Logistics: Bite-Size Insights - May 2024

In this edition of Logistics: Bite-Size Insights, we consider the latest post-Brexit entry requirements for drivers, the impact of the Baltimore bridge crash and the UK Government’s latest transport initiative to combat climate change.

Brexit impacts – ongoing uncertainties

It has been over three years since the UK left the EU, and yet new processes and requirements continue to be implemented, creating further challenges for the haulage industry. The latest comes in the form of the EU Entry/Exit System (the EES) which is an automated system for registering travellers from the UK and other non-EU countries each time that they cross an EU border. It was scheduled to come into force in 2022 but it is now estimated to commence in October this year.

The logistics of operating the EES for travellers in vehicles, which includes drivers of vehicles carrying cargo, is set to be ‘difficult’ with severe delays expected. With the requirement to provide fingerprints and partake in facial scanning to enter the Schengen Area there is little doubt that the haulage industry is going to be severely impacted.

There is, however, a suggested solution from the European Commission in the form of an app to speed up the EES process. The premise is that drivers pre-register on the app before arriving at a port to avoid any disruption. The issues with this are twofold – firstly, should the onus be on the drivers to correctly complete all the required information on the app? Secondly, it seems to be accepted that the app will not be ready for when the EES comes into force. Delays are, therefore, inevitable.

With delays come additional costs. Hauliers will need to factor in longer journey times, which will lead to additional wages for drivers, additional petrol costs and even vehicle hire costs. Hauliers will need to either pass on those additional costs to its customers or absorb such costs themselves.

Hauliers should start thinking about how they can avoid such delays now. Do insurance policies need to reflect the potential for claims for delay or even the added risk for theft of goods? Goods are of course at much higher risk of theft when they are stationary –waiting in a long queue outside a port is a prime theft location! This could cause premiums to increase. Insurers and insureds alike may wish to think about how these additional risks are managed at this early stage.

Contact: Shaan Burton

Baltimore bridge crash – what is in store for the supply chain?

The catastrophic collapse of the Francis Scott Key Bridge in Baltimore on Tuesday 26 March 2024 has made headlines in mainstream and trade media. The ramifications were immediately apparent, with the Port of Baltimore closed to shipping traffic and the M/V Dali, which was carrying 4,700 shipping containers, sitting in the Patapsco River under a vast piece of the bridge. The logistics industry braced itself for another major US supply chain crisis, while hoping for only temporary disruption.

In the aftermath of the accident, Danish shipping giant Maersk said that it would be "omitting Baltimore on all our services for the foreseeable future". It is also said that the collapse resulted in an estimated five thousand diverted trucks per day, leading to delays and raising fuel costs.

However, despite the fearmongering of a ripple effect to global supply chains, experts predict that the collapse will likely have greater implications for the local Baltimore economy, rather than national or global supply chains. This is largely due to many competing East Coast ports being ready and willing to handle more cargo. In addition, post COVID-19, US port infrastructure is now much more resilient and robust to react to any supply chain shocks.

Although the Baltimore bridge collapse is not expected to trigger a new supply chain crisis, it may contribute to a shift of container traffic to the West Coast ports. However, insurers and insureds should be comforted by the fact that any ramifications on the US and global supply chains are likely to be a lot more transient than first feared.

Contact: Samantha Butler

Department for Transport’s focus on climate change

The debate around how to tackle climate change is an ever present topic for the transport industry. The Department for Transport (DFT) has tried and tested many new regimes, each with a new acronym such as ULEZ, ZEZ and CAZs. These initiatives are, of course, welcomed from an environmental perspective. However, there is inevitably a price attached – a price that often falls to the logistics industry.

The DFT has recently launched a consultation seeking views on the transportation adaption strategy, which includes actions and policies to:

Enhance climate adaptation planning across the sector.
Ensure these plans are achieved.
Improved climate resilience in the transport system.

The aim is to develop these policies over a five year period.

It is clear that climate change is an ongoing challenge, and the DFT is attempting to develop a workable solution across the industry. Extreme weather conditions are becoming the norm and are having a significant impact upon the haulage industry; whether that be an outbreak of fire, flooding of roads or high winds impacting the safety of driving out on the roads. All of these serve to slow down the supply chain.

It is important that those within the logistics industry continue to monitor the facilities and services which they provide and ensure that they adequately assess and plan for the risks associated with climate change. Forwarders will be required to expect such extreme weather variants, and will be expected to provide equipment and facilities that are able to meet such changing conditions. Forwarders and their insurers need to assess the risks and understand how weather events might affect the intended voyage, the storage facility and any goods therein.

Such assessments are important for insureds to best prepare to avoid any losses, and equally for insurers in understanding and rating the risk.

Contact: Shaan Burton