TT Talk - Standard trading conditions – the cornerstone of risk management for ports and terminals

In the intricate world of global supply chains, contractual disputes are inevitable, and financial consequences can be severe. For ports and terminals, exposure to such risks can be significantly reduced by using and maintaining a robust set of standard trading conditions (STCs).   

Ports and terminals are at the intersection of maritime and shore-based interests, enabling trade across diverse jurisdictions and contractual relationships. These relationships – with customers such as shippers, freight forwarders and shipping lines, and suppliers such as facility managers, contractors and utilities – are governed by a complex mix of international conventions, national laws and commercial contracts.   

For the latter, ports and terminals sometimes negotiate bespoke contracts, though most find it more convenient to use STCs – a pre-determined set of terms and clauses that underpin fair, efficient and predictable business relationships. However, STCs can create significant risk if not properly drafted, updated and – most importantly – incorporated into every transaction.   

Benefits of STCs  

Ports and terminals face a multitude of risks – from unpredictable weather and geopolitical uncertainties to operational hazards and liability exposures. STCs can offer a comprehensive set of terms that address these risks, outlining responsibilities in unforeseen circumstances and reducing ambiguity. STCs can streamline negotiation processes, allow quicker contract conclusions and reduce the administrative burden of crafting bespoke agreements for every transaction. This efficiency fosters trust among stakeholders and can enhance the overall performance of the port community.  

While ports are governed by a complex mix of regulations, STCs can harmonise these frameworks by providing a common language and set of rules. This consistency minimises legal disputes, enhances enforceability and ensures compliance with regulatory requirements. Clear dispute resolution processes further reduce the risk of costly litigation.   

STCs can create a baseline of rights and obligations for all parties, promoting fairness and equity. They help balance power dynamics between customers and suppliers, ensuring no party is unfairly advantaged or disadvantaged. By fostering a stable and sustainable trading environment, good STCs can contribute to the long-term health of the maritime industry.   

Drafting and maintenance 

When drafting STCs, you should avoid excessive legal jargon and define key terms and concepts clearly. Highlight clauses that are especially important, such as payment terms, delivery conditions, dispute resolution mechanisms, responsibilities, liabilities, financial limitations and applicable law and jurisdiction.   

However, even the best-drafted STCs are worthless if they are not properly incorporated into contracts. You should reference specific terms, including version and date, in every business interaction and agreement. Make them an easily accessible, distinct document that is easy to locate and reference – and publish them on your website; embed links in all emails, quotes and invoices; and provide printed versions on request. Explicit incorporation ensures STCs function as a safety net in the absence of bespoke contractual terms.   

Drafting a set of STCs is not a one-off exercise: they should continually evolve with your trading and regulatory environment. You should seek legal advice to ensure ongoing compliance with all applicable laws and regulations, and you should regularly review and revise liability limits, making sure your liability insurer is aware of any changed risks. A quality assurance process can help you ensure that only the latest version is referenced and used.   

While STCs provide a baseline, some contracts may require specific terms. Be prepared to negotiate and adapt, recognising that flexibility can help build positive relationships and address unique risks in particular transactions.   

Conclusions

In today’s volatile supply chain environment, STCs are a cornerstone of port and terminal risk management and resilience. By developing clear, accessible and regularly reviewed STCs, and by ensuring their proper incorporation into every contract, you can protect your business from unnecessary risk, streamline operations and foster fairness and trust across the industry.  

Failure to develop, review, update and incorporate STCs can expose ports and terminals to significant liabilities. Without clear terms, your disputes become harder to resolve, exposures can become unlimited, and the risk of financial loss increases. 

STCs should be made a central part of your port and terminal risk management strategy. Review them often, communicate them well and incorporate them into every transaction. In doing so, you will not only mitigate risk – you will build a foundation for sustainable success in the ever-changing world of global trade.