!!To be able to see this page correctly, you need to have Flash player 7 or higher installed!!
Please click here to start installing the player.
Please click here to start installing the player.
Freight firms face peril
April 2008
Phil Hastings, International Trade Today
One likely outcome of any significant downturn in the global economy during 2008 will be an increase in the number of freight/logistics companies hitting the financial buffers and suddenly going out of business. Now, therefore, might be a good time for UK exporters and importers to check the details of their contracts with forwarders and carriers to reduce the risk of becoming embroiled in potentially lengthy and costly legal wrangles should one of their service suppliers cease trading.
That, at least, is the advice from Oliver Jackson, a specialist in dispute resolution with UK-based solicitors Mundays whose business activities include a team dealing with freight and logistics issues.
‘The key when it comes to contracts between shippers, consignees, forwarders and carriers is “certainty” because whenever there is uncertainty, there is scope for a dispute,’ he said.
To illustrate the complications that can arise when one of the parties in a supply chain hits financial problems, Jackson quoted the example of a shipment of clothes from Morocco to a leading retailer in the UK.
The case involved a Dutch forwarder trucking goods from a Moroccan manufacturer. The former had a contract with a UK import agent, that had arranged the shipment on behalf of the North African company. The UK agent went into administration and the administrator claimed the right to seize the goods. That development, explained Jackson, threw up all sorts of legal issues.
‘First, there was the issue of which country’s jurisdiction applied. The Dutch carrier said it was Dutch law because it was on their terms and conditions. We believed it should be English law because under EU regulations it can be either the law of the country in which the consignor is based, which in this case was Morocco, or the place of delivery and the place most closely connected with the contract – and as the agent was based in the UK and the place of delivery was in the UK, we felt that on balance it was the UK,’ he said.
‘Either way, there was a lot of argument as to the choice of law and that is something which for the sake of clarity should be written into contracts for the transportation of the goods and in this case wasn’t. You can also get into disputes if there are two sets of standard terms over whose terms will apply. There should be agreement on that before a dispute arises.’
Another issue highlighted by the same case, continued Jackson, revolved around interpretation of UK insolvency law, specifically whether the administrator was allowed to keep the goods seized. ‘In that instance he wasn’t because it was the agent that had gone into administration and not either the seller or the purchaser.’
In fact, said Jackson, the forwarder held onto the goods and refused to deliver them to the retailer until he got paid. ‘So you had the retailer wanting the goods, the administrator of the agent saying the goods should be held by him and then we had our client (the forwarder) who actually had the goods in his warehouse refusing to release them until he had been paid. He also claimed the right to sell the goods to offset against his transport costs which ultimately he was entitled to do.’
Jackson concluded by stating that such incidents were already ‘cropping up quite a lot. If there is a downturn in the global economy in 2008, then this is something which could increase,’ he warned.
COOL IDEAS
Organisations involved in cold chain logistics are beginning to show much greater interest in the idea of adopting industry-wide quality standards, claims the Cool Chain Association (CCA).
The CCA was established in 2003 to push for global harmonisation of the way perishables and other temperature-sensitive products (PTSPs) were handled. At the end of the same year, the initial members agreed to create a set of standards for the PTSP industry known as the Cool Chain Quality Indicator (CCQI).
Since then, membership of the CCA has grown steadily rather than spectacularly to now comprise just over 60 organisations from around the world, primarily airlines, airports, forwarders/logistics providers and cargo handlers.
The CCQI, which is said to be the first certification of its kind in the perishable products sector, is based on two methods of assessment – mandatory requirements, against which every aspect of a company’s perishable supply chain is graded, and a benchmarking system based on key performance indicators.
To date, adoption of the CCQI globally has generally been fairly slow, admitted CCA chairman Robert Arendal recently. Now, though, he claimed, there were signs that international interest in the CCQI was growing and he expected to see some significant progress over the first half of 2008.
One potentially significant recent development in that context, he suggested, was the creation of CCQI standards covering the point of sale in the supermarket/retail outlet.
‘We have already established the CCQI for the different players in the transport chain – the road transport operators, the airlines, the cargo handlers, etc. That left two elements of the total supply chain missing, the point of sale and the point of origin,’ he explained.
‘We have now included the point of sale following requests from supermarket groups, including some of the leading names in the world, which wanted to see if they could apply the CCQI to their stores. That is very encouraging because retailers, as the customer, will be able to tell the farmers and growers at the point of origin exactly how they want their products prepared prior to transport.’
Arendal went on to suggest that as with many other global standards, for instance those relating to quality processes and environmental issues, the CCQI would probably reach a tipping point where organisations realised that accreditation had changed from being a ‘nice to have’ to a ‘must have’ as customers increasingly demanded that their suppliers comply.
‘That is why I think the interest in the CCQI now being shown by supermarkets is important,’ he said. ‘I would say we will see a lot of things happening in the CCQI field in the next 3-6 months, worldwide.’
