The impact of Covid-19 on the world of shipping
by Ayesha Malik, Business Development Executive at CEVA Logistics, aspiring solicitor & LPM MSc part-time student at the University of Law
I work in the business development side of a supply chain and shipping company, where I sell freight management services. Due to the impact of Covid-19, the last two quarters have been the fastest paced in terms of finding appropriate legal and commercial solutions to keep the supply chain uninterrupted.
Before I begin sharing my thoughts I must make a disclaimer; all of the information below is based on own experience, knowledge, and observation of the market. I have not sourced this information from my employers, the competitors, my clients, or any other party related to supply chain industry.
The impact Covid-19 has had on both domestic and global trade will shift the whole dynamic of supply chain contracts in the near future. The restriction in human movement, lack of availability of human resource, shutting down of businesses, quarantining regions, and closing borders caused significant disruption to the supply chain, which in some cases meant that existing contractual obligations were not met either partly or wholly. In other cases, force majeure and frustration was invoked from the outset granted the terms of agreement allowed to do so.
Whilst the disruption has caused financial losses due to extortionate price appreciations, idle tonnage, blank sailings, delays due to shortage of space or slowdown of transport, non-claimable insurance clauses, vessels stranded at the ports due to infected crew members and the like, it has also made the market quickly become more open minded to engage in conversations with new service providers to form new contractual agreements to include the impact of Covid-19.
The most prompt changes had to be made in the operations side to accommodate the contractual obligations with counterparts and customers. This said, given the global stretch of the contractual obligations also meant relying on counterparts in other jurisdictions to apply the similar changes and/or take new measures in order to ensure smooth sailing (quite literally) to execute the supply chain movement. As an extension of this not only the in-house policies and regulations had to be aligned with the Coronavirus Act 2020, yet the scope of the implementation had to be kept very wide as the pandemic is still active.
The uncertainty of when the pandemic will end, is where new legal and commercial opportunities are emerging from. The fear of wastage within perishable product industry due to lack of movement, and stranding led to newer methods being innovated to keep the product in circulation. The local regional market has begun benefiting from lack of export of the product. The most interesting observation came from the contracts which are being designed per transactional basis as within them monetary values of the transactions became the least negotiated element. The only priority is to keep the trade moving. From my experience and observation no doubt this is mutually beneficial for all stakeholders, however, it subsides the long term competitive edge that is necessary to maintain a healthy economy.
We have all seen how advantageous technology has proven during this period. In the global supply chain world, not all countries have the same level of technological access. Some warehouses and ports in certain parts of the world are still very manual in their function, which meant either closures or very few staff members to look after very heavy volumes. Accordingly, clearing goods at the ports, and sorting them at the warehouses took longer, this in return has an influences on how employment contracts will be offered in the near future. Overall, the players within the supply chain world have proven that movement of goods can still take place regardless of the pandemic but only if one is financially strong and the terms of contracts are flexibly negotiable.