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The Next Big Threat To The U.S. Supply Chain Is Coming Sooner Than You Think – Rail, Road & Cycling



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In a move that could impact tens of thousands of workers and 30%
of U.S. goods, there may be a freight rail stoppage starting
Friday, September 14, 2022, if rail operators and unions fail to
reach a deal by 12:01 a.m. ET on Friday. Due to this potential lack
of staff, as of Tuesday, September 13, some rail operators even
stopped accepting certain freight (such as hazardous materials),
because there may not be anyone available to manage and keep it
safe. While the media skews towards doom and gloom—predicting
a massive of collapse of the supply chain—experts and
commentators do expect that halted freight shipments will disrupt
the already strained U.S. supply chain, including automotive and
other manufacturing companies that operate on a just-in-time sole
source basis.

Since the onset of COVID, the question that has come up more
times than I can count is upon us once again: What can my company
do to protect itself and enforce contract rights when supply is
disrupted, both downstream and upstream? Can we compel suppliers to
deliver under the contract? Can we issue a force majeure notice to
our customers to avoid liability for non-delivery?

The solution depends on the facts of each matter, and, in the
United States, will be answered by the applicable contract language
and law. If your company receives a force majeure letter, below are
some steps to consider. While not all of these options are
available under the contract or law at issue, they may put the
company in the best position to secure supply, to preserve claims
against a supplier, and to protect against a larger customer claim
later.

  1. Review what qualifies as force majeure under the contract
    language (don’t assume)

  2. Respond quickly to a force majeure notice

  3. Ask for specific information regarding the non-delivery

  4. Demand compliance with the contract

  5. Assert refusal to modify the contract

  6. Evaluate any allocation proposal and assert objections if
    appropriate

  7. Evaluate whether the supplier can manufacture and ship the
    goods using alternative sources

  8. Consider whether seeking a preliminary order requiring supply
    is a legal option under your contract

  9. Reserve all rights in communications

  10. Consider sending notice upstream (declare force majeure to your
    customers)

While there are legal pros and cons applicable to each of the
options above, if you believe your company will be impacted as of
Friday (and early next week if a strike ensues), now is the time to
start evaluating legal options.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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