Determining where to manufacture your products is a critical step in establishing your consumer goods company. The selection will ultimately impact the quality of the product, the production cost, and other business and legal considerations that your business will later have to make.
Each country has different legal requirements when it comes to manufacturing and exporting to the United States. American companies must be aware of these requirements and ensure that they have the necessary licensing to operate in those countries and can account for the countries’ respective tariffs. Companies should also be aware of the legal implications of manufacturing and supplying their goods from foreign countries on the entry of those goods into the United States. Additionally, such companies must be familiar with how their selection will ultimately impact their intellectual property rights.
It’s difficult to determine which countries are the easiest or hardest to import from as it can depend on the specific circumstances of each shipment. Some countries with strong manufacturing industries may be easier to import from due to the availability of suppliers, but may also face higher tariffs. On the other hand, countries with less developed manufacturing industries may have lower tariffs but may also present more challenges in terms of finding reliable suppliers and meeting import regulations. Here are some of the most well-known manufacturing countries and their respective pros and cons that you should consider before selecting one to produce your product:
China
As one of the world’s largest manufacturing hubs, China offers low production costs and high-quality products. However, the country is well-known for its failure to protect intellectual property rights. Consequently, if you select to manufacture in China, there is a strong possibility that your products can later be knocked-off and counterfeited, with little to no legal recourse. Additionally, although China may be easier to import from due to the availability of suppliers, it may also face higher tariffs, namely Section 301 tariffs ranging from 7.5% to 25%. Some goods may also be subject to antidumping (“AD”) and/or countervailing (“CVD”) duties because the goods originate in China, which has led many companies to move their production to other countries. Manufacturers must also be wary of the possibility that if you manufacture goods in China, you face an increased risk that you will be targeted for forced labor allegations. With the passage of the Uyghur Forced Labor Prevention Act, goods, wares, articles, and merchandise produced, mined, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China, or produced by certain entities, are not entitled to enter the United States. Thus, companies should be very careful where and with whom they manufacture their goods in China.
India
As another highly popular manufacturing destination, India offers low labor costs and a skilled workforce. However, the country’s infrastructure is not as developed as other well-known manufacturing countries, which often leads to production delays. India also has complex labor laws, due to the rampant use of child labor within the country.
Vietnam
Vietnam has also emerged as a popular manufacturing destination due to its low labor costs and favorable trade policies. The country has a skilled workforce, and production is relatively cheap. However, the country has strict labor laws, thus making it important to comply with the country’s regulations surrounding work hours and wages. Additionally, although Vietnam is not subject to high duties (like China), there has been a notable increase in circumvention cases, which apply existing AD/CVD duties on imports from other countries where only minor fabrication is taking place. One of the main countries targeted in these circumvention cases is Vietnam, thus increasing the likelihood that companies will face duties upon entry to the United States.
Mexico
Due to its proximity to the United States, Mexico is another popular manufacturing destination for American companies. Production costs in Mexico are low, and the country has a well-developed infrastructure. However, American companies must be aware of the legal requirements for hiring and firing employees in Mexico. Mexico is obligated to follow similar strict labor laws as those imposed by the United States under the United States-Mexico-Canada Agreement. Like the United States, Mexico recently passed a new forced labor regulation that prohibits goods manufactured with forced labor from entering the country. Thus, companies shifting their production process to Mexico should keep in mind the recent trade trends in Mexico that are mirroring the legal framework currently in place in the United States. Still, nearshoring to Mexico has been on the rise due to the country’s increasing economic growth and favorable government policies, including trade agreements with neighboring countries like the United States. Similarly, Mexico has also been an attractive option for outsourcing due to its proximity to target locations and low labor costs. Thus, companies that are not amenable to shifting their entire production process to a foreign country could consider outsourcing certain services from Mexican companies as an alternative.
If you are considering manufacturing goods on foreign soil and later importing to the United States, it is advisable that you discuss the matter with an attorney, so that you can make the best long-term decision and weigh the relative legal pros and cons.
