Your Chinese Factory Shut for Lunar New Year and You Cannot Deliver in the Philippines: Notice, Negotiation and Damage Control When the Customer Claims

The day you know: notify the customer in writing, without waiting for a date or for them to notice

The value of a delay notice lies in being early, not in being precise. A notice today saying "delay expected, new date pending factory confirmation" beats one in two weeks saying "delay confirmed to a specific date". If the customer discovers the goods have not arrived and comes to you, both your credibility and your negotiating position are a notch lower than if you had spoken first.

Send it by the method the contract specifies (email, formal letter, platform message); absent a specified method, send both an email and an instant message so there is a delivery record. Structure it this way:

1. Which orders: order number, item, original delivery date, quantity. One line per order, not a vague "some orders".
2. The reason: state truthfully that the upstream manufacturer closed for the holiday and needs time to restore capacity after restarting. Do not dress it up as "shipping delays" or "material shortages"; customers often understand the Chinese holiday calendar better than you expect, and being caught costs more than the delay.
3. What is certain now: which orders will ship on time, which can be part-delivered, which await factory confirmation.
4. When the next update comes: a specific date, and send the update on that date without fail, even if it only says "still confirming".
5. What you are doing: restart schedule demanded from the factory, part-delivery and alternative sources being assessed.

What the notice should not contain: no admission that "we are in breach" and no offer to "bear all losses". The delay is a fact; how responsibility is shared comes later. Do not plead force majeure either, for reasons in the next section.

The same day, internally: send the factory a written request to confirm the restart date, where your orders sit in the production queue, and whether partial shipments are possible, and ask for a written reply. Every date you give a customer should have a written factory commitment behind it; otherwise you are guaranteeing the factory's performance with your own reputation.

A holiday shutdown is not force majeure: reading your delay clauses, and what to do with no written contract

The Lunar New Year shutdown happens every year on a known date and can be foreseen months ahead. It fails the basic "unforeseeable and unavoidable" test for force majeure. Pleading it in a delay notice does not help and tells the customer's lawyer at a glance that you have not read your contract. The four-element test is set out in does this count as force majeure and is not repeated here.

What you actually need to read are the late-delivery provisions, usually found in these places:

• How delivery is defined: "arrival at the customer's warehouse by" or "departure from factory by", and who carries the transit time in between.
• Grace and notice: whether some delay is tolerated, whether delay must be notified in writing in advance, and whether the customer may accept or reject after notice.
• Consequences of delay: liquidated damages calculated on the length of delay, a right for the customer to cancel, or a right to buy elsewhere and charge you the difference. These three differ enormously in weight; identify which one you face.
• Scope of loss: whether consequential loss (the customer's downstream breaches, lost profit) is excluded, and whether there is a cap.
• Dispute resolution: negotiation and mediation first, or straight to arbitration or court, and under which law.

No written contract is common in China-Philippines trade: only purchase orders, quotations and chat messages. Delivery dates and consequences must then be reconstructed from those fragments. The principle: a date you wrote in a quotation or order confirmation is the date you promised; a penalty you never wrote cannot be conjured by the customer, but a reasonable, provable loss the customer actually suffered from the delay can still be claimed. Compile every order-related communication in date order; it is the base document for every negotiation that follows.

Reading the clauses gives you one number: the worst-case contractual exposure for this delay. Do not disclose it to the customer, but it decides how far you can go in the next section.

The option menu for customers: part-delivery, substitutes, sourcing elsewhere, extension with a concession, and putting the change in writing

What the customer really wants is usually the goods, not damages. Solve the goods problem and most claims never get formally raised. From easiest to hardest, and combinable:

1. Part-delivery: ship a first tranche as soon as the factory restarts, prioritising the customer's most urgent items. Get the factory to confirm the first-tranche quantity and date before offering it.
2. Stock or substitute specifications: your Philippine inventory, stock in other warehouses in China, or a functionally equivalent product with slightly different specs to tide the customer over. Substitutes need the customer's written acceptance, stating whether the price changes.
3. Sourcing from another factory: a plant that did not close or has already restarted produces temporarily, with you absorbing the cost difference. The most expensive option, and the most effective when the customer faces downstream breach.
4. Extension with a concession: the customer accepts a new date and you give consideration, such as a discount on the order, free freight, longer payment terms or added units. The form and size are yours to set, but keep them proportionate to the actual impact and do not open at your floor.
5. Partial purchase elsewhere by the customer: the customer buys the urgent portion themselves, you bear a reasonable price difference or forgo the margin on that portion, and the balance ships on the new date. Far better than a full cancellation plus a claim.

Three disciplines when negotiating these:

• Every date has a written factory commitment behind it. Do not quote a date you are not sure of to calm a customer; a second delay does far more damage than the first.
• Offer in writing, and get the acceptance in writing. One email stating the revised date, quantity, price or concession, with the customer's confirming reply, is a valid supplementary agreement. A verbal yes or a one-word chat reply becomes two different memories later.
• Do not label concessions "as compensation"; call them "as the arrangement for this delivery adjustment". The wording matters if the matter ever reaches a dispute.

If the customer is your distributor or a long-term partner, how you handle this directly shapes next year's contract talks; the termination and claim logic in distribution relationships is in when a partner terminates unilaterally.

The customer has formally claimed, deducted or cancelled: check the components, demand proof, and draft the reply

When a formal claim letter arrives, the first response is neither "pay" nor "refuse" but verification: what each item is, whether the contract supports it, and whether there is evidence.

Break the claim into categories and handle each:

• Contractual liquidated damages: the part calculable from the clause. Check the basis (per day or per week, on the whole order or the delayed portion), the start date and any cap. Miscalculation is common; recompute first.
• Direct loss: money the customer actually spent because of the delay, such as the premium on an emergency purchase elsewhere or extra storage and logistics. Demand original invoices.
• Consequential loss: claims from the customer's own customers, lost profit, reputational harm. Check first whether the contract excludes this category; with no contract, the evidentiary bar is high, so demand proof.
• Deduction: the customer nets the claim off what it owes you. Check whether the contract grants a set-off right; if not, object in writing and reserve your rights, but do not stop delivering the remaining orders. Stopping converts you from "late" to "refusing to perform".
• Cancellation: check whether the contract gives a cancellation right once delay reaches a threshold, and how already-produced goods are treated, including whether the customer must accept completed portions.

Drafting the reply: acknowledging the fact of delay is not accepting the customer's full liability and figure. The reply confirms receipt of the claim, confirms the fact and cause of the delay, responds to each item separately (accepted, further evidence required, or rejected under the relevant clause), proposes your solution, and reserves your rights. Keep the tone restrained and have counsel review every line; this letter will be among the most important documents if the matter escalates.

The routes if negotiation fails are compared in Barangay conciliation, arbitration or litigation. Two reminders: if the contract provides for arbitration, do not go to court first; if the customer is a Philippine company and the contract is silent on forum, ask a lawyer which route is open to you.

Whether and how much to pay depends on the contract, the evidence and what the customer relationship is worth to you, not on the tone of their letter. Whatever you settle, write into the settlement that you reserve the right to recover from your upstream supplier. That is the next section.

Recovering from the factory and keeping the relationship: the purchase contract, the evidence, and why communication must not stop

Whether the loss you bore toward the customer can be passed to the factory depends on your purchase contract with the factory, not on what feels fair. Many Chinese trading companies have only verbal arrangements or bare purchase orders with their factories, which leaves little room for recovery, though not none.

Start with the purchase contract or order:

• Is the delivery date explicit, and did the factory commit in writing to shipping before the holiday or restarting on a given date.
• Is there a delay clause: liquidated damages, pass-through of customer claims, cancellation rights.
• Did the factory give advance notice of the shutdown: if it announced the holiday dates months ahead and you did not adjust your orders, your recovery case is weak; if it closed early or restarted late without notice, it is strong.
• Governing law and forum: contracts with Chinese factories usually apply Chinese law and resolve disputes in China, so recovery is pursued there through Chinese counsel.

Start preserving evidence now: every delivery-date query you sent and the factory's replies, the holiday notice, the post-restart schedule confirmation, proof of what you paid or conceded to customers, and the extra costs incurred (sourcing premiums, expedited freight). Send the factory a written claim notice stating the delay, the loss you bore, the clause relied on, the remedy sought and a reply deadline.

Communication must not stop. After the holiday you still depend on this factory to ship the balance; recovery and expediting are two separate tracks, and expediting must not turn into a quarrel. The common practical outcome is that the factory gives price or payment-term concessions on subsequent orders to offset your loss, rather than paying cash. Put that in a written supplementary agreement, not a "we'll give you a better price next time".

Advance payments are a separate matter: if you paid a large deposit and the factory neither restarts nor responds, that is no longer delay but a different risk, handled as in when a supplier takes a deposit and does not deliver. Multiple suppliers, milestone payments and splitting key orders across two factories belong to the next section.

Preventing a repeat next year: calendars, stock, contract clauses, customer pre-communication, and what Yixing can do

The holiday shutdown is fixed on the calendar. Being hit by it means production planning, inventory or the contract left it out. Fix it in these places:

1. Overlay both countries' holiday calendars: the Chinese shutdown plus the post-restart capacity ramp, on top of the Philippine tail from Christmas into early January, leaves far less normal production and shipping time than expected. The Philippine shutdown windows and lead-time rules of thumb are in how long Philippine factories close for holidays, which has a risk calendar you can overlay directly.
2. Safety stock: for date-sensitive customers and items, hold one to two delivery cycles in your Philippine warehouse before the holiday. Compare the carrying cost with this year's compensation, concessions and sourcing premiums; stock is usually cheaper.
3. Order lead times: work back to the last pre-holiday shipping cut-off and tell customers in advance that orders after that date deliver after the holiday, so they choose between ordering early and accepting the delay.
4. Delivery clauses in customer contracts: delivery in working days with the holiday window expressly excluded, a delay-notice procedure, a cap on liquidated damages, and exclusion of consequential loss. Customers rarely object to these at signing; after an incident it is too late.
5. Matching clauses in factory contracts: delivery commitments, advance written notice of holiday schedules, delay liability and pass-through of customer claims, and milestone payments instead of large deposits.
6. Multiple suppliers: a backup source for key items, even if it normally carries a small share.
7. Pre-holiday customer communication: a holiday delivery plan sent to customers every year-end is far more dignified than a delay notice after the fact.

If you yourself spend a long stretch in China over the holiday, how to handle being questioned about your job and status when you re-enter the Philippines is in questioned at immigration after a long absence; settle the company's staffing and delivery arrangements before you leave.

What Yixing can do. Yixing is a private consultancy registered in the Philippines, with no affiliation to any government agency, and it does not represent parties in litigation. After an incident we can map the delivery, delay and loss clauses across your customer contracts and purchase records, prepare the factual base for notices and claim replies, and connect you with a licensed Philippine attorney where needed; before one, we can redesign the delivery and delay clauses in your customer contract templates around the holiday window. → Contract delivery risk review and customer claim support

Once more: consult a licensed attorney for your specific case. This article is not legal advice.