TERM PAPER AT THE INTERNATIONAL SCHOOL OF MANAGEMENT

ADVANCED TRANSPORT
MANAGEMENT

Name: Sai Ram Reddy Allu

Degree Course: Master of Science

Subject: International Logistics and Supply Chain Management

Course semester: 2

ISM campus: Hamburg

Lecturer:

Submission: 27-Aug-2020
Table of Contents

1.DIGITAL AND SUSTAINABLE SUPPLY CHAINS ................................................................... 5

1.1 Introduction: Sustainability in the world of Textiles................................................................ 5
1.2 Linear Production Model ......................................................................................................... 5
1.3 Impacts of Linear Model .......................................................................................................... 6
1.3.1 Emission of CO2 ............................................................................................................... 6
1.3.2 Water Consumption........................................................................................................... 6
1.3.3 Microplastic....................................................................................................................... 6
1.4 Closed Loop Model of MUD Jeans.......................................................................................... 7
1.5 Sustainability in the closed model ............................................................................................ 7
1.5.1 Waste Reduction ............................................................................................................... 7
1.5.2 Recycling and Upcycling .................................................................................................. 8
1.6 Disadvantages/Risks of Closed Loop Model ........................................................................... 8
1.6.1 Conscious Customers ........................................................................................................ 8
1.6.2 Ethics and Values .............................................................................................................. 8
1.6.3 Revenue Structure ............................................................................................................. 9
1.7 System Thinking a way to improve Sustainability ................................................................... 9
1.8 Revenue Structure of MUD jeans ............................................................................................ 9
1.8.1 Sales of products ............................................................................................................... 9
1.8.2 Leasing .............................................................................................................................. 9
1.9 Role of Digital Technologies ................................................................................................. 10
1.10 CONCLUSION ........................................................................................................................ 11

2. ECOLOGY AND ECONOMICS................................................................................................. 12

2.1 INTRODUCTION .................................................................................................................. 12
2.2 Negative Externalities ............................................................................................................ 12
2.2.1 Impact of Negative Externalities ..................................................................................... 13
2.2.2 Environmental Impacts ................................................................................................... 14
2.2.3 Social Impacts ................................................................................................................. 14
2.3 Suggestions ............................................................................................................................ 15
2.4 CONCLSUION ...................................................................................................................... 17
3. INTERNATIONAL LAW TRANSPORT POLICY & LOBBYING .......................................... 18
3.1 INTRODUCTION .................................................................................................................. 18
3.2 Key Clauses of an International Service Agreement.............................................................. 18
3.2.1 Clauses aimed at maintaining service provider and client integration........................... 18
3.2.2 Clauses aimed at limiting Risks/losses (Service Provider perspective) .......................... 19
3.2.3 Legal issues ..................................................................................................................... 20
3.2.4 Effective methods of Improvement ................................................................................. 20
3.3 Advantage of taking legal action in Europe ........................................................................... 21
3.4 TIR Convention (Transports Internationaux Routiers) .......................................................... 21
3.5 Warsaw Convention ............................................................................................................... 22
3.6 CONCLUSION ...................................................................................................................... 23
BIBLIOGRAPHY ............................................................................................................................ 23
 1.DIGITAL AND SUSTAINABLE SUPPLY CHAINS

1.1 Introduction: Sustainability in the world of Textiles

Considering the scale of the textile industry, which is one of the largest sectors in the world,
sustainability isn’t just a concept, but businesses have a huge potential to gain environmental,
economic and social differences. Sustainability is often described by the concept of reduce,
reuse, and recycle. The textile industry has many reasons to concentrate on sustainability,
including cost savings, environmental conservation, and increased support from its
consumers for environmentally sustainable practices but this is not so easy to achieve.
Sustainability in the Textile industry is a complex process, there is more to it than using
organic cotton and decent working conditions. Usage of water, electricity and chemicals
presents challenges for textile businesses at every point of its value chain. Encouraging the
shift towards renewables, digitizing, preferring the use of recycled fabrics and moving
towards a circular economy where there is no such thing as waste, acts as an important lever
for improving the sustainability of the textile industry. It is difficult to achieve a cent-per-
cent circular economy, but it is not impossible. In the further discussion, we will analyze
how companies like MUD jeans have achieved a circular economy (closed loop system) by
comparing their business model with traditional linear models in today's market.

1.2 Linear Production Model

The Linear production model or the traditional model which was being used by Textile
industries over the past decades involves 5 major steps, out of which not much consideration
or preference is given to the last step (Disposal/waste). Terms such as disposal and recycling
are only being heard over the last 15 years and they haven’t been part of their supply chain
before then. The major steps are as shown in the following diagram.

Fig:1 Linear Model of Textile Industry

The first phase of supply chain starts with the resource extraction where harvested cotton
from the fields are extracted and are processed. once the cotton fiber is processed it is weaved
into cloth and then this cloth is purified and prefinished. In the second phase the garments
are manufactured from the cotton fibers combined with other artificial fibers and chemicals.
Suitable additives are added based on the requirement and garments are made. Then in the
third phase these garments are shipped to warehouses and from there to all the nearest
storefront. Customers buy the product from the storefront and are consumed (Consumption
phase). Customers may use these garments for a year or two depending on their usage levels
and then are thrown to waste. Each step mentioned above harms our surrounding
environment one way or another, Emissions emitted by Production and Transportation are
only a part of the harmful consequences.

1.3 Impacts of Linear Model

1.3.1 Emission of CO2

Today, the textile industry emits 1.2 trillion tons of CO2 annually, more than combined
international flights and cruises. The fashion sector itself accounts for 5 % of global pollution
as part of the garment industry. They arise during the production and transportation phases
additionally no proper care is taken while sourcing and processing of raw materials. There
are techniques which help to reduce the carbon footprint, but the companies tend to settle
down for a much cheaper alternative.

1.3.2 Water Consumption

Cotton planting and harvesting involves an enormous amount of water, varying between 3.6
and 26.9 cubic meters of water per kilogram of cotton. Even a low value corresponds to 25
bathtubs of water to produce one kilogram of cotton, besides this water is also widely used
in the textile production process. Almost all colors, specialty chemicals and finishing
chemicals are added to the textile substrates of the water bath. In addition, most of the
preparation steps (Step 3), including scouring, bleaching and mercerizing, use aqueous
systems.

1.3.3 Microplastic

The most widely used commodity in the fashion industry today is polyester. It is a synthetic
material, like nylon and acrylic. When the finished clothing is washed (Step 3), due to their
size the released microfibers could partially pass through wastewater treatment plants
(WWTPs) and enter the oceans directly. Recent studies have shown that synthetic clothing
contributes almost 35% to the global release of primary microplastics into the oceans,
making it the largest source of microplastics.
The linear model's "take-make-dispose" strategy increases the wastage in a big
stream like the textile industries. The waste is left unused and would overwhelm by hindering
the environment from performing its important tasks. Linear model also promotes increased
use of materials, because of its shortened lifespan linear model enable consumers to
constantly search for new products.
1.4 Closed Loop Model of MUD Jeans

MUD Jeans is a denim manufacturer that embraces the concept of circular fashion in
their production cycle. The business launched a product called "Lease a Jeans" in 2013, a
creative solution to offering guilt-free purchase. In addition to rent, they also allow their
customers to pick the appropriate number of jeans from their online store and return them
after their wear check. Below in the Fig:2 is the closed loop model of MUD jeans which
depicts all the process involved in manufacturing a jean. Here the core part of cycle begins
where the traditional model ends, Once the consumption is over, the customers can either
exchange their jeans for a new pair or can continue to use the same by claiming the
ownership after 1 year. They collect the used jeans and depending on the condition they
either sell it in their Vintage program or recycle the fabric into shredded fabrics and spin
them on a new jean again.

Fig:2 Closed Loop Model- MUD Jeans

1.5 Sustainability in the closed model

1.5.1 Waste Reduction

In contrast to the linear model's ‘take-make-dispose’ strategy, MUD jean's closed-

loop model emulates natural activity where waste is used as feed for the new phase, enabling
it to reduce waste and its corresponding environmental anti-pollution effect, which would
also prevent the various harmful effects caused by poor waste management.
Customers of MUD jeans are obliged to return their jeans at the end of its life cycle. MUD
jeans have two ways to deal with this used jean, either they sell it on their vintage market or
they will recycle it in order to use it as a raw material. The life of pair of MUD jeans docent
end here it simply restarts.

1.5.2 Recycling and Upcycling

The closed loop system benefits from its business model in such a way that there will be
continuous flow of goods, services, and resources along its supply chain. Since it is based
on nature 's concepts and cycles, it offers time and space for the restoration of natural
resources. Plus, by using the product material several times there is no need of constantly
utilizing original raw materials. Not only the materials used, but also the water and energy
required to produce a shirt are significantly reduced. Precisely these resources face a crisis
of scarcity because of activities involved in linear model (constantly pollute water or draw
resources from the soil) we leave a stain on the availability of water and use of energy. Thus,
a circular economy helps to create a regeneration loop for natural resources. Additionally,
MUD jeans offer a vintage program where they sell used jeans pushing the limits of their
upstream process in their supply chain.

1.6 Disadvantages/Risks of Closed Loop Model

1.6.1 Conscious Customers

Customers need to have the understanding towards MUD jeans mission, this business model
requires knowledgeable and conscious customers who understand the importance of
sustainable clothing because the entire business model is based on the concept of guilt free
buying.

1.6.2 Ethics and Values

If other companies jump into the leasing market or offer sustainable low-priced jeans, this
could influence the price of leasing. Not everyone has the same values for their partners,
they sometimes work with providers that don't have the same values (cheaper substitutes)
providing them the advantage to occupy the market and thereby affecting the MUD Jeans
business.
1.6.3 Revenue Structure

Costs of the product incurred in advance. Costs arise well before the product is sold, in
particular with the leasing models and hence the revenues are recognized at much later
stages. With this type of revenue generation model, effort need to be kept while considering
the leasing price because you need to think way a head about all the risks and then fix a
price.

1.7 System Thinking a way to improve Sustainability

Sustainability is often approached from a disciplinary perspective, with the

consequence that the essential systemic issues causing the problems remain unresolved.
Sustainable management is not only a matter of technology, ecology and waste management
but also involves economic, financial, political, cultural, and ethical aspects. It is becoming
increasingly necessary to optimize the entire processes and systems rather than single
components. This "system thinking" is at the heart of the circular economy concept, which
is aimed at arranging material and commodity flows in cycles in such a way that no resources
are wasted and the amount of waste is reduced sharply. At MUD jeans, Systems Thinking is
at the core of their operations. They cannot compromise the quality standards that they
maintain when developing jeans, i.e. instead of delivering quality and showing responsibility
towards the surroundings, if they chose to adopt some cost-cutting methods, MUD jeans
would definitely gain some advantage over the linear model, but they did not choose to do
so.

1.8 Revenue Structure of MUD jeans

1.8.1 Sales of products

This first way of generating revenue is by selling their eco-friendly jeans on the market,
MUD had capped their jeans at an average price of 108 €for a pair of jeans that is similar to
all the other players on the market but has a strategic advantage over them because of their
circular business model.

1.8.2 Leasing

The company offers a new way of buying jeans, that is, the company favors you to rent jeans
at a price of as low as €7.5 with a one-time cost of € 20. It encourages its customers to
purchase jeans through a leasing model by providing them with a free repair and tailoring
service. At the end of the year, the customer had the chance to retain their jeans or exchange
their jeans for a brand-new pair. This leasing model acts as a subscription model that benefits
the company from recurring payments and also a means of retaining its customers.
The additional revenue stream provides a strategic advantage over the linear model. as we
knew, Customers are obliged to return their jeans to MUD, which promotes less use of
resources and minimizes costs. I At some point, they aim to manufacture jeans made from
100% recycled cotton, which may seem too optimistic, but if they do, it will be like making
jeans out of thin air (without any additional raw material) and they don't even need to buy
cotton or fabric again, because whatever they need, they are already receiving it from their
customers themselves.

1.9 Role of Digital Technologies

"Changes are often interpreted and caused by the rise of emerging technologies, the steam
engine powered the industrial revolution and the development of computers, digital media
and microchips launched the 20th century technology revolution" (de Jesus & Mendonça,
2018:81).

The transition into the closed economy is driven primarily by technological expertise
(Internet of Things) and technical solutions (Autonomous robots), particularly as it facilitates
the development of durable and high-quality goods. Moreover, not only are product and
process advances based on technical expertise, service innovations, for example, demand
that technological ability to replace multiple aspects of a leasing system. Another important
technology which enables service innovations as well as other innovations is the availability
of information (The Cloud, Big data analytics) and communication technology which
facilitates economic dematerialization. In addition, technical expertise promotes new
developments in recycling and waste management, which have increased the re-use of goods
by enabling the re-use of different items. As technology capacity is very important for many
eco-innovations, it is a key technology barrier to make the transition to a circular economy.
Often there is a lack of technical solutions, while others are hindered by economic or
business constraints by a realistic application of technology.
An example of one such company who is taking use of the technological innovations is the
Lenzing Group, it’s a multinational company headquartered in Lenzing, Austria, with
manufacturing sites in all major markets. Lenzing produces wood-based viscose fibers,
modal fibers, lyocell fibers with filament yarn used in the textile industry. Their mission is
to produce sustainable fibers by relying on the circular economy to save planets resources.
The Lenzing Group, in collaboration with Textile Genesis, is one of the first organizations
to deliver digital traceability to both investors and customers. Blockchain technology helps
brands and customers to recognize sustainable wood-based fibers in finished clothing or
home textiles during each phase of fiber production and distribution. The technology also
helps customers to test the fabric composition and the underlying clothing supply chain at
the point of sale, simply by scanning the barcode with a mobile device. This extreme
transparency measure by Lenzing shows that they have nothing to hide and with an
impressive use of blockchain technology they managed to develop a sense of trust amongst
their customers.
1.10 CONCLUSION

Sustainability has been a significant phenomenon within the textile industry in recent years.
Consumers are well informed and generally demand environmentally friendly goods in the
textile industry, and therefore sustainable solutions emerged. Manufacturers are profoundly
committed to maximizing opportunities for innovation and to promoting sustainable growth.
Sustainability approaches vary from sustainable projects and the use of new products and
technologies to resource use and recycling optimization. The social and environmental
problems in the global value chain of textiles, however, can only be addressed if
governments, industry and civil society come together.
 2. ECOLOGY AND ECONOMICS

2.1 INTRODUCTION

In recent years, e-commerce has grown enormously, with fast growth rates of up to two digits
in most developing countries. Revenues from online food delivery, for example, are rising
at 7.7% in Germany, according to the Statista Online Food Delivery Report 2019, which has
resulted in a consequent increase in last-mile retail sales. Adding to the steady increase over
time is the impact of the COVID-19 pandemic. Apart from any short-term impact of the self-
isolation and lock-down periods implemented in many countries, the very structure of the
industry will undergo a transformation, accelerating the transition to e-commerce very
quickly. All this will in turn magnify the externalities associated with the logistic operations.
An externality in economics is the cost or benefit involving a third party that has not decided
to pay the cost or benefit. Externalities often occur when a product or service's price
equilibrium cannot reflect the actual costs or benefits for the society in general of that
product or service. Negative externalities arise when a third party experiences a negative
result from the use or output of a good. An example of a negative externality is driving a car,
when you drive a car it causes air pollution and congestion. Both are external costs levied
on other citizens living in the area.
The emergence of more negative externalities in the search for positive externalities is
generally overlooked by logistics companies. This can be realized in the form of increased
production and contribute to economic growth by creating more jobs and taxes. Positive and
negative externalities go together, for example, the growth of the e-business market would
not only boost e-commerce gains, but also generate more jobs (Amazon pays more salaries
for the same working class when compared to its competitors).
In the further analysis, we will look at the negative externalities caused by the last-mile
delivery (last-mile business-to - customer parcel delivery service) of logistics service
providers such as UPS, DHL, Amazon, etc. and analyze the impacts on our society.
In conclusion, we will provide some suggestions for minimizing these impacts and provide
some of the reasons why companies are reluctant to implement them.

2.2 Negative Externalities

As far as transport is concerned, practices have a significant impact on the environment;

there will undoubtedly be clear adverse effects. Unless transport consumers take these effects
into account and do not cover additional costs, instead we are talking about negative
externalities. There are different categorizations when it comes to negative externalities in
Last mile deliveries, they are air pollution, climate change, infrastructure wear and tear, noise
emissions, congestion and accidents. We can broadly divide the negative externalities in to
Environmental and Social impacts. But before we move further let’s understand why
negative externalities occur in the first place, Negative externalities, otherwise known as
social costs, arise because social costs are not commonly included in the production costs.
Generally, production decisions are based on financial data, and most social costs are not
calculated that way. For example, when a company decides to open a new plant, it does not
take into account the costs associated with residents drinking contaminated water that is
contaminated by the plant (Social Cost). As a result, a product which shouldn’t even be
manufactured because the total cost (Private cost + Social cost) exceeds the return value.
The reason why companies fail to understand the concept of negative externalities is that it
is difficult to predict social costs, whether they are producing a product or delivering a
service, there will be social costs involved in one way or another and organizations need to
be aware of them.

2.2.1 Impact of Negative Externalities

The concept of supply and demand (see figure) exists in economics (X axis = quantity, Y
axis = price). Demand is the downward sloping red line or, in this case, the demand for a
product or a service whose side-effect is pollution (e.g. Amazon prime’s one day delivery).
The upward sloping blue line is the cost (in this case cost of service offered). Supply has a
positive slope which means that the higher the demand, the higher the quantity. A
manufacturer should produce more, as their revenue will increase by doing so. Demand is
inversely related to supply i.e. less people would buy a product or opt a particular service
when the price is increased.

Ps: Production cost @

Aggregate Social Cost
Pp: Production cost @
Marginal cost
Qs: Quantity demanded
at Ps
Qp: Quantity demanded
at Pp

Fig 1: Price Vs Quantity, Demand curve

What is special about this graph is that there are two distinct cost curves, one is the social
cost and the other is the private cost. This difference means that there is a negative
externality, hence the producer/service provider incurs an indirect expense imposed on a
third party, In our case more frequent transport, that is to say, instead of providing a long
stop for delivery so that more orders can accumulate resulting in trucks being filled to their
100% storage capacity, a prime one-day delivery pushes the service provider to move the
trucks even though they are not filled to their potential to cause more frequent movement of
vehicles, which in turn causes more pollution.
In other words, production costs are marginal costs of an individual. Personal marginal costs
are greater than aggregate social costs and often reflect the true effects of negative
externalities. It results in producer overestimating the optimal quantity of the product to be
made. Graphically, when social costs are smaller than private costs, negative externalities
arise, and businesses generate more units than is socially desirable. The ideal quantity of
equilibrium representing negative externalities is Qs, but firms usually produce at Qp.

2.2.2 Environmental Impacts

Considering the high number of vehicles, the high distribution rate and the amount of
transport, in towns, the transport issues can be compounded, in particular for last-mile
carriages. Empirical evidence also shows that 25 % of total CO2 and 35% of NOx out of
whole transport sector is via last-mile delivery. All the adverse effects of running a vehicle
can be clubbed with the negative externalities of last-mile delivery, For example, smoke
from vehicles pollute breathable air and contributes to chronic respiratory illnesses,
pulmonary cancer, etc. as all these consequences are not immediate but have a long-term
influence on society, this must be discussed with utmost importance and need to be dealt
immediately.

2.2.3 Social Impacts

According to the European Science Foundation, Social impact is defined as the “contribution
to community welfare, quality of life, behavior, practices and activities of people and
groups”. First, it reflects on how the rise in e-commerce has contributed to the changing
customer habits and attitudes. Even though the goods needed by the customer is within the
walking distance he/she is not motivated to go into the retail and buy, instead he/she just
orders it online, (Poor waste of paper, plastic, time and service). People are developing these
kinds of behaviors subconsciously. Moreover, the main challenge with last-mile logistics are
that customers often miss out on deliveries requiring additional journeys, which means more
traffic, noise, emissions and costs for logistics firms.
2.3 Suggestions

To reduce the environmental impact of last-mile deliveries in cities, a general reduction in

the consumption of goods is needed. But the current-trend forecast point to an entirely
opposite behavior. Having said that, if the goal is to reduce the effect on the environment,
any coming solution should involve a technological advancement.

2.3.1 Innovative Vehicles

Electric, hybrid and Fuel Cell Electric Vehicles (FCEVs) are technical advances capable of
mitigating externalities: they have positive effects on emissions of the atmosphere, noise and
are mature for market. Automobile companies like Tesla, Ford and Hyundai have been
rigorously competing in the todays market, Tesla may soon build a battery which can last
for 1 million miles over the course of its life span. Apart from advancements in electric
vehicles, logistic operators like DHL and UPS have been testing drones and autonomous
robots to fulfill their last mile delivery needs. UPS was granted a Federal Aviation
Administration License on October 2019, becoming the first organization to operate a remote
drone network in the United States. The initial phases of research to provide medical
assistance to hospitals have been completed and UPS is expected to finalize the package
distribution product by 2020. UPS is expanding its operation and using such innovative
technologies to create a huge footprint for digital freight delivery. While these concepts
require a number of tests and trails before they are integrated into the network, UPS is not
far from reaching its customers via drones.

2.3.2 Proximity stations or points

The use of nearby proximity stations or local points is a creative strategy to improve delivery
efficiency over the last mile, in particular for the distribution of small and medium-sized
goods. This strategy is based on the use of a warehouse(depot)where goods can be stored if
the customers are not at home. The goods are stored in the warehouse(depot) until they have
been picked up, thus eliminating the possibility of unsuccessful delivery. This approach
leads to both economic and environmental benefits. Furthermore, an innovative idea of pick-
own-parcel (pop-station) was proposed, the new plan is based on the use of ICT stations for
parcels and crowd staff to boost deliveries over the last miles. A certain amount of money
will be paid to a worker for delivery based on his/her historical path patterns' additional
travel costs. The goal is to distribute all parcels in the pop-stations to the most convenient
staff in order to reduce the total reward paid by the logistics companies.
2.3.3 Laws, Regulations and Fines

The most popular method of reducing externalities, in particular pollution, is to enforce

regulatory limits and policies on the number of externalities generated. One of the most
successful ways of alleviating externalities and creating a sense of obligation towards the
parties is to enforce penalties and fines on those parties who set externalities above the
defined limit. Although this technique is a quick and easy solution to adopt, it requires all
organizations to reduce their externality to an appropriate level, otherwise the strategy would
not be successful.

2.3.4 Sustainability, A way of eliminating Negative Externalities

Eliminating negative externalities and being sustainable are closely related, being
sustainable develops a sense of responsibility towards our surroundings. UPS is doing a great
job when it comes to being sustainable, Proper waste management: use of biodegradable and
reusable products, UPS in partnership with Teracycle has unveiled a new system to reduce
the use of single -use product packaging .This groundbreaking method , known as Loot,
provides a range of goods directly to customers. Packages do not come in a carton box, but
in a custom tote that is durable and can be used repeatedly. The tote material is then stored,
washed, refilled and re-delivered for distribution. The use of recycled packaging and
cardboard boxes is an exciting step forward.

Companies often try to avoid negative externalities, They try to be in compliance with the
rules and regulations as it would reduce their operational costs, but sometimes they are
unwilling or hesitant to do so, whether it’s for gaining additional revenues or to meet their
customer expectations i.e. with the case of delivery time, its getting reduced day by day,
countries like China already had a Same day delivery option where customers receive their
products before the day end. Customers keep on pushing the limits of their logistic providers,
from receiving parcels with in a week of placing an order to receiving the product within the
same day, Ecommerce and logistic providers had come too far in reaching their customer
expectations.
2.4 CONCLSUION

At present, with ongoing changes and rapid market adaptation, it is impossible to deny that,
in order for a company to grow successfully, it is necessary to know all its possibilities and
boundaries. A company submits its offer with regard to its costs and a reasonable profit, so
that it can withstand a competitive battle.
What the company should also take into account is the factor of negative externalities, which
are sure to have an impact. They interfere with the company's life every day. It is difficult,
but not impossible, to counteract these pitfalls. The company must be prepared to deal with
any problems that may arise. Although it is difficult for companies to prepare for something
that may not even happen in the first place, they should at least try to minimize the social
costs that lie in their hands.
 3. INTERNATIONAL LAW TRANSPORT POLICY &
LOBBYING

3.1 INTRODUCTION

When parties from other countries sign an agreement, transactions are governed by
international contract law unless they consent to comply with a contract law of any of the
countries. Contract law is a branch of international private law. Such legislation is often used
as international sales law. International sales contracts are governed by the 1980 United
Nations Convention on Contracts for the International Sale of Goods (CISG). The aim of the
CISG is to provide a contracting system for the international sale of goods. The Convention
is developed with a view to promoting trade between private parties. Historically, merchants
were developing their own kind of international contract law. Traders decided to comply
with their own code for international transactions, despite gaps in cultures, culture and
legislation. Such principles developed into present-day contract regulations.
An agreement is a legal document setting out the rights and obligations of the parties which
enter the contract. There are various types of agreements and they each have their own
purpose. The contract you enter into with any service provider, such as an event manager,
3PL service provider, digital marketer, telecommunications company, internet provider, etc.,
is referred to as a service agreement.
A service agreement is a contract between a service provider and its customer/client which
is legally binding. The Convention clearly stipulates each party's rights and duties. It
describes the relationship between the parties, sets the expectations and addresses how to
handle the situation when things went wrong. A service agreement specifies the types of
services offered by the provider, how are they offered, duration, distribution process,
payment method, and also the conditions by which it may be terminated. A service
agreement is an important type of trade agreement that needs to be carefully drafted to cover
all the important clauses that specify the terms of the contract.

3.2 Key Clauses of an International Service Agreement

3.2.1 Clauses aimed at maintaining service provider and client integration

• Engagement Clause
The key provision that a service agreement must have is the provision related to
commitment. You can hire a service provider as an employee, or as an independent
contractor. An employee and an independent contractor have different rights and duties. It
is important to establish a clear commitment when drafting an Agreement.
Employees are entitled to unique legal entitlements such as workplace pension payments,
etc. Whereas a contractor is an individual company manager, so no workplace benefits are
favored towards them.
• Term and Duration
The next clause to be applied to a service agreement is the contract term. In other words, it
states the starting and ending of a service agreement. It is necessary because the duration for
which a contract will be valid is clearly stated here.
• Dispute Resolution Clause
Any conflict, issue or allegation arising out of or relating to this contract, including its
meaning, understanding, results, violation, termination or invalidity, shall eventually be
resolved under the predefined rules set in a contract, These rules are from any of arbitrators,
one such example is the rules formed or defined by UNCITRAL.
• Force Majeure Clause
It is usual to witness a Force Majeure clause in most of the service agreements, This clause
enforces a binding relationship between both the parties in times of earthquake, storm,
emergency, fire accident, industrial strike, or other obstacle that proves beyond the control
of the affected party. In the event that Force Majeure occurs in relation to one of the parties
affecting, or possibly affecting, the performance of any of its obligations under the contract,
it shall inform the other party of the nature and duration of the circumstances and their effects
on the ability to fulfill them within a reasonable period of time.

3.2.2 Clauses aimed at limiting Risks/losses (Service Provider perspective)

• Indemnities Clause
The next major provision to be included in a service agreement is the indemnity clause. This
clause functions as a safeguard against any loss or damage. Within a service agreement, an
indemnity clause is included to resolve any condition that results in harm during service
delivery. Mistakes do occur at contract time, which is natural. The indemnity clause states
that no liability will be held by a business that is the result of an act of a contractor during
the period of the agreement. The Supplier shall not be held liable to the Customer for any
loss, injury, Costs or other compensation claims arising out of any material or Instructions
provided by Customer.
• Liability Clause
This clause either limits a party's liability to the contract or excludes it. This clause has many
variations; a well-drafted liability clause can act as a shield protecting the business from
significant damages or losses. Before drafting this clause, consider what and what kind of
protection you need to satisfy.
 • Representation and Warranties
A service provider, in most cases be recruited based on their experience, qualifications and
credentials. Yet what happens when the service provider doesn't deliver on the expected
results? A formal agreement and a warranty clause will give you the answer. The provision
should state that the arrangement has been entered into regarding the service provider 's
representation and warranties. Failure to achieve the result is a material breach of contract
and must be compensated.
Entering a service contract is a normal business scenario but it is important to ensure a robust
service agreement is in place. The clauses mentioned above are the bare minimum for any
international service agreement, and the activation of those clauses will help both parties to
be legally secure while drawing up a service agreement. In a further analysis, we will discuss
some of the key financial & legal issues facing the automotive industry and provide solutions
on ways to mitigate them.

3.2.3 Legal issues

• Third-party Indemnity
Insurance firms only underwrite part of logistics ties, such as property insurance and freight
insurance, but do not cover the entire logistics process. Only logistics firms can bear many
of the logistics risks themselves. Modern logistics involves transportation, warehousing,
shipping, storage, handling, and other connections, with contracts for each component. In
addition to this, there are no applicable laws and regulations but only Contract Law
concerning the collection and dredging of ports, space booking and storage, customs
declaration and inspection, issuance, and distribution of relevant documents.
• Compliance Risk
To escape financial and legal penalties, Supply chains must abide by the laws and regulations
of the country in which you work. Modern slavery, particularly in developed nations, where
workers may be forced to work under unethical and unlawful conditions, is one form of
enforcement risk faced by many organizations.
• Regulatory Issues
Such regulatory flexibilities which shift overnight present a challenge to the automotive
industry. Reason is there are many vendors and automotive makers who are tied to the nature
of particular vehicles so to respond rapidly to these regulatory developments may be a
difficult problem.

3.2.4 Effective methods of Improvement

• Strengthening the Insurance in Logistics

Insurance is an essential guarantee in the Logistics settlement of various disputes. Logistics
companies may add theft liability insurance, non-delivery liability insurance, miscarriage
loss insurance, distribution processing and packing liability insurance according to their own
risk situation. The most widely used way of avoiding risk to market participants in
international trade is through commercial insurance. Logistics firms can easily pay for the
damages incurred by post-insurance accidents and recover from insurance firm. this
facilitates the 3PL's ability to avoid risks.
• Being active in rulemaking process
The rulemaking process is a great way to tackle the troublesome portions of a particular
regulation, especially if they impact your business negatively. Regulations are continually
being revised to incorporate new emission control technology and equipment types or to
enforce state emissions reduction plans. Rulemaking actions appear to be listed on regulatory
agency websites, which are almost always available to the public. Every company has the
need to constantly update themselves regarding all the new regulations to be in compliance.

3.3 Advantage of taking legal action in Europe

The EU's Online Dispute Resolution Framework ("ODR") entered into force on 15 February
2016 under EU Regulation No. 524/2013. To online traders selling goods / services to
customers through a website or other electronic means, the ODR makes it compulsory to
provide an easily accessible electronic connection to the EU ODR website on their sales
page, as well as to provide customers with a direct contact e-mail address. The goal is to
provide a simple low-cost method of settling contractual disputes involving provided goods
or services, without the parties needing to go to court. Additionally, you may make a claim
against a person, company or business located in another EU country for a maximum value
of €5,000 by using the European Small Claims Procedure. You can, for example, sue for a
defective product you have purchased in another EU country or buy online in another EU
country and the fun part is you don’t need a lawyer to make this lawsuit.

3.4 TIR Convention (Transports Internationaux Routiers)

The TIR Convention on International Goods Transport Under the TIR Carnets is a
multilateral treaty signed in Geneva on 14 November 1975 on the simplification and
harmonization of administrative formalities for international road transport. Under the
guidance of the United Nations Economic Commission for Europe (UNECE), agreements
have been signed. As of December 2018, there are 76 Parties to the Convention, including
75 States and the European Union.
The TIR procedure allows goods to travel across foreign borders under customs control
without paying any customs duties or taxes normally required at the time of importation (or
exportation). Custom carnets, which often offer a financial guarantee for the payment of
duties and taxes, transfer goods from the customs office of departure in one of the countries
to the customs office of destination in another country.
The TIR Convention lays out an internal tariff transit scheme for the largest possible flow of
goods:
• In cars or sealed containers.
• From one country's customs departure office to another country's customs office.
• without long and time-consuming intermediate border controls.
• while offering the requisite protection and guarantees to customs authorities at the
same time.
T&C of TIR Convention lead to following changes in Truck Transport:
• No physical examination (in principle) of goods in transit.
• No formal system of guarantees.
• No national documentation and control scheme for the customs required.
• Effective monitoring procedures for in-transit goods.
• Boom in trade industry.
• Minimum border procedures.
• Delays at borders minimized.
• No restriction on transport modes.
• Minimized transportation costs (lower costs for export and import).

3.5 Warsaw Convention

This Convention, commonly referred to as the Warsaw Convention, is an international

convention which governs international liability for the international carriage of persons,
packages or goods by aircraft. This Warsaw convention was approved in 12th October 1929
and it unified an important sector of private air law. Over the course of the years several
amending protocols, new instruments, laws and regulations have been added that are called
the Warsaw system over accordance with the original conventions. It is now regulated by
the International Civil Aviation Organization (ICAO), regarded as being a significant
influence in the growth of international air traffic. It stayed in action until the Montreal
convention came into place which was signed in the year 1999.
T&C of Warsaw Convention facilitated the following key changes in Air travel:
• Defining the extent of the convention's international carriage.
• Solidifies guidelines for transport documents.
• Establishes rules and sets limitations on air carrier liability.
• Sets out professional integrity laws.
• Requires carriers to carry out checked baggage inspections.
• Establishes a two-year limitation period when you are claiming against any losses.
 3.6 CONCLUSION

An era in which people trust a piece of paper rather than a person, the Agreements and
Contracts are the key to moving forward in any relationship. An important factor in drawing
up a good convention is that it should have information on its next renewal, which provide
the parties concerned with the necessary planning and response, and it also limit the time-
consuming process of monitoring and updating all the terms of an agreement.

BIBLIOGRAPHY

➢ 7a08238f81841eae0c7799c9abf23575153e.pdf. (n.d.). Retrieved 20 August 2020, from

https://pdfs.semanticscholar.org/1154/7a08238f81841eae0c7799c9abf23575153e.pdf

➢ Circular Economy in Textiles and Apparel: Processing, Manufacturing, and Design.

(n.d.). Retrieved 20 August 2020, from

https://www.scribd.com/book/392571776/Circular-Economy-in-Textiles-and-Apparel-

Processing-Manufacturing-and-Design

➢ Circular-4.jpg (788×759). (n.d.). Retrieved 15 August 2020, from

https://cf.motif.org/wp-content/uploads/2019/03/29150110/circular-4.jpg

➢ De Falco, F., Di Pace, E., Cocca, M., & Avella, M. (2019). The contribution of washing

processes of synthetic clothes to microplastic pollution. Scientific Reports, 9(1), 6633.

https://doi.org/10.1038/s41598-019-43023-x

➢ Emprechtinger, F. (n.d.). Sustainable solutions in the textile industry. Retrieved 13

August 2020, from https://www.lead-innovation.com/english-blog/sustainable-solutions-

in-the-textile-industry

➢ Ending the era of dirty textiles. (n.d.). World Economic Forum. Retrieved 20 August

2020, from https://www.weforum.org/agenda/2019/09/ending-the-era-of-dirty-textiles/

➢ Mud Jeans: A Circular Economy Leader In The Apparel Industry. (n.d.). Brilliantly

Made. Retrieved 20 August 2020, from

https://www.brilliantlymade.com/blog/apparel/mud-jeans-a-circular-economy-leader-in-

the-apparel-industry

➢ MUD Method | A Circular Journey | Who We Are. (n.d.). Mud Jeans. Retrieved 20

August 2020, from https://mudjeans.eu/about-mud-method/

➢ Muthu, S. S. (2016). Sustainability in the Textile Industry. Springer.

➢ Online, F. (n.d.). Schlimmer als Flüge und Kreuzfahrten: Mode-Wahn zerstört Umwelt –

wie wir das ändern. FOCUS Online. Retrieved 15 August 2020, from

https://www.focus.de/perspektiven/nachhaltigkeit/nachhaltiger-leben/nachhaltigkeit-

mode-wahnsinn-zerstoert-umwelt-wie-wir-das-aendern_id_10964545.html

➢ Pioneering a lease model for organic cotton jeans. (n.d.). Retrieved 20 August 2020,

from https://www.ellenmacarthurfoundation.org/case-studies/pioneering-a-lease-model-

for-organic-cotton-jeans

➢ Textile Industry & Sustainability. (n.d.). Study.Com. Retrieved 13 August 2020, from

https://study.com/academy/lesson/textile-industry-sustainability.html

➢ Wijnen, R., & Groenestege, M. T. (2020). A Circular Economy Business Model Case.

34.

➢ Externalities. (n.d.). Economics Online. Retrieved 24 August 2020, from

https://www.economicsonline.co.uk/Market_failures/Externalities.html

➢ Externalities in Depth | Boundless Economics. (n.d.-a). Retrieved 24 August 2020, from

https://courses.lumenlearning.com/boundless-economics/chapter/externalities-in-depth/

➢ Externalities in Depth | Boundless Economics. (n.d.-b). Retrieved 24 August 2020, from

https://courses.lumenlearning.com/boundless-economics/chapter/externalities-in-depth/
➢ Kassai, E. T., Azmat, M., & Kummer, S. (2020). Scope of Using Autonomous Trucks

and Lorries for Parcel Deliveries in Urban Settings. Logistics, 4(3), 17.

https://doi.org/10.3390/logistics4030017

➢ Kopcani, J. (n.d.). NEGATIVE EXTERNALITIES AFFECTING TRANSPORT. 7.

➢ Negative externality. (n.d.). Retrieved 24 August 2020, from

https://textimgs.s3.amazonaws.com/boundless-economics/negative-

externality.svg#fixme

➢ Pettinger, T. (n.d.). Negative Externalities. Economics Help. Retrieved 23 August 2020,

from https://www.economicshelp.org/micro-economic-essays/marketfailure/negative-

externality/

➢ Ranieri, L., Digiesi, S., Silvestri, B., & Roccotelli, M. (2018). A Review of Last Mile

Logistics Innovations in an Externalities Cost Reduction Vision. Sustainability, 10(3),

782. https://doi.org/10.3390/su10030782

➢ Why the Milkman Model Is the Future of Consumption. (2019, January 25). Longitudes.

https://longitudes.ups.com/why-the-milkman-model-is-the-future-of-consumption/

➢ Why We Cannot Eliminate Negative Externalities Completely – Environmental Science

and Technology. (n.d.). Retrieved 24 August 2020, from

https://eportfolios.macaulay.cuny.edu/est2016/2016/10/27/why-we-cannot-eliminate-

negative-externalities-completely/

➢ 7 Ways to Minimize Compliance Issues at Your Facility. (2017, December 15). Envera

Consulting. https://www.enveraconsulting.com/compliance-roadmap-7-ways-minimize-

compliance-issues-facility/

➢ 8-international-supply-of-services.pdf. (n.d.). Retrieved 22 August 2020, from

https://legacarta.intracen.org/wp-content/uploads/8-international-supply-of-services.pdf
➢ Anonymous. (2016, September 13). TIR (Transports Internationaux Routiers,

International Road Transport) [Text]. Taxation and Customs Union - European

Commission. https://ec.europa.eu/taxation_customs/business/customs-procedures/what-

is-customs-transit/tir-transports-internationaux-routiers-international-road-transport_en

➢ EU Online Dispute Resolution – All Bark and No Bite? (n.d.). Bird & Bird. Retrieved 22

August 2020, from http://www.twobirds.com/en/news/articles/2017/global/eu-online-

dispute-resolution-all-bark-and-no-bite

➢ Going to court: EU Small Claims Procedure & Payment Order. (n.d.). Your Europe -

Citizens. Retrieved 22 August 2020, from

https://europa.eu/youreurope/citizens/consumers/consumers-dispute-resolution/formal-

legal-actions/index_en.htm

➢ Hansen, P. (2006). Overview of the TIR System and its benefits. 23.

➢ International Contracts—Research Guide International Law | Peace Palace Library.

(n.d.). Retrieved 23 August 2020, from //www.peacepalacelibrary.nl/research-

guides/national-law/international-contracts/

➢ Manage Legal Risk in Business and Supply Chain Operations. (n.d.). Retrieved 21

August 2020, from https://www.lexisnexis.com/en-us/products/entity-insight/legal-risk-

in-supply-chains.page

➢ Tips For Drafting Key Terms In A Service Agreement. (2019, November 19). Zegal.

https://zegal.com/blog/post/tips-for-drafting-key-terms-in-a-service-agreement/

➢ Top Legal Issues Facing the Automotive Industry. (2019, September 16). Diligent

Insights. https://insights.diligent.com/legal-compliance/top-legal-issues-facing-

automotive-industry

➢ Warsaw_convention.pdf. (n.d.). Retrieved 22 August 2020, from http://www3.mpifr-

bonn.mpg.de/div/vlbi/geodesy/Docs/warsaw_convention.pdf
➢ What is Warsaw Convention? Definition and meaning. (n.d.). BusinessDictionary.Com.

Retrieved 22 August 2020, from http://www.businessdictionary.com/definition/Warsaw-

Convention.html

➢ Zhu, J. (n.d.). Study on the Effective Methods of Legal Issues of Third Party Logistics

Indemnity in China. 4.