Adv. Gill Nadel, Adv. Tina Kaplan
Recently, the Tel Aviv Magistrates Court ruled that an importer, who owes funds due to air transport, could not offset from these funds the costs relating to customs brokering and to the release of cargoes.
The Tel Aviv Magistrates Court accepted the claim of an international freight forwarding company against a client who requested to offset funds he was forced to pay to a third party for the release of the goods, from the payment made by him for the transport of the goods; the third party was a customs broker, which according to the client was successful in releasing the goods in a better manner, without the requirement to present an approval from The Standards Institute of Israel.
Case Facts and the Parties' Claims:
The client ordered air transport services of goods from China to Israel from an international freight forwarding company, and in return obligated to pay a total of 845 NIS. At the time of the release of the goods in Israel, the freight forwarding company claimed that in order to release the goods from customs it was required to receive approval from The Standards Institute of Israel, which resulted in a disagreement between the parties.
As a result, the release of the goods was delayed and the client choose to use the services of another customs brokering company and was forced to pay for customs brokering services for the release of the goods. The client requested to offset the payment which was paid to the other customs broker from the payment which was paid to the freight forwarding company.
The freight forwarding company claimed that it did not charge funds for customs brokering from the client, and that his claim only focuses on transportation costs, therefore he does not have the right to offset the costs.
The Verdict:
The court accepted the freight forwarding company's claim and ruled that the debt owed is only for the air transport and that the payment for the freight forwarding company did not include customs brokering services for the release of the goods. Therefore, and without the client being charged by the freight forwarding company for the release of the goods, he does not have the right to offset payments paid to third parties for the release of the goods.
It shall be noted that the court also ruled on the original dispute between the parties for which the freight forwarding company refused to release the goods, as the client admitted that the cargo did actually include goods which require, by law, the obtaining of approval from The Standards Institute of Israel.
For the air transport debt of 600 NIS, the client eventually had to pay a total of 2,500 NIS which included court fees, expenses and fees for professional services.
[Civil Case in Swift Proceedings (Tel Aviv Magistrates Court) 59340-05-13, the Senior Registrar Amir Zechnoviz, verdict given on March 27th 2014]
Commentary:
Clause 53 to the Israeli Contract Law (General Part), which deals with the offset of obligations, states:
"Mutual monetary obligations, which arise out of a single transaction and the time for its fulfillment has arrived, may be offset by notice from one party to the other; the same applies to monetary obligations which do not arise from a single transaction, if they are fixed obligations".
Meaning that the law enables one party to offset monetary obligations it deserves from the other party, out of the debt required from that party, if there is a single transaction, or if there is a fixed obligation (not requiring from a single transaction).
In the aforementioned case, in fact, the importer asked to offset from the payments to the international freight forwarder, the customs brokering costs which he paid to another customs broker, so claimed, due to the negligence of the freight forwarder which in his additional position as a customs broker, allegedly did not perform as required.
From reviewing the verdict it is evident that the court did not examine the question whether the importer has the right to offset according to this clause of the Israeli Contract Law, and in our opinion it is possible that the importer could have claimed that it was a "single transaction" from which he has the right to offset. Alternatively, as the amount paid to the other customs broker is not known, it is possible that the importer might have claimed that this is a fixed obligation and he has the right to offset.
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This document provides a general summary and is for information purposes only. It is not intended to be comprehensive nor does it constitute legal advice. If you are interested to obtain further information or wish to follow the legal developments on this matter, please contact Adv. Gill Nadel - Chair of the firm's Import, Export and International Trade Law Practice, Tax and Executive Compensation Department. 6089848. -3-+972, phone: Gill.Nadel@goldfarb.comEmail:
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