Cargo Sector Warned on Coronavirus Pitfalls

Transport insurance specialist the TT Club has issued a warning to clients and the wider business community over the unseen risks of the ongoing Coronavirus.

As more victims are identified across the world the club has warned the ongoing disruption to freight transport services and global supply chains resulting from the coronavirus is significant and will continue to evolve on a daily basis.

However, in addition to the heightening challenges transport operators are facing in moving their customers goods to and from China, potential unforeseen exposures may also accrue.

In a briefing compiled with the assistance of specialist international lawyers, HFW, the club outlined how freight forwarders, logistics service providers and other intermediaries can protect themselves legally and minimise their liabilities, while still giving a quality service to their customers.

“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,” explained the report.

The TT Club briefing outlines these pitfalls and provides guidance on correct and comprehensive documentation handling. However, it said the key message remained that transport operators have to be proactive in their communication.

“In such disruptive situations, 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,” said the report.

“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. (pic) “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.”

He added in attempting to deliver such solutions, however, a forwarder may need to use routes, carriers or modes that are less familiar, or to partner with other actors, of whom he has no experience.  Such ‘workarounds’ are common at times of crisis when pressure from customers to deliver freight by whatever means can be intense.  Additional care and due diligence must be taken when working in unfamiliar environments.  It might be necessary to take extra precautions in employing bills of lading, standard trading conditions (STC), letters of indemnity (LOIs) and other means in order to protect the stakeholders from unforeseen costs and liabilities.

“Underlying most of these steps however is good communication,” said the club.  “For example, if force majeure notices are required to be sent, it must be ensured that these are fully understood by the recipient. In other cases, when delays or deviations are caused by matters genuinely outside the operator’s control, then these circumstances must be well documented.”

Common sense, proactive communication with counterparties as required and the adherence to good working practices will set operators in a better position to be protected in these abnormal circumstances.  However, when stress can be heightened by unexpected pressures, it is useful to have guidelines that focus on the possibility of unusual risks, TT Club’s briefing seeks to provide such guidance.