Lowering Your Landed Costs, a panel hosted by international trade firm Sandler, Travis & Rosenberg, brought together top minds in the industry to discuss how businesses can use existing and future trade agreements to keep final costs under control. Big on the agenda was market diversification. Additional topics included the Trans-Pacific Partnership, DR-CAFTA compatibility, and the need for the government to more actively promote U.S. made goods through trade preferences.
The panel, moderated by Nicole Bivens-Collinson, President of International Trade & Government Relations at STR, started with a discussion about the new global middle class.
“This growth in the global middle class…opens up huge new markets for trade, and should require a refocus on those emerging markets when establishing commutability,” said Bivens-Collinson.
At the same time, she said, makers that look to China for inputs may not fully calculate the added costs of importing those goods without duty-free benefits. In Latin America, many potentially duty-free items can lose that status if they contain materials imported from other countries (the exception is for materials that are in short supply). This is because DR-CAFTA doesn’t have cumulation with many other trade agreements.
Thomas G. Travis, Managing Partner at STR, spoke extensively about the failure of the government to ensure adequate cumulation with existing trade agreements, and also to bring together more U.S.-made goods for duty-free exemptions.
In addition, the United States has a comparatively low duty-free allowance per citizen. Travis explained that the duty-free allowances for US citizens is bound to go up substantially given the spate of new free trade agreements under negotiation, but will still remain considerably lower than what one would find in other countries.
Jerry Cook, Vice President of Government & Trade Relationships for Hanesbrands Inc. discussed the need to reorient trade policy to benefit U.S. producers.
“In some cases, we’re effectively taxing cotton twice, for example, because of re-import charges. Once when we grow it in the states, and once when we bring it back into our country as yarn in a product. This doesn’t promote U.S. trade interests.”
All the panelists expressed some concern about the upcoming Trans-Pacific Partnership. The new deal will open up markets, Cook said, but, “the rule-set feels awkward, because it breaks away from the established order.”
Trade was not the only focus of the panel, however. Cook also discussed Hanes Brand’s plans to improve their bottom line through quick decision-making and more responsible sourcing. This should reduce sampling times and also make it easier to get higher quality goods to market.
“If your name is on it and you cut corners, you own those cut corners too,” he said.
Kevin Hoover, Vice President, Materials and Color Innovation at Under Armour, pointed out that trade and taxes make a simple issue (making clothes) very complex. To address this, he emphasized the importance of continuous process improvement.
“We call it S.L.E.D. That stands for “suck less every day,” he said, getting a laugh. “The question for us is, how do you get out of the current screwed up model?”
For Under Armour, this means more virtual sampling, and, ultimately, moving production closer to markets.
And the issue of the impact all these variables will ultimately have on sourcing figured prominently in the discussion as well. Bivens-Collinson said, “The predictions made by our panelists all indicate that sourcing is changing and that we need to be ready for those changes. Whether it is regional sourcing, hub and spoke sourcing, new technological means to develop products or using existing agreements, preferences, rules and regulations, there are ways to continue to minimize the landed price of goods, but we need to consider the ‘other factors’ and not just price.”
Bevins-Collinson also observed that an increased sensitivity to environmental concerns on the part of consumers promises to have a powerful impact on every link in the supply chain. She said, “The emphasis on environmental impact of sourcing from afar or of sourcing from countries which do not have the same standards for working conditions are all “costs” that we need to incorporate into minimizing costs. It is a new day, new demands and the consumers are much more savvy. We need to be flexible and forward thinking now.”