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Ahead of the Curve Auto Supplier Blog

March 17, 2022

2022 COVID-19 Lockdowns

Yogi Berra’s “It’s déjà vu all over again” resonates so loud and clear with us today, March 17, 2022. The COVID-19 virus is now resurfacing, and outbreaks are occurring across several cities overseas. And, governments are instituting lockdowns to help prevent the spread of the virus. It seems like we’ve traveled back in time to March 2020 when COVID-19 swept the world and paralyzed cities, nations and entire countries – that was almost exactly two years ago. With this recent turn of events, two questions come to mind: 1) Will the outbreak arrive in the United States? and 2) What will the effects be?

While much of the United States has opened up in the past few weeks, with people returning to mostly normal life and mask mandates disappearing, China’s zero-COVID policy has resulted in lockdowns in several cities with outbreaks. The lockdowns include manufacturing hubs like Shenzhen and Dongguan. At this time, the lockdowns are set to end by March 20, 2022. But as we have learned over the past two years, these timeframes are fluid and subject to change.

And, as we know all too well, what happens elsewhere will affect supply chains here. The effects may arrive at our doorsteps within days or weeks. Are you ready? Here are three steps you can take to prepare for this resurgence of COVID-19:
 
  1. Check your supply chain to determine if you have supplies coming from the affected cities. If you do, have you received notice from your suppliers informing you of the expected effects of the lockdowns? What rights and options do you have? Start, as always, with your contracts. Check your purchase obligations and whether you are able to purchase elsewhere as needed. Check your force majeure provisions to determine if your suppliers have provided appropriate notice, and what your rights are in response.
  2. Review your customer contracts to determine the obligations you have to your customers, and whether you may have options to alleviate the effects from these lockdowns. You may need to provide force majeure notices. It’s important, as we have mentioned before, to check your contracts to make sure you provide appropriate notice as required by your force majeure provisions.
  3. Prepare for the long-term. This lockdown is a good lesson for what we may expect in the coming months and years. In the contracts you are negotiating now and in the future, make sure you account for these potentials. If you’re part of the global supply chain, your business will be subject to governmental policies in any area you or your suppliers and customers operate in. This week demonstrates that even as you may be returning to work as usual, your suppliers and/or customers may be in lockdown under a zero-tolerance policy instituted by a government on the other side of the world. As these issues become more commonplace, dealing with COVID-19 and similar issues may arguably become foreseeable. And if foreseeable, the risks associated will need to be appropriately allocated in your contracts and relationships within your supply chain.
Warner’s automotive and supply chain attorneys are staying on top of news related to these current lockdowns and additional events that may impact the way you do business. We’re here to assist and advise you through these uncertain times and potential curves in the road.
 

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