Ask the expert: Konstadina Kottoros
Question: How well protected are freight forwarding companies with respect to conducting their business in this fast-paced environment?
Expert: Konstadina Kottoros, Legal consultant, Fichte & Co Legal Consultancy
Fulfilling a key role
Freight forwarders are currently the partners of choice for many traders as they offer unlimited value-added services, from coordinating the entire process of a shipment between certain locations and booking the goods with the relevant sea or air and haulage companies, to storage for unpacking and effecting customs clearance and related formalities.
They offer their expertise of the market, preferred routes, mode, shipment type and transit times which best reflect the nature of the commodity and the trader's obligations towards their own clients, such as inventory control and deadlines.
When traders are selecting a suitable forwarder they will check whether a company is fully insured and adequately covered to undertake the project concerned. A company that is registered with an approved freight forwarding association and which has set the scope of its liability will clearly gain a competitive advantage over rivals with no protection.
Professional indemnity is a must
This is a very challenging and interesting era for the UAE, which is facing the upheaval associated with generating the largest and most sophisticated maritime and industrial depots and logistics parks in the world. However, at the same time, a worryingly low percentage of the entire freight forwarding market in the country has freight forwarders liability and coverage, while a large proportion of the market is still working ad hoc.
Damage to cargo is often highly likely, especially when a string of parties are involved, but it is normally quite difficult to ascertain at which stage of the journey the goods have been damaged or lost.
Nevertheless, the freight forwarder will remain liable as it will have assumed control of the goods. A particular route could be logistically challenging, needing several modes of transport to ship the cargo to its specified destination, particularly when containers are being transhipped via several locations or where the freight is subject to container change.
For instance, a forwarder in Dubai has no control over any airport or warehouse workers repacking its container in a location where standards invariably differ from other parts of the world, and thus it is vital for forwarders to protect themselves against those incidents that fall outside the scope of its jurisdiction and national standards.
Peace of mind
Damage, delays and loss commonly occur internally due to workload and high staff turnover, where shipments and documentation are simply overlooked and have cost the company a substantial amount of money in terms of rent and demurrage which could have easily been avoided.
Professional indemnity is of crucial importance when a company is involved in the movement and distribution of millions of dollars worth of goods, and claims are likely to arise. It is vital that transport companies should protect themselves against potential claims.
Companies need to be more commercially aware of these risks if they are going to compete against industry giants that will be establishing their presence in the Middle East in the very immediate future.
Nevertheless, a company that trades without any particular protection and which has not gone that extra length to protect its own client's interests will eventually be phased out of the market. It is only natural for businesses to try and reduce their overheads and not burden themselves with such formalities, but paying more attention to these intricacies will benefit a company in the long run.
How and where?
There are several approved associations available in the market such as the International Federation of Freight Forwarders Association (FIATA), or IATA.
It is a very simple process and by registering to any of the above associations and by applying their standard trading conditions (STC), a forwarder can limit his liability for any claim, loss or damage to goods whilst in their care; clients are then automatically accepting your terms of business once contracting work out to you and should they require extra protection for their cargo they have the option of taking out further insurance for the full commercial value of their goods.
Being a member of an international association is entirely optional but if companies choose not to register with any association they can alternatively seek the professional services of a law firm specialised in this field to draft the terms of business to the forwarder's specifications.