Background. With brick-and-mortar stores closed by COVID-19 and folks trapped at home with nothing to do but shop online, the purchase of goods from overseas has exploded. Increased demand, coupled with capacity issues related to the pandemic, such as an undersupply of containers, employees and warehouse space, has led to delayed shipments. As a result, there has been an increase in claims against carriers for damages related to service levels, delays and spoiled cargo. Unhappy shippers and receivers are also lobbying regulators to address what they perceive as poor treatment by carriers and intermediaries, and the Federal Maritime Commission (FMC) in the U.S. is looking closely at the treatment of customers by ocean shipping lines.
Impact. We expect the FMC's scrutiny of shipping lines to lead to scrutiny of other links in the shipping chain, including the rail, trucking and aviation sectors, as well as intermediaries such as warehouses, freight forwarders and logistics providers. We also suspect U.S. regulatory changes may be on the horizon. We expect that Transport Canada will follow the U.S. lead and scrutinize the treatment of customers by carriers in Canada. If regulations come into effect, carriers will bear the enormous organizational costs of complying in multiple jurisdictions with similar — but not the same — laws. On the disputes front, the increase in claims against carriers will mean increased internal and external costs to defend those claims.
Top tip. Cargo carriers and intermediaries need to make sure they're living up to the terms and conditions of their own contracts and avoid making promises they can't keep. A key strategy is to ensure the messages customers receive from the sales and customer service departments are ones the legal and claims side of the business would agree with. This will help prevent and defend claims and may be a step towards offering the service regulators will expect.
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