The Hormuz trap: Why Indian Importers don't have to pay the war durcharge

The shipping lanes connecting India to the Middle East have turned into a commercial battlefield. For three months, an ongoing conflict has effectively choked the Strait of Hormuz, leaving cargo bound for India stranded at sea or held back at origin. For Indian manufacturers and importers dependent on this corridor, shipments are now routinely delayed by two months or more.

But as the queues at sea grow longer, a quieter problem has emerged, one that has nothing to do with the war itself, and everything to do with how shipowners are responding to it. Across multiple consignments, Indian buyers are being told their cargo won't move, or won't be released, unless they personally pay a “war risk premium” or “detention charge” running into crores of rupees. Facing stalled production lines, many companies are quietly paying up.

This is, in most cases, a mistake. Indian importers are not legally obligated to pay these charges, and where they've already paid under pressure, the law gives them a real route to get that money back.

The confusion stems from a basic misunderstanding of shipping contracts, one shipowners have every incentive to exploit during a crisis.

When goods move from a foreign seller to an Indian buyer, the shipowner typically has no direct contract with the buyer at all. Its contract is with the charterer, the seller or intermediary who hired the vessel, under a charter party agreement. The Indian buyer’s only connection is being named consignee on the bill of lading, the document allowing them to claim goods on arrival.

This matters. Under privity of contract, a party can generally enforce obligations only against those it actually contracted with. A shipowner delayed by war has a claim against the charterer, not the buyer merely awaiting delivery under a separate sale contract. So when a shipowner demands a surcharge directly from an Indian buyer, it isn’t exercising a clear legal right, it’s using the buyer’s urgency as leverage. Calling something a “detention charge” doesn’t create an entitlement to collect it from a party with no contract.

If the law is this clear, why do companies pay regardless?

The answer is commercial reality, not law. A buyer with a stalled production line and working capital tied up in stranded goods often can't afford months of legal argument. Uncertainty over further escalation adds pressure; nobody wants to hold out on principle while their shipment sits exposed in a war zone.

Shipowners know this. In a tight market with few alternatives, some are using the crisis to extract payments they wouldn't otherwise be entitled to. Disputes over who bears war related delay costs have a long maritime law history, but the scale of the Hormuz disruption has sharpened the issue for Indian trade.

This surcharge problem doesn’t arrive alone. The same conflict blocking the Strait is also pushing up the price of the goods themselves, as sellers price in war risk, scarcity, and costlier routes. Indian importers are often paying more for cargo than before the crisis, then being asked to pay again just to receive it.

This is why the surcharge deserves scrutiny rather than reflexive payment. A buyer who’s already absorbed a higher purchase price has even less reason to also absorb a shipping cost that was never legally theirs. One increase is market reality baked into the sale price; the other is a charge with no contractual basis against the buyer, and is recoverable.

Here’s what gets lost in the panic of an urgent shipment: paying to release cargo doesn’t mean accepting the charge as legitimate, and it doesn't extinguish the right to recover that money later.

Where a buyer pays because there’s no real choice, cargo effectively held hostage, delay causing severe harm, no practical alternative, the law treats this as payment made under coercion, not a voluntary settlement of a genuine debt. Such payments can generally be recovered later from whoever was actually responsible for the underlying cost.

In practice, this means a buyer who pays a shipowner’s surcharge has a strong basis to pursue that amount from the seller or charterer contractually responsible for the vessel and its delays, through arbitration or litigation, pushing the loss back up the chain.

The practical guidance is simple: pay explicitly “under protest” or “without prejudice”, documenting that payment is made only to secure release, not as an acknowledgement of liability. This single step significantly strengthens any later recovery claim.

Paying under protest isn’t the only option. A more aggressive route reverses the pressure entirely: instead of paying to free the cargo, the buyer moves against the vessel itself.

Ship arrest is a court-ordered detention of a vessel, used as security for a maritime claim rather than as punishment. It exists because a ship is mobile and can sail out of reach before any dispute is heard. Once arrested, that mobility becomes the owner’s problem; an idle vessel earns nothing while crew wages and charter obligations keep accruing, shifting commercial pressure onto the shipowner. In India, this remedy sits in the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, letting coastal High Courts arrest a vessel wherever there’s reason to believe the owner is liable on a genuine maritime claim. Courts have made clear that a mere promise not to sail away isn’t enough; where a real claim exists, arrest is the ordinary way to secure it. A vessel is released once the owner posts proper security, not once the buyer pays cash, so the underlying charge still has to be justified first.

It’s also worth knowing why many surcharge demands are weak. Shipowners often dress them up as “general average”, the principle letting a carrier ask cargo owners to share extraordinary costs incurred to save the voyage from genuine peril. But general average rules specifically exclude delay caused costs, and detention charges or war risk premiums are, in substance, exactly that: the price of an idle, insured ship, not an emergency expense that rescued the cargo. Where that’s true, the shipowner has no valid lien either, no real right to hold cargo hostage over the charge, which is precisely what arrest is built to test and defeat.

So which approach should prevail, paying and recovering later, or refusing and arresting? It depends on the strength of the demand and how much delay the cargo can absorb. Where the charge is plainly delay-based, the shipowner’s footing is weak, and a buyer with room to manoeuvre is often better off refusing to pay and insisting on release against standard security, holding arrest in reserve as an enforcement threat. Where cargo is perishable, seasonal, or feeding a production line that can’t wait, paying under protest and recovering later remains more practical, since it gets goods moving immediately even against a weak demand. Arrest is the sharper tool when the sum is large, the legal basis thin, and the vessel reachable in a willing court; it forces the shipowner to prove entitlement before collecting a rupee, rather than leaving the buyer to fight for a refund afterward. What it demands in return is a genuine claim and the will to see the dispute through, since an unjustified arrest can expose the buyer to a claim for damages.

About the author: Varun Singh is the Founder and Managing Partner of Foresight Law Offices India.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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