APA Advisory - Challenges in China

December 31, 2019

TO:                        

SUBJECT:   China Production, Warehouse, and Shipping Update

During the past several days, there has been a flurry of production, warehouse and shipping updates announced by China suppliers. Due to the impact on the industry, we wanted to pass along the information that we have been provided to date. Please understand that details are fluid and subject to change at any time.

Production / Work Stoppage

Following a production halt due to a serious accident on December 4, it is our understanding that all factories in Liuyang, Hunan returned to work on December 24 having been granted 5 days to eliminate the dangers posed by high volumes of semi-finished products and raw materials. However, on December 26, there was another accident at a fireworks materials factory which resulted in one injury and one fatality. Because of this second accident, all factories and export consolidation warehouses in Liuyang were ordered to stop work once again.

As of December 27, factories were allowed to apply for permission to start work temporarily in order to reduce raw materials and semi-products stock. We do not know if the factories will be granted permission to do so. 

A meeting of firework officials is scheduled to begin on March 5 in Beijing and is expected to last 2 or more weeks, meaning that most factories in Liuyang may not be back to work until the end of March.

Warehousing

To further complicate an already challenging situation, because of the December 4th accident, Chinese authorities are now treating all consumer fireworks devices with tubes greater than 30 mm inner diameter as a 1.3G (this includes reloadable shells and cake devices). These devices are now required to be stored in first grade warehouses, not consumer fireworks warehouses, creating a storage problem.

Background: China has its own GB (mandatory) standard on fireworks safety and production. It classifies fireworks into 4 different grades of A, B, C and D, with A being the most hazardous. Each factory is permitted to produce only one particular category and grade of fireworks as listed on their production permits. Warehouses outside of factories are also permitted to store only one particular grade of fireworks.

The vast majority of fireworks warehouses in China are only permitted to store Grade C fireworks, but only a very few warehouses are permitted to store Grade A product.

Below are the types of fireworks which China classifies as Grade C. Any fireworks that exceed these limits are considered as A or B, and therefore can only be stored in Grade A warehouses.

  • rockets with powder weight up to 10g (USA allows 20g)

  • cakes and artillery shells 30mm inner diameter with 20g max powder weight per tube (USA allows over 30mm and up to 60g per tube)

  • roman candles with powder weight up to 2g per star and 20g per tube and inner diameter of 20mm (USA allows 20g per tube but no limit on per star or inner diameter)

  • ground spinners 15g (USA allows 20g)

  • helicopters 5g per piece (USA allows 20g)

Needless to say, these changes have a huge impact on many USA consumer fireworks because all cakes and artillery shells over 30mm diameter are not legally allowed to be stored in most warehouses in China. Since storage is limited at the factory, as soon as these fireworks are produced they would need to be loaded directly into containers and moved to port for shipment. Logistically, this is not possible for all containers.

Warehouses which only have Grade C approval are now asking for all Grade A and B fireworks to be removed. 

Shipping

Beihai port has started to take bookings for fireworks shipments. Loadings out of Jiangxi continue to change, with the local government now requiring 50% of the container to be Jiangxi manufactured products after January 1, 2020. That means:

  • All containers with supervised loading in Hunan must only contain 100% Hunan produced cargo.
  • All containers with supervised loading in Pingxiang, Jiangxi must contain at least 50% Jiangxi produced cargo by carton. 
  • At present, all containers loading in Beihai do not have any requirements for origin of products.

The largest problem will be for containers with mixed Hunan and Jiangxi/Guangxi products which now can either be exported from Beihai or Jiangxi (if only it contains at least 50% of Jiangxi products).

There are reports that loading of containers out of Hunan and Jiangxi has been suspended due to increased scrutiny and enforcement of domestic transportation of fireworks as well as Customs requirements.  Bookings for containers leaving Beihai is open; however, it is very difficult to obtain a transport permit from Jiangxi to Guangxi.  Only Hunan to Guangxi is possible at this time.  Since most containers will have a proportion of Jiangxi products, only fireworks stored in Hunan can be transported and loaded in Beihai currently.

The shipping situation is fluid and continues to develop. It is suggested, where possible, to fill empty space left open with Jiangxi products with Hunan products so that containers can be shipped out before Chinese New Year.

The APA is grateful for the detailed updates provided to us by International Director Cindy Cheung and other association members with insights on the current situation.  We will continue to keep the membership updated as more information becomes available regarding the China production, warehouse, and shipping challenges.    

Advisory #2019-31