December 2007 | Commentary | Risks and Rewards

2008: Applying What We Learned

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In this last column of 2007, I thought I'd look back at some practical issues addressed last year, and speculate on future trends in supply chain risk and liability.

Insurers will broaden their scope. In October, we heard from a logistics operator whose business grew, through an acquisition, from handling and transporting air cargo to servicing aircraft and operating air terminal facilities. This crossover presented a challenge as he tried to structure an insurance program that was suitable for both his existing operation and for the new service.

Insurers tend to specialize in specific industries, so one willing to devise a program that is international in scope and that crosses the aviation/maritime divide is difficult to find. But insurance does have its niche providers, and seamless coverage is not impossible to obtain.

It would not be surprising to see insurers broadening the scope of their coverage as their clients add to the mix of services they provide.

Partnering and globalization will continue to grow. Liability complications continue to arise during the cargo handling process, sometimes with costly consequences.

In August, an operator recounted his experience involving a shipment of machine parts that his customer wanted packed in "seaworthy" condition. The operator arranged with a sub-contractor to crate the goods and ship them to their destination. On arrival, the goods were found to have suffered corrosion damage.

Containers are often loaded at their place of origin by entities having no contact with those who unload them at destination. The challenge for shippers is to bring these two operations together.

This calls for greater control over the shipment from origin to destination, either by partnering with those who control the process or by globalizing your own operation. It is likely that both partnering and globalization will continue.

Shippers need to keep track of time. The transportation industry allows extremely short time periods in which to file claims, as we discussed in the April column. One operator allowed a claim against a steamship line to lapse by failing to file his claim within one year after the goods arrived.

While each transportation mode has its own time limit for filing claims, the period is always very short. Time is clearly not on the shipper's side, and this can prove dangerous and costly for the unwary.

Industry standards play a key role in avoiding bodily injuries and cargo damage. In February, we discussed a shipment of steel tubes that was packed in wooden crates and loaded into a container in an upright position without being strapped to prevent them from falling over. At destination, several crates toppled and fatally crushed a worker.

While goods must be shipped in a manner that is able to withstand the normal rigors of ocean transit, courts look to a number of factors to determine whether that standard has been met. These include industry guidelines for handling particular types of commodities, and standards for the safe handling of cargo.

By keeping abreast of these standards, and by agreeing to a policy regarding the loading, transportation, and discharge of goods in advance, shippers can avoid these complications.

Operators and cargo interests alike must maintain adequate insurance protection. Like any other commodity, insurance goes through hard and soft cycles. Today, the insurance market is increasingly competitive and premiums are comparatively low.

Clearly, this presents an opportunity for an operator to save on insurance costs. But insurance should not act as a replacement for good business practices.

As we enter a new year, we will continue to address the liability issues affecting supply chain operations. We look forward to hearing from you.

Have a liability question or concern? I will try to help. Please send your questions to me via e-mail at dan.negron@thomasmiller.com.

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