Mar 27 | 2020
Weighs China, Industry Response to Covid-19 Pandemic
Breakbulk spoke with Morgan Meng, deputy director of the department of material, Hubei Electric Power and Design Institute, about the impact of the coronavirus pandemic on Asia’s shipping and project cargo industry. Following are edited comments.
Q: So far, what challenges and impacts does this outbreak pose to your company? Will there be any new adjustments to the regional strategic deployment of the project investment and development?
Our main business is the general contracting for power projects, and the outbreak brought real challenges.
First, because of the plant shutdown, much of the equipment and materials required for our project cannot be produced, accepted and delivered, which caused great difficulties in the construction and installation of at project site proceeding as planned. Some projects are difficult to deliver to the owner as stipulated in the general package contract.
Second, when the epidemic came, there were many projects in the design stage, or bidding and procurement could not be carried out, or there was equipment unavailable and projects we’re not in start-up condition. The inability to ensure progress of projects presented a great challenge.
Third, because of the national plan to contain and control the epidemic, production and instillation that required human resources and construction tools could not be effectively guaranteed.
What countermeasures does the current company have to take to respond positively? From the perspective of eliminating these impacts in the medium to long term, what are the internal response strategies and implementation plans?
To minimize the adverse impact of the outbreak on the company’s normal operation, we took several responsive measures. First of all, we formulated and issued emergency plans for epidemic prevention and control, putting serious and pragmatic efforts into practice.
We fully grasped in-depth thinking and advanced planning to ensure we have project material and support in place for when work resumes. We divided the current phase of work into three categories: "Affected must be suspended," "affected can be telecommuting," and "not affected," and make rational recommendations for each type of work.
We sought to improve the "advance consciousness" and "remote awareness" of work during the outbreak, and ensure the operation of the production and operation management system policies through online telecommuting in a timely manner, and strived to minimize the impact.
For foreign employees, we distinguished the scope of personnel, strictly implement isolation observation measures, abiding by the epidemic prevention and control regulations, strictly fulfilling the procedures for approval, strengthening the health check of overseas project site owners and partners, and fully coordinate and promote the return to work.
We’ve paid close attention to the government's demands and assumed the social responsibility of the state-owned enterprises.
How do you hope the shipowner and freight forwarder will assist you in this transition?
By strengthening awareness of prevention and control, formulating comprehensive prevention and control measures, deepening the implementation of the responsibility for epidemic prevention, and ensuring the health and safety of the whole work. They can provide in-depth understanding of cargo owner needs, such as during the outbreak of the port, shipment, inspection and quarantine, import and export customs declaration, and timely reminders of port of destination epidemic prevention.
Does the outbreak have an impact on the performance of the signed logistics and transportation contracts? How can legal means be used to reduce risk losses? What new points of concern will be paid to the upcoming contract, and how will it be reflected in the contract?
There will certainly be an impact, such as our wind power projects, wind turbines and towers and other large transport.
For domestic projects, because the outbreak is not selective to the contract-related parties, although force majeure can fight for some rights and interests, but more should still strive to understand each other.
For international projects, the legal interests of the owners shall be sought and defended in accordance with the force majeure clause, and the understanding and volume of the owners should be sought. In particular, it is important to note that, in the course of the performance of the contract, once force majeure is formed, the parties to the contract shall be notified in a timely manner and provide the corresponding supporting documents, especially in the field of engineering construction. They should strictly abide by the time limit requirements of the force majeure notice, such as FIDIC EPC conditions for 14 days to 28 days at the latest, must be issued to the owner of force notice, and provide proof within a reasonable period of time, otherwise it may be considered a waiver of the right to claim.
In addition, if force majeure results in the non-performance of the contract, the parties to the contract are subject to the obligation of derogation, otherwise, the loss without taking measures to expand will not fall within the scope of force majeure. In the case of supporting documents for the force majeure of overseas underwriting contracts, the China Trade Promotion Association shall apply in time for the application of the implementation certificate related to the force majeure of goods and logistics, and the China Foreign Underwriting Engineering Chamber of Commerce shall apply for the proof of force majeure in a timely manner.
When do you think an inflection point will occur as soon as possible? What support can the government give?
For the development and change of the epidemic, the relevant departments think that there will be a turning point in the growth of confirmed cases around late February, but overall, there are many constraints. It is not convenient to make predictions. But we believe in the determination and ability of the Chinese government and believe that the outbreak will be effectively controlled soon. Because the epidemic has caused a certain degree of impact on the normal production and operation of enterprises, it is suggested that the government can temporarily introduce some policies to support enterprise development, such as tax reduction, deferred payment of social security, unemployment benefits return, lower rates, advocate rent reduction, special government subsidies, financing and reduce financing costs, special subsidies, or other policies to stimulate the economy, to help enterprises, especially small and medium-sized enterprises as soon as possible out of the difficult situation.