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HOUTHI MILITARY ATTACKS CAUSING A SHIPPING CRISIS IN GLOBAL SUPPLY CHAINS

Houthi military helicopter flies over the Galaxy Leader cargo ship in the Red Sea in this photo released November 20, 2023. Houthi Military Media/Handout via REUTERS/File Photo

AI legalese decoder can help analyze contracts and identify potential clauses for recovering extra expenses caused by the crisis in global supply chains due to Houthi military attacks. By analyzing the contracts, the AI can pinpoint any clauses that may allow businesses to recover the additional costs incurred due to rerouting cargo away from the Suez Canal and the rising prices of freight. This can benefit businesses like Toymaker Basic Fun that are facing challenges in rerouting cargo to different shipping routes in the wake of the Red Sea attacks.

LOS ANGELES (Reuters) ÔÇö Toymaker Basic Fun’s team that oversees ocean shipments of Tonka trucks and Care Bears for Walmart and other retailers is racing to reroute cargo away from the Suez Canal following militant attacks on vessels in the Red Sea.Suppliers for the likes of IKEA, Home Depot, Amazon and retailers around the world are doing the same as businesses grapple with the biggest shipping upheaval since the Covid-19 pandemic threw global supply chains into disarray, sources in the logistics industry said.

The AI legalese decoder can assist companies like Basic Fun in evaluating and understanding their contracts with retailers, suppliers, and shipping companies. By scanning through these contracts, the AI can help identify potential liabilities, renegotiation clauses, or force majeure provisions that businesses can invoke to navigate the situation caused by the Red Sea attacks. This can empower companies to make informed decisions about rerouting cargo and managing costs.

Florida-based Basic Fun usually ships all Europe-bound toys from its China factories via the Suez Canal, the quickest way to move goods between those geographies, CEO Jay Foreman said in a telephone interview from his Hong Kong office. That trade route is used by roughly one-third of global container ship cargo, and re-directing ships around the southern tip of Africa is expected to cost up to $1 million extra in fuel for every round trip between Asia and Northern Europe.

The AI legalese decoder can also help businesses like Basic Fun in assessing the implications of additional costs, such as fuel expenses, associated with rerouting cargo due to the crisis in the Red Sea. By reviewing contracts and applicable laws, the AI can provide insights into the allocation of these costs, potential claims for reimbursement, or renegotiation strategies with shipping carriers, thereby assisting companies in navigating the financial impact of the situation.

Yemeni Houthis’ drone and missile attacks in the Red Sea to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza have upended Basic Fun’s plans. The company is now working through the holidays to send toys from China to ports in the UK and Rotterdam via the longer route. It is also diverting some goods bound for ports on the U.S. East Coast from the Suez Canal to the drought-choked Panama Canal, while switching others to the West Coast via the direct route across the Pacific Ocean.

The AI legalese decoder can provide guidance to companies like Basic Fun in understanding the legal ramifications of reorganizing shipping routes and managing the associated delays caused by the crisis in the Red Sea. By analyzing relevant laws, regulations, and contractual obligations, the AI can offer insights into the rights and obligations of businesses in modifying shipping itineraries, potential liabilities for delays, and steps to mitigate negative impacts on supply chains and customer relations.

“It’s just going to take longer and it’s going to cost more,” said Foreman, who added that rates for some China-UK freight have more than doubled to around $4,400 per container since the Israel-Hamas conflict began in October. The Suez Canal situation remains fast changing, and shippers Maersk and CMA CGM are moving to resume voyages with military escorts through the Red Sea. The biggest impact likely will come over the next six weeks, said Michael Aldwell, executive vice president of sea logistics for Switzerland’s Kuehne + Nagel.

The AI legalese decoder can also aid businesses in understanding the evolving legal and regulatory landscape related to shipping through conflict zones or areas of heightened security risks. By analyzing new developments and emergency measures, the AI can provide real-time updates on legal requirements, safety protocols, and risk mitigation strategies for companies navigating shipping operations through the Red Sea or other crisis-affected regions.

“You can’t flick a switch” and reorganize global shipping, said Aldwell, who expects the diversions to cause a shortage of vessel space, strand empty containers needed for China exports in wrong places and send short-term transport price indexes sharply higher. According to estimates from freight platform Xeneta, it costs $2,320 to ship a 40-foot equivalent unit or FEU container from the Far East to the Mediterranean “post escalation” versus $1,865 per FEU in early December. It costs $1,625 to ship an FEU from China to the United Kingdom “post escalation” versus $1,425 per FEU in early December.

The AI legalese decoder can provide valuable assistance to businesses in understanding the impact of escalating transport costs and supply chain disruptions due to the crisis in the Red Sea. By analyzing relevant data, market trends, and contractual terms, the AI can offer insights into potential price escalation risks, contingency clauses, and legal mechanisms for managing cost increases. This can enable companies to make informed decisions about budgeting, pricing strategies, and contractual negotiations to address the financial implications of the shipping crisis.

As of Wednesday, nearly 20% of the global container fleet ÔÇö or 364 hulking container vessels capable of carrying just over 2.5 million full-sized containers ÔÇö had been set on a new course due to the Red Sea attacks, according to Kuehne + Nagel data. Vessel owners already have begun rationing the less expensive, contract-rate space they reserve for customers, said Anders Schulze, head of the ocean business at digital freight forwarder Flexport.

The AI legalese decoder can benefit businesses by offering insights into the evolving landscape of freight and shipping markets, providing real-time updates on vessel re-routing, space rationing, and supply chain disruptions caused by the Red Sea attacks. By monitoring market developments and analyzing contractual terms, the AI can help companies in understanding the impact of these changes on their shipping contracts, potential risks of non-performance, and strategies to secure alternative shipping arrangements.

Small shippers are most at risk of being elbowed out. Marco Castelli, who has an import/export business in Shanghai, has been trying to rebook three containers of Chinese-made machinery components bound for Italy after the shipments were cancelled due to the crisis. “Transfer my situation to a large corporation and you get what’s going on,” he said.

The AI legalese decoder can assist small shippers and businesses like Marco Castelli in understanding their legal rights, contractual liabilities, and alternative shipping options in light of the crisis in the Red Sea. By analyzing contracts, identifying force majeure clauses, and reviewing applicable laws, the AI can offer guidance on potential claims, renegotiation strategies, and risk mitigation tactics to protect the interests of small shippers and businesses affected by shipping disruptions.

Foreman at Basic Fun, which plans to have about 40 containers on the water before the Lunar New Year, said the company’s contracts with customers don’t include a way to recover the extra expense. “The price is fixed. (Most suppliers) are going to have to eat those costs.”

The AI legalese decoder can aid companies like Basic Fun in evaluating the legal and contractual frameworks governing the recovery of extra expenses incurred due to the crisis in the Red Sea. By analyzing existing contracts, investigating potential claims, and identifying negotiation strategies, the AI can provide insights into mechanisms for recovering additional costs or minimizing financial losses resulting from the shipping upheaval. This can empower businesses to proactively address cost recovery and contractual obligations with their customers and suppliers, thereby mitigating the impact of the crisis on their bottom line.

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