Where Should I Source My Production?

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Before you run to China, Bangladesh, India, Pakistan, Vietnam, Cambodia, Sri Lanka, Mexico, Sub-Saharan nations, Central America, South America, Russia, or other places being packaged as the panacea of low labor costs or great site locations, please stop and answer a few questions:

         Is there enough electricity and natural gas in the area?

         Does the local government support my industry?

         Is there enough skilled managerial and technical labor available to support my production?

         Is there enough water for my process, and what about environmental responsibilities?

         How is the local highway network? What is the telecommunications situation?

         How are relations with local unions?

         Where are the nearest vendors for my product, and are there other industrial users of similar product in the area?

         What incentives are available from local government?

         How would I ship my product to market from here?

         Where are the nearest international airports and shipping ports?

         Are there special climatic weather considerations is this area?

         What is the quality of life of the labor force?

         Is the local political situation stable?

         What organizations or institutions of learning can offer training?

         What would my supply chain look like?

         How are the country's customs brokers?

         Where do they have free trade zones and custom bonded space available?

         How can I ensure that I am properly covered with insurance?

         Who are the logistic providers and are they competent?

         Does my U.S. Customs Broker have knowledge of my products?

         How many licensed customs brokers are employed by the brokerage company?

         Will the brokerage company assist in submitting ruling requests to customs headquarters on a client's behalf?

         Does the brokerage company keep its clients up to date on changes in customs regulations?

         Does the brokerage company provide customs clearance at all U.S. Ports of Entry?

         Can the brokerage company assist in applying for duty drawbacks?

         Which Free Trade Treaties (FTAs) are applicable?

         Who are the real owners of my facility?

         What is the justice system like in the country?

         Are my trade secrets secure?

         What are my recourse action capabilities, if needed?

The wrong answer to any one of these questions can cause great financial harm.

As manufacturers and retailers doing business in the U.S.A., we do the research, use professional services to make contracts, perform due diligence, and have monitoring systems in place to complete processes. It seems that in foreign countries, we assume that our selected infrastructure (or the factory we are placing orders with) understands what is needed to complete an order with proper specifications and on-time delivery. The romance and drama of doing business in a foreign country tempts us to negate the RISKS as we visualize our increased gross margins.

The story usually goes like this:  You land in a foreign country, the bell boy speaks very good English and answers your many questions. (He usually becomes your General Manager!!)  One of your long-term employees has a sister in the foreign country, you arrive and she speaks passable English, and she becomes your agent!

When this takes place, instead of gaining gross margins, you will learn about the world of attorneys specializing U.S. Customs law, forensic accounting procedures of the IRS,  Transfer Pricing,  Safe Harbor, and tax regulations you have never heard of.

I kid you not, this story is being repeated over and over again.

The professionals at Stonefield Josephson have been servicing importers, exporters and multinational corporations for over 30 years. We also have a network of experienced professionals in most industrial countries that can assist you with all of your accounting, foreign legal, and transitioning of manufacturing needs.

We cannot eliminate all of the risk factors, but we can make you aware of them, and help you reach your goals.

 
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