International Trade Law News /title <!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" ""> <html xmlns="" xml:lang="en" lang="en"> <meta name="verify-v1" content="6kFGcaEvnPNJ6heBYemQKQasNtyHRZrl1qGh38P0b6M=" /> <head> <title>International Trade Law News

« Home | BIS Imposes Civil Penalty on Illinois Company for ... » | Mexico Law Blog Unveiled » | New U.S. Container Seal Requirements Go Into Effec... » | DDTC Imposes $4 Million Penalty on Lockheed Martin... » | U.S. Subsidiary of Japanese Telecommunications Com... » | Allies say Germany is "Wobbly" on Pressuring Iran » | CBP Responds to Laptop Computer Search Controversy... » | House Passes One-Year Extension of GSP Program » | Dateline NBC's Program on CBP Now Available Online... » | Canadian Government Blames ITAR for Delays in Acqu... » 

August 13, 2008 

Manufacturers Say "Adios China, Hola Mexico!" As Cost of Doing Business in China Rises

Another good post in the Mexico Law Blog. This time on companies considering moving their operations from China to the U.S. and Latin America:

William Armbruster and Bill Mongelluzzo recently wrote an interesting article in the Shipping Digest discussing how many businesses that have outsourced manufacturing operations to China are now transferring (or seriously considering transferring) those operations to the U.S. or Latin America, particularly Mexico.

In deciding whether to leave China, businesses are focusing on "total cost of ownership" of their China operations, which, according to the article, "include the costs of labor, raw materials, transportation, taxes, port congestion, intellectual property protection and import duties." The article suggested that the dramatic appreciation of the Chinese yuan in relation to the U.S. dollar over the last 3 years has substantially affected certain elements of the total cost of ownership.

The article continued:

"Higher transportation costs must be factored into the entire supply chain, from the sourcing of raw materials used in the manufacturing process, to the ocean and inland costs of transportation of the finished product as it moves from the factory to retail outlets. On that scale, Latin America, and especially Mexico, rank favorably.

Manufacturers of products that include petroleum, plastic or steel have made Mexico a popular location for new or expanded production because those raw materials can be sourced competitively in Mexico.

Although wages in Mexico are higher than in Asia, they are still much lower than in the United States. In addition, Mexico’s proximity to the U.S. market cuts down on transportation costs, especially for bulky products such as appliances. Central America and the northern rim of South America also enjoy a time advantage in comparison with Asia. The faster delivery time can be important for producers of fashion items and apparel that change with the seasons."

In reviewing the total cost of ownership, businesses considering transfer of their manufacturing operations to Mexico or other Latin American countries should carefully analyze, among other factors:

  • The ways, if any, in which the North American Free Trade Agreement (NAFTA), the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), and other free trade regimes (including Free Trade Zones and maquiladora and similar programs) may reduce the total cost of ownership. Businesses contemplating a move to Mexico might also consider President Felipe Calderon's National Infrastructure Program (NIP), a 5-year, US$141 billion initiative to improve Mexico's infrastructure (including the planned Punta Colonet port facility near Ensenada), which may, in the long-run, help manufacturers reduce the shipping and port congestion costs of the total cost of ownership.
  • The cost of security of their personnel and property. Security-related businesses seem to be booming in in Latin America as kidnapping has become a greater threat in the region and drug traffickers have attempted to penetrate the legitimate export shipments of well-known companies with contraband, as I reported on August 8, 2008.
  • Whether their Intellectual property can be adequately protected. Although the strength of intellectual property laws and their enforcement is subject to considerable variation in Latin America, a 2007 International Chamber of Commerce survey ranked Mexico as the 16th most unfavorable jurisdiction in the world for intellectual property protection (China ranked as the 1st most unfavorable jurisdiction, Brazil ranked as the 4th, and the U.S. ranked as the 27th).

Labels: ,



Subscribe to our confidential mailing list

Mobile Version

Search Trade Law News

International Trade and Compliance Jobs

Jobs from Indeed




  • This Site is presented for general informational purposes only and does not constitute legal advice. No attorney-client relationship is formed when you use this Site. Do not consider the Site to be a substitute for obtaining legal advice from a qualified attorney. The information on this Site may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While we try to revise this Site on a regular basis, it may not reflect the most current legal developments. The opinions expressed on this Site are the opinions of the individual author.
  • The content on this Site may be reproduced and/or distributed in whole or in part, provided that its source is indicated as "International Trade Law News,".
  • ©2003-2015. All rights reserved.

Translate This Site

Powered by Blogger