Dive Brief:

• The Agriculture Transportation Coalition warned members disruptions will come to agriculture and forest product supply chains, as threats of a trade war between China and the U.S. "loom large."
• Shippers and carriers expecting lower demand for agriculture exports — or even steel imports — may find their contractual obligations at risk, as they cannot meet the cargo capacity targets originally agreed upon with shipping lines.
• As a safeguard, supply chain managers may have to invoke "force majeure" clauses, which allow them to sidestep obligations due to "governmental restrictions."  

Dive Insight:

Fifteen years ago — amid a trade war with China over U.S. waste paper — the Agriculture Transportation Coalition began advocating for its members to include "force majeure" clauses within their contracts. Now, the group considers it a best practice in supply chain management.

"This is not the first trade war we've been in," Peter Friedmann, Executive Director of the Agriculture Transportation Coalition, told Supply Chain Dive. "We have had, from time to time, trade battles in which the import restriction ... has made the product that was carried uneconomic for consumers of the (other) country." 

Often, shippers have no way of knowing a trade war will disrupt their product flow. In this case, it was a spat over steel imports that led China to retaliate against the agriculture industry. The next set of tariffs may target a whole other group of exporters. 

In each case, however, shippers may find themselves in the unfortunate position of not being able to meet cargo capacity targets. In addition to the top-line pain, they can also be hurt by fees from ocean carriers for each unfilled, but promised, container. The fees, Friedmann said, can go up to $250 per container.

Every ocean carrier has a clause to sidestep obligations due to unforeseen circumstances in their contracts, typically found in the backs of bills of lading. It could be a typhoon, or even a "government restriction" like customs policy.

However, these are virtually never written to protect the exporter, so shippers need to take matters into their own hands when drafting contracts. "In this case, China is imposing import duties — additional duties — of 15%. That would constitute, in my opinion, a government restriction," said Friedmann.

"People have learned (the lesson) the hard way," he added. "That's why for our members we developed a force majeure clause," a legal way out of any liabilities in case of unexpected events like trade wars.