Impact of COVID19 on International Supply Chains
COVID-19 is effecting global supply chains and having an impact on all aspects of international trade. Lorna Bolton, Director of Greenaway Scott, shares some practical considerations for businesses to consider.
Businesses have experienced these effects since the earliest cases of the virus in Wuhan, as China is so integral to supply chains across the world. On 17 March 2020, the United Nations estimated that the world economy would decline by 2% as a direct result of COVID-19, costing the world economy $1 trillion. This is thought to be a conservative estimate.
The UK Government has introduced the emergency Coronavirus Bill, and businesses should make themselves aware of how this will affect trade in the coming months until the end of this pandemic is in sight. Importers and exporters, both for goods and services, should be thinking about what pro-active steps they can take to mitigate the impact of the virus on their business.
Below is a non-exhaustive table of steps that businesses should consider taking to mitigate the impacts of COVID-19 on their supply chains. It has been split into actions that can be taken now, and actions that should be considered for the future:
Ocean and Air Freight Impacts
Whilst freight and supply chains from China are restarting, the rest of world is now being impacted as the virus has gradually spread and nationwide lockdowns are being ordered. Freight and vessels are still moving, with capacity, but can be subject to cancellations. Ocean freight is still moving around the English Channel and mega vessels are not making as many port calls as they otherwise would. Where vessels have successfully ported, they may remain inactive for extended periods of time due to the unavailability of personnel to accept delivery and move freight for onward transmission.
There has been a move from passenger aircraft to freight-only aircraft. Air freight rates have generally been increasing from around $1.50-4.50 per kg to $6-7 per kg, but these rates are dependent on territory.
- Businesses should make use where possible of track and trace technology to see where their goods are at all times, and plan in advance of cancellations. Arrangements and back-up plans should be made for the onward transmission of goods to get them to their destination. Businesses should also consider country-specific port requirements in light of the virus, and see if their goods are on affected vessels.
- It is important for importers and exporters to check the goods’ airport of arrival and departure to see if rates have changed, there have been cancellations or any other effects of the virus on the relevant air freight.
Essential vs Non-Essential Businesses
The UK Government has provided a list of businesses and premises that must remain closed for the time being. The following businesses are considered essential and are exceptions to this list:
- Supermarkets and other food shops
- Health shops
- Medical services
- Pharmacies and chemists
- Veterinary surgeries and pet shops
- Storage and distribution facilities, including delivery and drop off points.
- Food delivery and takeaways
- This list is not exhaustive and businesses should take a close look at the Government guidance to see if and how closures will affect their supply chains, and if they are in a chain that supplies to an essential business.
- Workers in manufacturing are being encouraged to go to work as normal where they cannot work from home and are fit to do so, whilst continuing to observe public health guidelines in relation to maintaining a distance of at least two metres from others and regular hand-washing.
Medical and Protective Equipment
Some countries have implemented national controls to restrict the export of medicines and medical equipment, such as face masks, gloves and protective clothing.
The EU Commission has discouraged Member States from adopting measures which would limit intra-EU trade, although it has introduced a temporary export ban on exports of certain medical protective equipment to destinations outside the EU.
- If your business provides medical or protective equipment, consider where the customers are based and whether or not there is a temporary ban on exports of certain medical protective equipment.
- The World Customs Organisation has advised exercising extreme caution when purchasing critical medical supplies from unknown sources, particularly online.
The UK Government has also provided a notice on what constitutes a key worker. These include:
- Those involved in food production, processing, distribution, sale, and delivery, as well as those essential to the provision of other key goods such as hygienic and veterinary medicines;
- Those who will keep the air, water, road and rail passenger and freight transport modes operating, including those working on transport systems through which supply chains pass;
- Those involved in utilities, communication and financial services.
Now, more than ever, the importance of communication with customers, suppliers and stakeholders is in sharp focus, as well as the forging or maintenance of relationships with all parts of the supply chain. It takes just one part of the supply chain to be disrupted for the whole supply chain to be impacted.