< Previous20DECEMBER 2019 | LOGISTICS MIDDLE EASTwww.logisticsmiddleeast.com As readers will be aware, the Strait of Hormuz is the only sea passage to the important ports in the Arabian Gulf. The attacks on tankers transiting the Strait of Hormuz on 12 May and 13 June 2019 have had an immediate impact on terms of insurance premiums for shipowners. In this article, we consider the ramifications for the ship- ping and logistics industry. Insurance Following the attacks, the Joint War Committee designated the Arabian Gulf and its adjacent waters as a high-risk area. Shipowners whose vessels transit through this area are required to pay additional premiums to maintain their insurance cover. Whether such additional insurance costs can be passed on to charterers or cargo owners will generally depend on the wording of the charterparty and bill of lading. An example of a charterparty clause which may allow for costs to be passed on to charterers is as follows: “If the vessel is ordered to trade in areas where there is war or threat of war, Charterers shall reimburse Owners for any additional insurance premia, ...” Normally under a bill of lading, a carrier would not be able to pass to the cargo owners such additional insurance costs save for the extreme circumstances discussed in the next section. May the shipowner or carrier refuse to call at ports within the Arabian Gulf ? The general position is that under a charterparty, the ship- owner is required to follow the charterers’ orders. Similarly, under a bill of lading the carrier is required to proceed to the place of destination listed in the bill of lading. If the shipowner or carrier failed to do so, then, absent a specific clause allowing a deviation, it would be liable for any damages, including the costs of carriage of the cargo to the agreed destination. In the charter context a common clause is the CONWAR- TIME or VOYWAR war risks clause. These generally provide that if the master of the vessel has considered the situation and Strait of Hormuz: the impact of vessel attacks on shipping and logistics Got something to say? If you have any industry comments to make please e-mail: shaun.ebelthite@itp.com COMMENT | JEB CLULOW Jeb Clulow, partner, Reed Smith, London looks at the impact of the Iran tensions on shipping in the region COMMENT concluded that there is ‘likely to be’ or ‘may be’ a danger if the vessel proceeds, then the shipowner may be relieved of having to enter within that high risk area. The words “likely” and “may” suggest different levels of probability, with the former connoting a greater chance of exposure to danger and the latter being further down on the scale of probability. In general, this wording is permissive and gives the Master some dis- cretion. A bill of lading for contain- erised cargo will typically have clauses permitting al- ternative performance such as transhipment, but these will not relieve a carrier from taking the cargo to the agreed destination. A bill of lading may have a war risks clause, which might read as as follows: it should “appear” that the vessel “would” be exposed “to the risk of sei- zure, damage or delay, in con- sequence of war or warlike operations”. Such wording About the author: For 20 years Jeb has helped clients with shipping, logistics, sale of goods, offshore and construction issues. He has extensive international arbitration and court experience. suggests that more extreme circumstances would be re- quired for a carrier to bring himself within the ambit of this clause. In the present circum- stances, where there have been only two attacks causing damage to tankers, it is un- likely that they would justify a Master refusing to proceed through the Strait of Hormuz. It is also worth mentioning that on 11 July, it was report- ed that three Iranian vessels sought to interfere with a BP tanker passing through the Strait of Hormuz and were warned off by a British naval vessel. It is said that the Ira- nian vessels complied with the instructions of the British naval vessel and the transit of the BP tanker was not affect- ed with and no damage was done to her. It is also reported that a US led military coali- tion plans to offer support to commercial shipping transit- ing the Strait of Hormuz. Shipowners/carriers should consider the con- tinuing developments in the Arabian Gulf but as it cur- rently stands, it is probably unlikely that shipowners/ carriers will have the right to refuse to transit the Strait of Hormuz.www.logisticsmiddleeast.com COVER | AMAZON 22 BUILDING AN E-COM GIANT RONALDO MOUCHAWAR, THE FOUNDER AND CEO OF SOUQ, WHICH EARLIER THIS YEAR BECAME AMAZON.AE, ON WHY THE COMPANY’S FIRST MOBILE APP WAS AN ‘AFTERTHOUGHT’ DECEMBER 2019 | LOGISTICS MIDDLE EASTwww.logisticsmiddleeast.com AMAZON | COVER 23LOGISTICS MIDDLE EAST | DECEMBER 2019www.logisticsmiddleeast.com Too many digital start-ups try to use tech- nology to optimise first and then scale operations, when they should be doing it the other way around, according to Ronaldo Mouchawar, the founder and CEO of SOUQ, which earlier this year became Amazon.ae. “SOUQ started out as Souq.com, and was tailored for desktop,” he told the audience during ‘TECHCHAT with Leaders - What’s next: Aspirations for the next decade’ on the Keynote Stage at Za’abeel Hall 4 during GITEX Technology Week 2019. But, in 2012, when SOUQ noticed a sudden spike in growth in mobile usage, it developed its first app. “The app was really an afterthought, we outsourced it and didn’t make much of an effort, it was ill-suited to our needs,” said Mouchawar. “We were more focused on building our merchant relationships, getting more products and deals onto the site. It wasn’t until 2014 that we decided to become a mobile-first company.” The souq.com logo was changed, along with the name of the company, to SOUQ, for better mobile display, and a new app was launched, through which the company has grown its mobile traffic to account for 80% of all interactions. “Now we’ve become part of Amazon, and although we’re still very much a local brand with local same and next-day delivery options, we’re also able to offer access to, for example, a selection of 50-million books with free shipping to the region within three days,” explains Mouchawar. “Now we’re looking at optimising the app for search and discoverability, but none of it would be possible if we hadn’t first scaled-up our item selection and our mobile ability.” Logistics Middle East had to opportunity to speak to Mouchawar on the side-lines of the event. He said that SOUQ’s success lay in becoming a desti- nation, rather than a means to an end. “Most online properties are about producing content for consumption, but what we real- ised early on was that the needs of merchants and brands and even customers were a bit dif- ferent in terms of how they want to shop online to how they want to consume content,” he says. The latter is more about being a means to connect or consume and be informed, whereas what SOUQ realised it had to become was a destination. “A destina- tion for online shopping,” says Mouchawar. “We tried to do that initially under Maktoob, mainly by trying to copy what was going on in the west, but that didn’t really pan out for us because FA ST FACT 15M BECOMING PART OF AMAZON HAS GIVEN SOUQ ACCESS TO AN EXPANDED SELEC- TION OF 15-MILLION BOOKS. IT WASN’T UNTIL 2014 THAT WE DECIDED TO BECOME A MOBILE-FIRST COMPANY. BE- FORE THAT, WE WERE MORE FOCUSED ON BUILDING OUR MERCHANT RELATIONSHIPS, GETTING MORE PRODUCTS ON THE SITE” COVER | AMAZON 24DECEMBER 2019 | LOGISTICS MIDDLE EASTwww.logisticsmiddleeast.com we then realised that we had to build trust in the platform as a shopping destination.” To build that trust, SOUQ was launched in all six GCC coun- tries, but with its logistics focus in the UAE, where the greatest consumer power was. “We saw that customers were enjoying the service, more merchants were joining the platform, we focused on making the listing process super-easy, and through that we got more range, diversity, more items and the rest is history,” he says. The making of that his- tory, the major turning point that would see SOUQ become a household name, occurred thanks to the migration of in- ternet users from desktop to mo- bile. “The huge turning point for this region was mobile. Initially we had Souq.com and we were growing our traffic on desktop, but then around 2012 or 2013, we saw a sudden spike in growth of traffic coming from mobile phones, so we launched the first version of our app, but it was kind of an afterthought,” says Mouchawar. “We outsourced the design and it really wasn’t the best thing. It wasn’t until 2014 that we decided to make every- thing mobile-first and we changed our logo to simply SOUQ, with the square aspect ratio that’s better suited to dis- play on a mobile screen. We also started to think of SOUQ less as a website and more as a shopping destination that hap- pened to exist online,” he adds. Now in the UAE and KSA, the company’s two biggest markets, more than 80% of the traffic is from mobile phones. “People only really use desk- top when they’re looking for something super-specific and want to do some com- parison shopping or product research,” explains Moucha- Amazon.ae serves the entire GCC region from its central Dubai logistics hub. AMAZON | COVER 25 Mouchawar says the company focused on building its infrastructure fire before it focused on optimisation for efficiencies. LOGISTICS MIDDLE EAST | DECEMBER 2019www.logisticsmiddleeast.com26 at bandwidth consumption reports, it’s YouTube in Saudi Arabia and the UAE.” Mouchawar says Amazon. ae has benefitted from that. “Online shopping in this en- vironment quickly, within the space of a generation, goes from being a novelty or something that a few people do, to being the norm and something that everyone does. That has defi- nitely driven our growth.” war. “And now with mobile the engagement is totally different, we can get information about how long users are spending on the app, what they’re searching for, how they find it, what other products they look at, what other products they buy, how long they spend reading reviews or product descriptions.” “Suddenly you see the difference between being a mobile-first shopping destination compared to what we started out as, which was a website connecting users to someone else’s services,” he says. Amazon.ae is now customise the customer’s journey, from search through to buying the product, paying and even delivery. “Through the app you can get notifica- tions from drivers using maps as well to circumvent a lot of the address issues in the region,” says Mouchawar. When asked about the outlook for e-commerce in the GCC region, Mouchawar says the figures support an optimistic outlook, but also points out that there are deeper factors at play. “we’re lucky because you see a lot more young people that got to technology quite early through social media, they’re posting, they’re reading news, they’re tweeting, and I think that the move into shopping via e-commerce then comes quite naturally from that,” he says. “We have the advantage of being based in a region that’s very young and very mobile driven. If you look FA ST FACT $500M+ SOUQ WAS PUR- CHASED BY AMAZON LAST YEAR FOR MORE THAN HALF A BILLION DOLLARS. A LOT MORE YOUNG PEOPLE GOT TO TECHNOLOGY EARLY, THEY’RE POSTING, TWEETING, AND I THINK THAT THE MOVE INTO SHOPPING VIA E-COMMERCE THEN COMES QUITE NATURALLY FROM THAT” What held Amazon.ae back in the beginning was a lack of diversity and range of products, even those it was many, many times larger than its closest competitor. “Even once we were the largest e- com platform in the region, we still didn’t have the breadth of the US or Europe. Our larg- est selections were limited to electronic, apparel and some beauty products,” he says. According to Mouchawar, this is where the acquisition of SOUQ by Amazon has had the greatest impact – inven- tory. “Now, with Amazon, the type of selection on the site has changed drastically. That’s not to say we don’t still have a long way to go, we need more local merchants, and in broader e- commerce space more local apps like ours. What we are now focusing on is search and COVER | AMAZON DECEMBER 2019 | LOGISTICS MIDDLE EASTwww.logisticsmiddleeast.com AMAZON | COVER WE’RE STILL VERY LOCAL WITH SAME DAY DELIVERY AND NEXT DAY DELIVERY, BUT WE OFFER MANY MORE ITEMS, FILLING THAT GAP FOR WHAT WAS NOT AVAIL- ABLE IN THE REGION” 27 discoverability. How do people find the items? Which products should we recommend? Are we in the right price range? Are our customers becoming speed sensi- tive and how do we fix that?” he says. Mouchawar’s focus now, as the founder of the re- branded Amazon.ae, is on localising inventory through a global supply chain. “We just did a big shift from SOUQ to Amazon, anyone who’s been on the site just notices how suddenly we’re still very local with same day de- livery and next day delivery, but we offer many, many, many more items, filling that gap in terms of what was not available in the region,” he says. “Our research shows that lots of local e-commerce customers were buying on international sites for a long time and using local sites only for certain categories like grocery, electronics, beauty and so on. But when it came to books and shoes and other items they were going global. We’re part of Amazon now, so those customers don’t have to go global anymore,” he adds. Mouchawar points to a heady fact to underline his point. “When we launched as Amazon.ae for example, we instantly made a 15 million plus book selection avail- able with free shipping to the region within three or four days,” he says. There isn’t any other regional e-commerce platform that can compete with that. LOGISTICS MIDDLE EAST | DECEMBER 201928DECEMBER 2019 | LOGISTICS MIDDLE EAST REPORT | DUBAI AIRSHOW 2019 www.logisticsmiddleeast.com MRO logistics and new ways to make aircraft parts transport and replenishment more ef cient were in focus during the Dubai Airshow 2019 MRO LOGISTICS TAKES FLIGHT29LOGISTICS MIDDLE EAST | DECEMBER 2019 REPORT | DUBAI AIRSHOW 2019 www.logisticsmiddleeast.com During the 5 days of the Dubai Airshow 2019 deals worth more than US $50-bil- lion were announced. Emirates firmed up orders for 30 Boeing 787-9 Dreamliners, with a dirham value of Dh32.3 billion. It also unveiled orders for 50 Airbus 350-900 WXB widebody aircraft, with delivery to begin in May 2023. Emirates already has a whopping 271 large aircraft, including 113 Airbus A380 superjumbos and 158 Boeing 777 planes. The deal replaces an earlier plan to buy 30 A350s and 40 A330neos in a deal worth $21.4 billion, but Emirates said that discussions on purchasing the A330neos could still be revived. Air Arabia announced a deal to buy 120 Airbus A320s, thereby tripling its fleet. It currently operates 53 Airbus A320 and A321 aircraft. With the expanded fleet, it plans to add new routes to its network, which includes 170 des- tinations. These were just some of the aircraft orders from regional operators, but what was most interesting from a logistics perspective was the MRO activity. Strata Manufacturing (Strata), the advanced composite aero structures manufacturing company wholly owned by Mubadala Investment Company PJSC, signed a contract with Grupo Aeronáutico Zona Centro (GAZC) at Dubai Airshow, to estab- lish a competitive and lean supply chain network. Under the five-year agreement, GAZC, the leading Spanish manu- facturer of machined de- tail parts for major OEMs and aerospace industry heavyweights, will be Strata’s strategic supplier of fixed metallic ‘computer numerical control’ (CNC) machined detail aircraft parts until 2025. Strata will receive its first GAZC shipment at its Nibras Al Ain Aerospace Park production facility later this year. “Building strategic rela- tionships to leverage the very specific expertise of well- established players across the global supply chain of aero-structure components and establishing Strata’s own supply network are key factors in Strata’s immedi- ate and long-term strategy,” said Ismail Ali Abdulla, CEO of Strata. “GAZC is renowned as a globally-recognised expert in manufacturing metallic CNC machined detail aircraft parts of the highest levels of preci- sion and customisation. Se- curing their place in Strata’s next phase of growth marks an important highlight in our journey and ensures we will continue to service our global customers competitively and Emirates ordered 30 Boeing 787 planes..Next >