A lost volume discount
A ship agent was appointed to provide agency services to a fleet of ships. One of the duties of the agent under the contract was to liaise with the local Canal Authority to make all necessary arrangements for the fleet to pass through the Canal promptly and without delay. In addition, the agent was to advise the fleet operator in writing of all applicable tariffs and available discounts. One of the discounts was a volume incentive rebate, calculated on the basis of cargo volumes carried through the Canal over a period of one year.
In order to claim the volume incentive rebate, the agent was required to present the Authority with a standard form for each ship at the time it transited the Canal. Unfortunately this requirement was overlooked by the ship agent for a period of three months. During these three months 36 ships in the fleet transited the Canal, and the total discounts were in the region of USD 2.7 million.
ITIC arranged for local lawyers to determine whether there was any way in which the discounts could still be claimed. However, the Canal regulations were extremely clear. Failure to follow proper procedures meant that the entitlement to the rebate was lost. There were no legal grounds on which to claim the discounts if the agent had failed to file the necessary paperwork. However, following negotiations with the Canal Authority, they agreed to allow part of the rebate. The lost rebates totalled USD 1.2 million. It was clear that the agent had caused this loss to the fleet operator, who was reimbursed. ITIC in turn reimbursed the agent.