Omicron Variant Bullrushes China

While China’s zero-tolerance policy is among the strictest approaches in the world, a recent surge in Omicron COVID-related infections have hit the mainland hard, forcing it to reconsider how it deals with the pandemic. The omicron variant has run rampant through the country, causing the latest jump in daily cases. With tens of millions of people in China, including the entire north-eastern province of Jilin and the tech-hub city of Shenzhen infected, the government has ordered them to lockdown. Trucks are being delayed due to testing of the drivers, products are piling up in warehouses – it’s a madhouse. 

 

China’s largest city, Shanghai, has joined the list after battling the new wave for nearly a month, as makeshift hospitals and quarantine centers crop up across the country. Suspending work at electronics factories in the south and a wide variety of industrial companies in central China, lockdowns have also closed highway exits in cities near Shanghai unless each driver shows a negative PCR test. This has in turn created miles-long lines of trucks trying to carry crucial components between factories. 

 

China’s zero-COVID strategy is becoming increasingly difficult to sustain as more infections are detected. Most of China’s policy to combat this is staying the same. Such as:

  • Travel to and from China is limited with restrictions on internal movement
  • Travelers coming into China are screened then sent to a government-designated hotel for mandatory 2-week quarantine, followed by further monitoring
  • While regular testing programs are carried out, should infections be detected, residents can and will be evicted and sent to quarantine facilities (along with targeted area lockdowns)
  • All non-essential businesses have been shut, apart from food shops and essential suppliers
  • Schools are closed and public transport is suspended with almost no vehicle movement 

While these remain the same, others have been relaxed, such as:

  • Those with mild symptoms no longer need to attend designated hospitals, but they still need to isolate at centralized facilities
  • Quarantine period rules have been reduced
  • City-wide testing is no longer being carried out, replaced by local community testing
  • Self-testing kits are to be made available in stores across the country, as well as online, but those who test positive will need to take the PCR tests

With truck traffic to the docks interrupted, ships are facing delays at the ports. Airfreight is also facing complications as the Civil Administration of China said that many of the remaining international flights into Shanghai’s Pudong airport would be suspending flights until April 1st.

 

Having remarkable success at containing the pandemic prior to the current outbreak, China has managed to have lower numbers than Europe or the US. Prior to March 24th, there were just over 14,000 new cases in the whole of mainland China, whereas in the UK over a similar period, there were over 610,000 new infections. 

 

Is China’s policy working? From the numbers, it would appear so, despite the recent omicron variant hitting mainland China with a force to be reckoned with. With Future Forwarding, we’re keeping an eye on the situation in China to stay up to date on how this will affect you and your cargo. Should you have any questions about this situation in regards to how this will modify your shipping plans, please contact your Future Forwarding representative today and let us help you stay on track. 

Explaining MFN and what it means for Russian Imports

As the US and European allies continue to identify ways to punish Russia for Ukraine, last week news broke that one step that governments were planning to take was the revocation of the country’s Most Favored Nation trade status, or MFN. Whether you realize it or not, MFN is what allows most importers to enjoy favorable duty rates on goods imported into the United States and losing this status not only puts duty rates at a higher level, but also sets the stage for imports to be banned entirely.

For importers, the details of MFN status are laid out in the beginning of the Harmonized Tariff Schedule, or HTS.

 

There are only two countries right now that do not enjoy MFN status with the United States: Cuba and North Korea. That list alone should be a significant indicator of the severity of the relationship a country would (or wouldn’t) have with the United States to be included.

When determining classification in the HTS, after the proper tariff number is located, the question then is whether or not the exporting country is eligible for Column 1 duties (the lower, preferable rate) or Column 2 duties (the higher, prohibitive rate). The idea behind the stark difference is that US buyers who want to select between identical merchandise purchased from a friendly trading nation versus an unfriendly one will find little market for a product priced far more expensively and therefore choose a country with MFN status.

 

Take, for example, this page from the tariff for footwear showing the difference in duty rate for Column 1 versus Column 2 countries.

MFN

Sandals from a friendly country are 3% – from a Column 2 country, 35%.

 

Aside from the outright prohibition for entry that the administration announced on oil, seafood and diamonds, other products such as steel, iron or aluminum will see additional duties as well. It is likely that Russia’s actions and reaction here in the United States will, by and large, eliminate a buyer’s appetite for these products unless they absolutely cannot be procured elsewhere, but that remains to be seen based on the length of time sanctions will remain in place.

 

The steps taken by governments continue to evolve and move rapidly, and Future Forwarding’s compliance team is committed to monitoring announcements by governments in the US, UK and EU and proactively advising our clients if products they source or ship could be caught up in trade action.

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