Resolving Container Surcharge Disputes Caused By Port Congestion In South Korean Law

• Published date: 12 July 2023
• Subject Matter: Corporate/Commercial Law, Transport, Corporate and Company Law, Contracts and Commercial Law, Marine/ Shipping
• Law Firm: DR & AJU LLC
• Author: Hee Kyung Jeong

There are various occasions in the shipping business where parties to carriage contracts must pay additional container charges for prolonged container use. Some examples include demurrage charges, which are levied on consignees by the shipping line when they fail to unload the container within their allotted free time after the container arrives at the terminal; detention charges, which are levied on consignees by the shipping line when they fail to return the container to the shipping line within the free days after the container arrives at the terminal; and storage fees, which are imposed on consignees by the port when they fail to unload the container within the free period offered by the port after arriving at the terminal. Likewise, the party that levies the charges and the party that pays the charges may differ according to the circumstances.

A few years ago, shipping lines would flexibly waive surcharges for demurrage, detention, etc. However, after the COVID-19 pandemic in 2021, the shipping industry experienced an increasingly serious global shortage of available shipping containers due to severe port congestion, and more shipping lines began to charge fees for delays in container use.

Port congestion has also caused various contractual disputes between Korean and foreign companies, which are increasingly ending up in court. A frequently arising issue is who will pay the extra charges for demurrage and storage at terminals and to what extent.

While social factors may be the cause of container congestion, charges for the prolonged use of containers still accrue on a per-day basis. Consequently, these fees can increase exponentially the longer the delay. In Korea, there are endless disputes over whether the shipper or the consignee is responsible for paying these extra charges for demurrage, detention, storage, etc., and to what extent. This article will view how the Commercial Act of South Korea and Korean courts interpret disputes over container charges and explain who is responsible for how much of these surcharges from the perspective of Korea Law.

The first question is who is responsible for container surcharges. The Commercial Act of South Korea does not explicitly stipulate matters related to who is responsible for additional container charges. However, the responsible party has to be a party to the contract of carriage, which means the identification of the parties in the contract should precede the determination of the responsible party...