge interest, require cash before delivery or exercise a lien over goods if invoices aren't paid.

Example: Storage Fees Add Up Quickly

Zara runs an ecommerce homewares business and imports a container of ceramic lamps. Her quote is $4,800. The terms allow three free days of warehouse storage, then $75 per day. There's also a container detention charge of $125 per day if the empty container is returned late.

A missing packing list delays clearance. The goods sit for 10 paid storage days, adding $750. The container is returned five days late, adding $625. Zara's final cost is $6,175 before any customs or treatment costs.

If Zara had checked the terms earlier, she could have arranged documents before arrival, asked for alerts before free time expired and built a buffer into her landed cost calculation.

What Should The Contract Say About Insurance, Dangerous Goods And Indemnities?

The contract should clearly say who arranges cargo insurance, how dangerous goods are handled and when you must indemnify the forwarder.

Insurance is separate from the forwarder's liability. A forwarder may arrange cargo insurance for you, but only if you ask and the policy is actually placed. Don't assume insurance is included because the forwarder is handling valuable stock.

Check:

• whether the insurance is all risks or limited cover
• the insured value, including freight and other costs
• the excess and exclusions
• whether fragile, high-value or temperature-sensitive goods need special approval
• the process and deadline for making a claim

Dangerous goods need special care. If you ship lithium batteries, aerosols, chemicals, cosmetics, paints or certain cleaning products, transport rules may apply even if the goods seem ordinary to your customers. Depending on the transport mode, rules may come from the Australian Dangerous Goods Code, the International Maritime Dangerous Goods Code or air transport dangerous goods requirements.

Your agreement will likely require you to properly classify, pack, mark, label and declare dangerous goods. If you get this wrong, goods may be refused, delayed or destroyed, and your business may be responsible for costs and penalties.

Indemnities are another key risk. An indemnity is a promise to cover another party for certain losses. A fair indemnity might say you cover losses caused by your incorrect documents or undeclared dangerous goods. A risky one might make you cover almost every loss connected with the shipment, even where the forwarder contributed to the problem.

Try to narrow indemnities so they match what your business can control.

How Do You Review A Logistics Agreement Before Signing?

You review a logistics agreement by checking the commercial deal first, then testing the clauses against realistic things that could go wrong.

Start with the practical details. Are the parties correct, including ABN or ACN details? Is the service door-to-door, port-to-port or something in between? Are the locations, timing, reporting and handover points clear?

Then move to risk. A simple review checklist is:

• What exactly is included in the quoted price?
• What extra charges can be passed on without your approval?
• Does the forwarder act as agent, principal, carrier or a mix?
• What is the liability cap for loss, damage and delay?
• Are consequential losses excluded?
• Who arranges cargo insurance?
• Who is responsible for customs documents, permits and product information?
• What happens if goods are held, abandoned or uncollected?
• Can the forwarder hold your goods for unpaid invoices?
• How quickly must you notify claims?
• How can either party end the arrangement?

The Australian Consumer Law may also be relevant if you're given a standard form contract and your business has fewer than 100 employees or annual turnover under $10 million. Since 9 November 2023, unfair contract terms in standard form small business contracts have been prohibited, and penalties can apply. This can help with very one-sided terms, but it's much better to fix unclear or unfair wording before you sign.

Freight Forwarding Agreement Outline

If you're preparing or reviewing business terms and conditions, these are the clauses you would usually expect to see. A lawyer should tailor the document before you use it, because templates often miss industry-specific risks.

1. Parties: Write the correct legal names, ABNs or ACNs and contact details.
2. Role Of The Forwarder: State whether the forwarder acts as agent, principal, carrier or broker.
3. Services: List the transport, customs, warehousing and delivery services included, including any warehouse and logistics arrangements.
4. Quotes And Charges: Explain what the price includes, what can change and when approval is needed.
5. Customer Responsibilities: Set out your document, packaging, labelling and customs information obligations.
6. Delivery And Delays: Say whether timeframes are estimates or commitments, and what reporting is required.
7. Liability And Claims: Cover liability caps, exclusions, claim notices and evidence needed.
8. Insurance: State who arranges cover, insured value and the claim process.
9. Dangerous Goods: Explain declaration, packaging and compliance requirements.
10. Indemnities: Limit each indemnity to losses the responsible party can fairly control.
11. Storage, Lien And Uncollected Goods: Set out fees and rights if goods are delayed or invoices are unpaid.
12. Termination: Explain how the account or services can end and what happens to shipments in progress.

Key Takeaways

• Freight forwarder terms can limit your recovery if goods are lost, damaged or delayed, so don't assume you'll get the full stock value back.
• Customs, biosecurity and product information responsibilities usually sit heavily with your business, even where the forwarder helps with clearance.
• Extra charges like storage, demurrage, detention and inspection fees can add up quickly if the contract lets them be passed on.
• Cargo insurance should be checked separately from the forwarder's liability clause, especially for high-value or fragile shipments.
• Dangerous goods, lithium batteries and regulated products need clear declarations and handling processes.
• A tailored agreement or contract review can help you negotiate the risky clauses before stock is already on the water.

If you'd like help with reviewing freight forwarder terms, tailoring a logistics agreement, checking liability and insurance clauses, or negotiating customs and storage risk, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.