In light of the ongoing and increasing impact of COVID 19, here we summarise a few relevant issues in the international supply chain, including at our national border.
|View previous articles on the effects of COVID-19 in the international supply chain here and here.
We have also written on the impact of COVID 19 on the domestic supply chain which focusses on the “essential” characterisation of the domestic freight and logistics industry enabling the industry to continue to provide services notwithstanding various restrictions being imposed by the State governments on movement across State borders.
- Many nations have openly committed to maintaining open supply chains despite COVID-19 issues including Australia, Singapore, Brunei, Canada, Chile, Myanmar and New Zealand. Those commitments are of particular significance given that many of those countries have imposed various levels of “lockdown” at their borders and internally within their countries.
- In Australia, the very clear message to industry is that Australia is “open for business” and government and its agencies would do all things necessary to facilitate the trade in goods. In many cases, this is leading to the development of new regulation at speeds unseen in “usual” times. Industry has requested a number of new regulations including for the payment of customs duty and other border charges to be deferred until the economic conditions improve to relieve the burden on importers and others using or selling all goods being imported. At the same time, government and its agencies have flagged severe actions against those seen to be exploiting the current pandemic.
- That commitment is not necessarily shared in all respects throughout the world. For example, a number of other countries have imposed additional export controls on items of Personal Protective Equipment (PPE) such as masks, testing kits, other protective equipment and sanitiser in an effort to preserve those items for domestic use. We have been working with other lawyers throughout the world to map these export controls and other restrictions on trade which are available if needed.
- During a press conference on 24 March 2020, the Australian Prime Minister indicated that there may be actions taken against those considered to be taking advantage of the current demands by stockpiling PPE and related items such as infant formula and either selling them locally at inflated prices or exporting those items overseas. However, the Australian Border Force (ABF) and other agencies have confirmed that no present export controls are contemplated to intervene against legitimate trade. This leaves open actions against the persons dealing with the PPE and related items within Australia. This position has been confirmed in a letter by the ABF to industry dated 26 March 2020. (Read our update on PPE >>)
- The whole range of government agencies and authorities at National and State levels have increased their levels of co-operation and co-ordination to help manage the exigent circumstances. This has included authorisations from the Australian Competition and Consumer for various types of co-operation between competitors in certain industries to deal with the current issues while minimising potentially adverse effects from unreasonable increases in prices and reductions in services.
- The increased demands for PPE has also led to an increased incidence of counterfeit items and fake medicines being produced and moved through the supply chain. Those items both infringe the intellectual property of legitimate producers and are dangerous. The World Trade Organisation (WTO), the World Customs Organisation (WCO) and other national customs agencies around the world are working together to share information to identify, seize the offending items and prosecute those parties associated with these products, their sale and movement.
- The WCO has also established a page for its updates on COVID-19 issues which also includes reference to those tariff classifications which could be appropriate for classifying PPE on their import. The WTO has also established a similar central source of information.
- A number of countries are also considering reductions or elimination of prevailing customs duties and other border charges specifically for PPE in the interests of facilitating the movement of the PPS through the supply chain. For example, even in the current environment of the trade war between the US and China, the US granted China tariff exemptions for imports of Chinese medical products including PPE, even though such items are produced in the US.
- The significant reduction in passenger air services has denied “belly space” for air cargo which is normally an important source of services. As a result, air cargo rates have increased significantly even while there have been delays against normal delivery times.
- Production in China has been increasing as the effects of COVID-19 in China have reduced. This has led to the reinstatement of sea cargo routes towards “normal” levels in and out of China at the same time as a number of additional services to reposition empty containers to reflect reinstated demands.
Importantly, even with all of the challenges throughout the world posed by the COVID-19 and all of the urgent steps being taken to keep supply chains open during the pandemic, it should also be noted that the WTO, the WCO, governments and their agencies continue to pursue goals of trade liberalisation. Negotiations on free trade agreements (FTA) have continued albeit by more remote mechanisms. One example of that work is to be found in the recent bilateral Digital Economy Agreement between Australia and Singapore.
Despite all of this, government, their agencies and the private sector have started planning for the end of the pandemic, how trade can resume and what form it would take. Obviously, that will include a strategic review of the “just in time” supply chain and the value of the reliance on one country over others for supply or demand. That does not mean that parties will be making a decision to “consciously uncouple” from China or the wider Asian region. However it may make a stronger case for the increased use of regional and multi-lateral FTAs to spread the risk.
We continue to work closely with clients, governments, their agencies and members of the private supply chain to help manage the risks arising from the pandemic. Current events have emphasised the need to plan for other major interruptions to the international supply chain and establish strong business continuity plans.
|Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
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