If your company orders, receives or sends goods in transit, you’ll have noticed supply chains are a different ball game thanks to the impact of COVID-19. In this article, we’ll outline the changes and how they affect your company’s risk profile as well as insurance cover.
Here are the changes in a nutshell:
But there are more risks on the horizon.
When a massive cargo ship blocked the Suez Canal in March, it highlighted another set of risks for those with goods in transit. An estimated 12% of the worlds’ commerce pass through the canal. More than $12 billion of goods were held up there, so a deluge of claims is expected from companies with marine delay insurance.
Meanwhile, Australia’s trade tensions with China adds another risk closer to home. About 20% of world trade goes through the South China Sea. If China chooses to take control, such as through a change in its domestic policies, it’s a problem. We saw that with China blocking Australian imports of wine, barley, beef, lobsters, and timber.
Be mindful it can take months to work out potential losses if things go awry on the waters, as happened with the 2017 bankruptcy of the South Korean shipping company, Hanjin. The insolvency was covered in the ‘landing and warehousing” clause of many cargo policies.
You can minimise your goods-in-transit issues by:
As well, learn about incoterms. There’s a set of internationally recognised rules which set out sellers’ and buyers’ responsibilities in export transactions.
And, to fine-tune your logistics, consider technology to give you real-time data insights so that you can make in-transit decisions. Here’s how an agrifood technology solution is helping berry producers deal with food supply chain issues.
You might think the carrier and freight forwarder’s liability insurance will cover you for loss. Usually, it has many exclusions and is limited to about $2 per kilogram of your goods stolen, lost or damaged. Should your cargo be worth more, then cargo and transit insurance will give you peace of mind. It covers goods transported by sea or air.
A policy can help protect your business in these ways:
Here are typical policy exclusions:
We can guide you on which policy type suits you best - single, open, all-risk, or named perils cover - depending on your trade volume and frequency. For example, named perils generally include cargo theft, acts of God, the vessel colliding or sinking at sea, bad weather, and the cargo not being delivered.