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Changing face of logistics liability

Trade growth and the increased complexities of global supply chains mean that the demands on logistics operators are changing rapidly from the traditional organisation of international movement of goods. Manufacturers, other shippers and retailers are increasingly requiring the provision of additional logistics services, such as warehousing, sub-assembly and packing, with tight margins for error and sometimes harsh financial penalties for breakdowns in their supply chains.

As a consequence of providing these additional services, whether sub-contracted or provided within their own operation, transport operators are typically accepting extended contractual exposure.

TT Club believes it is vital that logistics operators recognise how their role is changing and the consequences of these changes. Importantly, from a risk management perspective, companies must understand how this can result in newly acquired exposure to liability.

Importantly, TT Club provides an advisory service that helps such operators to understand the steps that can be taken to mitigate this exposure, primarily by a disciplined and organised approach to the contractual terms agreed with their customers, and well-advised insurance cover.

TT Club believes it is vital that logistics operators recognise how their role is changing and the consequences of these changes

Individuals negotiating such contracts have many things to consider, not least the commercial implications of winning the contract. It is, therefore, wise for them to consult their insurer about the liability implications of the contract before it is agreed. In all probability, contractual obligations in relation to risk exposure – and whether or not insurance cover can be reasonably obtained – are scarcely of concern at the outset of negotiations. TT Club, however, advises project bidders and contract negotiators to apply their minds to such issues at the very start of the negotiating process.

TT Club’s greatest concern is that the contracts which forwarders and logistics operators are asked to sign may be based on no-fault liability and lack typical carriage liability limitations or defences. This may be inconsistent with, or may derogate from, international conventions or locally applied law. For example, while international law, such as the Hague-Visby Rules, may cut in for the ocean carriage, this may only benefit the sub-contractor for that leg of the freight’s journey.

The contracting forwarder or logistics operator may be exposed to substantial liability exposure from what is a seemingly open-ended contract. The combination of such onerous conditions and the high value of many cargoes mean that, if there is a service failure, a huge claim may result.

TT Club, with its 45 years’ experience of international freight transport and the risks and liabilities associated with such operations, is the ideal adviser in such circumstances. The insurer’s worldwide network of offices, claims handling partners and correspondents provide expert local knowledge in all trade regions. This combination of benefits is unique in its ability to guide international freight transport operators.

Today any transport company, wherever in the world it is operating, is under pressure to agree to deliver services within tight operational and financial margins, and typically will face harsh financial penalties for delays. Expert and specialist advice on the complexities of liability in this competitive commercial environment is crucial.

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