‘Disrupted supply chain China could lead to liability claims’
Forwarders and logistics providers trying to operate within the currently disrupted supply chain between China and Europe should protect themselves from liability claims. This is the recommendation of TT Club, a provider of insurance and related risk management services for the industry.
“Restrictions due to labour shortages at ports and cancellations of inland transport links within China, constraints in the supply of goods due to factory closures and reduced schedules of air, ocean and rail carriers may expose forwarders to claims arising from delivery delays and cargo deterioration”, the company says. In a briefing, it details these pitfalls and provides guidance on correct and comprehensive documentation handling.
“There is a risk of claims from sellers against forwarders and logistics operators and/or their Chinese agents/network offices. If sellers fail to get paid owing to clerical or data entry problems, or because the buyer has received the goods but failed to pay, they are likely to claim against the party issuing the forwarder’s cargo receipt (FCR) or NVOC bill in China.
“Before any goods are released to receivers, operators should check that sellers have not issued stop notices to them or their Chinese agents/network offices or intimated a claim should the goods be released. LOIs provided by buyers/receivers should expressly cover this risk. If stop notices or claims have been intimated then operators are advised to seek legal advice”, TT Club states.
But this is only one of the issues to be concerned about. According to the firm, any reduction in goods handled and shipped could have a significant impact on customer revenue. “There is also the risk that key customers will lean on forwarders to provide, without a contractual obligation to do so, more expensive “workarounds”, such as airfreight and using non-core ocean service providers to perform voyages.
“In general, apart from office closures in China, many companies have implemented restricted travel regimes. As a result, expected business travel related to securing transactions or continuing servicing relationships are likely to be disrupted. Inevitably, remote conferencing technologies provide a measure of continuity. It will be important to maintain clear and open communications.”
In general, it is important to be proactive in communication. In disruptive situations such as the one the coronavirus has precipitated, both the value of the operator’s service to his customer and his protection against future liability claims lies in good, accurate communication, TT Club argues.
“Up-to-date status reports on their cargo’s progress, or lack of it, are vital to shippers,” emphasises TT Club’s Risk Management Director, Peregrine Storrs-Fox. “Forwarders and logistics operators will certainly prove their mettle if they can consistently make customers aware of the ongoing attempts to problem-solve. Careful recording of communication trails detailing such actions will also help in any disputes in the future.”