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20 Feb 2015

What constitutes Force Majeure? 

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Look in any contract or rules tariff and you will probably see this phrase defined. It is a French term literally translated as “greater force”. When invoked, it frees both parties from liability or obligation when an extraordinary event prevents one or both parties from fulfilling their obligations under the contract. Some scenarios included in many rules tariffs describe: Acts of God, war, insurrection, strikes, embargoes, and derailments. Still others may go further and site fire, explosion, and acts of terrorism. Union Pacific railroad gives a description of how to amend your volume commitments during this time.  Included also are events which do NOT constitute a force majeure such as economic downturns or market conditions.

Due to the severe port congestion and labor disputes on the West Coast, over 70 Southern California truckers have notified the Uniform Intermodal Interchange Agreement (UIIA) and a number of shipping lines that they have declared “force majeure” and will not be held responsible for the payment of carrier-imposed charges for late equipment return.  These harbor truckers are unable to operate normally, and many are being billed for these delays and service issues. Recent news also reports that although the CP Rail strike has ended after only one day, they still have numerous issues on the table. Both parties have agreed to go before an arbitration board to find resolution.

Shippers would be wise to examine all their agreements during this time of labor negotiations in both the US West coast as well as Canada. It would also be wise to have all your freight examined by a third party audit firm who is well versed in the language and law of contract and rules tariffs.

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