Scopelitis International Newsletter - January 2019
January 30, 2019
Scopelitis International News – January 2019
Freight Forwarder Contract Issues
In our last International Transportation Law newsletter, we discussed the critical importance of a clear dispute resolution mechanism in contracts with third party agents, to govern the “divorce” with that agent should that be necessary. This month, we’re addressing the “engagement” with the agent. Analogies aside, the scope of the engagement – that is, properly delineating the actual, permitted range of functions you are authorizing the agent to perform on your company’s behalf – is just as important and in some ways might be determinative in avoiding later operational friction and disputes with the agent. Often, in commonly used “mutual agency agreements”, the scope of agency is vague and purposefully broad, with the intention of providing wide latitude for the agent to perform a range of services. However, a freight forwarder seeking assistance from an agent is usually interested in particular services, sometimes on account of business it is handling for one major client, or a small group of clients. As such, we recommend that careful thought go into the specific functions being delegated to an agent in order to ensure proper “guardrails” are in place to govern the agent’s conduct, including any prohibitions or restrictions on their conduct, advertising, or how the agent holds itself out to the public (particularly if the client you are asking the agent to handle has name recognition in the market). Properly structuring the terms and boundaries of an agent’s authority will set proper expectations by both parties, help avoid misunderstandings and, if a dispute arises over the agent’s conduct, provide grounds for the “divorce”.
Brexit Self Defense
“Hard”, “soft”, “no deal”, “delayed”, “reversal”? In her January 21 address to the House of Commons, the UK Prime Minister reviewed a number of Brexit alternatives, including a possible delay of the EU exit, but none seem to be on solid ground. In fact, as the March 29 Brexit deadline approaches, the path forward for the UK and those that have business interests there and/or contracts governed by English law is becoming less clear by the day. Whether the January 29 vote on “Plan B” will provide any clarity remains to be seen (vote to delay Brexit was narrowly defeated). Those businesses that arrange for the delivery or movement of cargo into or out of the UK should be prepared for delays and possibly contract defaults. A delay or other failure to perform that is attributable to a “no deal” Brexit or possibly even a “hard” Brexit will, at a minimum, probably be characterized as a force majeure event and could arguably even form the basis for contract termination due to frustration. Parties to contracts that involve UK activities and have “outs” or other consequences due to a “material adverse event” may be about to experience such a circumstance. Anyone who may be impacted by Brexit, which in practical terms includes anyone in the supply chain that relies on goods transiting the UK or services rendered in the UK, should examine their near term contract exposure and, where possible, negotiate contingency solutions for Brexit related obstacles. Similarly, contracts now being negotiated for long term performance should specifically address the changed circumstances which will inevitably result from almost any form of Brexit.
U.S. Government Shutdown
Critical federal agencies with jurisdiction over trade within the Department of Homeland Security, such as the U.S. Customs and Border Protection (“CBP”) and the Transportation Security Administration (“TSA”), were only partially funded and their staffs severely curtailed during the recent shutdown. In addition, other agencies with jurisdiction over transportation, including the Federal Maritime Commission, were either completely shut down or at least significantly affected by personnel shortages. The shutdown affected a wide range of participants in international trade, with CBP having put on hold issuance of duty drawback refunds, exclusion requests for Section 301 tariffs and other pending trade-related programs being delayed, as well as other hindrances affecting the everyday business of importers and customs brokers. Personnel shortages at TSA negatively affected the ability of Indirect Air Carriers (i.e. air freight forwarders) to fulfill routine administrative processes or have needed contact with key TSA air cargo personnel. While the shutdown has been resolved for at least three weeks, the prospects for a resolution of the fundamental causes of the dispute remain unclear. In addition, despite a short term funding solution, we would expect it to take some time for operations to return to normal after such a lengthy hiatus. Clients of the Firm are encouraged to plan appropriately where federal personnel or resources may continue to be stretched or unavailable, as well as to keep a weather eye on developments in Washington D.C. should another shutdown become a possibility. Scopelitis attorneys are regularly in contact with CBP and TSA personnel, and are available to assist Firm clients through this uncertain period.
For more information on the latest in international transportation law, contact a member of the Scopelitis International Transportation & Logistics Law team - Nathaniel Saylor, Braden Core, John Hove, or Jake Fisher, or your Scopelitis contact.
Scopelitis practice area newsletters are intended as reports to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
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