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Zika Hits Supply Chain

ASCM CEO

Friday September 2, 2016


This summer, the world has heard a great deal about the Zika virus, especially as athletes and fans from all around the globe flocked to Brazil, an affected region, for the 2016 Olympics. As the mosquito-borne virus has spread to the United States, Zika has affected US supply chains and trade with China as well. Chinese officials have tracked the virus and keep a list of Zika-affected countries. Shipments from these countries must be fumigated before they enter the Chinese market. Last month, officials added the United States to this list. This new status has US exporters worried about added costs and shipping delays, according to The Wall Street Journal.

Conflicting information from Chinese customs officials has caused confusion, Costas Paris writes in the article. Although the overarching requirement is that containers must be fumigated either in the country of origin or at the Chinese ports, Brazilian exporters learned firsthand that this rule actually varies from port to port, with only some accepting fumigation documentation from abroad.

Scott Harer, vice president of Oregon-based Columbia Seeds, explains in the article the conundrum this creates for his company. He expresses concerns that items sent to be fumigated in China will not be handled in a timely manner. However, if Columbia Seeds opts to fumigate in the United States, “We fear that won’t be acceptable in China and then costs pile up very quickly,” he says in the article.

Small and medium exporters such as Columbia Seeds have the most to lose from these supply chain costs and delays. Right now, it costs approximately $100–$200 to fumigate each container. Columbia Seeds ships about 100 containers to China each year, and it cannot pass on the extra costs to its customers because of existing contracts, Harer says in the article. Instead, the company’s already small margins are being squeezed by the compliance expenditures.

On top of this, exporters are concerned that the Chinese’s fumigation methods could damage their products. One coffee exporter reported that five of his 13 containers were sprayed with a pesticide that ruined the coffee, according to The Wall Street Journal.

Because there are few exceptions to the fumigation rule, which does exempt refrigerated items, shipments from areas of the United States that currently are not affected by Zika still must comply. “Oregon doesn’t have the Zika problem, but we still have to fumigate and it’s a significant expense,” Harer says in the article.

Unless these issues are sorted out quickly, Zika could result in high costs for exporters from the 60 affected countries, including Mexico, many South American nations, and some Asian countries. The United States ships approximately 5.1 million containers worth $255 billion a year to China, The Wall Street Journal reports, citing the Agriculture Transportation Coalition. To assuage the situation, shipping company Maersk tells The Wall Street Journal that it is working to better understand the fumigation requirements, even though it currently does not expect any delays for China-bound US cargo.

Know your trade rules

New trade complications, such as this one that has popped up because of Zika, highlight the importance of understanding compliance. Consider the description of trade compliance from the CLTD 2017 Learning System, Version 1.0: “Compliance refers to how organizations manage their fulfillment of government regulations. In terms of import and export activities, these regulations can affect product classification, documentation requirements, valuation, and record-keeping practices.” In short, understanding trade regulations and how they affect your supply chain can save your company both time and money.

Trade compliance is just one of the many important topics covered in the APICS Certified in Transportation, Logistics and Distribution (CLTD) learning system. Participants preparing for the certification exam also learn about capacity planning and demand management, order management, inventory and warehouse management, transportation, global logistics considerations, logistics network design, reverse logistics and sustainability, and more. To start your journey toward APICS’s newest certification, visit apics.org/cltd



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