The impact of Coronavirus has impacted everything we do from a personal and business perspective.
Businesses must manage internal resources, production and trade within suppliers and customers in the UK. In addition, businesses trading internationally must consider the impacts of Coronavirus on how they receive goods from their suppliers, and how they get goods to their customers.
Every business will be impacted in a different way depending on the nature of what you buy and sell, and the countries that you trade with (examples among many include medical products, food products and manufactured goods).
Freight is still moving, and goods are still arriving, but in some cases with delays. Whilst sea freight costs have decreased, air freight costs have risen, and availability of freight supply remains an issue.
There are no easy answers for businesses, however, here are some points you should consider, both now and for future trade strategy:
Sources of Supply
- Where are my sources of supply?
- Do I have a key supplier dependency, and do I need to consider this for how I trade in the future?
- Will I need to look for more local or regional sources of supply?
- How can I work with my customer to try to ensure continuity of my goods? Will my customer be able to take delivery of the goods, if they are delivered?
- Will the goods need to be placed in a warehouse / storage facility temporarily and does this constitute delivery? (as noted below Payment Terms and Incoterms are absolutely vital)
- Are all divisions/departments of the company working internally to ensure supply sources and overseas sales.
- If everyone clear on the Incoterms and Payment terms used?
- Clarity on trade documentation used by the company is important to ensure goods move efficiently and in an endeavour to avoid delay
Terms of Sale, and Terms of Purchase
- Businesses should take the opportunity to review their terms of sale, or terms of purchase, for example;
- What governing law is quoted? (this can impact how the law interprets force majeure)
- Is there a jurisdiction clause in the contract?
- Are there dispute resolution / arbitration clauses?
- Who is responsible for insurance of goods in transit? (this should be explicit)
An understanding of Incoterms and Payment Terms is now more important than ever, businesses can simply not afford to have goods delayed because of uncertainly as to who is responsible for customs declarations and customs documentation, for example under DDP and EXW. This may seem an obvious conclusion however as a lot of trade with European Union countries is on these terms this is clearly an issue for the future.
It is clearly important to liaise with your freight forwarder to ensure that supply routes are open and to try to ensure access to Track and Trace technology, in order to see where goods are in the trade journey.
In this article we have tried to provide you with some considerations for importers and exporters, and supply chains at this time.
We will be providing further blogs and information however we would welcome your feedback on other considerations that businesses should consider.