Best Practices For Managing Tariff Changes

00:59:03
https://www.youtube.com/watch?v=0mBRHPYbitE

Resumen

TLDRThe webinar presents strategies for manufacturers to cope with tariff changes, featuring insights from specialists in supply chain management. It covers the historical context of tariffs, their economic implications, and practical measures businesses can implement, such as diversifying supply sources, increasing domestic production, and reassessing logistics practices. The session highlights the uncertainty surrounding tariffs and urges businesses to remain proactive and informed. Key takeaways include the necessity of collaborating with customs brokers, considering geopolitical risks, and reviewing internal cost structures to adapt swiftly to evolving trade conditions.

Para llevar

  • 📈 Understand tariff impacts on costs.
  • 🔄 Consider diversifying supply sources.
  • 📋 Audit customs brokers regularly.
  • 🇺🇸 Increase domestic sourcing efforts.
  • 🎓 Stay informed about tariff changes.
  • ⚖️ Assess geopolitical risks thoroughly.
  • 📊 Review internal cost structures.
  • 🛠️ Explore foreign trade zone strategies.
  • 💡 Evaluate product design to lower tariffs.
  • 🌍 Balance global market opportunities.

Cronología

  • 00:00:00 - 00:05:00

    The webinar on managing tariff changes is introduced by Don Lynch from the MEP Center, emphasizing the importance of engaging with local centers for manufacturing support. The session highlights research findings and practices to help manufacturers navigate uncertainties due to tariff changes.

  • 00:05:00 - 00:10:00

    Rosemary Coats from the Reshoring Institute introduces the organization's mission to assist businesses in reshoring strategies and providing educational resources for university students. Coats discusses the impact of tariffs and the importance of understanding global supply chain dynamics and sourcing.

  • 00:10:00 - 00:15:00

    The Reshoring Institute conducted interviews with executives to explore their responses to tariffs. A notable finding was the shift away from sole sourcing, encouraging diverse sourcing strategies to mitigate risk while emphasizing historical tariff impacts on the domestic manufacturing landscape.

  • 00:15:00 - 00:20:00

    Coats explains the original purpose of tariffs and current trends, such as the significant tariff imposed on China. The discussion includes historical context, including the Smoot-Hawley Act of 1930 and its repercussions, highlighting the economic effects of tariffs on trade and domestic industries.

  • 00:20:00 - 00:25:00

    Current tariff rates vary by country, affecting imports significantly. Coats emphasizes that while some tariffs are paused, the environment remains fluid. Companies are burdened by increased tariffs and are trying to strategize accordingly, focusing on geopolitical risks and supply chain adjustments.

  • 00:25:00 - 00:30:00

    Interviews revealed a trend of companies freezing capital investments due to tariff uncertainty. Many manufacturers prefer domestic sourcing when economically feasible, with strategies to freeze hiring and adjust pricing due to increased costs from tariffs.

  • 00:30:00 - 00:35:00

    Companies are exploring alternative sourcing strategies and assessing risks in manufacturing locations such as Vietnam and Mexico. Many executives are adapting to compliance with new regulations surrounding imports, impacting operational costs and supply chain decisions.

  • 00:35:00 - 00:40:00

    Survey results indicate businesses are impacted by increased tariffs, with many absorbing additional costs or passing them onto consumers. The use of foreign trade zones is being explored by some companies to manage tariffs effectively.

  • 00:40:00 - 00:45:00

    A call for comprehensive pricing analysis and product redesigns is made as companies face increased tariffs. Coats underscores the need for a systematic approach to assessing import classifications and seeking alternative sourcing options to mitigate expenses.

  • 00:45:00 - 00:50:00

    The discussion focuses on forming cross-functional teams to develop comprehensive strategies for navigating tariff changes. Staying informed about tariff updates and geopolitical risks is emphasized as critical for future planning and operational success.

  • 00:50:00 - 00:59:03

    Finally, Coats concludes by reiterating the role of the Reshoring Institute and local MEPs as valuable resources. Attendees are encouraged to stay engaged, utilize available resources, and seek further guidance as necessary.

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Mapa mental

Vídeo de preguntas y respuestas

  • What is the best source of information for tariff rates?

    Work with your customs broker for the most up-to-date information on tariff rates.

  • Can tariffs be included in standard costs for inventory?

    Yes, tariffs should be included as part of the purchase price in your cost accounting.

  • Are there exemptions for tariffs still valid?

    Exemptions for the 2018 tariffs ended at the end of May.

  • Can there be duty drawbacks on tariffs?

    No, you cannot get duty drawbacks on tariffs.

  • How should companies evaluate their global market during tariff changes?

    Companies should analyze their markets carefully and consider production in multiple locations.

  • What can be done if a customs broker is making mistakes?

    It's advisable to conduct annual audits of brokers to ensure compliance and accuracy.

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Desplazamiento automático:
  • 00:00:00
    and start the webinar in three two one
  • 00:00:07
    Good afternoon and welcome to our
  • 00:00:09
    webinar on best practices to man of
  • 00:00:11
    tariff changes Uh I'm Don Lynch with uh
  • 00:00:14
    the MEP center in New York State and I'm
  • 00:00:17
    delighted to have you with us today
  • 00:00:19
    We're looking forward to sharing the
  • 00:00:21
    information that we've gathered and some
  • 00:00:23
    recommendations to effectively manage
  • 00:00:25
    uncertainty and tariff changes Next
  • 00:00:27
    slide please
  • 00:00:33
    Today's webinar is possible because of
  • 00:00:35
    funding from the National Institute of
  • 00:00:37
    Science and Technologies MEP or
  • 00:00:39
    manufacturing extension partnership
  • 00:00:41
    network The mission of the MEP network
  • 00:00:43
    is to strengthen and empower US
  • 00:00:45
    manufacturers We are a network of,400
  • 00:00:48
    trusted advisers and experts at
  • 00:00:50
    approximately 475 centers nationwide My
  • 00:00:54
    firm TDO is a member of New York State's
  • 00:00:56
    MEP network Our mission is to help
  • 00:00:59
    manufacturers drive operations
  • 00:01:01
    operational excellence by assisting them
  • 00:01:02
    with lean manufacturing applied
  • 00:01:05
    technologies quality safety human
  • 00:01:08
    resources and supply chain management If
  • 00:01:10
    you haven't engaged with your local ME
  • 00:01:13
    MEP center please do so We'll provide a
  • 00:01:15
    link to find your local MEP center in
  • 00:01:18
    our follow-up email after today's
  • 00:01:20
    session We are recording today's webinar
  • 00:01:23
    A link to our slides and today's
  • 00:01:25
    recording will also be provided to all
  • 00:01:27
    registrants via
  • 00:01:29
    email We encourage you to ask questions
  • 00:01:32
    during today's session Please submit
  • 00:01:34
    questions via the Q&A button at the
  • 00:01:36
    bottom of your screen We will answer
  • 00:01:38
    questions near the end of our time
  • 00:01:40
    together Today's webinar will be led by
  • 00:01:43
    Rosemary Coats of the Reshoring
  • 00:01:44
    Institute Rosemary is a best-selling
  • 00:01:47
    author and management consultant with
  • 00:01:49
    over 35 years of experience in global
  • 00:01:51
    supply chain management She leads the
  • 00:01:53
    Reshoring Institute a nonprofit and
  • 00:01:56
    nonpartisan organization providing
  • 00:01:58
    research and consulting for companies
  • 00:02:00
    reshoring Rosemary
  • 00:02:04
    thanks
  • 00:02:05
    Don Okay I want to talk a little bit
  • 00:02:07
    about the reshoring institute before we
  • 00:02:09
    get started talking about the terrace Um
  • 00:02:12
    as Don mentioned we are a nonprofit and
  • 00:02:15
    nonpartisan organization and we help
  • 00:02:18
    companies that are considering making a
  • 00:02:21
    decision to reshore or in the past
  • 00:02:24
    couple years also nearshore Um we're
  • 00:02:27
    doing quite a bit of work in in Mexico
  • 00:02:29
    also So we provide research and
  • 00:02:32
    consulting and we publish all of our
  • 00:02:34
    research on our website It's all free
  • 00:02:37
    It's all downloadable So uh at the end
  • 00:02:40
    you might want to have a look at
  • 00:02:43
    reshoringinstitute.org Uh we also the
  • 00:02:46
    half of our mission is also to provide
  • 00:02:48
    experiential education for university
  • 00:02:51
    students um that can then learn about
  • 00:02:54
    global sourcing and manufacturing And
  • 00:02:57
    you can see the universities where we've
  • 00:02:59
    had interns in the past We uh have uh
  • 00:03:04
    relationships with 19 universities
  • 00:03:06
    across America and uh we're adding more
  • 00:03:10
    as we go along and take more great
  • 00:03:12
    students um on board to help us with our
  • 00:03:15
    both our research as well as our small
  • 00:03:18
    consulting projects Our students are
  • 00:03:21
    paid uh interns and they work a semester
  • 00:03:24
    usually about a 100 hours per
  • 00:03:27
    semester Uh this a little bit more about
  • 00:03:29
    me Along the bottom you'll see my books
  • 00:03:32
    Um I did a lot of work in China The red
  • 00:03:35
    book there the 42 rules for sourcing and
  • 00:03:38
    manufacturing in China was a bestseller
  • 00:03:40
    for quite some time Uh that was
  • 00:03:43
    published back in 2009 and uh I don't
  • 00:03:46
    know people are still buying it and I I
  • 00:03:49
    don't know why it's a little outdated
  • 00:03:50
    these days Um and then on the far right
  • 00:03:53
    Legal Blacksmith is a book that uh I
  • 00:03:57
    wrote together with an attorney And it
  • 00:04:00
    is uh full of uh both process as well as
  • 00:04:04
    the clauses that you need in contracts
  • 00:04:07
    as you're moving through global supply
  • 00:04:09
    chain So it's kind of a handy desk
  • 00:04:11
    reference The first part of each chapter
  • 00:04:14
    is the sections that I wrote about
  • 00:04:17
    sourcing and manufacturing
  • 00:04:20
    Excuse me And
  • 00:04:22
    uh the back uh half of each chapter was
  • 00:04:26
    written by the attorney and she's the
  • 00:04:28
    one that has identified clauses and
  • 00:04:30
    things you need in your your contracts
  • 00:04:32
    with supply chain partners Um as Don
  • 00:04:36
    mentioned I'm the executive director of
  • 00:04:38
    the Reshoring Institute We were founded
  • 00:04:41
    in 2014 so we've been around in 11 years
  • 00:04:45
    helping companies rethink their global
  • 00:04:48
    supply chains We've been uh doing this
  • 00:04:50
    for quite some
  • 00:04:51
    time All
  • 00:04:54
    right So the research project that we
  • 00:04:58
    were asked to do by by Don and his team
  • 00:05:00
    at MEP
  • 00:05:02
    uh was to research companies strategies
  • 00:05:05
    for reacting to the new tariffs So you
  • 00:05:08
    know we've all read lots of things about
  • 00:05:10
    the tariffs the on again off again the
  • 00:05:12
    pauses the increases and so forth but we
  • 00:05:15
    were really trying to figure out what
  • 00:05:18
    companies are actually doing And so uh
  • 00:05:21
    we interviewed a number of executives
  • 00:05:24
    actually 18 executives most of them were
  • 00:05:28
    at the sea level And um we asked them
  • 00:05:32
    what are they doing what how are they
  • 00:05:34
    reacting to the tariffs and so that's
  • 00:05:37
    what we're going to talk about today Uh
  • 00:05:40
    in the blue box there are some notable
  • 00:05:42
    quotes throughout the presentation and
  • 00:05:45
    these are quotes that these executives
  • 00:05:48
    gave us during our our interview So we
  • 00:05:51
    we picked out a few that we thought were
  • 00:05:53
    pretty significant This one is we're
  • 00:05:55
    moving away from soul sourcing uh to
  • 00:05:58
    give us more options and that was a
  • 00:06:00
    common theme we found
  • 00:06:03
    throughout Okay So what was the original
  • 00:06:06
    purpose of tariffs you know before
  • 00:06:08
    income tax uh was put in place in 1913 I
  • 00:06:13
    believe Um the the taxes or tariffs that
  • 00:06:18
    were placed on import supported the
  • 00:06:21
    entire federal government which is just
  • 00:06:24
    astonishing uh when you think about that
  • 00:06:26
    today So just the tariffs all of that uh
  • 00:06:30
    money went to supporting the government
  • 00:06:32
    and then in 1913 when we went to an
  • 00:06:34
    income tax approach uh then the revenue
  • 00:06:38
    from tariffs became relatively small in
  • 00:06:42
    fact very small by comparison to the
  • 00:06:44
    overall budget for the government and
  • 00:06:46
    originally the intent was to protect
  • 00:06:49
    domestic industries So by putting up
  • 00:06:52
    import tariffs putting those in place it
  • 00:06:55
    gave us manufacturing an opportunity to
  • 00:06:58
    try to manufacture and be competitive
  • 00:07:01
    And that may sound familiar because
  • 00:07:02
    that's sort of what's happening today
  • 00:07:04
    We're putting big tariffs on uh on
  • 00:07:08
    countries around the world particularly
  • 00:07:10
    China uh in the hopes of giving our US
  • 00:07:14
    manufacturing a boost um so that they
  • 00:07:17
    can be competitive and we can grow US
  • 00:07:20
    manufacturing Today tariffs are not a
  • 00:07:23
    major source of revenue for the US and
  • 00:07:25
    even with the new tariffs they will not
  • 00:07:27
    be It's a fairly small revenue amount
  • 00:07:31
    And today the primary purpose is trade
  • 00:07:34
    negotiations and retaliation me measures
  • 00:07:37
    and a way of achieving federal
  • 00:07:39
    government goals In this case the Trump
  • 00:07:41
    administration goals Uh tariffs uh have
  • 00:07:45
    as as I'm sure everyone's aware of
  • 00:07:47
    fairly significant economic effect as
  • 00:07:50
    they're having effects on the
  • 00:07:52
    marketplace today on um the stock market
  • 00:07:56
    the bond market uh the price of goods
  • 00:07:59
    and so forth So there's a there's a big
  • 00:08:02
    effect but nothing compared to Smoot
  • 00:08:05
    Holly So I know if you watch the news
  • 00:08:09
    sometimes there's a reference to Smoot
  • 00:08:11
    Holly in the 1930s So this is what it is
  • 00:08:14
    There's Senator Smoot Um I think he's
  • 00:08:17
    the one on the left and Representative
  • 00:08:20
    Holly They were in Congress and they got
  • 00:08:22
    together in the late 20s and introduced
  • 00:08:26
    a bill that was then passed in 1930 and
  • 00:08:29
    it the Smoot Holly Act was uh putting
  • 00:08:32
    tariffs on pretty much all imports that
  • 00:08:35
    were coming into the US about a 20%
  • 00:08:38
    tariff import or tariffs on uh all
  • 00:08:42
    imports and there were a lot of
  • 00:08:44
    economists at the time that were opposed
  • 00:08:46
    to the tariffs just like now but
  • 00:08:49
    President Hoover signed it anyway and
  • 00:08:52
    many countries particularly Canada and
  • 00:08:55
    Mexico retaliated with their own tariffs
  • 00:08:58
    Again sound familiar uh and um
  • 00:09:02
    they were you know putting reciprocal
  • 00:09:06
    tariffs on and there was a lot of churn
  • 00:09:08
    in the global environment even back in
  • 00:09:11
    1930 But the Smooth Holly Act is
  • 00:09:14
    commonly blamed for the severe deepening
  • 00:09:17
    of the global depression wasn't
  • 00:09:20
    necessarily the cause but it certainly
  • 00:09:23
    deepened the depression worldwide Uh and
  • 00:09:26
    it did significant foreign policy damage
  • 00:09:29
    So that's the kind of the model and we
  • 00:09:31
    look to that to see uh if we can compare
  • 00:09:34
    that against what's happening in the in
  • 00:09:37
    the environment in the US
  • 00:09:40
    today So Trump's tariffs are intended to
  • 00:09:44
    achieve a balance in trade Um originally
  • 00:09:47
    they were an attempt to force other
  • 00:09:50
    countries to change their policies
  • 00:09:52
    particularly to stop drug shipments
  • 00:09:54
    coming across the border from both
  • 00:09:57
    Mexico and China in small packages
  • 00:10:00
    coming from China and to stop illegal
  • 00:10:03
    immigration but it expanded uh across
  • 00:10:06
    the board to other countries as well as
  • 00:10:09
    to address other issues
  • 00:10:12
    One of the key provisions was also to
  • 00:10:14
    stop dimminimous shipments And you may
  • 00:10:16
    have heard that term or you're familiar
  • 00:10:19
    with that term And that's bringing
  • 00:10:22
    shipments into the US that are valued at
  • 00:10:24
    less than
  • 00:10:25
    $800 So for example if you're traveling
  • 00:10:28
    um and you go to you know spend a couple
  • 00:10:32
    weeks in Italy and bring back some
  • 00:10:34
    souvenirs and so forth as long as you
  • 00:10:36
    have less than $800 there's no tariff on
  • 00:10:39
    it And then during the growth of the
  • 00:10:42
    e-commerce uh era the US government
  • 00:10:46
    decided be because there were so many
  • 00:10:48
    small shipments coming into the US to
  • 00:10:52
    fill ecommerce um orders the $800 de dim
  • 00:10:57
    deminimous limit was also placed in all
  • 00:11:00
    those small shipments So for the
  • 00:11:03
    last several years many many years maybe
  • 00:11:06
    10 years or so 15 years anything coming
  • 00:11:10
    into the US that was a shipment less
  • 00:11:12
    than $800 did not do a formal customs
  • 00:11:15
    clearance They came in on manifests went
  • 00:11:18
    zipped right through customs and were
  • 00:11:21
    del delivered to your door Uh if you are
  • 00:11:24
    ordering things from Amazon for example
  • 00:11:27
    often times they come from overseas
  • 00:11:29
    certainly from Teeu or Shine If you've
  • 00:11:32
    ordered anything from those websites
  • 00:11:35
    that was all part of this dimminimous
  • 00:11:37
    allowance Those dimminimous shipments
  • 00:11:40
    have been stopped So US customs now uh
  • 00:11:45
    requires that those shipments go through
  • 00:11:47
    a more formal entry process And as you
  • 00:11:50
    can imagine that has had an enormous
  • 00:11:53
    effect Um we're actually um importing
  • 00:11:57
    uh
  • 00:11:59
    $438.9
  • 00:12:01
    billion worth of goods from China every
  • 00:12:04
    year and that includes a lot of these
  • 00:12:06
    small shipments as well as all kinds of
  • 00:12:08
    industrial um industrial goods
  • 00:12:12
    So recently President Trump has
  • 00:12:15
    increased the tariff rate uh on imports
  • 00:12:18
    from China and it is in place now to
  • 00:12:23
    145% So now we've got all these small
  • 00:12:26
    shipments that now have to clear customs
  • 00:12:28
    You can imagine customs is reeling from
  • 00:12:31
    the additional work Um but also they're
  • 00:12:35
    t they're taxed or tariffed at 145% So
  • 00:12:39
    if you're bringing in something that
  • 00:12:41
    maybe a machine part or something like
  • 00:12:43
    that's worth
  • 00:12:44
    $100 you now have to pay
  • 00:12:47
    $145 on top of that as part of the
  • 00:12:50
    tariff So it's got it's pretty
  • 00:12:52
    significant in impact And in fact a lot
  • 00:12:55
    of companies that we talked to during
  • 00:12:59
    the during our interviews um were
  • 00:13:01
    heavily burdened by this tariff and were
  • 00:13:04
    trying to determine what their strategy
  • 00:13:06
    should be
  • 00:13:10
    So this is the current state I
  • 00:13:14
    think and I say that because it's really
  • 00:13:17
    hard to keep up as I'm sure you know
  • 00:13:19
    there's um changes and on again off
  • 00:13:22
    again and pauses and so forth So it's
  • 00:13:24
    really difficult u to keep up with the
  • 00:13:28
    exact numbers as we go forward but
  • 00:13:31
    generally right now there's a pause on
  • 00:13:33
    the reciprocal tariffs So uh President
  • 00:13:36
    Trump wanted to place a reciprocal
  • 00:13:39
    tariff on each country and that means if
  • 00:13:42
    they were already importing US goods
  • 00:13:44
    into a foreign country say Vietnam for
  • 00:13:47
    example then we had a reciprocal tariff
  • 00:13:50
    placed on them at a 46%
  • 00:13:54
    uh tariff on imports to the US So we're
  • 00:13:57
    making the trade more balanced in terms
  • 00:14:00
    of the tariff approach And so uh right
  • 00:14:04
    now some of the samples here 25% on
  • 00:14:07
    Canada and Mexico and they have an
  • 00:14:10
    exemption However if you are building
  • 00:14:13
    goods under USMCA that have content in
  • 00:14:16
    North America those are still if they
  • 00:14:19
    qualify those are still
  • 00:14:21
    duty-free Uh so that's one of the
  • 00:14:23
    exemptions but otherwise other goods
  • 00:14:25
    coming in from Canada and Mexico have a
  • 00:14:28
    tariff rate of 25%
  • 00:14:31
    20% across the board in the European
  • 00:14:33
    Union 10% on the United Kingdom 145% as
  • 00:14:38
    I mentioned on China 46 on Vietnam 24 in
  • 00:14:42
    Japan 32 on Taiwan zero on Russia and
  • 00:14:47
    that raised a lot of eyebrows However
  • 00:14:50
    there are other sanctions that have been
  • 00:14:52
    placed on Russia since the beginning of
  • 00:14:54
    the Ukraine war Uh so right now the
  • 00:14:58
    tariff rate is at zero
  • 00:15:00
    And there are various rates for other
  • 00:15:02
    countries around the world um including
  • 00:15:05
    small islands I'm sure you've seen the
  • 00:15:07
    the memes with the uh with the penguins
  • 00:15:11
    um uninhabited islands that have uh
  • 00:15:14
    tariffs on them now So there's a lot of
  • 00:15:17
    stuff around the world where there's an
  • 00:15:19
    application of different rates of
  • 00:15:21
    tariffs Um on the right hand
  • 00:15:24
    column the China exemption So in 2018
  • 00:15:29
    um President Trump had placed uh tariffs
  • 00:15:32
    on Chinese goods at about 25% and then
  • 00:15:36
    there was a uh aluminum and steel tariff
  • 00:15:39
    and so forth Um and a lot of companies
  • 00:15:42
    applied for exemptions In fact I help
  • 00:15:44
    helped a number of companies write
  • 00:15:45
    exemptions uh because they were
  • 00:15:48
    importing critical goods from China But
  • 00:15:51
    all of those uh exemptions expired or
  • 00:15:54
    will expire on May 31st So there would
  • 00:15:56
    be no further exemption
  • 00:16:00
    allowances There's also a across the
  • 00:16:02
    board 25% tariff on all cars Um as I
  • 00:16:06
    mentioned the elimination of dimminimous
  • 00:16:09
    imports 25% on Canadian goods plus a 10%
  • 00:16:15
    on certain energy products
  • 00:16:18
    Mexico Um except for anything coming in
  • 00:16:21
    under
  • 00:16:23
    USMCA imported steel and aluminum uh
  • 00:16:26
    under section 232 are subject to d
  • 00:16:30
    regular duty rates or whatever is
  • 00:16:32
    applying now plus
  • 00:16:35
    15% And finally uh there's a brand new u
  • 00:16:40
    levy that's being placed on Chinese
  • 00:16:42
    ships unloading at American
  • 00:16:44
    ports And that was a policy that was
  • 00:16:47
    started under the Biden administration
  • 00:16:49
    is and is now going to be
  • 00:16:51
    enforced About 98% of trade ships around
  • 00:16:56
    the world when I say trade ships I mean
  • 00:16:58
    those carrying cargo not um not cruise
  • 00:17:01
    vessels but those carrying cargo are
  • 00:17:04
    made in China And so the idea of putting
  • 00:17:08
    port fees and additional burden on those
  • 00:17:11
    ships is to perhaps give a boost to US
  • 00:17:15
    ship building We'll see So that's what I
  • 00:17:18
    think the tariffs are today unless there
  • 00:17:20
    have been announcements that I missed
  • 00:17:22
    this morning Um but keep an eye on that
  • 00:17:24
    and it'll give you at least a general
  • 00:17:27
    idea Okay So our little project here we
  • 00:17:30
    asked 18 executives and they were mostly
  • 00:17:33
    sea level CEOs COOs um chief supply
  • 00:17:37
    chain officers that's CSCO that's kind
  • 00:17:40
    of a new term and they were all across
  • 00:17:43
    America in 16 different industries And
  • 00:17:46
    we got pretty consistent
  • 00:17:50
    responses Uh I'm going to show you some
  • 00:17:52
    graphical results of those surveys um
  • 00:17:56
    where after we ask them individual
  • 00:17:58
    questions So that's what's coming next
  • 00:18:01
    Okay So these are the industries and
  • 00:18:03
    regions of the
  • 00:18:07
    survey At the bottom you can see we
  • 00:18:10
    interviewed companies that were located
  • 00:18:12
    in upstate New York New York City uh
  • 00:18:15
    Toronto and Maine
  • 00:18:18
    uh Minneapolis Silicon Valley Santa
  • 00:18:21
    Monica San Diego and they were in all of
  • 00:18:24
    those industries I was a little
  • 00:18:26
    surprising when I went to uh collect all
  • 00:18:29
    this information h the variety of
  • 00:18:31
    industries and how many different
  • 00:18:33
    industries that we actually talked to
  • 00:18:36
    And the other surprising part was how
  • 00:18:37
    consistent the answers were to our
  • 00:18:42
    questions Okay Um this is now I'm going
  • 00:18:46
    to give you a little overview of the
  • 00:18:47
    responses before I get into the actual
  • 00:18:50
    charts
  • 00:18:51
    here One of the things in the in the
  • 00:18:53
    blue box above that was sort of scary I
  • 00:18:58
    guess Um our capital investments are
  • 00:19:00
    frozen because we don't know what to
  • 00:19:02
    expect uh and that was capital
  • 00:19:05
    investment and hiring were frozen And
  • 00:19:10
    when we don't move forward we make no
  • 00:19:12
    investment in the economy uh that is a
  • 00:19:14
    that is a warning sign for recession And
  • 00:19:17
    so we we pretty much heard that from
  • 00:19:20
    everyone that no one was making
  • 00:19:22
    decisions to go forward with investment
  • 00:19:24
    at this time until the uh outlook and
  • 00:19:29
    tariff rates and so forth are stabilized
  • 00:19:31
    and they can depend on uh what's what's
  • 00:19:34
    going to happen I mean once you
  • 00:19:36
    understand firmly what's happening then
  • 00:19:39
    you can make decisions based on that
  • 00:19:42
    uh the uncertainty in tariffs and ge
  • 00:19:45
    geopol geopolitics was creating chaos in
  • 00:19:49
    global operations especially in the
  • 00:19:51
    electronics industry So not everyone
  • 00:19:54
    that we talked to was in electronics but
  • 00:19:56
    a fairly good portion were And
  • 00:19:59
    electronics of course you may know most
  • 00:20:02
    of the electronic component components
  • 00:20:05
    around the world are manufactured in the
  • 00:20:07
    Pearl River Valley just uh uh west and
  • 00:20:13
    north of Hong Kong Uh so along um Guan
  • 00:20:17
    Dong Dong uh Dong Guan Guanghao uh
  • 00:20:22
    Shenzhen those are the big uh production
  • 00:20:25
    areas for electronics Uh and so there
  • 00:20:29
    were a lot of companies who were very
  • 00:20:31
    concerned about being able to get
  • 00:20:32
    electronic parts which are not
  • 00:20:34
    manufactured in the US
  • 00:20:37
    Um most of the companies told us they
  • 00:20:39
    prefer to manufacture in the US if they
  • 00:20:41
    could make the economics work which can
  • 00:20:44
    be challenging as I'm sure you
  • 00:20:46
    know Uh companies were working to
  • 00:20:49
    increase domestic sourcing I think
  • 00:20:52
    everyone said that So that um domestic
  • 00:20:56
    sourcing uh will grow I I believe over
  • 00:21:00
    the next couple years So instead of
  • 00:21:02
    bringing all the manufacturing back more
  • 00:21:04
    companies are trying to find um
  • 00:21:06
    suppliers and manufacture in the
  • 00:21:09
    US And then a lot of companies told us
  • 00:21:12
    they were going to have to increase
  • 00:21:14
    prices to customers because they simply
  • 00:21:16
    could not absorb the the duties
  • 00:21:21
    So some of the companies were stuck not
  • 00:21:23
    moving forward not knowing what to do
  • 00:21:25
    and other companies were starting to m
  • 00:21:28
    uh model alternative strategies such as
  • 00:21:32
    preparing multiple alternative
  • 00:21:34
    approaches and whatif scenarios which is
  • 00:21:36
    we encourage that and try to tell our
  • 00:21:39
    customers always they should have plan A
  • 00:21:42
    plan B and plan C um to be able to
  • 00:21:45
    respond to whatever may be happening
  • 00:21:49
    um many of the companies were assessing
  • 00:21:51
    geopolitical risks So for example if
  • 00:21:53
    they were manufacturing in Vietnam um
  • 00:21:57
    trying to understand what the risk might
  • 00:21:59
    be there and we all know I think what's
  • 00:22:02
    going on with China and Taiwan So that
  • 00:22:05
    was a a big one but a common one and
  • 00:22:08
    sort of that risk has been identified
  • 00:22:10
    for quite some time
  • 00:22:13
    Many of the executives told us they were
  • 00:22:15
    moving manufacturing to alternative
  • 00:22:18
    countries out of China particularly
  • 00:22:20
    Mexico India and
  • 00:22:23
    Vietnam Um as I mentioned before they're
  • 00:22:25
    increasing domestic
  • 00:22:27
    sourcing They're trying to reshore
  • 00:22:30
    manufacturing to the US if they can make
  • 00:22:32
    it work
  • 00:22:34
    And then um a lot of the companies and
  • 00:22:37
    this is another item that we hardily
  • 00:22:39
    recommend and that's working with your
  • 00:22:41
    forward or broker to rethink your import
  • 00:22:44
    classification So you you have an
  • 00:22:46
    opportunity to look at your product and
  • 00:22:48
    determine if it could be classified
  • 00:22:50
    differently in parts and so forth Um and
  • 00:22:54
    the potential for drawback the use of
  • 00:22:56
    foreign trade zones and other trade
  • 00:22:58
    strategies And I'm going to talk a
  • 00:23:00
    little bit more about each of those
  • 00:23:01
    later on in this
  • 00:23:03
    presentation Uh and finally strategies
  • 00:23:06
    are sea level decisions So it's you know
  • 00:23:09
    it's not up to someone that's working uh
  • 00:23:12
    in a day-to-day tactical operations job
  • 00:23:15
    to determine where in the world you're
  • 00:23:17
    going to manufacture That's a very high
  • 00:23:20
    level and strategic decision And so you
  • 00:23:24
    know behooves you if you're working in
  • 00:23:25
    in uh importing or exporting to make
  • 00:23:28
    sure that you're in touch with your
  • 00:23:30
    senior executives so that um together
  • 00:23:32
    you can design a strategy that will
  • 00:23:36
    work Okay here's the start of the survey
  • 00:23:40
    results
  • 00:23:42
    94% of the companies that we talked to
  • 00:23:45
    are importing finished or in
  • 00:23:46
    intermediate goods And I would say that
  • 00:23:49
    last little 6% there even though they
  • 00:23:52
    may not be importing parts for
  • 00:23:55
    production they're probably importing
  • 00:23:57
    Chinese goods for other reasons such as
  • 00:24:00
    um lab equipment machine tools small
  • 00:24:04
    tools Uh so somewhere along the line you
  • 00:24:07
    probably have Chinese goods in your
  • 00:24:09
    factory or in your shop or your lab Um
  • 00:24:13
    and my guess would be that that a 100%
  • 00:24:16
    of the people are going to be affected
  • 00:24:17
    by these
  • 00:24:20
    tariffs 72% of the executives told us
  • 00:24:23
    that they were absorbing at least some
  • 00:24:25
    of the costs and 83% said they were
  • 00:24:29
    passing on the cost to the customers And
  • 00:24:32
    of course you know what that means that
  • 00:24:34
    we're all going to be paying more for
  • 00:24:37
    goods um in the near future because
  • 00:24:39
    these additional tariffs uh are can't be
  • 00:24:43
    absorbed by these companies and so
  • 00:24:45
    they're going to have to pass on that
  • 00:24:48
    increased cost to
  • 00:24:52
    customers Uh some companies were using
  • 00:24:54
    foreign trade zones Uh if you're not
  • 00:24:56
    familiar with foreign trade zone this is
  • 00:24:59
    a a an area a physical area that's
  • 00:25:02
    located within the United States but
  • 00:25:05
    it's considered outside of the customs
  • 00:25:08
    territory of the United States So it's
  • 00:25:10
    possible to bring products into a
  • 00:25:12
    foreign trade zone that have not been
  • 00:25:15
    officially imported and you can hold
  • 00:25:18
    them there to store them there and so
  • 00:25:20
    forth Now a lot of companies are using
  • 00:25:22
    foreign trade zones with what's called a
  • 00:25:25
    privileged import uh and they hold their
  • 00:25:29
    goods there for release later when they
  • 00:25:32
    need them And the reason why they would
  • 00:25:34
    use that strategy is because the tariffs
  • 00:25:36
    may go up later And so companies are
  • 00:25:39
    building inventory and holding that
  • 00:25:42
    holding that inventory right now because
  • 00:25:45
    under a privileged import you can import
  • 00:25:48
    the goods later under an earlier tariff
  • 00:25:51
    rate when you actually physically move
  • 00:25:53
    the goods into the foreign trade zone So
  • 00:25:56
    it's a delay of strategy It may be
  • 00:25:58
    avoidance of strategy A small percentage
  • 00:26:01
    were using it but it was a big enough
  • 00:26:03
    that um we flagged that issue 60% of the
  • 00:26:08
    companies told us they were expanding
  • 00:26:10
    domestic sourcing and I think that
  • 00:26:12
    number will go up as well That's a very
  • 00:26:15
    popular
  • 00:26:18
    strategy Uh finding alternative sources
  • 00:26:21
    and and that's for manufacturing also
  • 00:26:24
    and moving out of China Um 78% of the
  • 00:26:27
    companies said they were looking for
  • 00:26:28
    alternate sources in new locations
  • 00:26:31
    beyond China Um and of course that 145
  • 00:26:35
    tariff rate on Chinese imports is really
  • 00:26:38
    impacting that movement It's going quite
  • 00:26:41
    quickly where companies are are trying
  • 00:26:43
    to determine where to go to
  • 00:26:45
    manufacture Uh 44% said they were moving
  • 00:26:48
    out of China and I expect that number to
  • 00:26:51
    increase as
  • 00:26:54
    well Okay Some companies said they were
  • 00:26:57
    moving to Mexico India or Vietnam um you
  • 00:27:00
    can see 28% moving to Mexico Uh and in
  • 00:27:04
    fact you know at the Resuring Institute
  • 00:27:06
    we've done a few studies but one in
  • 00:27:09
    particular on um global labor rates um
  • 00:27:13
    which is on our landing page if you're
  • 00:27:15
    interested And we found that Mexico is
  • 00:27:17
    often less expensive than China Um
  • 00:27:21
    central Mexico in particular is one of
  • 00:27:23
    the most inexpensive places in the world
  • 00:27:25
    to manufacture and because of the
  • 00:27:28
    proximity to the US and the ability to
  • 00:27:31
    import fairly easily from Mexico it
  • 00:27:34
    looks very attractive Um and so an awful
  • 00:27:38
    lot of companies are considering Mexico
  • 00:27:39
    as an alternative
  • 00:27:42
    Uh India is another one a developing
  • 00:27:44
    nation but as I'm sure you know there
  • 00:27:46
    are infrastructure problems and other
  • 00:27:49
    bure bureaucratic issues in India that
  • 00:27:52
    make it a little harder to do business
  • 00:27:54
    there versus Mexico And then Vietnam um
  • 00:27:58
    a good alternative A lot of companies
  • 00:28:00
    moved there over the last five or 10
  • 00:28:02
    years Um but they only have 95 million
  • 00:28:06
    people in Vietnam and they're sort of
  • 00:28:07
    full up hard to find a factory to
  • 00:28:11
    manufacture in Vietnam these days
  • 00:28:13
    They're quite full and there's a fairly
  • 00:28:16
    hefty tariff right now on imports from
  • 00:28:21
    Vietnam Okay There were also some
  • 00:28:23
    additional concerns Um so in the blue
  • 00:28:26
    box you see the the uh
  • 00:28:29
    quote This was quite an interesting
  • 00:28:32
    quote Um one person told us that their
  • 00:28:35
    Asian suppliers are now asking them to
  • 00:28:38
    change the incot terms So incot terms on
  • 00:28:41
    uh the negotiated way be way that you
  • 00:28:45
    operate between buyers and sellers Um so
  • 00:28:48
    incot terms are the international
  • 00:28:50
    commerce terms of sale and a lot of the
  • 00:28:54
    uh goods had been sold FOB destination
  • 00:28:57
    like FOB port of Los Angeles for example
  • 00:29:00
    Um and these Asian suppliers were asking
  • 00:29:04
    the companies to switch the enco terms
  • 00:29:06
    to Xworks factory meaning that the buyer
  • 00:29:11
    would be responsible for freight export
  • 00:29:14
    and import into the US instead of
  • 00:29:18
    sharing that responsibility with the uh
  • 00:29:21
    with the shipper So um that means that
  • 00:29:26
    it's going to be more expensive not only
  • 00:29:27
    because of the tariffs that are in place
  • 00:29:30
    but also additional logistics and
  • 00:29:32
    transportation charges uh and perhaps
  • 00:29:35
    export charges uh for goods that are
  • 00:29:39
    shipped out of um certain com countries
  • 00:29:43
    and that can have a huge impact So in
  • 00:29:45
    this particular case the executive that
  • 00:29:47
    I spoke with works for a giant Silicon
  • 00:29:50
    Valley company and they were very
  • 00:29:52
    concerned about this particular
  • 00:29:54
    issue There were also uh other concerns
  • 00:29:58
    retaliatory tariffs by other countries
  • 00:30:00
    on exports So not just the import side
  • 00:30:03
    but now if you have an export market
  • 00:30:05
    because of the retaliatory tariffs and
  • 00:30:08
    other tariffs So for example China has
  • 00:30:11
    put a 125% tariff on US goods going into
  • 00:30:15
    China which makes that more expensive
  • 00:30:19
    importing into China also Um and so that
  • 00:30:22
    was a big concern if you have an export
  • 00:30:24
    market Um if you're in the aggra
  • 00:30:26
    business for example trying to ship
  • 00:30:28
    soybeans to
  • 00:30:30
    China pretty hard to make that economic
  • 00:30:33
    case these days um because of the tariff
  • 00:30:37
    u related activities
  • 00:30:39
    uh cyber security concerns that was a
  • 00:30:42
    big one and an increasing concern Soul
  • 00:30:46
    sourcing concerns a lot of companies you
  • 00:30:48
    know have a spec specific part or
  • 00:30:50
    something unique um that they're using
  • 00:30:52
    soul sourcing
  • 00:30:55
    for Uh can't find workers or there's no
  • 00:30:59
    capacity in the US You know we have a a
  • 00:31:02
    severe worker shortter shortage right
  • 00:31:05
    now across the US So it's really
  • 00:31:07
    difficult to find skilled workers and
  • 00:31:10
    that will only increase uh as we exclude
  • 00:31:14
    other workers and we focus on
  • 00:31:16
    immigration and and so forth We exclude
  • 00:31:19
    those workers from our industries Uh
  • 00:31:22
    finding workers or worker shortages is
  • 00:31:24
    going to increase Uh some companies were
  • 00:31:27
    lobbying Congress or the president to
  • 00:31:29
    try to make a difference in the tariff
  • 00:31:32
    application The dimminimous imports were
  • 00:31:35
    a concern for companies that were using
  • 00:31:37
    that were importing small goods cargo
  • 00:31:40
    theft and uh first sale which is a
  • 00:31:44
    technique I'll I'll talk about in a
  • 00:31:47
    minute Okay So how are these companies
  • 00:31:50
    responding to the tariffs um here are
  • 00:31:53
    some recommendations that we have that
  • 00:31:56
    not only we heard from some of the
  • 00:31:57
    companies but also recommendations that
  • 00:32:00
    um TDIO and and Don's group Jim
  • 00:32:04
    Augustinino Dagustinino's group are are
  • 00:32:07
    using in their practice in New York and
  • 00:32:11
    across the board these are some of the
  • 00:32:12
    ways that we're trying to coach our
  • 00:32:14
    clients So first of all form a crossf
  • 00:32:17
    functional team and that might include
  • 00:32:19
    like purchasing finance marketing sales
  • 00:32:22
    legal to develop new strategies Uh so
  • 00:32:26
    the crossf functional team is fairly
  • 00:32:27
    important This is not simply an import
  • 00:32:31
    export issue but it's a strategic issue
  • 00:32:34
    Where in the world should you
  • 00:32:35
    manufacture where should you source what
  • 00:32:37
    are the impacts going to be
  • 00:32:40
    uh you should work with your customs
  • 00:32:42
    broker for up-to-date information As as
  • 00:32:44
    I mentioned that terror slide is as much
  • 00:32:49
    information as I know as of this morning
  • 00:32:51
    Uh but things are changing rapidly So
  • 00:32:54
    stay close to your customs broker uh
  • 00:32:57
    where you can find up-to-date
  • 00:32:59
    information Uh customs brokers are going
  • 00:33:01
    to be the ones who will know how the
  • 00:33:03
    duty rates apply Review your import
  • 00:33:06
    classifications
  • 00:33:07
    um the potential for duty drawback Uh
  • 00:33:11
    sometimes you can get uh a refund of
  • 00:33:13
    duties that come into the US It's my
  • 00:33:16
    understanding that you cannot get duty
  • 00:33:18
    drawback on tariffs that are paid
  • 00:33:20
    However
  • 00:33:22
    uh the use of foreign trade zones and
  • 00:33:24
    other trade stat strategies
  • 00:33:27
    uh assess the impact of tariffs on
  • 00:33:29
    purchasing costs This is one that I
  • 00:33:31
    think is quite important uh and also the
  • 00:33:34
    margins and and sales if your prices
  • 00:33:37
    increase You one of the things that we
  • 00:33:40
    advocate for is to start from a position
  • 00:33:42
    of information So understand what those
  • 00:33:45
    costs and the impacts are going to be
  • 00:33:48
    before you start considering a strategy
  • 00:33:51
    So for example if um you look at your
  • 00:33:55
    imported purchase goods and find it's a
  • 00:33:58
    fairly small percentage
  • 00:34:00
    um your tariff is fairly small it may
  • 00:34:03
    not be worth a lot of pursuit um going
  • 00:34:06
    forward or at least it's not going to be
  • 00:34:08
    as high priority But if you uh are
  • 00:34:11
    importing 80% for example of what goes
  • 00:34:15
    into your production then you've got a
  • 00:34:17
    you know a siren that should go off and
  • 00:34:20
    you should pay attention to that right
  • 00:34:21
    away And the same is true on the margins
  • 00:34:24
    and sales Um if your prices increase how
  • 00:34:27
    will that affect demand will your
  • 00:34:30
    customers say "Well can't afford it
  • 00:34:32
    anymore Can't buy your goods." Which
  • 00:34:34
    would affect your demand or notifying
  • 00:34:37
    your clients that there will be a price
  • 00:34:40
    increase Uh you should evaluate your
  • 00:34:43
    product design and change things So
  • 00:34:46
    that's working with engineering um to
  • 00:34:49
    understand uh if you can redesign parts
  • 00:34:52
    or the product itself
  • 00:34:54
    uh in order to lower your your um duty
  • 00:34:59
    rate uh and take out foreign parts So
  • 00:35:02
    sometimes you can re-engineer product
  • 00:35:05
    and remove certain parts or make it work
  • 00:35:08
    differently with parts that are sourced
  • 00:35:09
    in the
  • 00:35:11
    US We highly advocate you prepare
  • 00:35:14
    alternative approaches and whatif
  • 00:35:16
    scenarios Um you should deliver or
  • 00:35:19
    develop several plans including
  • 00:35:22
    alternate locations Uh the steps to take
  • 00:35:25
    a timeline and a budget I think very
  • 00:35:29
    often um our clients overlook the budget
  • 00:35:32
    part So they're making p plans but they
  • 00:35:35
    haven't figured out what the cost will
  • 00:35:37
    be So that that's going to be really
  • 00:35:38
    important to decision
  • 00:35:41
    making Okay Uh stay a breast of the news
  • 00:35:44
    and changes to tariffs and
  • 00:35:46
    geopolitics You got to stay you got to
  • 00:35:48
    stay informed on a daily basis um in
  • 00:35:51
    order to make the right decisions
  • 00:35:54
    uh assess the geopolitical risks um
  • 00:35:57
    particularly in China and Taiwan You
  • 00:36:00
    know most of our semiconductors are
  • 00:36:02
    produced at Taiwan semiconductor TSMC in
  • 00:36:07
    Taiwan and uh if China in I guess I
  • 00:36:12
    should say when China invades Taiwan
  • 00:36:15
    because it's more likely to happen uh
  • 00:36:17
    they may shut down that production or
  • 00:36:19
    those shipments to the US So if you're
  • 00:36:21
    dependent on manufacturing and goods
  • 00:36:25
    coming from Taiwan that that's got to be
  • 00:36:27
    a top priority for
  • 00:36:29
    you Uh move manufacturing to an
  • 00:36:32
    alternate lowcost country Mexico or
  • 00:36:34
    India for
  • 00:36:36
    example Aggressively look for US sources
  • 00:36:38
    for parts and our favorite reshore
  • 00:36:42
    manufacturing to the
  • 00:36:45
    US Okay no question there's change ahead
  • 00:36:49
    for sure
  • 00:36:50
    This is our contact information It's
  • 00:36:52
    also at the end of the deck So I'm going
  • 00:36:54
    to skip over this and talk to you a
  • 00:36:56
    little bit about the appendix in in the
  • 00:36:58
    last few minutes we have here before we
  • 00:37:01
    open it up to
  • 00:37:03
    questions So what we did was we came up
  • 00:37:06
    with a a number of more detailed
  • 00:37:08
    strategic alternatives on how to address
  • 00:37:11
    the tariffs So I think some some helpful
  • 00:37:14
    suggestions here with a slight more
  • 00:37:16
    detail than just our statistics and our
  • 00:37:19
    charts
  • 00:37:22
    before The first section is US customs
  • 00:37:25
    strategy Um you may have heard the term
  • 00:37:27
    substantial
  • 00:37:29
    transformation and that's when you take
  • 00:37:31
    a product um in say for example
  • 00:37:36
    uh you're sending logs from the Pacific
  • 00:37:40
    Northwest to Tijuana Mexico where
  • 00:37:43
    they're turned into uh
  • 00:37:46
    furniture that would be that would
  • 00:37:49
    qualify for a substantial transformation
  • 00:37:51
    from one product so the logs into a new
  • 00:37:56
    product which would be furniture So the
  • 00:37:58
    nature of the product must change as
  • 00:38:01
    well as the tariff classification in
  • 00:38:03
    order to uh qualify for substantial
  • 00:38:06
    transformation Now the reason why that
  • 00:38:08
    is important is if you can transform
  • 00:38:11
    your product into a different product
  • 00:38:13
    the tariff rate may be
  • 00:38:15
    lower So a lot of companies try for that
  • 00:38:18
    So it's you need help with your broker
  • 00:38:21
    to understand if that's appropriate Um
  • 00:38:24
    but that's one of the the strategies to
  • 00:38:26
    at least
  • 00:38:27
    evaluate tariff or duty engineering I
  • 00:38:30
    spoke about that a little bit before You
  • 00:38:32
    may be able to re-engineer your product
  • 00:38:34
    to to uh assess a lower duty
  • 00:38:39
    rate Uh reclassifying your heart and ice
  • 00:38:42
    tariff This is one we find from time to
  • 00:38:45
    time is uh companies been importing the
  • 00:38:47
    same thing for 20 years using a tariff
  • 00:38:50
    classification
  • 00:38:51
    And if they look at that and evaluate it
  • 00:38:53
    it's quite possible the classification
  • 00:38:55
    is no longer
  • 00:38:58
    valid there may
  • 00:39:00
    be a different uh classification
  • 00:39:04
    available at a lower duty rate Duty
  • 00:39:07
    drawback as I mentioned sometimes you
  • 00:39:09
    can get a refund on uh duty if you
  • 00:39:12
    reexport the product after uh you've
  • 00:39:15
    imported it or changed it in the
  • 00:39:19
    US First sale is an idea that um is used
  • 00:39:23
    by um in the apparel industry and a lot
  • 00:39:27
    of times in bro in industries where
  • 00:39:29
    there's brokers involved such as the
  • 00:39:31
    metals industry and that for sale is a
  • 00:39:35
    definition meaning that when you sell a
  • 00:39:38
    product from the manufacturer to the
  • 00:39:40
    broker or to an intermediate party
  • 00:39:43
    there's one sale price and then that
  • 00:39:45
    broker may sell it to a customer in the
  • 00:39:48
    US and they mark it up So there's an
  • 00:39:50
    additional price a different price on
  • 00:39:52
    the import Well US Customs allows for
  • 00:39:56
    you to apply duty to the first sale So
  • 00:39:59
    the price from the manufacturer to the
  • 00:40:02
    broker uh if you're importing into the
  • 00:40:05
    US and it's known that you're going to
  • 00:40:06
    do that So that can save you some money
  • 00:40:09
    on on import tariffs And then foreign
  • 00:40:11
    trade zones we talked about
  • 00:40:15
    before Okay Um so many companies still
  • 00:40:18
    export products uh to uh into the United
  • 00:40:22
    States from other countries duty-free or
  • 00:40:25
    with low tariff rates And so um that's
  • 00:40:28
    something definitely to consider Mexico
  • 00:40:31
    and Canada under the US MCA agreement
  • 00:40:34
    can import duty-free if those products
  • 00:40:37
    qualify And there's a quite a big
  • 00:40:39
    qualification process to go through Uh
  • 00:40:43
    if you were considering moving to
  • 00:40:44
    Vietnam Thailand and Malaysia those are
  • 00:40:47
    popular Asian destinations
  • 00:40:50
    um you may find lower lower labor costs
  • 00:40:52
    and so forth But um there's enough
  • 00:40:56
    change going on with respect to the
  • 00:40:58
    tariffs and scrutiny uh that may become
  • 00:41:01
    problematic in the future
  • 00:41:04
    India Indonesia and Philippines also
  • 00:41:07
    being considered larger labor pools
  • 00:41:10
    cheaper labor Um but again with the
  • 00:41:14
    unknown application of tariffs and
  • 00:41:17
    sanctions and so forth it's just a
  • 00:41:19
    little bit unknown Taiwan and South
  • 00:41:22
    Korea both have significant advantages
  • 00:41:24
    and they're very much more advanced in
  • 00:41:27
    manufacturing than than other countries
  • 00:41:29
    in Asia
  • 00:41:32
    Um consider contract manufacturing Uh if
  • 00:41:35
    you have contract manufacturer it's
  • 00:41:37
    possible they can help move production
  • 00:41:39
    around the world A lot of these big
  • 00:41:41
    contract manufacturers have sites in
  • 00:41:43
    multiple countries maybe China and
  • 00:41:46
    Mexico and India and Indonesia and
  • 00:41:49
    Poland Um so you may have an opportunity
  • 00:41:52
    to move your
  • 00:41:54
    manufacturing to one of their other
  • 00:41:56
    contract manufacturing locations
  • 00:41:59
    Uh and so there's a there's a lot to
  • 00:42:01
    that decision but definitely speak with
  • 00:42:03
    your contract manufacturer if you have
  • 00:42:05
    opportunity to do
  • 00:42:08
    that Uh building inventory and domestic
  • 00:42:11
    sourcing So this was a in the blue box a
  • 00:42:15
    notable quotes This was a good one Um
  • 00:42:18
    one of the executives told us they were
  • 00:42:20
    asking their Chinese suppliers to give
  • 00:42:22
    them a discount or share 50% of the US
  • 00:42:26
    import tariffs So good luck with that
  • 00:42:30
    But you know maybe you can get your
  • 00:42:32
    Chinese uh
  • 00:42:34
    manufacturer to reduce their price
  • 00:42:37
    because of the additional tariffs that
  • 00:42:39
    are being placed on the imports into the
  • 00:42:43
    US Uh building inventory is interesting
  • 00:42:46
    but a short-term solution Obviously it's
  • 00:42:49
    not going to help you in the long term
  • 00:42:51
    but it may be a way to mitigate your
  • 00:42:53
    risk in the in maybe four to six months
  • 00:42:56
    something like that
  • 00:42:58
    redeveloping a supply base in the US is
  • 00:43:01
    a very good strategy But you know when
  • 00:43:03
    we moved all this manufacturing off
  • 00:43:05
    offshore to China the suppliers moved
  • 00:43:08
    right along with them And so a lot of
  • 00:43:11
    times the suppliers are not capable of
  • 00:43:14
    manufacturing the parts that you need
  • 00:43:16
    anymore because they moved uh all of
  • 00:43:18
    that production to another country So
  • 00:43:21
    you may have to redevelop those
  • 00:43:23
    suppliers And we usually tell our
  • 00:43:25
    clients it'll take you about 18 months
  • 00:43:28
    to redevelop suppliers if you need to Uh
  • 00:43:31
    but the hope is that you can indeed do
  • 00:43:34
    that Develop new suppliers apply new
  • 00:43:37
    technologies to reduce costs and so
  • 00:43:39
    forth moving
  • 00:43:42
    forward Uh reshoring and nearshoring
  • 00:43:45
    strategies that's our favorite of course
  • 00:43:47
    So we we help our clients understand
  • 00:43:49
    their cost structures uh how much of the
  • 00:43:52
    product is attributable to labor If you
  • 00:43:55
    have more than 50% of labor in the cost
  • 00:43:58
    of your goods you probably want to look
  • 00:44:01
    for a source in a lowcost country Uh
  • 00:44:04
    because labor is so expensive in the US
  • 00:44:07
    and it's really really hard to make the
  • 00:44:09
    economics work if you have a lot of
  • 00:44:11
    labor So let me give you an example If
  • 00:44:14
    you're making men's shirts that's your
  • 00:44:17
    product Uh and those shirts are made in
  • 00:44:20
    a sewing factory with a lot of people at
  • 00:44:23
    sewing machines that you pay a a small
  • 00:44:26
    wage to in China or Bangladesh or
  • 00:44:29
    somewhere Um then it would be really
  • 00:44:32
    hard to make that case to bring a sewing
  • 00:44:35
    factory back to the US It just we have
  • 00:44:37
    to pay minimum wage that's considerably
  • 00:44:40
    higher than other countries
  • 00:44:43
    But if you're making textiles for that
  • 00:44:46
    shirt let's say you're making the cotton
  • 00:44:48
    blend for that men's shirt textiles are
  • 00:44:51
    fully automated There's almost no labor
  • 00:44:53
    involved It's all machinery And if you
  • 00:44:56
    go to a textile factory and walk around
  • 00:44:58
    there's no people there It's just all
  • 00:45:00
    machines making making products And so
  • 00:45:03
    in that case you have more options um
  • 00:45:05
    because you're not worried so much about
  • 00:45:07
    the minimum wage or the low costs in the
  • 00:45:10
    US So there's a lot of production of
  • 00:45:12
    textiles in North Carolina and South
  • 00:45:15
    Carolina and Georgia These are places
  • 00:45:17
    where um textiles are indeed
  • 00:45:20
    manufactured because there's a a low
  • 00:45:22
    percentage of
  • 00:45:23
    labor Um look for incentives and funding
  • 00:45:26
    in federal state and local communities
  • 00:45:28
    There's often funds available to help
  • 00:45:30
    support your manufacturing And you can
  • 00:45:33
    work with economic development
  • 00:45:35
    organizations such as TDO and MEPs
  • 00:45:38
    around the country to help you identify
  • 00:45:41
    those
  • 00:45:42
    incentives Uh and then finally research
  • 00:45:45
    made in the USA Uh that's a labeling
  • 00:45:48
    requirement that seems like it'd be
  • 00:45:51
    straightforward but it is not There are
  • 00:45:53
    a lot of regulations around how you
  • 00:45:56
    label your product what the content
  • 00:45:59
    should be depending on who you're
  • 00:46:01
    selling it to If you sell to the US
  • 00:46:03
    government there's a certain percentage
  • 00:46:05
    I think right now it's at 65% of the
  • 00:46:08
    product must be uh the manufacturer or
  • 00:46:10
    origin in the USA Um but in other cases
  • 00:46:14
    u to label your product made on made in
  • 00:46:17
    USA if you're say importing parts and
  • 00:46:20
    assembling it here you have to uh
  • 00:46:24
    identify at least or north of 95% of the
  • 00:46:27
    product must be the origin of the USA
  • 00:46:30
    And if you're simply assembling products
  • 00:46:32
    you cannot label that way So there's a
  • 00:46:35
    lot of complexity there We do quite a
  • 00:46:37
    bit of work in labeling products um
  • 00:46:40
    labeling projects and how to approach
  • 00:46:44
    how to label your product So there's
  • 00:46:45
    there's quite a bit
  • 00:46:47
    there Okay Um there's just a couple
  • 00:46:50
    slides here about TDO I think
  • 00:46:53
    Um do you want to talk about these Don
  • 00:46:56
    or
  • 00:46:58
    people care about you Rosemary not about
  • 00:47:00
    TDO so
  • 00:47:02
    a Don we love TDO But whenever you're
  • 00:47:06
    ready for questions uh just let me know
  • 00:47:07
    And we've got a several that have been
  • 00:47:08
    entered So okay So this is uh there are
  • 00:47:11
    a couple resource slides here about TDO
  • 00:47:14
    And so if you need help um certainly in
  • 00:47:16
    the in uh the
  • 00:47:20
    uh New York area upstate New York TDO is
  • 00:47:23
    there to help
  • 00:47:24
    you Okay And this again is the contact
  • 00:47:27
    information As I mentioned we have a big
  • 00:47:29
    website It's
  • 00:47:31
    reshoringstitute.org where we publish
  • 00:47:33
    all of our surveys all of our case
  • 00:47:36
    studies our white papers Everything is
  • 00:47:39
    there It's all downloadable It's all
  • 00:47:40
    free um we provide it as a a service to
  • 00:47:44
    the US um helping US manufacturers to
  • 00:47:48
    make good decisions and I think we're
  • 00:47:50
    ready to turn it over for questions Don
  • 00:47:52
    if there are any Okay Yeah we have a lot
  • 00:47:55
    of questions that have come in so I'll
  • 00:47:56
    do my best to to use our time wisely uh
  • 00:47:58
    to put up the questions that I that I
  • 00:48:00
    hope will create the most value for
  • 00:48:02
    everyone that's participating Um so uh
  • 00:48:05
    first question what is the best source
  • 00:48:07
    of information for tariff rates by HTS
  • 00:48:11
    or country of origin
  • 00:48:14
    uh well there's a lot of stuff published
  • 00:48:17
    out there I would say to make sure you
  • 00:48:19
    have upto-date and the best information
  • 00:48:21
    is to work with your import broker your
  • 00:48:24
    customs broker um they're going to have
  • 00:48:27
    the most up-to-date information and
  • 00:48:29
    because they're doing imports every day
  • 00:48:31
    and they're likely to have the freshest
  • 00:48:34
    information Um as you know because there
  • 00:48:36
    are so many changes going on u by the
  • 00:48:39
    Trump administration it's hard to keep
  • 00:48:41
    up on a day-to-day basis what may or may
  • 00:48:44
    not be happening So you really need to
  • 00:48:46
    stay in touch
  • 00:48:49
    Okay great Thank you Rosemary Oh she
  • 00:48:51
    froze up there
  • 00:48:53
    Let's give her just a second to see if
  • 00:48:54
    she comes back
  • 00:49:00
    There you are I think you're back now
  • 00:49:01
    Rosemary Don you're on
  • 00:49:05
    mute There we go Okay Can you hear me
  • 00:49:08
    now can you All right Excellent Um so uh
  • 00:49:12
    next question Um
  • 00:49:17
    uh this is a very specific question to
  • 00:49:19
    the anexure 2 exceptions uh some
  • 00:49:22
    questions around if those exceptions are
  • 00:49:24
    still valid still in place uh and if
  • 00:49:28
    they're all if they're considered part
  • 00:49:30
    of the baseline tariffs
  • 00:49:32
    Yeah the exemptions that were applied to
  • 00:49:36
    the 2018 tariffs end at the end of May
  • 00:49:39
    so they will no longer be available to
  • 00:49:42
    you Uh so again work with your broker uh
  • 00:49:45
    to understand what applies and what
  • 00:49:48
    doesn't apply There are all kinds of
  • 00:49:50
    specific situations that may change So
  • 00:49:52
    you really need to stay in touch with
  • 00:49:54
    your broker
  • 00:49:56
    Thank you Um we have one uh related to
  • 00:50:00
    accounting for tariffs Are tariffs
  • 00:50:02
    included in standard costs or valuing
  • 00:50:04
    your inventory obviously this would be
  • 00:50:06
    unique to the company's accounting
  • 00:50:08
    practices but I'm wondering if you ran
  • 00:50:09
    into any uh more common practices or
  • 00:50:12
    opinions about accounting for the tariff
  • 00:50:14
    costs as a part of standard cost or an
  • 00:50:17
    expense uh as a part of a variance
  • 00:50:19
    process
  • 00:50:21
    Yeah So that was one of the
  • 00:50:22
    recommendations that we had was to look
  • 00:50:24
    at your uh your cost structure in
  • 00:50:27
    purchasing in particular to determine
  • 00:50:29
    what you're paying right now So it isn't
  • 00:50:33
    so much a standard cost um because each
  • 00:50:36
    part's going to be classified
  • 00:50:37
    differently and there may be a different
  • 00:50:40
    uh a different rate Um well if you're
  • 00:50:43
    bringing things in from China it's all
  • 00:50:45
    145% Um but yeah it's accounted for
  • 00:50:48
    usually in um in your accounting
  • 00:50:51
    department and applied in cost
  • 00:50:54
    accounting to the price or to the cost
  • 00:50:56
    of your production So yeah I mean you
  • 00:50:58
    should include it as the purchase price
  • 00:51:01
    plus tariffs You should definitely
  • 00:51:03
    identify it if you're looking at your
  • 00:51:05
    overall cost structures Yeah And if I
  • 00:51:08
    can add just a brief comment to
  • 00:51:09
    Rosemary's answer um the last round of
  • 00:51:12
    these uh tariff changes that I went
  • 00:51:14
    through Um we chose to treat that as a a
  • 00:51:18
    variance obviously but a search charge
  • 00:51:20
    from an accounting perspective so that
  • 00:51:22
    we were able to maintain visibility for
  • 00:51:24
    reporting purposes It was kind of nice
  • 00:51:26
    to to have it separated out um in that
  • 00:51:30
    particular category So if you will we
  • 00:51:32
    created a new GL code um for those costs
  • 00:51:35
    and were able to clearly report on them
  • 00:51:38
    uh uh throughout the period of time
  • 00:51:40
    where they were
  • 00:51:41
    changing Okay
  • 00:51:44
    Um I have sort of a a couple of opinion
  • 00:51:47
    questions here but I'll I'll throw them
  • 00:51:49
    out because I think they're they might
  • 00:51:50
    be of interest more to a lot of the
  • 00:51:52
    attendees Would the frozen capital
  • 00:51:54
    spending here uh be offset by the
  • 00:51:57
    foreign investment declarations we have
  • 00:51:59
    heard from companies like Apple Taiwan
  • 00:52:02
    Semiconductor etc
  • 00:52:04
    Yeah So we'll see
  • 00:52:08
    Um I don't I can't imagine setting up an
  • 00:52:12
    Apple production for iPhones where you
  • 00:52:15
    know I've been to Fox Con and
  • 00:52:17
    Shenzhen to Foxcon City it's called It's
  • 00:52:21
    this a huge uh huge site and there are
  • 00:52:24
    thousands of people sitting at on
  • 00:52:26
    plastic stools assembling iPhones and uh
  • 00:52:30
    I I can't imagine bringing that sort of
  • 00:52:33
    production back to the US So I think
  • 00:52:35
    what's going to happen and although
  • 00:52:37
    Apple has um uh confirmed that they're
  • 00:52:40
    going to make investments in the US
  • 00:52:42
    we're not going to see that kind of
  • 00:52:44
    assembly but we may see assembly of um
  • 00:52:48
    more sophisticated computer systems you
  • 00:52:50
    know other other more um sophisticated
  • 00:52:55
    systems that don't require so much
  • 00:52:57
    handwork um I just I can't see how you
  • 00:53:00
    could make it happen with um with so
  • 00:53:04
    much labor required And the other option
  • 00:53:06
    of course is to automate If you can
  • 00:53:08
    automate that assembly then that's a
  • 00:53:10
    possibility too So I think you're going
  • 00:53:12
    to see a lot of changes um announcements
  • 00:53:16
    that may be related to at least some
  • 00:53:19
    products coming back but probably not
  • 00:53:21
    everything
  • 00:53:25
    Okay thank you Um this one is uh uh just
  • 00:53:28
    to reemphasize the point I think that
  • 00:53:29
    you made earlier You mentioned duty
  • 00:53:31
    drawbacks Can it be used on tariffs
  • 00:53:35
    no you're not allowed to draw back
  • 00:53:38
    tariff Um you pay it at the border Uh
  • 00:53:42
    and you can't get it back You just it's
  • 00:53:45
    just an expense
  • 00:53:49
    Okay Thank you
  • 00:53:55
    Um would you say that a company should
  • 00:53:58
    evaluate its global market be careful
  • 00:54:00
    not to overdevelop the US If a company
  • 00:54:03
    has a global product balance might be
  • 00:54:05
    the key to mitigation So your thoughts
  • 00:54:08
    yeah Yeah that was worrisome I think
  • 00:54:11
    throughout the
  • 00:54:12
    interviews you know these executives
  • 00:54:15
    were like what you know what are we
  • 00:54:17
    going to do right um so not only are
  • 00:54:20
    they worried about imports and
  • 00:54:22
    particularly importing pro uh parts for
  • 00:54:24
    the products they were developing but
  • 00:54:26
    also the export markets So it would be
  • 00:54:29
    hard for me to make a sweeping uh a
  • 00:54:32
    sweeping answer or response to that
  • 00:54:36
    because I think it's really individual
  • 00:54:38
    So if you're selling to Western Europe
  • 00:54:40
    that's one thing but if you're selling
  • 00:54:43
    to Africa that's something else So it
  • 00:54:46
    depends on your product what your
  • 00:54:48
    markets are but you're absolutely on the
  • 00:54:50
    right track You need to identify that
  • 00:54:53
    stuff So you know in my experience over
  • 00:54:55
    the last 40 years a lot of companies
  • 00:54:58
    when they decided to move to China they
  • 00:55:01
    would come to me and just say "Get me to
  • 00:55:03
    China set up a factory in China." And
  • 00:55:06
    there wasn't a whole lot of analysis
  • 00:55:08
    done And you know there was just a basic
  • 00:55:11
    assumption it was going to be cheaper
  • 00:55:13
    and all their competitors were doing it
  • 00:55:14
    so we should do it too Not so much
  • 00:55:17
    anymore Now you need to have a full
  • 00:55:20
    picture You need to analyze the scenario
  • 00:55:23
    Understand what the costs are going to
  • 00:55:25
    be Understand what the volatility may be
  • 00:55:29
    with the environment with the with the
  • 00:55:32
    government of these other countries as
  • 00:55:34
    well as our own government Are we going
  • 00:55:36
    to start putting sanctions on this
  • 00:55:38
    country these are all things you should
  • 00:55:40
    consider and identify and the kind of
  • 00:55:43
    projects that we work on um at the
  • 00:55:46
    reshoring institute every day and I know
  • 00:55:48
    TDO does as well uh is to help companies
  • 00:55:52
    through this process to make them help
  • 00:55:54
    them make this
  • 00:55:56
    decision Okay thank you Rosemary Just
  • 00:55:58
    one last question as we wrap up our time
  • 00:56:00
    together today This is uh a question
  • 00:56:03
    about selecting a broker There were a
  • 00:56:04
    few questions about selecting a broker
  • 00:56:06
    Uh this one I thought might be
  • 00:56:07
    particularly helpful to talk about or
  • 00:56:09
    gain your insight from Rosemary our
  • 00:56:11
    broker is making a lot of mistakes What
  • 00:56:13
    is your suggestion to fix the mistakes
  • 00:56:15
    uh HTS code commercial invoice wrong
  • 00:56:17
    tariff codes applied etc Yeah that's a
  • 00:56:21
    that's a very good question Um I've been
  • 00:56:24
    I've worked with some clients who have
  • 00:56:27
    been importing stuff for a long time and
  • 00:56:31
    when I did an analysis and reviewed what
  • 00:56:33
    they were importing I found some pretty
  • 00:56:34
    horrendous mistakes where they had to
  • 00:56:37
    make a a disclosure to customs and pay
  • 00:56:40
    back duties on on
  • 00:56:42
    products You know brokers are human
  • 00:56:45
    beings they have a lot of um uh sort of
  • 00:56:49
    admin people and
  • 00:56:51
    processors that are simply processing
  • 00:56:54
    paperwork and may not be thinking bigger
  • 00:56:57
    about the strategies So my
  • 00:56:59
    recommendation is to um audit those
  • 00:57:02
    brokers at least once a year to go to
  • 00:57:05
    them talk to them what they're doing ask
  • 00:57:08
    questions You don't have to be I I
  • 00:57:10
    happen to be a licensed customs broker
  • 00:57:12
    so I would ask somewhat different
  • 00:57:14
    questions but you don't have to be a
  • 00:57:16
    licensed broker to ask probing questions
  • 00:57:19
    and to try to understand the approach to
  • 00:57:21
    customs So ask those questions audit
  • 00:57:24
    them ask them how they're doing the
  • 00:57:28
    classifications you know how they're
  • 00:57:30
    preparing the electronic submissions
  • 00:57:33
    use your common sense to do an analysis
  • 00:57:36
    of these brokers to determine whether
  • 00:57:38
    they're doing the right thing Um the
  • 00:57:41
    other thing is u sometimes you'll get a
  • 00:57:43
    small broker in an area that's just
  • 00:57:45
    terrific maybe very smart and helpful
  • 00:57:49
    and strategic thinker but other times
  • 00:57:52
    you they won't be So and the same is
  • 00:57:55
    true for big brokerage companies Um
  • 00:57:58
    while a big brokerage company may have
  • 00:58:00
    more systems availability more training
  • 00:58:02
    they are also perhaps subject to
  • 00:58:04
    mistakes as well So like I said you know
  • 00:58:07
    you have a responsibility to oversee
  • 00:58:10
    what's happening in that business
  • 00:58:12
    relationship and to at least do an
  • 00:58:15
    annual audit
  • 00:58:17
    Okay Thank you Rosemary We are just
  • 00:58:18
    about out of time Uh thank you very much
  • 00:58:21
    for all the questions that have been
  • 00:58:22
    submitted We will uh do our best to put
  • 00:58:24
    together a Q&A document after the
  • 00:58:26
    webinar uh to address them Um so thank
  • 00:58:29
    you Rosemary for sharing your insightful
  • 00:58:31
    information and thank you for everyone
  • 00:58:33
    that joined us today Uh if you haven't
  • 00:58:35
    yet engaged with your local MEP center
  • 00:58:37
    please do so They're a great resource Uh
  • 00:58:39
    and I think some of the questions that
  • 00:58:41
    we talked today could be uh supplemented
  • 00:58:43
    by the knowledge that your local MEP
  • 00:58:45
    center has We'll provide a link to find
  • 00:58:47
    your local MEP center in the follow-up
  • 00:58:49
    email Uh the email will also contain a
  • 00:58:51
    link to our slides and today's recording
  • 00:58:54
    Uh thank you again for attending and
  • 00:58:55
    have a wonderful day
Etiquetas
  • tariffs
  • US manufacturing
  • supply chain
  • reshoring
  • trade practices
  • customs broker
  • geopolitical risks
  • manufacturing strategies
  • cost management
  • domestic sourcing