Page 26 - Logistics News - November December 2022

S UP P LY C H A IN

Mitigating legal risk

in supply chain

With continued threats to global supply chains, shoring up a business’s legal position is non-
negotiable. Find out how to plan for key issues endemic to South Africa’s supply chain landscape.

hen supply chains are stressed, as they clear on how to handle that issue. What we then do is build
have been for the past three years due to some sort of wording into our annual review so that if that
WCOVID-19 and more recently the Ukraine situation arises again, it’s now clear and everyone knows
conflict, companies need to be secure in the knowledge what to expect.”
that the legal arrangements that underpin trade
relationships are watertight. This is particularly relevant When it comes to subcontracting, there are very clear
in South Africa, where legislation changes frequently. and specific subcontracting agreements that set out which
party is liable for what aspect and who is responsible for
Contracting lies at the heart of supply chains. Not only taking out insurance.
do contracts govern the system of manufacturing, selling,
importing, exporting and transporting goods, but they also “We also have a summary document that very
aid in mitigating risk. Alison Wixley, Head of Legal and clearly sets out what insurance cover we have and how
Risk at Bidvest Freight (the holding company for Bidvest our liabilities work. This is provided to clients and/
International Logistis [BIL]), says one of the big problems or transporters so they know exactly who is liable in a
in South Africa today is a lack of understanding of how the particular situation,” she adds.
contractual regime works. “People often don’t understand
how the liabilities fit into the bill of lading from the carrier According to Wixley, STC arrangements should be
or the contracts you might have with your transporter,” she reviewed at least every two years, but if a major legislative
says. change occurs, this might need to be done sooner. “When it
comes to contracts with clients, I would say these should be
“You might get a small ‘one-man band’ transporter reviewed at least once a year.”
or forwarding agent along the chain who simply doesn’t
understand how everything fits in. The risk this can expose Another legal risk is what is termed ‘scope creep’. This
you to is that you might have gaps in your insurance cover occurs when a client might sign on to use a particular
because you haven’t contracted correctly throughout the service and then later request additional services. “The
supply chain.” problem comes in when we go back to the contract and
establish that these additional services are not covered. It
For BIL, as the logistics operator, there are two parts to could also happen that a claim occurs, but when we go to
the contractual chain: customers and subcontractors. “In the insurers to explain, for example, that a claim has arisen
terms of our customers, we have a very clear set of standard out of customs clearing activities, if the contract only refers
trading terms and conditions, based on the South African to transport services, the claim may be repudiated.”
Association of Freight Forwarders (SAAFF) conditions,
Wixley also emphasises that businesses need to make
but over the years we have adapted them as and when sure they have an understanding of the potential risks of the
L O GI S T I CS NEWS change in case law or legislation, but also when we come business, which could be different. “If you’re transporting
the South African landscape has changed. That could be a
cell phones, for example, you might need armed escorts.
across a new situation,” Wixley explains.
You need to identify the risks and then ask how these can be

mitigated – by insuring or procuring armed escorts, etc. If
“You could have a claim, for example, where our
standard trading terms and conditions (STCs) aren’t quite

24 NO V E MB E R/D E C E MB E R 2022 you do that upfront, that mitigates a lot of the risks.” •
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