Corona virus blocks air freight to and from China

Transport law, logistic, customs

Several airlines have suspended their flights to China. British Airways is currently not flying to China and will reassess the situation on 29 February 2020 (https://bit.ly/2Uc5RpH). Lufthansa, Swiss and Austrian Airlines will fly to China for the last time on 31 January. After that, all flights will be temporarily suspended until 9 February 2020 (https://bit.ly/2UdPKbk). Cathay Pacific plans to reduce flights to mainland China by up to 50% up to the end of March (https://bit.ly/2GI8V53). Further cancellations and suspensions of scheduled flights must be expected. This will not only have an impact on passenger transport, but will also lead to a significant reduction in air freight capacities to and from China. Considering that air freight is mainly used for time-sensitive and, in relation to their weight, valuable goods, these restrictions can lead to considerable problems and damage within supply chains.

 

Crisis Management

 

Restrictions in air travel can turn customers' entire supply chains upside down. Airlines and freight forwarders must therefore, depending on the products, look for alternative transport options at short notice. This includes both, alternative routes and other means of transport. Furthermore, it must be clarified immediately whether the products in question are perishable, otherwise subject to expiration or whether a specific arrival time as contractually been agreed. If the goods do not reach their destination via alternative routes or expiry or delivery dates cannot be met, it must be determined whether the goods must be stored, returned or even destroyed.

 

Due to the shortage of air freight, bottlenecks and possible delays are to be expected also on the alternative routes. This in turn results in many problems which must be anticipated as far as possible and for which solutions must be found. The transport of products for which shippers are unable to negotiate priority handling on the alternative transport routes will again be threatened by substantial delays.

 

Between shipper (forwarder) and air carrier, customs authorities also have to face challenges. For example, it must be clarified whether export clearance has already taken place or whether certificates of origin still remain valid, and via which customs office customs clearance will take place if an alternative transport route is used. Depending on the customs status, documents may have to be cancelled, amended and/or resubmitted.

 

All these urgent issues, including those with legal implications, must be resolved under extreme time pressure. This is where, however, fundamental decisions are taken which subsequently prove to be an obstacle in the further processing of the matter. Therefore, despite great time pressure, the necessary care should be taken.

 

At the same time, everything points to the fact that the restrictions will not only have short-term effects, but that the corresponding supply chains will have to be reorganized in the medium term. Today's decision by British Airways to temporarily suspend its flights to Shanghai and Beijing for an entire month, i.e. until the end of February, reflects this.

 

 

Legal clarification and liability

 

Once the most urgent issues have been answered from a transport and supply chain point of view, the legal and financial consequences of these events must be clarified. A cancellation of flights will result in additional costs, e.g. for storage and alternative transport routes. In addition, damages caused by delays are likely to be incurred. There may be breaches of SLAs in supply chain contracts and there is a risk that perishable goods will arrive at the recipient in a condition that they can no longer be used. It will have to be clarified who is liable for the respective damages and to whom.

 

A distinction must be made between the underlying transaction, i.e. the commercial transaction between the seller resp. shipper and the buyer resp, consignee, and on the other side the contract of carriage or or logistics transaction.

 

Whether claims for damages can be successfully enforced depends largely on the content of the agreement entered into between the parties, but also on the law that is mandatory applicable on such contracts. In principle, the party which was unable to fulfil its contractual obligations under the given circumstances will attempt to invoke "force majeure" and thus reject its liability. However, an appeal to "force majeure" presupposes that an "unforeseen" event occurs. Thus, once supply chains are reorganized through alternative means, the exclusion of liability based on "force majeure" will no longer apply.

 

The MME Cross Border Team will be pleased to support you in your crisis management as well as in protecting your interests in legal processing on liability.

January 2020 | Authors: Raphael Brunner, LL.M., Karl Fässler, Andreas Furrer

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