Int'l Trade Update (27th Edition)
The Chinese New Year came early this year, with the aspirations of an entire country looking forward to a year of economic recovery, a year with hope in what a new trading relationship with the United States might hold. As communities around China prepared for the annual Spring Festival, the Chinese trade delegation was in Washington, D.C. signing, what many called, a historic trade deal with future commitments made by both nations. Unfortunately, as we know now, all of these future promises have been put on hold as Hubei Province, and China indeed, battle the terrible Novel Coronavirus epidemic. As of today, more than 60,000 people are confirmed to have been infected by this terrible virus and no less than 1700 people have passed away. As China continues to valiantly battle the spread of the Coronavirus, its economic impact is increasingly being felt in both China and the United States. As the days and even weeks pass, we believe this economic impact will be felt with even more ferocity. Already, the auto industry is preparing for significant disruptions and companies have begun evaluating their strategies around the inevitable delay in returning to normalcy.
As the full effects of the virus were being felt in China, the Chinese central government took extraordinary steps to prevent the spread of the virus. When the traditional holiday shutdown drew to an end, the central government extended the holiday layoff and ordered factories to remain on idle. Then, many of the provincial-level governments announced a further extension and restriction for general enterprises, which saw further shutdowns until February 9th or even later. Although some cities have resumed operations and some regions have allowed companies to resume production, the ramp up has been slow to recover as factories are experiencing shortages in their workforce and permission to resume full manufacturing has been delayed in some of the hardest hit regions of the country, such as Hubei Province, which includes Wuhan. Exacerbating this slow craw to recovery for China’s leading domestic manufacturers, the tier 2 and 3 suppliers within China, the freight haulers and the shipping yards have all been hit with labor shortages, uncertainty, and even fear. While most US OEMs are maintaining a stiff upper lip to potential supply disruptions, Chinese OEMs are aggressively realizing the impacts. Volkswagen Group, for example, announced that it was postponing the start of production at its joint venture with SAIC Motor Corp. by another week to February 24.
As the central government and provincial governments evaluate and introduce measures to protect the workforce and prevent the spread of the virus, Chinese companies must also plan for the realities of what looks like a prolonged slowdown or an uneven start-up. Of course, in China, keeping workers at home has significant financial considerations, beyond simply a delay in production. Here to the government has played a role; requiring state-owned landlords to reduce or exempt rents for small and medium-sized enterprises, encouraging non-stated owned landlords to do the same, offering reprieves from government deadlines, like the enterprise tax filing and refunding unemployment insurance premiums, delaying social security contribution adjustments and reducing the employer’s contribution rate on employee’s medical insurance premiums.
In another extraordinary step, the China Council for the Promotion of International Trade ("CCPIT") created an online certification platform on January 26, 2020, allowing companies affected by the epidemic to submit proof of certain facts that establish a force majeure event and excuse performance of contracts. A force majeure event in commercial law terms is also often referred to as an “Act of God,” an “Inevitable Accident,” or a “Perils of the Sea.” As these phrases might suggest, it is an event unintended and unprovoked by the parties to a contract that prevents either or both of the parties from performing their obligations. Most standard terms and conditions within contracts offer some form of force majeure language tucked towards the back of the parties’ agreement, but seldom do parties have the need or the reason to consider this historically significant “life line.” Importantly, however, not all force majeure clauses are the same, and parties would be well advised to consider the exact provisions within their own agreements. One size doesn’t fit all, and often times such provisions obligate the party looking to exercise this option to provide certain notices or mitigate the harm.
除此之外，另一个非同寻常的举措是中国国际贸易促进委员会 ("CCPIT" 或 "贸促会") 于2020年1月26日创建了一个在线认证平台，使受疫情影响的公司可以提交某些事实证据，以证明不可抗力事件和免除合同履行责任。商法条款中的不可抗力事件通常也被称为 "天灾", "不可避免的事故", 或 "海上风险"。正如这些短语所暗示的那样，这是合同双方无意间无端引发的事件，从而阻止了任何一方或双方履行其义务。大多数合同中的标准条款和条件都在当事双方协议的背后提供了某种形式的不可抗力语言，但当事方很少有必要或有理由会考虑在历史上曾经很重要的合同中的"命脉"条款。但是，重要的是，并非所有不可抗力条款都相同，因此，当事双方最好在自己的协议中考虑明确的规定。合同模板并不能满足所有的需求，而且通常，此类条款要求寻求行使此选项的当事方有义务向合同另一方发出某些通知或减轻损失。
Because the exercise of such rights is not linear, parties unable to perform should take any steps necessary to protect their legal rights. CCPIT’s actions in this regard have given an added tool to Chinese suppliers. On February 6, 2020, CCPIT issued China’s first force majeure certificate of Novel Coronavirus to an auto parts manufacturer in Huzhou, Zhejiang Province, where the manufacturer was unable to deliver products to its oversea clients on time due to the outbreaks. The Deputy Director-General of CCPIT, Commercial Certification Center said that force majeure certificates have been recognized by more than 200 countries and is widely accepted overseas. It is unclear, however, what significance this certificate offers in the way of protection in the United States. Nonetheless, given the developing situation in China, those impacted should evaluate this government-sponsored certificate as it could further an argument by the supplier that the Chinese government has determined that the facts necessitate such extraordinary action.
A force majeure certificate can be applied online through http://www.rzccpit.com/. An enterprise will need register an account with CCPIT first, start an application for 'Factual Proof of Coronavirus Outbreak' (新冠疫情事实性证明), and upload the following documents to CCPIT's web portal in PDF version:
1. Certificate/announcement issued by the government or agency where the company is located; 企业所在地政府、机构出具的证明/公告;
2. Notice/certificate on delay or cancellation of sea, land or air transportation; 海陆空相关延运、延飞、取消等通知/证明;
3. Export sales contracts, cargo booking agreements, freight agency agreements, customs declarations, etc.; and 出口货物买卖合同、货物订舱协议、货运代理协议、报关单等; 以及
4. Other available materials. 其他所能提供的材料。
The regular processing time for a force majeure certificate application takes five (5) business days. An applicant can choose to expedite the application within one (1) to three (3) business days. Please see here for details in applying a force majeure certificate.
Dickinson Wright Law Firm
About Mark: Mark Heusel is an experienced commercial business attorney and serves as the Chair of the Firm’s China Practice Group. He has more than 25 years of experience in representing multi-national companies in the manufacturing, retail and automotive industries. Mr. Heusel’s experience includes advising foreign companies in the areas of foreign direct investment in the United States, business formation, Greenfield investment, international trade, commercial transactional matters, and dispute resolution. In his role as International Practice Group Chair, he serves as general counsel to companies throughout Asia and Europe, directing the firm’s resources to better assist his clients.
Mr. Heusel began his legal career by representing clients in a variety of litigation matters in state and federal courts and in various domestic and international arbitral forums. With more than 20 years of litigation experience, particularly in the areas of contract disputes, supply chain litigation, employment matters (including discrimination and wrongful discharge litigation), commission disputes, personal injury, and real estate and land use litigation, he gained invaluable first-chair experience in understanding and recognizing how a company’s success may be impacted by business disputes. Leveraging this experience, Mr. Heusel focused his career on assisting foreign companies entering the North American market. His interests and passion for helping companies in a proactive manner led to his current position as International Practice Group Chair, where he now has the opportunity to advise and counsel clients entering or expanding their businesses in North America.