The global pandemic has created disruptions in the supply chain. Many factories are either closed or working at partial capacity and are not producing the raw materials and components needed for the manufacturing of finished goods. For example, Italian factories are closed and not producing fabric which is typically sent to Chinese factories for sewing into apparel.
For finished goods, suppliers and retailers are rushing to ship merchandise already produced and sitting in distribution centers. The next phase may be more challenging as it will become increasingly difficult for purchase orders to be 100% fulfilled. Already some ports in southern California have reported a 20% decrease in volume compared to the same time in 2019 and it is anticipated that shipments into the United States will continue to decline in March and April. There has been no word on port closures or bans on products from certain countries, but this is an evolving situation, and a possibility that should be considered when planning for the future.
The United States has not yet instituted increased documentation requirements for certain products from specified countries, but other countries have already done so. Greece, for example, has imposed additional documentation requirements for imports of Italian cheese.
Numerous parties along the supply chain will feel the disruption. In preparation for when vendors cannot fulfill purchase orders (or similar documents), companies should review supply chain agreements. Purchase order terms need to be reviewed to determine liability for partial or late delivery. Do the agreements contain a force majeure clause and if so, would it be upheld? Who bears the responsibility? Companies may wish to consider adding provisions to address these issues on new purchase orders.
Going into the global pandemic, U.S. companies were already working to diversify supply chains out of China. Now they need to track global shutdowns curtailing production of raw materials, components, and finished goods.
As far as specific medical products from China, the U.S. Trade Representative has recently released two lists of medical products that will no longer be subject to the additional tariffs on Chinese made goods. The products include rubber gloves, plastics used in laboratories, face masks, blood pressure cuffs, and stethoscope covers. Importers of these products can also request duty refunds back to Sept. 1, 2019. The exclusion for these products will expire on Sept. 1, 2020. However, this is only relief from additional section 301 duties, and may not help the supply chain situation.