Trade wars are not fun
for customers or suppliers. During high China
tariffs times each company will take a hard look at their needs to
try to determine if they should move forward with projects that are affected by
new higher tariffs (usually temporary). There are several factors to consider, such
as: Do they want to disrupt existing offshore supplier relationships? Can they
find alternative domestic suppliers to deliver on the project if they don’t
have existing relationships? But like many things in business it comes down to
price. Do the new higher China tariffs adversely affect the the project budget
so much so that there is no longer any financial benefit to doing business in
China. This is of course the point of a punitive tariff, to discourage offshore
work and encourage domestic spending.
Because price is such
an important factor let’s take a look at the math and a case study. An apples
to apples project comparison quote to help tell the full story of how a normal 3.1%
tariff that is now 28.1% tariff affects the bottom line price of an injection
mold that is made in China and imported into the USA.
China Supplier with
28.1% Tariff & DDP Shipping USA
Supplier with 0% Tariff
8 Cavity Mold – $75,750
Base Quote 8
Cavity Mold - $150,640 Base Quote
Delivered with Duty
Paid - $88,592 Final Price Delivered
- $151,320 Final Price
Even with the current
high 28.1% tariff on China injection molds that is still a $62,000 savings when
you find a supplier who can offer you a legal DDP shipping option. Using the
same numbers and a supplier who cannot offer DDP shipping you will still save roughly
$50,000. NOTE: the vast majority of China injection mold makers cannot offer you
a DDP shipping option but some can.
So, what are the takeaways?
1. After China tariffs
have been paid, if saving between $50,000 - $62,000 is not enough for you to
continue working with a China injection mold maker then working with a USA
based injection mold maker and their higher price is the option you are left
with.
2. If saving between
$50,000 - $62,000 is a plus to you then you will likely stay the course and
adjust your existing budgets up a bit to compensate for the new China tariffs…because
you are still receiving substantial savings even with the higher tariffs.
It is also important
to note that many China suppliers will say anything to win your business and
will suggest some crazy things to you that are illegal and will land YOU, not
them, in big trouble with customs in the USA.
One quick example, a
supplier may tell you to create two separate PO’s, one for engineering and one
for the mold as a way to save on tariffs. This is bad advice and an illegal maneuver.
Carefully vet the “solution” that your China supplier offers when it comes to
tariffs because most of it is nonsense that comes with heavy repercussions on
the back end for you. At the end of the day you will save time and money if you
direct your efforts into finding suppliers who can offer you legal solutions to
reducing tariff burdens.
No comments:
Post a Comment