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Freight forwarders taking on increasing liability risk


December 7, 2011   by Canadian Underwriter


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Freight forwarders and other transport intermediaries face increasingly significant liability risk, particularly in emerging markets, as they tackle additional supply chain services for their customers, warns international transport liability insurer TT Club.
Manufacturers, retailers and other users of transport and logistics services are expecting their suppliers to undertake new complex risks as they outsource more of their sub-assembly, inventory handling and distribution processes, TT Club notes in a press release.
“Those traditional freight forwarders who have in the recent past seen the opportunity to expand their service role by offering extended warehousing, packaging, delivery fulfillment and even purchasing functions for many shippers are not always fully aware of the liabilities for cargo loss and third-party damages that these additional tasks are opening them up to,” said Andrew Kemp, TT Club’s European regional director.
Kemp will be speaking about the subject at the Cargo and Freight Insurance Annual Conference in Moscow on Dec. 8.
As supply chains continue to develop in emerging markets – in places where cargo owners are not always willing to invest in distribution infrastructure – the outsourcing of tasks will proliferate, Kemp said. While this can bring significant new business opportunities to companies, these additional procedures can be complex and open up freight forwarders to new exposures.
“A typical new type of activity would be the packaging for the local retail market of an item with a sales promotion attached [i.e. a price discount or a two-for-one offer],” Kemp said. “This task is straightforward in itself but brings with it risks of errors and possible damage to the items. This would be something not experienced by transport operators in the past.”
Cargo owners are also increasingly requiring forwarders to cover the full value of their goods throughout the sometimes lengthy and involved supply chain, Kemp said. This can be an onerous and unfamiliar risk for the forwarder, which is seeing its contractual obligations extended beyond what used to be accepted as standard terms and conditions.


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