Made in USA is becoming more attractive day by day. Yet companies still considering or currently importing their product hear the “the China price” and it can be very appealing. On the surface, it appears as a small fraction of what domestic suppliers charge. But a quote from a China or other Far East factory is only the beginning of your cost calculation, and there are many more costs and variables that determine your total cost, which is what you should really compare.
Here is a list of additional charges:
Shipping costs: You can choose air freight or sea freight. Sea freight is much cheaper, but usually takes 20-30 days from the Far East. International air freight is quite expensive and is typically only considered in the most urgent of circumstances.
Insurance: Various insurance coverages protect the importer and shipper from unforeseen disasters such as the ship sinking, fire, accidents, pirates, etc.
Customs bond: A customs bond or surety bond is a guarantee from a bonding company to the government (customs department) that the importer will abide by all laws governing importation, will present the goods to Customs for inspection, and pay all duties and fees related to the shipment.
Customs duties/fees: You’ll need to pay duty costs on your items according to harmonized tariff schedule (HTS) code. Depending on the type of product, duties can add significantly to your landed cost. 17.6% is applied to many nylon products like bags, pouches, and cases.
Customs clearance fee: More fees to cover customs clearance and processing services.
Documentation fees: In international trade, there’s tons of documents being processed both domestically and internationally. Original bill of lading, power of attorney, documentation between ports and logistics companies, and documents to and from your customs broker.
Customs inspection: There are a number of exams that Customs and other agencies can require to ensure the safety of US citizens, wildlife and natural resources. Don’t be surprised when your shipment is held for additional inspection beyond cursory inspection.
Inland Ground Transporation: Once your freight hits the port, it’s loaded onto a truck or train to get it to its final destination.
So there it is, the composite list of what you need to import your product. Am I crazy for telling you? Not really. If people think that a sewn product is just a commodity and want the lowest price available, China is the default option.
But even if the price still looks good after adding in these costs, you have to consider one more thing. All of these additional costs don’t include potentially the most costly element of all – product issues. You just might go through the entire time and expense to get your shipment here only to discover that there’s a problem. And when you discover the problem when the shipment hits your receiving dock, then you got a big problem. Issues can include: Manufacturing mistakes, wrong counts, wrong SKUs, improper packaging, or damage to the cartons. All may leave you with unusable products. There’s no good recourse and a very long and costly delay to replace them. How do you tell China to fix their mistake in a few days? You don’t. They can’t and they won’t.
But here’s the biggest problem: the broken promises to customers. It’s likely that while you’ve been waiting for your product, you’ve made promises to customers that they will have product on a certain date. When that doesn’t happen and you need another 60 days to rectify the situation, customers walk. And quantifying this lost opportunity cost is something many companies can’t do and therefore don’t know how to fairly compare prices to domestic sources.
Unfortunately, there’s one too many purchasing folks who know they’re reviewed on acquisition costs, not total cost. Total cost is too difficult or impossible to calculate in many companies. How do you account for all the extra hand holding, extra checking, lost time communicating and resolving issues? That’s not a 5 minute conversation, so many companies live with this large unquantifiable cost until the one day the wrong product hits the dock and the s%$# hits the fan.
