Managing logistics in the global market is critical for international businesses. To succeed in the global marketplace, businesses must develop strong supply chain networks, leverage technology to optimize logistics, manage risks and challenges, and understand local regulations and customs requirements.
In this blog post, we’ll share some key strategies to help you manage your company’s global logistics more effectively.
Every country has unique trade regulations and requirements and it’s important to consider how those rules and policies can impact importing and exporting to and from these countries. For example, when importing components into China to be incorporated into assemblies, you may be subject to duties and tariffs. It’s essential that you take the time to understand these regulations beforehand, as navigating them after the fact can become very time-consuming and expensive.
China takes a state-led approach to economic policy and international trade, with the government participating directly in many aspects of the country’s economic activity.
China’s government collects three kinds of taxation on imports:
Chinese customs duties can apply to imports or exports. Customs regulators impose some duties based on the value of the goods (ad valorem) while basing others on the quantity traded.
Whether your imported goods are subject to these taxes varies by product type and CT status for cars or luxury goods, for example. Which party has to pay these taxes depends on contract terms between buyers and sellers. Once again, it’s important to note that components sent to China to be incorporated into assemblies may also be subject to duties and tariffs, especially if they are not later not exported out of the country. As always, it’s best to be informed and to work with knowledgeable partners when first working with Chinese facilities and manufacturers. Kingstec, for example, has over 40 years of experience in the Chinese market and can help you navigate the country’s logistics and taxation policies, ensuring you never run into issues, delays, or costly mistakes.
Most rates, but not all, follow the most-favored-nation (MFN) guidelines. China also has conventional, special preferential, general quota, and provisional duty rates, which are all higher than MFN rates. Tax provisions, however, can change based on trade relations between China and its trading partners. China’s government applies these taxes to protect its key domestic industries.
The Government of China also uses non-tariff barriers to manage imports. These include import quotas on roughly 40 product categories, although authorities are gradually phasing them out.
Import licenses are another non-tariff barrier the Chinese government requires for roughly 135 products. Generally, ozone-depleting substances and essential mechanical or electronic components require import licenses.
China also directly subsidizes targeted domestic manufacturers while excluding foreign firms from these incentives. While this acts as a trade barrier by giving a competitive advantage to domestic manufacturers, it’s also very beneficial to companies partnering with Chinese manufacturers, as it lowers the total cost of manufacturing.
As you can see, there can be a wide range of laws, policies, procedures, and guidelines to track and follow. Errors, missed steps or misinterpretations can cause confusion and delay, which in turn, can increase your costs and lengthen your product’s time to market. Too many logistical blunders can even defeat the purpose of your offshoring initiative.
The best way to ensure compliance and streamline logistics is to draw on local knowledge. That’s one reason finding the right partners is vital for offshoring your company’s production. Along with manufacturers, this includes suppliers, distributors, and freight carriers in your host country.
Experienced, reputable, local partners, like the organizations Kingstec has worked with for over 40 years, can ensure your products and processes meet local requirements. They can also draw on their background to mitigate any misunderstandings that arise.
Several emerging technologies are revolutionizing logistics management. Probably the most important of these is 5G, the fifth generation standard for wireless communication.
5G provides the backbone for advanced logistics technology, and China has already deployed the world’s largest 5G network, with fully automated, smart warehouses operating on the capabilities enabled by 5G.
The Internet of Things (IOT) is another key logistics technology. It enables inter-vehicular networks, which people have started calling the internet of vehicles (IOV).
IOT technology also enables shippers to install sensors in facilities, on products, and aboard vehicles. Using 5G communication via the cloud, systems provide real-time updates on stocking levels, truck condition, driver performance, and traffic problems.
Artificial intelligence (AI) enables fleet monitoring systems to process the extensive volume of cloud-based data that 5G tracking generates. AI can also improve demand forecasting in smart warehouses. Advanced robotics also plays a vital role in managing smart warehouse operations.
Thousands of companies in North America and Europe are now working with leading Chinese partners to leverage these technologies, and this number is rising quickly.
Well-managed international logistics can mitigate risks through diversification. On the other hand, doing business in multiple countries can expose you to unforeseen hazards around the world, like natural disasters, political unrest, or trade disputes.
For example, in 2021, the container ship Ever Given ran aground in the Suez Canal, blocking it for six days. At one point, 369 ships were waiting in line to gain access to the canal.
Shippers like Maersk Line used advanced logistics systems to update customers in real time and redirect vessels around the Cape of Good Hope. Even so, this incident cost the world economy roughly $10 billion USD.
At Kingstec, we track global developments for all our customers and work to anticipate adverse events before they happen. We have, for example, successfully overseen a range of projects during port strikes in Vancouver and Long Beach, leveraging 40 years of experience and contacts with overseas markets, including a network of logistics partners, to reroute shipments and ensure components and products were not held up.
Regardless of your customer base, chances are they’re taking a growing interest in environmental sustainability. According to a McKinsey study, 66% of respondents and 75% of millennials said they consider sustainability when making a purchase.
Changing consumer attitudes offer a competitive advantage to businesses that prioritize sustainable practices. Brands like Patagonia, Seventh Generation, and AllBirds have based their entire brand identity on sustainability and environmental causes.
Major manufacturers like Toyota, Apple, GE and Phillips are also shifting to embrace environmental, social, and governance initiatives. To ensure that your business lives up to its environmental and ethical responsibilities, you need to work with offshore partners whose corporate values align with those of your company and its target audience. At Kingstec, we are committed to working with facilities that are certified with ISO 14000, a set of standards developed to help companies determine the impacts of products or services, and then establish management programs to meet ongoing environmental objectives.
China has the world’s largest logistics market, and with 40 years of experience working with leading Chinese manufacturers, Kingstec can help you maximize your business’ growth, serving as an extension of your mechanical and electrical engineering and logistics departments.
Call us today to learn how your business grow with world-class manufacturers in China.
