The Common Agricultural Policy

…a problem for ship agents, not just governments

ITIC Members in Europe need no introduction to the Common Agricultural Policy (CAP). It has been in force for the last 40 years and accounts for an astounding 50% of the budget of the European Union (EU). The sheer cost of CAP makes it a constant source of disputes between EU governments. For the benefit of those Members in other parts of the world, the Common Agricultural Policy is, as its name suggests, a policy which governs all agricultural matters in the EU. It covers a wide range of agricultural matters including economic support to farmers and the control of food production The CAP also controls the import and export of agricultural goods to and from the EU, and it is this aspect which is the subject of this article.

The implementation of the CAP has, in the past, resulted in the overproduction of agricultural goods in the EU and in huge stockpiles of goods (known at the time as “butter mountains“ and “wine lakes“). One of the ways to prevent stockpiling is to export goods, but how can you export goods which cost more to produce than the world market price? The answer is that our old friend the CAP provides refunds to traders who export EU agricultural products to countries outside the EU. The CAP also provides for import refunds connected to the import of certain agricultural products into the EU. Imports are often the subject of quotas, which are granted to importers on a “first come first served“ basis and involve the deposit of substantial funds by the importer, which become forfeit if the quotas are not taken up within the time period specified. CAP refunds for imports and exports to and from the EU are administered by one of the EU Rural Payment Agencies, but the physical import and export of CAP goods is controlled by the customs authorities. Customs have the duty of checking that shipments are (a) correctly described in the export refund guarantee form (sometimes by taking samples for analysis), (b) of sound and marketable quality and (c) exported within the time limits. The customs authorities also check the documents and stamp them if they are in order. It is these documents which trigger the CAP refunds. Unless the trader negotiates his way properly through the minefield of EU regulations, he can find himself in a situation where he has irrevocably lost his CAP refund.

Traders obviously have a problem, but how does this affect ship agents? The customs clearing of import and export cargoes has traditionally not been the concern of the ocean carrier or its agent. The exception to this rule is cargo subject to CAP refunds. There is an increasing trend for cargo interests to demand that the ocean carrier (and therefore his agent) take the responsibility for lodging CAP documents with customs as a condition of booking the cargo.

Over the past few years ITIC ship agent Members in several EU countries have reported about 20 claims ranging from US$10,000 to US$200,000 which have resulted from the loss of CAP rebates by importers and exporters of foodstuffs from the EU. All of the claims faced by ITIC Members result from a failure to liaise properly with the local customs authorities.

Goods exported before CAP documents are registered with customs or without customs having an opportunity to inspect the goods

There are two requirements when dealing with customs. The first is to make them aware that the cargo is subject to a CAP refund and the second is to make the goods available for customs inspection before they are exported. A failure by the ship agent to present the CAP documents to customs before the goods are exported, or by exporting the goods before the customs have had an opportunity of inspecting them, will result in the loss by the exporter of the CAP rebate.

In one case, a 20ft container of butter was booked from a UK port to an African port. The butter was entered into the customs computer as CAP cargo. However, the container did not arrive at the port until 2300 hours on the Friday night before the sailing, which was at 0745 hours the next morning. As the container would have had to wait for some weeks before the next sailing, the person on duty that weekend, not realising the implications, decided to ship it. As customs had not been given the opportunity of inspecting the cargo, the CAP refund (of about US$10,000) was lost.

In another more serious case, 15 containers of milk powder were shipped from Barcelona to Manila without being entered into the customs computer system as CAP cargo.

The 15 containers were therefore automatically customs cleared for export and shipped. The agent attempted to redeem the situation by having the contents of the containers inspected at the discharge port, but unfortunately this made no difference, and the refund of US$200,000 was lost.

Export goods missing export dates

Another reason for the rejection of claims for CAP refunds is “late lodgement“. Exporters must export goods within 60 days following the date of acceptance of CAP documents by customs. Failure to do so results in the loss of part of the refund for each day over the 60 days allowed; a delay of 17 days means the total loss of the refund. Goods exported from a port in one EU country and transhipped at a port in another EU country (eg. shipped in Dublin and transhipped in Rotterdam) must travel under customs control and must leave the transhipment country within the time limits provided.

An Irish exporter booked 6 containers of milk powder from Dublin to Yemen via Southampton. The cargo stayed at Southampton for a month because it was shut out from several sailings, and left the last port in the EU too late for the exporter to qualify for any part of the CAP refund.

Even where the agent is not responsible for lodging the CAP documents with customs he can still become involved in claims for loss of CAP refunds. A German ship agent accepted

a booking for 16 containers of milk powder to Lagos from a forwarder. The forwarder’s booking note stated “b/l will not be dated later than 31 December“. As the ship was due on 24 December the agent did not bother to reject this stipulation. In the event the ship was delayed due to engine damage and did not arrive at the load port until 25 January, 25 days after the 60 day period for exporting the cargo had expired. The ocean carrier’s bill of lading usually contains a clause exempting him from liability due to delay, but if the agent guarantees a shipment date, or fails to reject an attempt to tie the ocean carrier to a shipment date, then the ocean carrier will not be able to rely on this clause.

Failure to register import goods within license period

The problem of lost CAP refunds does not just involve liner agents booking containerised exports, it also involves imports of bulk foodstuffs. Charterers of ships carrying bulk foodstuffs, are often also the importers. Where the importers and charterers are the same party, it is usually a condition of the appointment of a port agent that he also accepts responsibility for properly registering the cargo with the customs authorities.

In one case, a ship called at a UK port carrying 14,000 metric tonnes of molasses. The port agent was also tasked with lodging the customs documents before the expiry of the charterer’s import license. The port agent, having no expertise in the lodging of customs documents, sub-contracted the customs clearance to a specialist, who missed the date of the expiry of the license by one day. This resulted in the loss by the importer of his deposit of US$135,000 with the Rural Payments Agency.


As can be seen from the above, ship agents, by providing this extra service to customers (almost invariably free of charge), can find themselves on the receiving end of very large claims. Even when a service is provided free of charge, the duty to perform with skill and care remains. The EU Rural Payments Agencies have very little scope to be flexible and a minor breach of the strict provisions for obtaining refunds usually means the refund is lost. There is a “Force Majeure“ provision in the CAP regulations, which applies when the trader is unable to comply with the rules because of circumstances outside his control. However, the regulations also make it clear that “Force Majeure“ does not apply if the trader (or someone acting for him) makes a mistake, or does not know the rules which apply to the goods. There is obviously a need for ship agents to familiarise themselves with the intricacies of dealing with CAP cargo, and to make sure that all staff (not just those involved in customs matters) are broadly aware of the serious consequences of failing to follow correct procedures for CAP cargoes, or of guaranteeing that CAP cargo.

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