An auto parts supplier became one of the earliest known companies to obtain a “force majeure” certificate in China that may help it avoid penalties for breaching contractual obligations because of the coronavirus outbreak.
The manufacturer, eastern China-based Huida Manufacturing (Huzhou) Co., supplies steering-system components to a plant operated by Peugeot maker PSA Group in Africa, a Chinese trade body said Tuesday.
The organization, China Council for the Promotion of International Trade, said it issued the certificate on Feb. 2. More companies have since received the document, which is recognized by enterprises, governments, trade associations and customs officials in more than 200 places around the world, CCPIT said.
The certificate can excuse companies from not performing or partially performing contractual duties because of extraordinary circumstances beyond their control. The coronavirus contagion has shuttered plants across China -- a disruption that could get much worse if rolling quarantines and suspended rail and air links prevent the return of the millions of blue-collar laborers to workstations.
Huida Manufacturing produces components for engines as well as transmission and steering systems, according to its website. Huida representatives didn’t immediately respond to requests for comment.
The company may incur a direct loss of 2.4 million yuan ($344,000) from failing to meet contractual obligations with PSA, and faces a potential compensation claim of 30 million yuan because of a two-week production halt at the carmaker, CCPIT said.