According to Robert Keen at the British International Freight Association (BIFA), the COVID-19 crisis has put emphasis on the importance that freight forwarders play in delivering vital commodities through our international supply chains. After spending many years being the “invisible hand of international shipping” Keen speaks of freight forwarders as, “the important role……taking centre stage and being recognised.”
With BIFA seeking to influence the UK government on all issues surrounding international shipping, they have been pleased so far with the pragmatic solutions that have been made. These include the easing of opening hours at temporary storage facilities rather than going through the formal process of a change in legislation, that could have held up the change. Currently, BIFA are looking for the government to ease VAT on import tax as they have done with domestic VAT.
Keen spoke of the official statement made in Parliament recently that the government acknowledged that international freight services are, “vital for ensuring the continuity of supply chains.” The government recognised the individuals working in this sector as key workers. Keen added it was important to recognise that the key worker title didn’t just extend to the obvious employees such as drivers and warehouse operatives but also people working behind the scenes such as customs data entry clerks.
COVID-19 and Freight Forwarding
As we consider the potential impact, COVID-19 will have on sea freight and supply chain management, it is important for freight forwarders and logistics operators to take vital steps to prevent the unnecessary spread of the pandemic which at present, continues to disrupt the movement of goods. Whilst this will undoubtedly cause significant delays to shipping and put a stop to many companies shipping altogether, the following provides some guidance on the potential risks to freight forwarders and how to combat them.
Impacts on Freight Forwarders and Logistic Operators
Social Distancing – Sea freight supply chains include many physical and clerical processes, many of which traditionally involved people interacting with each other in large groups. Similarly, this extends to physical cargo packing operations. All of these processes are usually executed in large offices and warehouses where constant interaction is necessary. Despite the increasing levels of digitalisation, the industry still heavily relies on transferring and dealing with physical documentation. With the introduction of social distancing now being implemented in all industries to kickstart the economy. Freight forwarding and logistics must find its own way of implementation.
Commercial Impact – Any reduction in the amount of goods handled and shipped will inevitably have an impact on the customers of any freight forwarding company. Potentially, freight forwarding companies could see key customers lean on them to create expensive “workarounds” and use non-core ocean service providers to make voyages to ensure that their items are shipped.
Furthermore, as business travel has been restricted for the foreseeable future, it will be important for freight forwarding companies to keep lines of communication open and accessible to them through the use of remote conferencing applications.
Legal Implications for Freight Forwarders
Special Contracts – Whilst many freight forwarders operate to standard trading conditions in terms of the contracts that they hold with their customers, there are a number that hold special contracts with their key customers. With regards to these, it has been questioned whether these special contracts need to be reviewed and identify the obligations of the supplier to perform in contexts such as COVID-19. Specifically, such questions as, Is the forwarder or the its agent required to issue a Forwarders Cargo Receipt (FCR)? Is the operator required to undertake consolidations? As well as obligations, it may be necessary for forwarders to impose force majeure clauses in their contracts whereby the problems in China may be a reason for the contract to be terminated and their obligations to be discharged.
Industry Standard Terms – For freight forwarding companies that operate to standard trading terms, it is recommended to look into whether imposing force majeure clauses into existing contracts with your customers may be an option. In terms of taking on new transactions relating to a supply chain reliant on China, scrutiny on its logistics and legal advice will probably be required.
Communication with Customers – It is imperative that freight forwarding companies keep customers updated of all issues that arise in the supply chain whether this from the vendors, hauliers, lines, agents or terminals. To be able to claim a force majeure clause or discharge the company’s obligations there needs to be sufficient evidence that customers losses were caused by matters genuinely outside of their control. Companies will also be required to consider any alternative workarounds that could be implement with a moderate additional cost to the customer.
Communication with Supply Chain Stakeholders – Freight forwarders and logistics operators need to maintain good communication with the other stakeholders of the supply chain to evidence that they did everything that they could to avoid customer losses. A high level of detail and accuracy should be maintained when explaining the steps that were taken and problems encountered.