Strait of Hormuz and other disruptions will continue to happen – What should you do..??

This is probably the most stressful situation because you have goods somewhere in the pipeline and very little control over what happens next..

The YOU here refers to whoever currently owns the cargo and bears the risk of it.. Depending on the Incoterms® rule in your contract, that could be the seller, the buyer, or it could have already transferred mid-transit.. If you are not sure where risk currently sits, check your contract before you do anything else..

Step 1 — Get a precise location fix

Is it on a vessel that has been diverted, anchored, or rerouted..?? Is it sitting in a congested port..?? Is it in a container yard waiting for a vessel that is not coming anytime soon..?? Know exactly where it is before deciding anything..

Step 2 — Speak to your freight forwarder or carrier

Ask what options exist.. Sometimes carriers will offer a transshipment option via an alternate hub.. Not ideal, but it keeps the cargo moving..

• If you are the seller
  • Communicate proactively.. Do not wait for the buyer to chase you.. Send a clear update on where the cargo is, what the likely delay is, and what options are being explored..
• If you are the buyer
  • Force majeure is likely to come up.. Pull out your contract and check whether it even has a force majeure clause.. If it does, read it carefully.. If it does not, the conversation with your seller is a commercial negotiation, not a contractual one.. If there is any ambiguity or significant money at stake, get a legal opinion before you respond..
• For both parties
  • The best outcome is almost always a jointly agreed one.. A temporary delay, a revised delivery schedule, a partial shipment, a shared cost arrangement — these are all real options that come from two parties who still want the deal to work.. Also inform your insurer early.. War risk coverage and deviation clauses may apply..

In this situation, both the buyer and seller have the most room to manoeuvre.. The cargo has not moved yet, no routing decisions are locked in, and no carrier has been committed to..

Ask the key question first

Can the cargo move via an entirely alternative route..?? Can it go via the Cape of Good Hope..?? Can it go overland through a different corridor..?? Can it go via air freight if the value and urgency justify the cost..?? Price each option out and make a decision based on actual numbers..

• If you are the seller
  • Get with your freight forwarder and explore alternative routing scenarios with estimated costs and transit times to present to the buyer..
• If you are the buyer
  • Be willing to share the burden of rerouting costs with your seller if the original contract did not anticipate this situation.. A shipment that arrives via an alternative route two weeks later is still better than one that never arrives.. Calculate the cost of delay against the cost of rerouting and make a commercial decision based on that, not on who is technically right under the contract..

Review your Incoterms® now

The Incoterms® rule determines who is responsible for freight, insurance, and routing decisions at each stage.. Knowing exactly where responsibility begins and ends determines who needs to find the solution and who bears the cost.. If there is any uncertainty, get an expert opinion now..

Do not sit on ready cargo waiting for the situation to resolve.. Unexpected disruptions can stretch for weeks or months.. Make a decision and move..

This is a fundamentally different position.. There is no signed contract yet, which means neither party is legally bound to anything.. The current disruption can be factored directly into the terms before anything is signed — something the parties in Situations 1 and 2 simply cannot do..

Routing and transport clauses

Be specific.. If the normal routing goes through a lane that is now disrupted or at risk, add a clause that addresses what happens if that route is unavailable at the time of shipment.. Agree upfront on who bears the cost of alternative routing, what the revised transit time expectations are, and how delays will be communicated.. Getting this agreed at contract stage costs nothing.. Sorting it out after the fact costs a great deal more..

Rethink your Incoterms® rule

Do not simply roll over the same rule from the last contract without questioning it.. An Incoterms® rule that worked well six months ago may not be the most practical choice when shipping lanes are disrupted.. Have that conversation now with the current landscape on the table..

Force majeure clause

Do not copy and paste a generic template.. Make sure it specifically addresses what qualifies as a force majeure event in the context of shipping lane disruptions, what notice periods apply, and what happens to the contract if the disruption extends beyond a certain number of days.. Is it suspended..?? Is it terminated..?? Who bears what costs..?? These are not details to leave vague..

Payment terms

If the buyer is nervous about committing full payment upfront when shipment timing is uncertain, discuss a milestone-based payment structure tied to actual shipping events rather than calendar dates.. A seller who is flexible on payment terms during a disruption is a seller who is more likely to keep the relationship and close the deal..