The Surge in Maritime Transport Prices Raises New Issues in Maritime Law

In recent months the world has faced a wave of price increases. The main reason is the sequence of events triggered by the pandemic, which due to closures and restrictions caused global trade to decline sharply. Fears of an economic crisis led shipping companies to lay off workers and reduce activity. When governments decided to inject money into their economies and provide financial assistance to citizens and businesses, trade suddenly began experiencing high demand for raw materials and products. Global supply has struggled to meet this demand, resulting in significant price jumps.

World Economies are Facing an Unexpected Crisis

Lately, the sight of traffic jams across the world’s ports has grown common, and many businesses are experiencing significant delays in receiving goods by sea, with no less than 60% of the global volume of goods coming from this trade sector.

The delay in shipping has led to the closure of small businesses and halted growth for many countries. Germany’s economy, for example, grew by 1.8% in the third quarter compared to forecasts of 2.2%. Inflation has also risen steadily. Owners of supermarket chains in Israel have warned of imminent price increases, with Eyal Ravid, CEO of Victory Group, describing the trend as a “tsunami.”

The Legal Consequences of Supply Disruptions

Disruptions in the supply of goods across all sectors, affecting businesses and consumers alike, raise quite a few legal questions that need to be addressed.

What happens, for example, when an importer of spare parts—used daily by hundreds of auto-repair shops—does not receive their shipment on time, causing the shops to lose money and customers? Will the importer be vulnerable to legal action for a delay beyond their control?

What about a plastic factory that produces panels and piping for construction but cannot deliver them on time? Residential building projects suffer delays, new apartments cannot be completed, and tenants file for compensation against project developers. Can the developers sue the plastic suppliers?

What if an exporter of oranges sees its contract terminated after its oranges arrive late and are found to have decomposed en route? Can the exporter sue the shipping companies for the delay? And if so, how should the damage be quantified?

And what happens when, due to port traffic, imported goods are unloaded after the four days of free storage, forcing the importer to pay the port for each additional day? Does the importer have to bear this fee?

To deal with the various issues commodity buyers struggle with these days, we have gathered for you several tips that will help reduce your exposure to claims and financial losses:

Cargo insurance – Make sure that the goods you deliver are insured as required, with long-lasting, comprehensive insurance tailored to the goods in question and which protects you not only against theft, loss, and damage but also against a delay in receipt. You should also take care that the shipping company is itself insured for those shipping-related issues that are beyond what your insurance covers.

Anchoring the transport prices in the agreement – At a time when shipping prices are rising sharply and the cost of containers is high, we recommend you reach an agreement with your shipping company on a fixed price for transporting goods, which will include a certain discount. Customers who order large quantities of goods can exercise their bargaining power to obtain a fixed, discounted price for shipping. However, since shipping costs will eventually fall, it is desirable that the contract not be too long-term.

Streamlining procedures and avoiding unnecessary delays – Part of what makes the transport of goods even more expensive is the cost of storage at the destination port, which can sometimes be avoided through more efficient management. Streamline procedures as much as possible, be more vigilant, and establish stricter practices for picking up the goods on time. It is also advisable not to order beyond what you require and can store so that once the goods are released from the port you can immediately pick them up and avoid additional payment.

Disruptions in the supply chain are expected to remain with us for the foreseeable future

When forecasters predict that disruptions in the supply chain are expected to persist at least in the near term, it is recommended that every customer ordering goods try as much as possible to reduce their cost of shipping. This can be done by streamlining the transfer of goods, avoiding unnecessary delays, and signing price agreements with shipping companies. Also, when it comes to contracting with the recipients of the goods, it is recommended to include clauses that protect you against delivery delays and limit the amount of damage for which you may be liable.

About the Author
My name is Daniel Behar and I'm Co-Managing Partner at GBK - International Law Office In Isreal, which its practice areas are: Hi-Tech, Commercial, Corporate, Litigation, Real Estate, Intellectual Property, insolvency, and more. I also served as deputy chairman of the Property and Real Estate Forum of the Bar Association, Chairman of the Intellectual Property - Commercial Property Committee of the Bar Association, Chairman of the Municipal Taxation Committee of the Bar Association, Chairman of the Cooperative Associations Committee of the Bar Association in Israel.
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