The impact of the Coronavirus / Covid-19 outbreak in China is being felt on a global scale. The World Health Organization (WHO) is following the case closely and making recommendations which are largely adopted by Australia’s Chief Medical Officer.
At the time of writing, the following disruptions are confirmed that will or may impact those doing business with China.
Chinese workers were advised to stay home after the Chinese New Year celebrations. Previous advice suggested that those in Shanghai, Beijing, Chongqing, Anhui, Fujian, Guangdong, Jiangsu and Zhejiang will return to work on 10th February, while those in Hubei province are currently expected to return on 13th February. Updated advice now suggests a return to work date of 17thFebruary for many cities. Shenzhen and Ningbo remain closed and it appears that provinces, cities and corporations are deciding on their own return to work dates in the best interests of their workers. The feeling within China is that a return to full work capacity is likely to be a drawn-out process and may extend into March. Once full capacity is reached shipping space is likely to be tight as multiple shipments are readied for departure and equipment harder to source.
Our partners in China are working closely with local truckers regarding route closures and road transportation restrictions. Many Chinese provinces are restricting access to trucks and drivers registered in other provinces, however services within provinces are largely unaffected although limited by capacity. The inability to send truckers into neighbouring provinces is heavily affecting usual service and adding to already significant delays.
Maersk Line Ningbo has requested all staff work from home until the end of February. Businesses in general have asked anyone with remote access to work from home.
Advice from our Shanghai agents is that few businesses have been able to return to work. As the Chinese Government continues to limit the spread of the virus, anyone requiring access to offices must show ID and have their temperature recorded. Most businesses are continuing to operate working from home. Manufacturers are facing delays with production as raw materials are still not able to be transported cross-province. Trucking companies are currently awaiting advice from the Government regarding return to work and how to obtain the required “resume work permit”. The general consensus among many businesses is that it may be another two weeks before any clear picture is available regarding full resumption of business while China still works to contain the virus.
The slower than anticipated return to work is expected to have significant downstream effects on global production. Whilst China’s production of manufactured goods is affected, so too is their production of components used in global manufacture. Factories elsewhere are expected to halt or stall production pending delivery of materials from China. Companies should be looking to review their supply chain to ascertain their exposure and where possible look to source materials from other markets.
Delays in production and carriage of goods could lead to claims for damages under existing contracts. The question may then be asked whether the coronavirus outbreak is a ‘Force Majeure’ event that would allow contracts to be cancelled without penalty. As discussed above, suppliers globally may find themselves unable to meet the terms of a contract, not just those in China. Contracts entered into before the outbreak should have provisions reviewed to determine any exposure faced.
Congestion at the ports of Shanghai and Xingang (Tianjin) is further exacerbated by a shortage of dock workers. Loading and unloading of cargoes is currently afftected and the backlog will take some time to clear once the full workforce returns. Export cargo to these ports should be re-routed or delayed where possible.
Reports from our Chinese partners suggests that full service of COSCO’s A3S service from South China will recommence in week 11 (March 9 from Shekou). An indication at least that business is starting to return to normal.
In addition, it is currently expected that many provinces in China will return to work on 24th February. Despite this, the landscape is ever-changing and this date is still liable to change as late as the morning of the 24th. Local governments have imposed restrictions on businesses for the return or their workers, all of whom are expected to have safety processes in place as well as fulfilling reporting and audit requirements. Further updates will follow as more news becomes available.
Vessels sailing from China to Australia after 1st February 2020 will not be allowed to enter port within a 14-day window of last being in China. This means for voyages taking 12 days, the vessel will have to anchor offshore for 2 days before being permitted to berth. Pilots are permitted to join vessels before the 14 days have elapsed but are advised to wear personal protective equipment (gloves and mask. If any single member of crew joins the vessel in China, the entire crew must serve the 14-day quarantine period. Ships are already required to make a health declaration as part of their Pre-arrival Report, and some ports and State Authorities have added the requirement for ships to report their last five ports and the date that any crew members visited China. This will add to delays and increase port congestion.
Some shipping lines had already planned blank sailings from China resulting from the Chinese New Year shut-down period (last week and this week from Shanghai, Xiamen and Ningbo). Another blank sailing has been announced for 17th February from Shenzhen. It is possible that further blank sailings will be scheduled due to the impact of the Coronavirus outbreak.
Due to the unpredictability of the virus and the fluidity of each Government’s response, the Australia Peak Shippers Association (APSA) has agreed to waive the need for 30 days notice to be provided to shippers informing them of blank sailings.
A recent report confirmed that a vessel from China to North Europe with a capacity of 23,000 TEU, sailed with only 2,000 TEU on loaded. Given similar reports form most carriers it has been estimated that the financial impact of coronavirus on the shipping lines could be as high as USD300-350 million per week as a direct result of the demand shortfall of exports from China. It is not unreasonable to suggest that shipping rates will increase along with demand once manufacturing in China gets back into full swing.
Qantas has suspended its two direct services to mainland China (Sydney-Shanghai and Sydney-Beijing) from 9th February until 29th March 2020. Resumption of Shanghai services will be determined on advice from WHO and Australia’s Chief Medical Officer, whilst the Beijing service was scheduled to end on 23rd February and will instead now end on 9th February.
Many airlines have cancelled or reduced passenger services to China, with some reports suggesting some two dozen airlines affected. This has necessitated cargo being channelled to freighter services which are already operating to reduced schedules. It is expected that there will be a rush for space once full production resumes in China.
Many shipping lines are electing to hold transhipment cargo destined for China at the port of Singapore until full operations resume in China. This will help to minimise congestion in the Chinese ports and allow port operators to clear the backlog of export cargo before volumes of import cargo are received.
There are also reports of a shortage of reefer plugs for export containers at Shanghai and Xingang ports. If you have any upcoming reefer exports these should be delayed if possible. Maersk has announced a congestion surcharge effective from 7th February 2020 of USD1,000 per container to cover the costs of re-routing. Yang Ming has also announced per container surcharges as follows of USD1,000 into Xingang; USD600 into Shanghai and Ningbo; and USD300 into Hong Kong or Macao.
OOCL has also advised that additional charges will be applicable for reefer containers arriving into Shanghai, Xingang or Ningbo. Rather than speak in monetary terms however, they have referred to Bill of Lading clauses 15, 17 and 18 which state that all extra costs for storage, demurrage, power, monitoring, plugging and unplugging at the alternative discharge port are for the account of the customer.
Concerns remain relating to delays in clearance at ports and airports due to lack of commercial and regulatory paperwork from suppliers and Government departments alike.
ChAFTA Certificates are currently not being issued due to Government office closures. Refund provisions remain available provided the certificate is produced after export and within 12 months of import (as per ChAFTA article 3.14).
Industry associations raised concerns with Department of Agriculture (DoA) regarding possible delays for consignments that cannot be released from Biosecurity control due to minor documentary amendments being required and not able to be obtained from the Chinese Authorities. Advice received from DoA is that as the issues and delays are only anticipated at this stage, the Department will not be revising any of its documentary policies to accommodate. If consignments are received that will be held pending documentation, movement of goods to an appropriate class of Approved Arrangement site should be requested.
If you have any shipments en-route to Australia and are missing documentation, please contact your Key Account Manager to discuss options.
A fact sheet has been issued by Department of Health for border workers with concerns about handling and destuffing imported goods from Hubei province. The fact sheet confirms items such as symptoms of the virus and how to minimise risk of exposure or contracting the virus. This fact sheet has important information for the wider community as well and is worthwhile reading.
Further information can also be found at the Department of Health’s website www.health.gov.au.
The Department of Health continues to monitor the situation along with WHO, ready to act as the need arises.
There is currently a level four “do not travel” advice warning in place recommending Australians do not travel to China.
Heightened border measures are in place which include restrictions on passengers entering Australia from China (excluding citizens, permanent residents and their families).
New questions have been added to the Traveller with Illness Checklist (TIC) for biosecurity officers to administer and attempt to identify passengers arriving that have been exposed to Coronavirus.
As the news of the outbreak is ever-changing, Australia’s response remains fluid. Henning Harders will continue to update stakeholders as news develops.
Please contact your Key Account Manager or Harders Advisory for further information.