Your Shipping Contract Decides Who Pays for the Disruption

Two businesses can sell the same product, use the same shipping lane and begin with the same margin. After a disruption, one invoices its customer for extra freight. The other receives a reminder that its price was fixed.

The board presentation will give both businesses a slide called geopolitical exposure. Only one will need to explain why its extensive knowledge of regional security failed to include paragraph 14 of the customer agreement.

On October 2, 2026, UK Maritime Trade Operations reported two tanker incidents in the Hormuz region, according to AFP reporting carried by Gulf News. One vessel experienced a fire and blackout, then resumed its journey after the fire was extinguished. Another tanker reported a projectile strike east of Oman. No casualties or environmental damage were reported in those accounts; investigations were continuing.^NEWS

Separately, Axios reported that senior U.S. officials met at Camp David on October 2 to discuss Iran and Yemen.^AXIOS

For crews, the immediate issue is safety. For a founder whose goods, inputs or customers depend on the route, the commercial question is what happens when safe performance becomes slower, more expensive or unavailable. The reports establish a reason to review exposure. They do not establish what happened to your shipment or who owes its next invoice.

That answer sits across the sales agreement, the carriage terms and the insurance policy. The difficult part is discovering that each was negotiated by someone who assumed the others were handling the difficult part.

A company can buy flexible transport and sell inflexible delivery. This arrangement often survives long enough to be mistaken for operational excellence.

Start with the documents for one actual shipment. The upstream purchase agreement determines what the supplier owes you. The carriage contract determines what the transport provider owes its customer. Your downstream sales contract determines what you owe the final buyer. Insurance responds to its own insured risks and conditions. A promise in one document does not automatically amend another.

ICC's introduction to Incoterms explicitly distinguishes the sale contract from surrounding contracts, including carriage and insurance. Incorporating a trade term into the sale does not itself bind those other counterparties to its allocation.^ICC

A real carrier's wording makes the gap tangible. Maersk's published Terms for Carriage give it broad routing liberties in clause 19. Clause 20 addresses qualifying hindrances that cannot be avoided through reasonable endeavours: its options include an alternative route with additional freight, suspension with additional charges, or ending carriage at a place it considers safe and convenient while retaining entitlement to full freight and additional costs. Those are examples of contractual powers, subject to the actual agreement and applicable mandatory law. They are not claims about the tankers in the news.^CARRIER

Now place a fixed-price customer promise beside those terms. If you have guaranteed arrival at a particular warehouse, the carrier's permitted change of route does not, by itself, rewrite that guarantee. Your own relief clause has to work. Otherwise you may need to negotiate an extension, buy replacement transport or absorb a customer claim.

The carrier was represented in the carriage negotiation. Your customer's launch date apparently sent you as its representative to every negotiation.

There is also a geographic limit to the familiar instruction to reroute. Sailing around the Cape of Good Hope can bypass the Red Sea and Suez route. It does not provide a second sea exit from inside the Persian Gulf. Some oil can use pipeline alternatives, but that is a different infrastructure option, not a turn the ship can take.^GEO An alternative is useful only if your cargo can reach it, capacity is available and the contracts permit the change.

In the illustrative flow below, the operator pays transport and insurance charges under its own arrangements. Customer reimbursement requires a separate right. That final arrow is the one to verify before calling the whole arrangement a pass-through.

Trade teams sometimes recite three letters with the confidence other people reserve for a signed guarantee. The letters are useful. Their confidence has acquired several obligations the letters never accepted.

Under unmodified Incoterms 2020, these examples separate delivery from the destination printed on the order:

These are the ICC rules' starting allocations, which must be read with the agreed places and the rest of the contract.^RISK

A CIF seller can therefore pay for the main voyage while the buyer bears the risk of cargo loss during that voyage. A DAP seller can retain that risk much further along the journey. Neither result identifies every possible emergency charge without examining the relevant cost provisions and amendments.

Keep ownership separate too. Incoterms do not decide when title passes, payment timing, most consequences of delay, or force majeure relief. Those need their own contractual treatment.^ICC

For a founder, the useful review is a comparison between what you buy and what you sell. If cargo risk passes to you early on the inbound purchase and remains with you until destination on the outbound sale, your company occupies the exposed interval. Price it, insure it where possible, and give someone authority to manage it.

Writing the destination in bold on the purchase order does not shorten that interval. It mainly makes the place where everyone expected the goods easier to locate during the argument.

Procurement may have spent six weeks negotiating the base rate. The emergency surcharge then arrives with the brisk confidence of someone who was not invited to those meetings.

Distinguish a carrier's commercial surcharge from reimbursement of a particular insurance expense. A charge called war risk might be a tariff amount under carriage terms. It might instead be an obligation to repay an owner's actual additional premium. The label cannot tell you which calculation applies.

BIMCO's CONWARTIME 2025 provides a concrete version of the second mechanism for time charters. If incorporated, it permits refusal of dangerous areas based on the master's or owner's reasonable judgment. When the vessel proceeds into or remains in an exposed area, charterers reimburse qualifying insurance costs actually incurred, net of applicable discounts or benefits. Owners must notify them as soon as practicable, if possible before entry. Payment falls due within 15 days after receipt of invoices and supporting documents. On request, owners must demonstrate reasonable endeavours to obtain appropriate cover and terms.^BIMCO

That clause connects discretion to evidence and payment. It does not automatically make a cargo customer liable under a separate sales agreement. The time charterer still needs its own contractual route for onward recovery.

For the charge you receive, identify the triggering clause, affected shipment, applicable rate and effective date. Then establish whether it is per container, per voyage, per tonne or a percentage of an insured value. If several charges appear to reimburse the same premium, ask how duplication is excluded. These are commercial review questions; the entitlement depends on the documents.

For the charge you want to pass on, the customer clause needs to say which costs qualify, whether approval is required and what happens while an amount is disputed. A negotiated ceiling may buy predictability for the customer while leaving you exposed above it. A cost-only mechanism may preserve volume but leave you funding recovery.

The negotiating objective is a usable allocation, not an unlimited right the customer will never sign. If your evidence consists entirely of the phrase market conditions, you have submitted a weather forecast to accounts payable.

The word insured tends to end a board discussion just before the useful questions begin. It is an impressive efficiency improvement for everyone except the person submitting the claim.

Under Institute Cargo Clauses (A) 2009, clause 6 excludes specified war risks. Clause 4.5 excludes loss, damage or expense caused by delay even when the delay follows an insured risk, subject to its exception for clause 2 expenses. The headline description of broad cargo cover therefore needs the exclusions beside it.^CARGO

Separate Institute War Clauses (Cargo) 2009 cover specified war-related physical loss or damage, subject to their conditions. They also contain a delay exclusion in clause 3.5, with the stated clause 2 exception. Buying war cover does not, on that wording alone, insure every commercial consequence of a dangerous voyage.^WAR

This distinction matters when goods arrive intact after the customer has found another supplier. The uninsured exposure may be the lost sale, a delivery concession or the financing cost of stock. Check whether any separate extension actually covers the claimed loss; do not infer it from the existence of cargo insurance.

Also separate the vessel owner's insurance from your cargo policy. Reimbursing a shipowner's additional premium does not make that policy a substitute for coverage of your goods and your interest in them.

Ask the broker to identify the insured party, covered journey, exclusions and relevant endorsements in writing. If the voyage changes, verify the notice obligations: the standard cargo wording contains provisions for early termination of carriage and changes of destination that require prompt notification in the circumstances specified.^CARGO

This is a loss-by-loss exercise. Replacing damaged inventory and replacing a quarter's revenue are different requests. The insurer did not attend the launch meeting, however unanimously the meeting agreed that the date was immovable.

When the margin disappears, force majeure can begin to sound like a premium cancellation plan. Unfortunately, it is billed according to the clause you already bought.

The ICC's 2020 model illustrates the mechanics. It requires an impediment to contractual performance and conditions concerning control, foreseeability and avoidability. Listed events such as war receive specified presumptions, but the affected party still has to establish that the effects could not reasonably be avoided or overcome. Notice is required without delay; late notice can postpone the start of relief.^FM

A more expensive voyage does not answer those questions on its own. Identify the exact obligation affected and the evidence connecting the event to non-performance. Record which alternatives were examined and why they failed or could not reasonably solve the problem. Your contract's wording and governing law determine the result.

The same ICC model distinguishes a temporary impediment from termination. It includes a substantial-deprivation termination test and, unless otherwise agreed, permits termination when the impediment exceeds 120 days. These are model provisions for contracts adopting them, not a universal shipping cancellation clock.^FM

Cost escalation belongs in the discussion too. ICC offers a separate hardship model with options for contractual adaptation or termination. A defined price-adjustment mechanism can address a specified cost increase more directly; the parties still have to agree its scope.^HARDSHIP

English law supplies a useful warning about assuming the other side must accept your proposed workaround. In RTI Ltd v MUR Shipping BV, decided on May 15, 2024, the UK Supreme Court held that, absent clear wording, a reasonable-endeavours proviso did not require acceptance of non-contractual performance. The dispute involved an offer to pay euros instead of the contractually required U.S. dollars after sanctions created payment difficulties.^MUR

That decision is about the meaning of the obligation. It does not decide whether a particular Hormuz delay permits cancellation. It does suggest that substitute payment, ports or performance should be addressed expressly if the business depends on those options.

The operational trap is mismatched exit rights. Your customer may have a cancellation deadline while your upstream purchase remains binding. Or your transport can stop while the sales contract offers only a narrow extension. The contract review should put those dates and remedies beside one another.

Forwarding the carrier's force-majeure notice to your customer is a useful communication. Treating the forward button as a contractual amendment gives your email software rather more authority than anyone negotiated.

Comparable businesses can report comparable margins while carrying different contractual exposure. The spreadsheet often treats the customer who must reimburse and the customer who might be persuaded as equally dependable citizens.

Consider two hypothetical sellers, each with one US$200,000 shipment and US$160,000 of attributable costs before disruption. Both start with US$40,000 of shipment contribution. Here, contribution means sales proceeds minus the specified shipment costs, before overhead, tax and financing.

Assume identical additional costs:

These are authored inputs, not observed Hormuz rates or a forecast. Assume the goods arrive, both base sales complete, and no physical-loss claim or delivery penalty arises.

Seller A has a fixed price and no applicable recovery right. Its contribution falls to US$20,000: US$200,000 minus US$160,000 minus US$20,000.

Seller B has an enforceable, agreed clause reimbursing the actual extra freight and cargo war premium. It satisfies the evidence requirements and collects US$15,000. Storage remains its responsibility. Its contribution becomes US$35,000: US$200,000 plus US$15,000 minus US$160,000 minus US$20,000.

The original 20% contribution margin becomes 10% for A. B retains contribution equal to 17.5% of the original US$200,000 sale value. That last percentage deliberately uses the original sale as its denominator; it is not B's margin percentage on receipts including reimbursement.

The interactive comparison isolates the consequence: the physical disruption costs the same, while the agreed recovery changes the seller's retained contribution by US$15,000.

B has not escaped the commercial cost. Its customer has agreed to bear US$15,000 and may demand something in return on future orders. B still absorbs storage. If reimbursement arrives 60 days after B pays those recoverable costs, B finances a US$15,000 recovery gap during that interval, in addition to any ordinary receivables. Financing expense is excluded from the example.

That distinction between eventual recovery and cash timing also appears in Magna's tariff experience. A right to recover and money available to spend should occupy separate columns.

The hypothetical rewards a signed agreement, satisfied conditions and collection. If the customer has merely said it understands the situation, keep the US$15,000 out of the committed recovery column. Empathy is a promising start to a negotiation and a surprisingly poor remittance method.

A disruption turns drafting choices into operating decisions. Someone has to authorise extra spending, negotiate with the customer and decide whether continued performance still makes sense. Calling this a strategic issue can be a way of promoting it beyond the seniority of anyone available to decide.

Build a one-page exception sheet for one exposed shipment:

Have the commercial and legal teams review the actual documents together. A summary saying the terms are standard is inadequate when different parties have different standards. Preserve the notices and the evidence supporting decisions; avoid casually conceding liability or waiving rights while negotiating an operational fix.

Then assign an internal approver and a spending limit. If an alternative voyage exceeds that limit, say who can approve the excess and how quickly. If customer consent is essential, give the account owner a specific amendment to negotiate. Counsel can assess the remedy under the governing law; management still has to decide what outcome the business can afford.

The point of escalation is a decision. A steering committee that convenes after the contractual deadline has become a historical society with calendar access.

Open the most exposed live order and place its purchase, carriage, insurance and customer terms together. Mark the first cost or obligation your company cannot pass on, insure or lawfully exit. Put a name and approval limit beside that exposure before authorising the next shipment.