Where and how to get a force majeure confirmation certificate in China

08.05.2022

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On January 30, WHO announced that the new coronavirus epidemic has been added to the list of public health emergencies of international importance (PHEIC). Although the WHO has not recommended a ban on trade and tourist traffic between countries, the pandemic is a very difficult test for export companies and foreign traders.

Companies affected by the new coronavirus infection, unable to fulfill planned international contracts, can apply to the China Committee for the Promotion of International Trade (CCPIT) to provide evidence of the existence of force majeure.

 

How to use and apply for a force majeure certificate?

Force majeure is a clause on exemption from liability for the execution of a contract or the shifting of the terms of the contract in the event of an unforeseen event.

Actual evidence of force majeure from CCPIT is used to reduce or remove liability for violation of the terms of the contract and reduce losses due to the epidemic.

This evidence is recognized by governments, customs, chambers of commerce and companies in more than 200 countries and regions around the world.

 

What should companies that have encountered PHEIC do?

1.Check the existing orders, pay attention to the risks of fulfilling the terms of the contract

It is recommended to sort and evaluate existing orders. If there may be a delay in delivery due to the resumption of work, then you should contact the buyer in time, explain the situation and try to increase the time in writing (e-mail, additional agreement, re-signing of the contract, etc.).

For orders that cannot be fulfilled due to the epidemic, it is recommended to negotiate with the buyer to cancel the contract and, if required, obtain a force majeure certificate issued by the China International Trade Promotion Committee (CCPIT) to reduce the risk of a claim from the buyer in the future.

 

2.Arrange transportation in advance and pay attention to logistics risks

At the moment, the movement of transport in many areas is temporarily blocked due to the epidemic, so try to avoid late shipment of goods. Especially if the payment method is used through a letter of credit. Pay attention to the delivery deadline and, if necessary, change it so that there is sufficient stock to avoid overlaps in the execution of the order.

Export companies are also advised to pay attention to the availability of important logistics hubs. If a port or airport is closed due to an epidemic, then logistics and warehousing should be changed quickly.

 

3.Pay attention to the risks in the supply chain

Export companies are advised to keep in close contact with local suppliers to know which suppliers are affected by the epidemic and to clarify the date of resumption of work. If necessary, it is necessary to increase inventory and take care of the necessary amount of raw material.

 

4.In case of requests from foreign buyers

Exporting companies are encouraged to actively communicate with customers, truthfully informing about the current situation with the epidemic and the latest events, as well as dispel customer doubts. If, due to the epidemic, foreign buyers refuse to accept goods or have overdue payments, export companies should clearly indicate to buyers that the interim recommendations issued by WHO do not include trade measures that may restrict exports, and strive to ensure proper storage of relevant evidence.

 

Questions and answers

 

We are a foreign trade company and force majeure circumstances, including a major epidemic, are stipulated in the contract with a foreign client. We cannot fulfill the terms of the contract at the moment, can I request the cancellation of the contract?

 

Depends on the terms of the contract. If the epidemic was included in the terms of the contract as force majeure, then both parties can suspend the execution of the contract within the framework of force majeure and its duration. If the objectives of the contract cannot be achieved, then the contract may be cancelled in accordance with the conditions prescribed in the contract.

But if the epidemic affected the terms of the contract, but did not affect the possibility of achieving the objectives of the contract, then the contract should not be canceled on the basis of force majeure and obligations can be fulfilled after the force majeure ends or in accordance with the results of negotiations between the parties.

 

We are a foreign trade company. Due to the epidemic, international trade orders cannot be fulfilled. Is this a force majeure situation? Can we cancel the contract or withdraw part of our obligations? What should we do to minimize losses?

First of all, you should focus on the text of the contract. If the epidemic is prescribed in the contract as a force majeure circumstance, then you should act in accordance with the terms of the contract. If there is no contract, then the buyer is a party to the UN Convention on Contracts for the International Sale of Goods, Article 79, paragraph 1:

 

A Party shall not be liable for non-performance of any of its obligations if it proves that it was caused by an obstacle beyond its control and that it could not reasonably be expected to take this obstacle into account when concluding the contract or to avoid or overcome this obstacle or its consequences.
Since the coronavirus epidemic is recognized as a force majeure situation in international trade and WHO has not issued a separate resolution, the epidemic meets the criteria of an unforeseen, unavoidable and uncontrolled situation.

 

 

Also keep in mind Articles 3 and 4:

 

The exemption from liability provided for in this article applies only to the period during which this obstacle exists

 

A party that does not fulfill its obligation must notify the other party of the obstacle and its impact on its ability to perform. If this notice is not received by the other party within a reasonable time after this obstacle became or should have become known to the non-performing party, this latter party is liable for losses resulting from the fact that such notice was not received.

 

 

And about Article 5:

 

Nothing in this article prevents each of the parties from exercising any rights other than the claim for damages under this Convention.

Firstly, the company must notify the buyer as soon as possible about the terms of the contract in order to minimize the buyer’s losses.
Secondly, as soon as the epidemic is over, it is necessary to return to fulfilling obligations.
Thirdly, force majeure circumstances exclude only the seller’s liability for damage, but the buyer still has the right to request assistance measures, such as price reduction and provision of replacement.

If a company is not subject to compulsory state measures and can overcome them, then this is not force majeure. In this case, you can refer to the “rules of difficulties” from the “general rules of international treaties” and negotiate with the buyer.

The rules of difficult situations proceed from the principle of justice. They relate to situations when, due to unforeseen and uncontrolled events by the parties, the cost of production of one of the parties increases or decreases the value of the products received and the balanced relationship between the parties has undergone fundamental changes. If they can be overcome, then they don’t matter. That is, you can explain the reasons to the buyer and both parties can negotiate again by changing the estimated quantity of goods or changing the delivery time.

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