Who Pays When the Route Changes?

The email that changes the deal

The goods are ready. The seller has met the production schedule; the buyer has arranged the financing. Then, just as the shipment is expected to move, an email from the carrier resets the plan.

The original service has been disrupted. The shipping company proposes discharging at a different port and moving the cargo by road to its intended destination. There is a revised timetable, a new inland leg and an extra charge.

The seller passes on the proposal. The buyer points to the freight already included in the agreed price. The seller argues that the disruption was beyond its control. Both may accept that an alternative route is necessary, yet neither has agreed who can authorise the change or bear its cost.

This is how a shipment with a workable logistical solution can remain commercially immobilised: the transport plan changes faster than the agreement governing it.

Start with the contract, not just the Incoterm

FOB, CIF and DAP are often the first terms mentioned when a diversion occurs. Incoterms® 2020 help define delivery responsibilities, costs and the transfer of risk. They do not, however, replace the sales agreement, the carrier’s terms, the insurance policy or the documentary-payment arrangements.

Take a CIF sale. The seller contracts and pays for carriage to the agreed destination port, but the risk of loss or damage generally transfers when the cargo is loaded on board at origin. That distinction alone does not settle an unforeseen rerouting surcharge. Liability depends on the wording of the contracts, the kind of charge imposed, the carrier’s rights and anything the parties subsequently agree.

The bill of lading creates another layer. Many carriage contracts contain a liberty clause allowing the carrier, in defined circumstances, to divert a voyage or discharge at a substitute port when proceeding as planned is hindered or unsafe, sometimes at the cargo’s expense.

A carrier’s authority to change the physical route is not the same as authority to rewrite the buyer’s and seller’s commercial bargain.

Four questions to settle before saying yes

A diversion proposal should not be approved on the strength of a short email or a hurried telephone conversation. Put four answers on record first.

01 / Who has the authority?

Identify the party that contracted the carrier, the person entitled to issue transport instructions and the approval required under the sales contract. An operational contact is not automatically authorised to alter the commercial terms.

02 / Who will pay the difference?

Distinguish unavoidable charges imposed under the carriage contract from costs created by a newly agreed delivery arrangement. Request the full breakdown and agree a spending limit before a commitment is made.

03 / What happens to the deadline?

Confirm whether the original delivery obligation remains in force, whether an extension is warranted, who must notify whom and how the revised schedule will be documented.

04 / Who carries the additional risk?

Examine custody of the cargo, handling at the substitute port, insurance coverage and the contractual point of delivery. The extra leg can create exposures that the initial shipment plan did not anticipate.

These are questions for the decision stage—not for the moment when an unexpected invoice arrives.

The diversion clause most contracts overlook

Commercial contracts tend to be precise about quantity, price, destination and the delivery term. They are often less precise about what happens when the intended route ceases to be available.

A useful rerouting provision does not need to predict every disruption. It needs to define a decision-making process:

Authority

Who may propose, approve or reject a change of route, port or delivery arrangement?

Cost approval

Which additional charges need advance consent, supporting evidence or a revised quotation?

Delay management

What notice is required, how are deadlines adjusted and how will potential delay claims be addressed?

Document control

Who coordinates necessary changes to the transport documents, insurance arrangements and payment instructions?

No single clause fits every trade. But an agreed process is far more useful than a dispute over an authority nobody defined.

The goods can arrive and the bank can still object

The documentary problem may outlast the physical diversion. Under a documentary letter of credit, banks examine the documents required by the credit; they do not determine compliance by following the actual journey of the cargo.

Suppose the credit calls for a bill of lading showing Jebel Ali as the port of discharge, but the vessel ultimately discharges the container at Khor Fakkan. Whether that creates a discrepancy depends first on the bill of lading presented to the bank.

If it shows Jebel Ali and the carrier subsequently diverts under a liberty clause, the document may still appear compliant on its face. If the original or a replacement bill names Khor Fakkan instead, the stipulated discharge port is no longer shown. Under Article 20 of UCP 600, the bank may treat that difference as a documentary discrepancy.

Transshipment is a different issue. UCP 600 permits it in certain circumstances, including some container shipments moving under a single bill of lading, even where a credit restricts transshipment. Those provisions do not resolve a mismatch in the named port of discharge.

Where an amendment to the credit is needed, the parties should arrange it through the banking process before presentation. The buyer’s practical consent to a different delivery route is not, by itself, an amendment to the letter of credit.

Physical delivery and documentary compliance are separate tests. A transaction has to pass both.

The executive checklist

Before you approve a diversion

• Get the carrier’s written diversion proposal and revised schedule.
• Re-read the sales agreement and the applicable Incoterm.
• Verify the carrier’s authority under the carriage contract.
• Request an itemised statement of every additional charge.
• Confirm the new delivery date and the responsible parties.
• Check insurance, custody, handling and discharge arrangements.
• Review the letter of credit and the required transport documents.
• Record the parties’ decision, any cost cap and who is authorised to act.

A telephone call may keep a shipment moving. It should not be the only evidence of a decision that changes the economics or documentation of the sale.

The responsibility should travel with the decision

A detour is not necessarily a failure. In disrupted markets, the ability to change routes can protect an entire transaction. The failure comes when a new logistics plan is accepted without an equally clear commercial instruction.

Before approving the route, establish the authority, allocate the costs, revise the timeline and make the documents work. A different route should never leave responsibility undefined.