Meaning
Maritime transport regulations grant cargo transporters the legal authority to retain custody of shipments until all unpaid freight and related charges are settled. Under possessory carrier liens, a shipping line has the right to refuse delivery of goods to the consignee if the freight fees, storage charges, or demurrage remain unpaid. This legal remedy secures the payment of the carrier by holding the cargo as collateral at the destination terminal.
The right terminates as soon as the carrier receives full payment or acceptable alternative security.
Holding Right
Carriers exercise this right by physically holding the cargo in a secure warehouse or terminal. Through possessory carrier liens, the transport company ensures that the shipper cannot claim the goods without settling outstanding invoices. This mechanism is a powerful protection because the cargo cannot be used or sold by the buyer.
Lenders and cargo owners must respect this right as it takes priority over other security interests in the goods.
Operational Impact
Unresolved payment disputes cause cargo to accumulate at ports, which disrupts supply chain throughput. When possessory carrier liens are enforced, the cargo sits in the port, incurring additional storage and demurrage fees that compound the original debt. This situation can lead to the deterioration of perishable cargo and the loss of market opportunities.
It requires quick resolution through negotiation or the posting of a bank guarantee.
Debt Settlement
Selling the retained goods is the final recourse if the owner fails to pay the outstanding balance. The shipping company must follow legal procedures, including giving notice, before auctioning the cargo under possessory carrier liens. This sale recovers the unpaid freight and limits the financial loss.
