Authors

Katie Chandler

Partner

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David de Ferrars

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Andrew Howell

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Authors

Katie Chandler

Partner

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David de Ferrars

Partner

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Andrew Howell

Partner

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9 April 2020

Product Protection – 6 of 20 Insights

Disputes Quick Read: COVID-19 and supply chain disruption – key issues

  • QUICK READ

Supply chain operations continue to feel the impact of COVID-19, with many key manufacturing hubs being hit the hardest. Those companies heavily reliant on China for products, raw materials or component parts are experiencing unprecedented disruption. Challenges include:

  • quarantine restrictions
  • port closures
  • new export/import restrictions
  • factory closures, and
  • depleting warehouse workforces.

Supply chains are facing long lead times, delivery delays and failures to supply, as well as non-availability of goods and the need for alternative sourcing arrangements. As cash flows inevitably tighten, non-payment of goods will also be an issue. There have already been reports in the media of high profile retailers suspending payments to suppliers for existing stock due to lack of demand.

Appointing new suppliers on an urgent basis carries additional risks. Are there existing exclusivity arrangements in place? Can all new suppliers be traced? How do you audit product quality and safety systems when due diligence is limited? Product regulators have temporarily relaxed compliance for certain emergency products but not for broader application and existing safety standards will apply. Businesses may also need to re-structure customer service procedures to ensure compliance with statutory warranties and consumer rights for repairs or replacements.

It can be difficult to plan ahead and mitigate risks in times of crisis. Existing supply chain arrangements and insurance policies should be reviewed to assess exposure. Insurance coverage will depend on the precise wording of the policy and any exclusions. Business interruption claims do not always include losses from a general decline in demand.

There is value in seeking advice at an early stage to avoid common pitfalls in commercial negotiations such as a waiver of rights, unlawful termination or inadvertent contract variation, and to help secure a resolution to preserve trading relations. Key supply terms such as indemnities, liquidated damages and force majeure will all be important.

Finally, termination – often seen as a last resort, despite the ongoing disruption and uncertainty – should not be triggered without legal advice and a viable exit strategy which mitigates exposure where possible.

In this series

Product liability & product safety

Launching a product on the GB market – Q&A guide

31 August 2021

by Multiple authors

Product liability & product safety

Big changes coming to the EU's product safety regime

12 July 2021

by Katie Chandler

Product liability & product safety

Post-Brexit food and drink labelling in the UK: What producers need to know

12 November 2020

by Multiple authors

Product liability & product safety

Product liability and safety – horizon scanning 2020

21 February 2020

by Katie Chandler, Max Kempe

Disputes & investigations

High Court rules consumers cannot circumvent 10 year longstop for claims

Wilson v Beko [2019] EWHC 3362 (QB)

15 January 2020

by Katie Chandler, Max Kempe

Product liability & product safety

"Natasha's Law" food labelling amendments published

17 September 2019

by Katie Chandler, Jo Joyce

Disputes & investigations

What next for AEVs?

5 August 2019

by Katie Chandler, Helen Robinson

Disputes & investigations

Taming the wild west? There's a long way to go yet…

23 May 2019

by Andrew Howell

Disputes & investigations

AI, risk allocation and liability

8 April 2019

by Dr. Philipp Behrendt, LL.M. (UNSW)

Disputes & investigations

The 'no deal' UKCA product safety mark

4 February 2019

by Katie Chandler

Product liability & product safety

FSA updates technical guidance in light of new Natasha's Law

9 July 2020

by Katie Chandler, Jo Joyce

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