1 00:00:00,240 --> 00:00:03,450 If you're a D two C or Omnichannel brand and you're based in New York City, 2 00:00:03,450 --> 00:00:04,950 or if you just want to travel to New York, 3 00:00:05,250 --> 00:00:07,650 I've got a special invitation for you. 4 00:00:08,310 --> 00:00:13,290 OMG Commerce and Raindrop Plus Google are hosting an exclusive 5 00:00:13,440 --> 00:00:17,700 invite only event at the Google offices in Manhattan at the St. 6 00:00:17,700 --> 00:00:21,930 John's terminal. This is an epic Google office, 7 00:00:21,930 --> 00:00:25,260 but the content is going to be even better. My buddy, 8 00:00:25,260 --> 00:00:28,530 Jacque Spitzer and I from Raindrop are going to be showing you how to scale your 9 00:00:28,530 --> 00:00:32,580 brand using YouTube, but there'll also be some very special guests there, 10 00:00:32,910 --> 00:00:36,330 including Dara Denny as her Firestone, Nick Sharma, 11 00:00:36,600 --> 00:00:40,740 plus some executives from YouTube. Here's the deal. This event is free, 12 00:00:40,740 --> 00:00:45,180 but space is extremely limited and you do have to apply and be 13 00:00:45,180 --> 00:00:49,770 approved to attend. And OMG Commerce and Raindrop clients do get first dibs. 14 00:00:49,950 --> 00:00:50,760 But if you'd like to know more, 15 00:00:50,760 --> 00:00:55,710 visit omg commerce.com/nyc event. Again, 16 00:00:55,710 --> 00:01:00,540 that's omg commerce.com/nyc event. 17 00:01:01,350 --> 00:01:03,720 Click there to get all the details to apply, 18 00:01:04,020 --> 00:01:08,010 and I can't wait to see you in New York City and help you dominate with YouTube 19 00:01:08,010 --> 00:01:08,843 ads. 20 00:01:20,010 --> 00:01:24,150 Well, hello and welcome to another edition of the E-Commerce Evolution podcast. 21 00:01:24,150 --> 00:01:27,390 I'm your host, Brett Curry, CEO of OMG Commerce, 22 00:01:27,780 --> 00:01:32,340 and today we are talking about optimizing your supply chain outside of 23 00:01:32,580 --> 00:01:34,500 China. How do we think about tariffs? 24 00:01:34,770 --> 00:01:38,670 How do we think about supply chain optimization and what opportunities are there 25 00:01:38,670 --> 00:01:42,000 for us outside of China? Obviously, 26 00:01:42,000 --> 00:01:46,980 this is very timely and this is a topic where the game is 27 00:01:46,980 --> 00:01:51,360 changing on the field, daily, hourly, all of those things. 28 00:01:51,360 --> 00:01:55,140 So we'll try to keep the conversation pretty high level and also make this 29 00:01:55,140 --> 00:01:59,010 useful regardless of what the tariff news is when you decide to hit play on 30 00:01:59,010 --> 00:02:02,310 this. But my guest today is Jim Kiner, 31 00:02:02,310 --> 00:02:06,210 and Jim is the founder managing partner of Cosmo Sourcing. 32 00:02:06,510 --> 00:02:10,800 I met Jim at Seller Summit in Fort Lauderdale last week, 33 00:02:10,800 --> 00:02:13,170 I guess it was at Steve Choose Events. 34 00:02:13,170 --> 00:02:16,560 Steve and Tony running a great event down there, one of my favorites. 35 00:02:16,560 --> 00:02:18,390 And so Jim was a speaker, I was a speaker, 36 00:02:18,390 --> 00:02:21,120 and he talked about tariffs and I was like, man, 37 00:02:21,120 --> 00:02:23,910 I got to get you on the pod because everybody's freaking out about this or at 38 00:02:23,910 --> 00:02:27,510 least wondering about this. And so with that, Jim, welcome to the show, man, 39 00:02:27,510 --> 00:02:28,343 and how's it going? 40 00:02:28,650 --> 00:02:31,560 Hey, it's great to be here and doing great. Yeah, thanks for having me here. 41 00:02:32,160 --> 00:02:34,080 It's been a whirlwind for you. 42 00:02:34,680 --> 00:02:39,240 You picked the right time to specialize in sourcing outside of 43 00:02:39,240 --> 00:02:40,960 China. I picked 10 years ago, 44 00:02:40,980 --> 00:02:45,810 so to you saw the future years ago when you map 45 00:02:45,810 --> 00:02:49,470 that out and you've had quite the couple of weeks, man, 46 00:02:49,470 --> 00:02:51,780 you were on stage before Lauderdale, 47 00:02:51,780 --> 00:02:55,800 you got quoted in the Wall Street Journal about this topic. 48 00:02:55,800 --> 00:02:57,570 And so tell us a little bit about that. 49 00:02:57,570 --> 00:02:59,860 How did you end up getting mentioned in the Wall Street Journal? 50 00:03:00,100 --> 00:03:02,740 Yeah, Hannah reached out to me, Hannah Mao. 51 00:03:03,070 --> 00:03:06,850 She's the reporter for Wall Street Journal, and she obviously covers tariffs, 52 00:03:06,850 --> 00:03:11,050 supply chain, manufacturing and Vietnam. So yeah, reached out. 53 00:03:11,800 --> 00:03:15,460 She's doing a six part story actually about manufacturing Vietnam, 54 00:03:15,460 --> 00:03:20,140 the whole on the ground and whatnot. But yeah, we helped for the first story, 55 00:03:20,140 --> 00:03:24,520 she visited a couple of factories that we put her in touch with, and yeah, 56 00:03:24,520 --> 00:03:27,400 she interviewed the factories and featured one of them pretty prominently in 57 00:03:27,400 --> 00:03:30,700 their story. And then, yeah, the one I was featured in was the second of six, 58 00:03:30,700 --> 00:03:35,530 I believe so, yeah. But yeah, it keeps changing with the news. 59 00:03:35,530 --> 00:03:36,363 So. 60 00:03:36,730 --> 00:03:38,200 Keeps changing. We were just talking about, 61 00:03:38,200 --> 00:03:43,030 so we kind a casual comment the president made recently that who knows what 62 00:03:43,030 --> 00:03:43,960 that's going to do to the markets, 63 00:03:43,960 --> 00:03:48,850 but I think we're just all our tolerance level for chaos is 64 00:03:48,850 --> 00:03:51,670 just going to be pretty high here for the foresee. 65 00:03:51,680 --> 00:03:53,110 Future, future, be adaptable right now. 66 00:03:53,680 --> 00:03:55,000 You've got to be adaptable. 67 00:03:55,000 --> 00:03:57,580 And so I think there's a few things we're looking at here. 68 00:03:57,580 --> 00:04:00,310 I just record a podcast with Andrew Ferris, 69 00:04:00,310 --> 00:04:03,520 who's just a legend in terms of marketing and media buying and e-comm in 70 00:04:03,520 --> 00:04:05,890 general. And he and I were both talking about, Hey, 71 00:04:05,890 --> 00:04:07,780 in times this times of uncertainty, 72 00:04:08,020 --> 00:04:12,160 there are always opportunities to grow actually to get better than you were 73 00:04:12,160 --> 00:04:14,080 before. And I think one of the things, 74 00:04:14,080 --> 00:04:15,280 and this is something that Andrew mentioned, 75 00:04:15,280 --> 00:04:20,080 one of the potential benefits or silver linings in this is going to 76 00:04:20,080 --> 00:04:24,160 force brands to optimize their supply chain look for better, 77 00:04:24,370 --> 00:04:28,510 more stable, more affordable ways to enhance their supply chain. 78 00:04:28,600 --> 00:04:33,460 Every point or couple of points you can save on your supply chain makes a 79 00:04:33,460 --> 00:04:36,130 huge, huge difference as you can make your supply chain more stable, 80 00:04:36,130 --> 00:04:37,960 more reliable, that makes a huge difference. 81 00:04:37,960 --> 00:04:40,540 You increase your quality of product, that makes a huge difference. 82 00:04:40,540 --> 00:04:43,150 And so it's a time to look at your supply chain. 83 00:04:43,210 --> 00:04:44,590 And you've been doing this a long time, Jim. 84 00:04:44,650 --> 00:04:45,483 Oh, absolutely. 85 00:04:45,790 --> 00:04:50,440 When did you first start looking outside of China and was it because you 86 00:04:51,310 --> 00:04:54,940 were predicting something like this could happen or was there something else 87 00:04:54,940 --> 00:04:55,773 that was driving that? 88 00:04:56,170 --> 00:05:00,850 Yeah, I moved to Vietnam and started sourcing from Vietnam in 2014. At the time, 89 00:05:01,690 --> 00:05:05,710 everybody was sourcing from China. I just felt like saturated, 90 00:05:05,740 --> 00:05:08,110 there were plenty of people doing it. And then I visited Vietnam, 91 00:05:08,110 --> 00:05:10,090 fell in love with country, and yeah, 92 00:05:10,120 --> 00:05:13,960 2014 at the time I was trying to get ahead of the transpacific partnership, 93 00:05:13,960 --> 00:05:17,590 which was at the time the largest free trade agreement in history. 94 00:05:17,620 --> 00:05:20,410 It ended up not getting ratified in the past, 95 00:05:20,410 --> 00:05:24,280 but I still had a lot of people reach out to me about finding manufacturers in 96 00:05:24,280 --> 00:05:26,530 Vietnam. And at that time, 10 years ago, 2014, 97 00:05:26,530 --> 00:05:30,940 it was much less developed manufacturing wise than it's today. I mean, 98 00:05:30,940 --> 00:05:34,750 we were doing industrial wood goods and some really kind of basic cheap stuff, 99 00:05:34,750 --> 00:05:37,990 to be honest at that time. But yeah, I mean there's still a demand for it. 100 00:05:37,990 --> 00:05:39,250 And yeah, 101 00:05:39,580 --> 00:05:44,320 definitely kind of saw Vietnam as being the future early and kind of got 102 00:05:44,320 --> 00:05:47,560 lucky in a sense, but yeah. Yeah. 103 00:05:47,590 --> 00:05:51,100 Love it. You were ahead of the time and man, it has really paid off for you, 104 00:05:51,100 --> 00:05:51,880 especially now. 105 00:05:51,880 --> 00:05:52,450 For sure. 106 00:05:52,450 --> 00:05:54,280 And so there's a few things I want to talk about. 107 00:05:54,280 --> 00:05:56,770 We'll talk about minimus with you. We want to talk about tariff engineering, 108 00:05:56,770 --> 00:05:59,480 we want to bonded warehouses. We're talk about what not to do. 109 00:05:59,600 --> 00:06:04,190 You really were dropping some bombs of knowledge in the talk in Fort Lauderdale 110 00:06:04,190 --> 00:06:06,350 that a lot of people were like, wait a minute, wait, I can't do that. 111 00:06:06,350 --> 00:06:07,460 Are you sure I can't do that? And you're like. 112 00:06:07,460 --> 00:06:09,260 Yeah, for sure. Yeah, I found out some people were doing it. 113 00:06:09,260 --> 00:06:14,120 I never named names, but I had awkward conversations with some people. 114 00:06:14,120 --> 00:06:14,900 I'm like. 115 00:06:14,900 --> 00:06:16,160 Yeah. They're like, wait a minute. Careful. 116 00:06:16,190 --> 00:06:18,290 So there's several things to talk about there, 117 00:06:19,910 --> 00:06:22,160 so stay at tuned for that. 118 00:06:22,160 --> 00:06:26,210 But I want to talk a little bit about why Vietnam, 119 00:06:26,750 --> 00:06:29,120 why did you go there? But more importantly, 120 00:06:29,120 --> 00:06:32,180 why should we consider Vietnam right now? Because as I've learned from you, 121 00:06:32,180 --> 00:06:34,700 and actually one of our top clients in ports from Vietnam, 122 00:06:34,700 --> 00:06:37,940 their product is phenomenal. Why should we consider Vietnam? 123 00:06:38,090 --> 00:06:39,740 And I know there are other places to consider as well, 124 00:06:39,740 --> 00:06:41,690 but you've got a special place in your heart for Vietnam. 125 00:06:41,720 --> 00:06:43,640 Yeah, I mean for Vietnam mean they definitely, 126 00:06:43,640 --> 00:06:47,240 you have to pick what they specialize in, but what they do specialize in, 127 00:06:47,240 --> 00:06:48,260 they do excellent job. 128 00:06:48,260 --> 00:06:50,720 And two biggest categories we do are anything textile cut. 129 00:06:50,720 --> 00:06:54,830 And so based that ranges from clothing, apparel to bags, luggage, tool belts, 130 00:06:55,430 --> 00:06:57,140 our mutual client that we work with. 131 00:06:59,750 --> 00:07:02,330 And then also we do a lot of wooden good and furniture. 132 00:07:02,330 --> 00:07:05,030 And they're definitely growing in several other industries. 133 00:07:05,030 --> 00:07:08,210 We're starting to do electronic more electronics, OEM, electronics, 134 00:07:08,210 --> 00:07:13,160 but it's definitely, I don't want to say hit and miss, but it's growing. 135 00:07:13,250 --> 00:07:14,690 It's probably the fastest growing industry. 136 00:07:14,690 --> 00:07:17,630 But when we're doing a lot more plastic ejection molding, silicon parts, 137 00:07:18,020 --> 00:07:21,440 we've been doing a lot of industrial metal projects, St metal goods, 138 00:07:21,530 --> 00:07:23,060 starting to do some car parts too. 139 00:07:23,780 --> 00:07:27,590 And all those industries I think are definitely growing more developed industry, 140 00:07:27,590 --> 00:07:32,510 but you really got to figure out what Vietnam can do and then target in on those 141 00:07:32,510 --> 00:07:33,343 products. 142 00:07:34,130 --> 00:07:37,190 That's great. And so I think it's always important to understand, hey, 143 00:07:37,190 --> 00:07:40,940 what are maybe the misconceptions about a country or where are the stereotypes 144 00:07:40,940 --> 00:07:42,020 true or not true? 145 00:07:42,020 --> 00:07:46,970 So any misconceptions out there about Vietnam right now or 146 00:07:47,420 --> 00:07:49,310 anything you like to set the record straight on? 147 00:07:49,730 --> 00:07:53,990 Yeah, for sure. I think a lot of people do private label manufacturing in China, 148 00:07:55,130 --> 00:07:55,670 which is fine. 149 00:07:55,670 --> 00:07:58,520 Just find a factory that makes a pre-existing products slap your logo on it and 150 00:07:58,520 --> 00:08:00,320 sell it, which everybody's been doing for years. 151 00:08:00,320 --> 00:08:03,980 But Vietnam and honestly anywhere outside of China just does not do that. 152 00:08:03,980 --> 00:08:05,600 So the overall, I mean, 153 00:08:05,750 --> 00:08:09,260 majority of what projects we do is going to be contract manufacturing where you 154 00:08:09,260 --> 00:08:11,930 supply the factory with your product specs, sheets and tech packs, 155 00:08:12,320 --> 00:08:14,000 and they'll make it to your specs, 156 00:08:14,000 --> 00:08:16,250 but they're not going to have existing designs on hand. 157 00:08:16,310 --> 00:08:16,850 Got it. 158 00:08:16,850 --> 00:08:21,380 Got it. That's probably the biggest one. Other one too, Alibaba. 159 00:08:21,380 --> 00:08:24,980 And those alternatives just aren't good or don't really exist there. 160 00:08:24,980 --> 00:08:29,150 So when you find factories, you can't just put an RFQ on a website, 161 00:08:29,150 --> 00:08:32,480 have a dozen factories come to you. You have to do your own research, 162 00:08:32,480 --> 00:08:35,780 really follow up with 'em and chase 'em down. 163 00:08:36,620 --> 00:08:38,000 I know a lot of people get turned off by that. 164 00:08:38,150 --> 00:08:41,810 They expect factories to be tripping over fine or work with clients, 165 00:08:41,810 --> 00:08:44,900 but it's not the case. And they're also higher MQs. 166 00:08:44,900 --> 00:08:49,340 I know a lot of people say low MQs and there are kind of boutique handmade 167 00:08:49,760 --> 00:08:53,120 dress factories and whatnot. They do small, but for the most part, 168 00:08:53,120 --> 00:08:57,390 I would say MOQs tend to be higher in Vietnam outside of China as well. 169 00:08:57,390 --> 00:08:59,880 Interesting. So higher, MOQ is a little more legwork upfront. 170 00:08:59,880 --> 00:09:03,420 You're going to have to supply the specs, it's contract manufacturing, 171 00:09:03,420 --> 00:09:07,410 that sort of thing. But then what are some of the benefits? 172 00:09:07,410 --> 00:09:10,920 Because I know in talking to our mutual client who manufactures in Vietnam, 173 00:09:11,850 --> 00:09:14,910 they actually moved from the US to Vietnam a few years ago, 174 00:09:14,910 --> 00:09:17,820 and they said their quality went up, 175 00:09:19,170 --> 00:09:23,070 cut their cogs by 70%, quality went up, that sort of thing. 176 00:09:23,130 --> 00:09:24,630 But speak to us about 177 00:09:26,520 --> 00:09:30,390 how does it compare manufacturing Vietnam for the things they're good at to the 178 00:09:30,420 --> 00:09:31,253 rest of the world. 179 00:09:32,370 --> 00:09:36,210 For what they're good at? I think they excel because yeah, the tool belt, 180 00:09:36,210 --> 00:09:39,450 I'm not going to name who, but yeah, the tool belt is pretty high end. 181 00:09:39,450 --> 00:09:43,050 And I mean they have a pretty good, 182 00:09:44,250 --> 00:09:48,690 the quality they have in place is pretty good. Yeah. 183 00:09:48,900 --> 00:09:50,370 And then, yeah, I mean just overall, 184 00:09:50,370 --> 00:09:52,860 I think the quality is quite good for a lot of what they excel in. 185 00:09:53,010 --> 00:09:54,420 We do a lot of furniture too, 186 00:09:54,420 --> 00:09:58,680 and we can do some very high end custom hardwood pieces that 187 00:09:59,730 --> 00:10:00,540 they go for thousands, 188 00:10:00,540 --> 00:10:03,960 thousands for a single piece and go in literally multimillion dollar homes we're 189 00:10:03,960 --> 00:10:04,470 doing. 190 00:10:04,470 --> 00:10:04,890 Interesting. 191 00:10:04,890 --> 00:10:07,020 The projects in Palm, Palm Beach, Florida right now. 192 00:10:07,020 --> 00:10:10,470 And then another comes to home builder, custom home builder out Palm Beach. 193 00:10:10,470 --> 00:10:13,110 So they're doing literally 10 million plus they doing. 194 00:10:13,110 --> 00:10:14,580 All that in Vietnam. Yeah. 195 00:10:14,640 --> 00:10:15,960 They're doing a lot of it, not all of it. 196 00:10:16,620 --> 00:10:19,560 So m OQs are a little higher, but prices, 197 00:10:19,560 --> 00:10:22,770 and I know it's hard to compare prices talking about it depends on the category, 198 00:10:22,770 --> 00:10:24,780 depends on the good, depends on so many things. 199 00:10:24,780 --> 00:10:29,040 But pricing general comments on pricing, how does it compare? 200 00:10:29,040 --> 00:10:33,450 Yeah, pricing for apparel and textiles tends to be cheaper in Vietnam than China 201 00:10:33,450 --> 00:10:37,470 outright. And same with wooden goods. Because Vietnam is a tropical country, 202 00:10:37,470 --> 00:10:40,950 there's lots of access to high quality tropical hardwoods. 203 00:10:41,460 --> 00:10:45,030 And with Asia Association of Southeast Asian nations, 204 00:10:45,030 --> 00:10:47,940 which all the Southeast Asian nations have free-trade, 205 00:10:47,940 --> 00:10:50,820 so it's pretty easy to move wood from one country to another. 206 00:10:51,690 --> 00:10:54,750 So the quality of wood you get in Vietnam is excellent. 207 00:10:55,410 --> 00:10:57,960 So for that is definitely one of the big things they sell on. 208 00:10:57,960 --> 00:11:01,560 And pricing for textiles, bags, backpacks, 209 00:11:01,680 --> 00:11:05,460 even shoes we consistently find is be about the same price and oftentimes 210 00:11:05,460 --> 00:11:08,340 cheaper than China and the price to quality ratio, 211 00:11:08,640 --> 00:11:12,180 like you're buying a $5 sweatshirt from Vietnam versus $5 in China, 212 00:11:12,180 --> 00:11:13,230 the quality is going to be higher. 213 00:11:13,470 --> 00:11:17,340 China does have a lot of very cheap low quality. So people are like, I can get, 214 00:11:17,970 --> 00:11:21,690 we were talking to clients getting t-shirts for like 83 cents in China and ours 215 00:11:21,690 --> 00:11:22,830 were coming in about one 30, 216 00:11:22,830 --> 00:11:27,690 but the one 30 shirts were decent versus very low quality 217 00:11:27,690 --> 00:11:31,230 t-shirts for that 83 cents. And that was as cheap as we could find, 218 00:11:31,230 --> 00:11:34,740 but it is definitely at the price to quality ratio. 219 00:11:34,740 --> 00:11:37,890 So the cost of quality ratio is really good there, which goes a long way. 220 00:11:38,640 --> 00:11:42,060 So lots of opportunities in Vietnam and we'll continue to talk about that as we 221 00:11:42,060 --> 00:11:45,330 go and as we go through our other topics, we weave that back in. 222 00:11:45,330 --> 00:11:47,940 But what other countries should people think about? 223 00:11:48,150 --> 00:11:51,660 I know basically you specialize in anything outside of China, 224 00:11:51,660 --> 00:11:53,980 so what other countries should we consider and for what? 225 00:11:54,400 --> 00:11:55,390 Yes, for sure. So yeah, 226 00:11:55,390 --> 00:11:59,470 we've been in Vietnam for 10 years and we've been expanding since last year to 227 00:11:59,530 --> 00:12:02,440 all of Southeast Asia, Mexico, and looking to expand even more this year. 228 00:12:03,640 --> 00:12:07,330 I mean, Southeast Asia is great. Indonesia has a lot of great factories. 229 00:12:07,330 --> 00:12:11,110 Thailand, we're doing a lot of higher end auto parts and appliances in Thailand, 230 00:12:11,560 --> 00:12:14,530 some rubber goods, some natural rubber. So pretty eco-friendly stuff. 231 00:12:15,550 --> 00:12:19,660 Malaysia does appliances and some really good metal furniture and Mexico too. 232 00:12:20,380 --> 00:12:21,670 A lot of interest in Mexico. 233 00:12:21,760 --> 00:12:25,480 But I will say Mexico is a little difficult to source from because they're very 234 00:12:25,480 --> 00:12:27,340 limited in what they could produce. Much more limited. 235 00:12:27,340 --> 00:12:31,330 People expect more people want Mexico work than it's suitable for. 236 00:12:32,920 --> 00:12:35,410 What are those limitations and why for Mexico? 237 00:12:35,560 --> 00:12:38,200 So we're doing a lot of stamp metal and industrial goods, 238 00:12:38,200 --> 00:12:41,980 some aftermarket car parts, some work wear denim, 239 00:12:42,130 --> 00:12:45,430 so we can do stuff like that. But we get a lot of requests for scrubs, 240 00:12:45,460 --> 00:12:49,030 which we do a lot of scrubs in Vietnam, and the quality is great, 241 00:12:49,030 --> 00:12:52,390 but then people specifically want Mexico just for the use of shipment, 242 00:12:52,390 --> 00:12:55,000 but it's just not a good quality scrub suppliers there. 243 00:12:55,000 --> 00:12:59,950 And there's definitely a few other products that people 244 00:12:59,950 --> 00:13:02,650 really want to get from Vietnam, or sorry, from Mexico. 245 00:13:03,580 --> 00:13:06,880 I really think Mexico is going to get more and more investment over the coming 246 00:13:06,880 --> 00:13:11,230 years just because the demand is absolutely there. 247 00:13:11,230 --> 00:13:12,940 It's just the supply has not caught up. 248 00:13:13,120 --> 00:13:17,860 And I will say a lot of new factories are getting or have Chinese backed 249 00:13:17,860 --> 00:13:20,230 investment to Mexico, but there's still a. 250 00:13:20,590 --> 00:13:21,940 Portion of it. Interesting. Makes sense, right? 251 00:13:21,940 --> 00:13:23,770 China's going to diversify themselves. 252 00:13:23,920 --> 00:13:27,460 They want to avoid the tariffs and so profit and from what they're really great. 253 00:13:27,460 --> 00:13:30,400 I was just manufacturing. So makes a lot of sense. 254 00:13:31,300 --> 00:13:35,890 One of the things that I know has caused some confusion, 255 00:13:35,890 --> 00:13:37,900 you talked about this during a talk at seller. 256 00:13:37,900 --> 00:13:38,733 Summit. 257 00:13:38,830 --> 00:13:43,330 Is country of origin because I think there's going to be some creative 258 00:13:43,330 --> 00:13:45,190 things that people are going to try to do. 259 00:13:45,250 --> 00:13:45,820 Oh, for sure. 260 00:13:45,820 --> 00:13:49,000 Skirt around country of origin and stuff like that. But can you talk about that? 261 00:13:49,000 --> 00:13:52,420 What constitutes country of origin and what do we need to know there? 262 00:13:52,900 --> 00:13:57,850 Yeah, I mean what's really kind of annoying is it's very broadly written in the 263 00:13:57,850 --> 00:13:58,330 law. 264 00:13:58,330 --> 00:14:01,990 Basically the law states that a new article of commerce has to emerge in the 265 00:14:01,990 --> 00:14:05,890 country. So it'd be, I import raw fabrics from China having made in t-shirt, 266 00:14:05,890 --> 00:14:08,560 that's a new article, commerce, and you actually do, 267 00:14:08,740 --> 00:14:12,370 so the fabric making everything in Vietnam, it's a new article. 268 00:14:12,370 --> 00:14:16,870 Commerce cause T-shirts fundamentally different from fabric. But yeah, 269 00:14:16,870 --> 00:14:19,630 I mean broadly speaking, you have to have substantial change. 270 00:14:19,630 --> 00:14:22,660 And I try to advise people at least 50% of value, 271 00:14:23,740 --> 00:14:27,010 but as long as it me as a new article of commerce is new, 272 00:14:27,010 --> 00:14:30,370 but you can't simply put a new label on something. If you get a mug, 273 00:14:30,370 --> 00:14:33,340 you can't just put your logo on it and ship it from Vietnam, 274 00:14:33,700 --> 00:14:36,250 from China or just add logos or change colors or. 275 00:14:36,250 --> 00:14:39,520 It was a mug. It is a mug. You added a logo that is not. 276 00:14:39,580 --> 00:14:41,020 The same thing with commerce. Same. And people, 277 00:14:41,620 --> 00:14:46,270 I've gotten a request for people to do repackaging multiple times and I either 278 00:14:46,270 --> 00:14:48,100 turn 'em down or nor 'em. But yeah, 279 00:14:48,100 --> 00:14:50,200 they think you can just have this product shipped from China, 280 00:14:50,380 --> 00:14:52,760 find a package supplier in Vietnam, package it in Vietnam, 281 00:14:52,820 --> 00:14:55,610 and then ship it to us is a new product. But it's not, 282 00:14:55,820 --> 00:14:59,780 the product is still fundamentally the same thing. So yeah, 283 00:14:59,780 --> 00:15:04,220 I mean you have to have substantial transformation of the product and generally 284 00:15:05,210 --> 00:15:07,520 if you get audited, you have to document it. So I mean, 285 00:15:08,660 --> 00:15:09,920 if you have a factory in Vietnam, 286 00:15:09,920 --> 00:15:13,220 you just simply have the factory write a certified letter. Yeah, we made it, 287 00:15:13,220 --> 00:15:16,430 here's the invoice, here's the letter we here's the factory. 288 00:15:16,430 --> 00:15:19,580 You can maybe even take videos of your product being made in Vietnam. 289 00:15:20,090 --> 00:15:23,840 That's some nice Vietnamese worker saying, yep, look, I making this. But yeah, 290 00:15:23,840 --> 00:15:27,350 just document it. It'll go through fine. But if you're just like we said, 291 00:15:27,350 --> 00:15:30,320 doing the repackaging or pass through transshipment, 292 00:15:30,320 --> 00:15:32,360 it's definitely something to get caught. 293 00:15:32,360 --> 00:15:36,860 And they're definitely with CBP and Customs of Border Protection who enforces 294 00:15:36,860 --> 00:15:37,693 customs. 295 00:15:38,270 --> 00:15:42,830 They're doing 50% more audits now just last month more in April, 296 00:15:42,890 --> 00:15:45,770 50% more in April than they were, I don't know what the timeframe, 297 00:15:46,250 --> 00:15:47,870 I guess probably during the Biden administration. 298 00:15:48,440 --> 00:15:51,740 And they're planning on increasing that more and more and they're planted here 299 00:15:51,740 --> 00:15:52,100 and whatnot, 300 00:15:52,100 --> 00:15:56,930 have contracts with CBP now and countries like Vietnam and most other 301 00:15:56,930 --> 00:15:58,880 countries share import data. 302 00:15:58,940 --> 00:16:02,060 So what's getting imported into Vietnam is getting shared with CBP, 303 00:16:02,720 --> 00:16:06,440 so they know what's getting shipped in and then they can hypothetically use AI 304 00:16:06,440 --> 00:16:11,120 or whatever to match it. So it's definitely, yeah, 305 00:16:11,120 --> 00:16:13,970 don't do transgender just actually make the product in the country. 306 00:16:14,390 --> 00:16:18,410 It's going get more about the fines are pretty steep. And once you get called. 307 00:16:18,410 --> 00:16:19,370 Ones, yeah. 308 00:16:19,910 --> 00:16:20,090 Yeah. 309 00:16:20,090 --> 00:16:23,870 Once you get called once you're pretty much red flagged for the rest for ever. 310 00:16:23,870 --> 00:16:25,850 And they can look back on previous shipments too, 311 00:16:26,330 --> 00:16:28,430 so it's not like they get caught one time, 312 00:16:28,430 --> 00:16:29,870 they're only looking back at your previous shipments. 313 00:16:29,870 --> 00:16:32,870 Yeah, yeah. It's just one of those things where, 314 00:16:32,870 --> 00:16:35,540 and I think one of the analogies you use is like, Hey, 315 00:16:35,540 --> 00:16:39,290 we would never cheat on our taxes. Right? 316 00:16:39,290 --> 00:16:43,040 Or not file our taxes or something like that. We know, dude, you don't mess. 317 00:16:43,040 --> 00:16:45,860 I mean, yes, I'm going to take every advantage, every deduction that I can take, 318 00:16:46,490 --> 00:16:50,210 but I'm not going to screw around with the IRS, right? Oh, absolutely. 319 00:16:50,210 --> 00:16:51,860 And CCB P is the same, 320 00:16:52,190 --> 00:16:56,450 maybe going to get more intense and it's going to be such a huge revenue 321 00:16:56,960 --> 00:16:59,960 generator for the US government tariffs that they're not going to be messing 322 00:16:59,960 --> 00:17:02,870 around here. And so it makes sense to do it by the book. Yes, 323 00:17:02,870 --> 00:17:04,130 look for advantages, but do it by the book. 324 00:17:04,520 --> 00:17:06,980 Yeah, absolutely. You do it by the book. So make sure everything's compliant. 325 00:17:06,980 --> 00:17:10,940 You've got paperwork and documentation support, everything you made. Yeah, 326 00:17:10,940 --> 00:17:14,360 I mean they'll look at payments potentially to the factory and I mean they have 327 00:17:14,360 --> 00:17:15,410 as much capability, 328 00:17:15,410 --> 00:17:19,760 more or less than as the IRS to look at your finances and why not? 329 00:17:20,420 --> 00:17:23,720 Yeah, I mean Trump wants to have the external revenue service, which is, 330 00:17:24,620 --> 00:17:25,460 I mean as far as I'm. 331 00:17:25,460 --> 00:17:28,070 Concerned, basically cvp, right? I mean they're going to be connected. Yeah. 332 00:17:28,460 --> 00:17:32,930 Absolutely. So yeah, if you don't cheat on your taxes, don't cheat on shipments, 333 00:17:32,930 --> 00:17:34,310 your taxes, period. 334 00:17:34,670 --> 00:17:38,540 Love that. Love that comparison. I think that sets the right frame for folks. 335 00:17:38,720 --> 00:17:41,810 Let's talk about di minimis. This is something that's talked about a lot. 336 00:17:41,810 --> 00:17:42,680 It's come up a lot, 337 00:17:43,370 --> 00:17:46,220 but explain that for folks that are still maybe a little bit fuzzy, 338 00:17:47,060 --> 00:17:49,680 how has that impacted and what should we know about that? 339 00:17:49,980 --> 00:17:50,130 Yeah, 340 00:17:50,130 --> 00:17:55,020 so minimis was a rule in place that basically shipments under $800 in 341 00:17:55,020 --> 00:17:59,220 value, would not have a tariff duty rates applied to it. 342 00:17:59,250 --> 00:18:02,220 Just at that point they were like $800. 343 00:18:02,400 --> 00:18:06,450 That tax and duty collect is going to be less than what or less than what the 344 00:18:06,450 --> 00:18:09,600 actual cost administrator calls to get in and figure stuff out. 345 00:18:09,600 --> 00:18:13,230 Was that rule's gone away for China and Hong Kong? 346 00:18:13,320 --> 00:18:16,080 But it's still in effect for the rest of the world. And I do want to get, 347 00:18:16,080 --> 00:18:19,680 the big caveat is definitely something the White House and the people in charge 348 00:18:19,680 --> 00:18:24,660 have talked about getting rid of some point in the future, but as of today, 349 00:18:24,660 --> 00:18:29,340 may probably about 10:00 AM a few hours ago, I'm checking news in a few hours, 350 00:18:29,940 --> 00:18:30,810 it's still in effect. 351 00:18:33,960 --> 00:18:37,440 Any single shipment under $800, no customs or no tariffs. 352 00:18:37,440 --> 00:18:40,620 There does not apply to China or Hong Kong. But right now. 353 00:18:40,980 --> 00:18:41,490 But yeah, 354 00:18:41,490 --> 00:18:44,580 you can ship from Vietnam and get under that $800 value and that's each 355 00:18:44,580 --> 00:18:48,990 individual shipment. So you have to do, I don't know, it's a lot of people just, 356 00:18:49,260 --> 00:18:53,160 but there are companies like port lists and whatnot that does warehousing in 357 00:18:53,670 --> 00:18:55,650 Vietnam. You can ship to the warehouse in Vietnam. 358 00:18:55,650 --> 00:18:57,240 Each time a customer plays it order to the United States, 359 00:18:57,240 --> 00:18:59,520 they ship each item out to the customer. 360 00:19:00,870 --> 00:19:05,280 And it scripts around as of now the di minimus law, 361 00:19:05,430 --> 00:19:08,130 assuming your product's lightweight, but I mean there is cost. 362 00:19:08,130 --> 00:19:11,310 Cause when you ship each individual item versus the container, 363 00:19:11,700 --> 00:19:14,460 you want to have small lightweight stuff like t-shirts and small electronic 364 00:19:14,460 --> 00:19:17,310 items. Cause once you get large heavyweight items, 365 00:19:17,610 --> 00:19:19,050 let's just say flat pack furniture, 366 00:19:19,500 --> 00:19:22,770 the shipping cost per item to do air shipping, it's going to get. 367 00:19:23,100 --> 00:19:25,560 Prohibitively you worth to save on shipping costs. 368 00:19:25,560 --> 00:19:28,710 It's worth the 10% tariff for whatever because you're saving more on shipping. 369 00:19:28,710 --> 00:19:33,660 So you got to kind balance that out. Great. Well, speaking of warehouses, 370 00:19:33,660 --> 00:19:36,450 I know something you've talked about and I've heard a few people talk about is 371 00:19:36,900 --> 00:19:38,460 bonded warehouses. 372 00:19:38,460 --> 00:19:43,410 And so explain that and then when should we consider that versus when is that 373 00:19:43,410 --> 00:19:44,850 maybe not advantageous to. 374 00:19:44,850 --> 00:19:45,930 Us? Yeah, for sure. 375 00:19:45,930 --> 00:19:50,580 So custom responded warehouses are warehouses that are more or less connected to 376 00:19:50,580 --> 00:19:51,413 the port. 377 00:19:51,540 --> 00:19:54,840 So what you can do is you can ship a product to the port and then from the port 378 00:19:54,840 --> 00:19:57,240 will get shipped to the custom responded warehouse directly. 379 00:19:57,540 --> 00:20:00,630 And then when it leaves the warehouse, so each shipment, 380 00:20:00,930 --> 00:20:04,860 that's when it gets to tariff rate applied to it. So yeah, 381 00:20:04,920 --> 00:20:06,120 the sample I use. 382 00:20:06,180 --> 00:20:09,000 So that way if you have a hundred thousand container with a hundred thousand 383 00:20:09,000 --> 00:20:13,800 dollars worth of goods, I guess new tariff rate is 30% typically goes to port, 384 00:20:13,860 --> 00:20:15,060 leaves the port through customs. 385 00:20:15,060 --> 00:20:19,950 You pay 30,000 on tariffs on that shipment at one time 386 00:20:20,070 --> 00:20:21,150 before product sells. 387 00:20:21,150 --> 00:20:24,540 But you can ship that shipment straight to a cost of bond warehouse. 388 00:20:24,540 --> 00:20:26,790 And then each time a customer placed an order on a product, 389 00:20:27,150 --> 00:20:29,370 you get revenue from the customer and then it leaves the warehouse. 390 00:20:29,370 --> 00:20:32,310 So let's just say as a hundred dollars items, 391 00:20:32,430 --> 00:20:36,300 you pay $30 in tariffs each time the product leaves the warehouse and you get 392 00:20:36,300 --> 00:20:39,720 cashflow in from your customer. So there's not that one big hit, 393 00:20:39,780 --> 00:20:42,030 you're going to still pay tariffs, but it splits it up. 394 00:20:42,030 --> 00:20:46,080 So you pay the tariff as you get cashflow coming in from the clients or your 395 00:20:46,100 --> 00:20:46,300 customers. 396 00:20:46,300 --> 00:20:47,110 Yeah, it makes a lot of sense. 397 00:20:47,110 --> 00:20:52,060 I know especially when tariff were 154% from China there for a hot minute, 398 00:20:52,060 --> 00:20:53,440 people were like, whoa, bond warehouse, 399 00:20:53,440 --> 00:20:58,120 I'm only going to pay that on a per item basis as much as I can. That is 30%. 400 00:20:58,120 --> 00:20:59,380 Maybe people are a little more flexible, 401 00:20:59,590 --> 00:21:04,180 but it's so nice to have that flexibility of it's there now you can absorb 402 00:21:04,450 --> 00:21:06,970 the hit because you got cashflow coming in from the customer. 403 00:21:06,970 --> 00:21:08,470 So a lot of benefits there. 404 00:21:08,740 --> 00:21:13,420 And if you shipped it in April, like late April, early May when it's still 145%, 405 00:21:13,420 --> 00:21:16,480 you shifted customs on their warehouse, you can ship it out now, 406 00:21:16,510 --> 00:21:19,900 pay the 30% tariffs instead of paying what would've been 145%. 407 00:21:20,500 --> 00:21:25,030 And I know a lot of people are trying, 30% is manageable for a lot of people, 408 00:21:25,030 --> 00:21:26,860 so they just want to get it out and pay what they. 409 00:21:26,860 --> 00:21:29,050 Need to at the time. It's still painful but manageable, 410 00:21:29,050 --> 00:21:32,950 especially in comparison. But so the customs, 411 00:21:32,950 --> 00:21:35,140 modern warehouses are close to a port. 412 00:21:35,560 --> 00:21:37,870 I know there's some extra costs associated there too. 413 00:21:38,110 --> 00:21:40,300 So what do we need to consider? When would we not want to do. 414 00:21:40,300 --> 00:21:42,730 This? I mean, for the most part, I mean, 415 00:21:42,730 --> 00:21:45,670 just kind look at your cashflow and how you want it managed. Yeah, 416 00:21:45,670 --> 00:21:48,160 customs on a warehouse, they're definitely in demand right now. 417 00:21:48,160 --> 00:21:52,240 So they're going to be more expensive on a per square footage rate than a trip 418 00:21:52,240 --> 00:21:54,760 to pull warehouse. But I mean, 419 00:21:54,760 --> 00:21:59,560 if you're looking at the tariff rates and it's more cost advantageous where you 420 00:22:00,520 --> 00:22:02,980 just want to preserve your cash flow for the time being, 421 00:22:02,980 --> 00:22:04,510 it's definitely going to be advantageous to do. 422 00:22:04,510 --> 00:22:06,490 And I know a lot of people are probably shipping out of customs, 423 00:22:06,490 --> 00:22:08,590 modern warehouses like I mentioned earlier, 424 00:22:08,590 --> 00:22:11,200 just moving a traditional one and just pay the tariff now. 425 00:22:11,200 --> 00:22:15,880 But it gives you that flexibility to kind of adjust as the tariff rates changes. 426 00:22:16,180 --> 00:22:18,850 Because right now, as every day is a new announcement. 427 00:22:19,330 --> 00:22:21,610 Every day, a new adventure for. 428 00:22:21,610 --> 00:22:23,560 Sure, he's going to have new on. 429 00:22:23,560 --> 00:22:26,410 Scores of country check tariff news. It really is every day. 430 00:22:27,730 --> 00:22:32,410 Totally makes sense. So then let's look at tariff engineering. 431 00:22:32,980 --> 00:22:36,130 So tariffs, I believe we're here to stay at least for this administration, 432 00:22:36,130 --> 00:22:38,770 and likely beyond. Just like anything with the government though, once 433 00:22:40,630 --> 00:22:43,060 Democrats say they don't like tariffs, but then once they're in place, 434 00:22:43,060 --> 00:22:45,820 if people are okay with it, it's hard to turn away revenue. 435 00:22:46,000 --> 00:22:48,760 And that's true for either party. So likely. 436 00:22:48,970 --> 00:22:49,750 Tariffs. 437 00:22:49,750 --> 00:22:50,740 Hearsay. Hearsay. 438 00:22:50,740 --> 00:22:54,070 Yeah. Biden kept to 25% on China. There is administration. 439 00:22:54,190 --> 00:22:57,070 Exactly. Yeah. So it's like, oh, we're pretty, well, nobody's talking about it. 440 00:22:57,070 --> 00:23:01,150 Let's just keep it. Yeah. So let's talk tariff engineering. 441 00:23:02,020 --> 00:23:06,070 How do you coach people or how do you work with your clients to 442 00:23:06,790 --> 00:23:08,410 engineer tariffs for the least? 443 00:23:08,770 --> 00:23:10,660 Yeah, it a little tricky. 444 00:23:10,900 --> 00:23:14,620 You really have to really dive in deep on what your product is, the HTS code, 445 00:23:14,620 --> 00:23:16,750 and then look at similar HTS codes. 446 00:23:16,900 --> 00:23:17,850 And what is the HTS code? 447 00:23:18,160 --> 00:23:22,150 Yeah, HTS code. So HTS code for those aren't familiar, 448 00:23:22,150 --> 00:23:25,660 harmonized tariff schedule is the code that assigned to pretty much 17,000 449 00:23:25,660 --> 00:23:26,830 different product categories. 450 00:23:27,250 --> 00:23:29,530 And that's going to be what the tariff rate is determined by. 451 00:23:29,530 --> 00:23:31,690 So there's going to be a list. 452 00:23:33,130 --> 00:23:37,150 So each product falls under a different HCS code. They're 10 digits. 453 00:23:38,050 --> 00:23:38,380 But yeah, 454 00:23:38,380 --> 00:23:41,230 what you do is you look at your HT S code and then look at similar ones. 455 00:23:41,830 --> 00:23:45,190 And then if you have a similar HCS code nearby, 456 00:23:45,380 --> 00:23:47,990 you can make changes to that, have a lower tariff rate. 457 00:23:47,990 --> 00:23:51,380 You can fundamentally change your product to get in. 458 00:23:51,620 --> 00:23:55,280 The example I used was Columbia Sportswear for all their shirts. 459 00:23:55,640 --> 00:23:58,820 They all started adding a little pocket on the inside of their shirts, 460 00:23:59,780 --> 00:24:01,130 credit card size pocket, I think. 461 00:24:01,460 --> 00:24:05,270 And the difference is the shirt has a higher tariff rate than a windbreaker. 462 00:24:06,140 --> 00:24:07,340 And so since it has a pocket, 463 00:24:07,340 --> 00:24:09,830 they can actually classify the shirts as a windbreaker. 464 00:24:09,830 --> 00:24:13,160 That meets the requirement for windbreaker change, the HTS code, 465 00:24:13,250 --> 00:24:14,150 lower tariff now. 466 00:24:14,210 --> 00:24:14,720 Exactly. 467 00:24:14,720 --> 00:24:18,440 And they engineer the product to meet the requirements for a windbreaker. 468 00:24:19,550 --> 00:24:22,730 And I'm sure everybody has a shirt. It's nice to have a little pocket. 469 00:24:22,910 --> 00:24:23,810 Nice little benefit as well. 470 00:24:24,020 --> 00:24:25,190 Yeah. So yeah, 471 00:24:25,190 --> 00:24:28,700 they figure that out and they pay a lower tariff rate on their shirt shipments 472 00:24:28,940 --> 00:24:31,580 because of that change. And Converse did that. 473 00:24:31,640 --> 00:24:35,630 They put a felt in liner in their Converse all stars. 474 00:24:36,140 --> 00:24:40,130 Cause the slippers instead of shoes or sneakers and slippers have a lower tariff 475 00:24:40,130 --> 00:24:42,980 rate than sneakers. That's probably one of the most famous examples, 476 00:24:42,980 --> 00:24:46,580 but a lot of people are kind of just exploring similar products that can 477 00:24:46,610 --> 00:24:51,080 effectively sold the same just to get a different HDS code. 478 00:24:51,080 --> 00:24:54,830 But this is a little tricky to do because not every product, 479 00:24:55,220 --> 00:24:58,460 because most of the time products in the same category get text at the same 480 00:24:58,460 --> 00:25:01,010 array more or less. So even if you do change. 481 00:25:01,010 --> 00:25:02,570 So not always a lot of opportunities here. 482 00:25:03,020 --> 00:25:06,770 And is this kind of going back to our IRS example, 483 00:25:06,950 --> 00:25:08,660 this is sort of using deductions, right? 484 00:25:08,720 --> 00:25:12,620 So then it's like do you fall under scrutiny here if you're getting too cute or 485 00:25:12,620 --> 00:25:13,850 too creative? Or is this. 486 00:25:14,240 --> 00:25:18,560 Relatively should would cause Yeah, I mean when you submit it through CVP, 487 00:25:18,920 --> 00:25:21,920 you're going to say, Hey, it's this HT S code and there's going to be some guy, 488 00:25:21,980 --> 00:25:26,090 literally somebody looking at their database, checking it, the product, 489 00:25:26,270 --> 00:25:29,660 the materials and whatnot. And if they say it's something different, 490 00:25:29,990 --> 00:25:32,180 they're like, Hey, we actually think it's this HTS code. 491 00:25:33,290 --> 00:25:34,640 And then there's going to be back and forth. 492 00:25:34,640 --> 00:25:38,570 And then ultimately there's an arbitration court more, 493 00:25:38,840 --> 00:25:39,920 I don't know the exact term, 494 00:25:39,920 --> 00:25:44,780 but I know there's basically arbitrator where more or less a judge rules on what 495 00:25:44,780 --> 00:25:47,780 the ultimate HS code is. Got it. We were looking at not, 496 00:25:48,260 --> 00:25:50,120 we didn't do the ruling, but we looked at a ruling. 497 00:25:50,270 --> 00:25:51,890 We were doing baby carriers for a client. 498 00:25:53,570 --> 00:25:57,380 It was trying to figure out which HT S code. Yeah, I mean there was a court, 499 00:25:57,620 --> 00:26:01,520 not court ruling, but customs ruling from 2013 said, is this HTS code, 500 00:26:01,820 --> 00:26:04,310 which is surprising catchall HT S code. 501 00:26:05,480 --> 00:26:09,500 It was all fabric baby carriers versus of course, 502 00:26:09,500 --> 00:26:11,870 most baby carriers dot have some sort of structure in it. 503 00:26:11,870 --> 00:26:15,470 Those structured baby carriers are actually tax at a different rate or 504 00:26:15,470 --> 00:26:18,560 classified as different than fabric. Yeah. 505 00:26:20,360 --> 00:26:23,930 So I mean, you got to kind of figure that out. But ultimately though, 506 00:26:23,930 --> 00:26:26,780 it's going to be what the custom says the product is. And again, 507 00:26:26,870 --> 00:26:30,590 if you get cute, it's not as bad as fines. It's just straight up lying to 'em. 508 00:26:30,590 --> 00:26:33,770 But they're going to say it's the HCS code. There's going to be some. 509 00:26:34,310 --> 00:26:35,340 Got to, you don't have to pay the difference. 510 00:26:35,340 --> 00:26:36,940 Everything they correct got to difference. 511 00:26:37,400 --> 00:26:39,110 If it gets held up, there's some demure, 512 00:26:39,110 --> 00:26:41,270 some storage charges too related to that. 513 00:26:42,590 --> 00:26:43,560 And look, 514 00:26:43,560 --> 00:26:47,850 we got to design our product for a customer and it's got to meet our vision and 515 00:26:47,850 --> 00:26:50,130 mission and what we're trying to accomplish with the product. 516 00:26:50,130 --> 00:26:52,350 But it's just another one of those things where it's like, Hey, 517 00:26:52,350 --> 00:26:56,550 let me take a look because maybe this is easy or maybe we have the wrong HT S 518 00:26:56,550 --> 00:26:58,770 code, we need to switch it and it's going to work better for us. 519 00:26:58,950 --> 00:27:02,190 It's something that take a look at because we could have a meaningful impact. 520 00:27:02,520 --> 00:27:06,480 A lot of small things too, like synthetic fabrics and natural fibers, 521 00:27:06,660 --> 00:27:08,460 fabrics are sometimes taxed differently. 522 00:27:08,460 --> 00:27:12,180 So you can look at just changing the fabric of your product, for instance, but. 523 00:27:12,330 --> 00:27:15,240 Just maybe you can change it and get better performance and now you get a lower 524 00:27:15,750 --> 00:27:20,400 turf. Right? Yeah. Yeah. Interesting. So let's talk about what not to do. 525 00:27:20,400 --> 00:27:23,730 And I know there are several caveats here. This is not legal advice. 526 00:27:24,000 --> 00:27:25,620 You're not an attorney, I'm not an attorney, 527 00:27:26,310 --> 00:27:28,470 but what are some things that we need to avoid right now? 528 00:27:28,470 --> 00:27:30,210 Or at least need to be very, very cautious of? 529 00:27:30,300 --> 00:27:33,630 Yeah, for sure. Yeah, I think the first thing I mentioned was DDP and I. 530 00:27:34,530 --> 00:27:35,640 If I were redo that talk, 531 00:27:35,640 --> 00:27:38,880 I would say there's a right way to do DDP and a wrong way to do DDP. 532 00:27:38,890 --> 00:27:39,780 Yeah. And what is DDP. 533 00:27:41,220 --> 00:27:44,160 Delivery duty paid? So DDP is ANCO term, 534 00:27:44,280 --> 00:27:46,530 which means you work with a manufacturer, 535 00:27:47,070 --> 00:27:49,410 they'll give you an invoice and the manufacturer will be in charge of making the 536 00:27:49,410 --> 00:27:52,020 product, shipping the product, paying the dues and deliveries, 537 00:27:52,050 --> 00:27:53,850 everything for you up until it reaches 538 00:27:55,470 --> 00:27:58,260 the ultimate final destination. And 539 00:28:00,000 --> 00:28:04,320 it's legal. It's been a thing for a while the right way. 540 00:28:05,100 --> 00:28:05,933 So in this case, 541 00:28:06,030 --> 00:28:10,050 you just basically pay the manufacturer one and they handle everything. I mean, 542 00:28:10,050 --> 00:28:12,540 there's a right way, and like I said, there's right way and wrong way. 543 00:28:12,540 --> 00:28:14,760 The right way is trust by verify your supplier, 544 00:28:14,760 --> 00:28:18,090 make sure you get copies of all the manufacturers, invoice the shipping, 545 00:28:18,420 --> 00:28:20,100 who's shipping what HCS. 546 00:28:20,400 --> 00:28:23,610 What they're classifying is because what's happening a lot of times, 547 00:28:23,610 --> 00:28:24,510 not all the time, 548 00:28:24,570 --> 00:28:29,460 but a lot of times is the manufacturers know that they have the lowest 549 00:28:29,460 --> 00:28:31,140 price they're going to go with them. 550 00:28:31,140 --> 00:28:35,460 So they're figuring out ways to falsify manufacturing invoice so that 551 00:28:36,540 --> 00:28:39,720 because what they use to the bill of lading or whatnot is what they use to 552 00:28:41,250 --> 00:28:45,660 calculate the tariffs on. So we can pay 145,000 or 30%, 145, I dunno, 553 00:28:46,440 --> 00:28:49,860 whatever it is today, 30% on 10,000, there's 20 pay 3000. 554 00:28:49,860 --> 00:28:54,600 But if they falsify it and say 5,000 and we pay 30% is half the tariff 555 00:28:54,600 --> 00:28:55,433 cost. 556 00:28:56,940 --> 00:29:00,210 And so a lot of manufacturers doing that. 557 00:29:00,480 --> 00:29:04,620 What's happened is ultimately the person that is legally and liable for it is 558 00:29:04,680 --> 00:29:06,540 the importer, the person buying the product. 559 00:29:07,290 --> 00:29:09,900 So if you verify that everything they say is accurate, 560 00:29:09,900 --> 00:29:11,640 the manufacturer's invoice is accurate, 561 00:29:11,760 --> 00:29:16,110 the shipping bill ladings correctly listed a CS code is correct, it's fine. 562 00:29:16,620 --> 00:29:20,370 So no issue there, but they don't always supply that information to you. 563 00:29:20,370 --> 00:29:24,120 So a lot of people just turn the blind eye just accept what everything the 564 00:29:24,180 --> 00:29:25,530 manufacturer is saying is correct. 565 00:29:25,710 --> 00:29:28,560 And they have a lot of times that they have suspicious low bids. 566 00:29:28,560 --> 00:29:31,770 This what they're probably doing. Yeah, trust. 567 00:29:32,340 --> 00:29:33,300 To verify. 568 00:29:33,300 --> 00:29:35,910 But I think that's the piece a lot of people don't dunno is they're like, oh, 569 00:29:35,910 --> 00:29:40,730 no, no, no, it's my factor doing it. Right? So they're the ones are reliable. 570 00:29:41,410 --> 00:29:46,150 The agent of record is the, or the manufacturer, and they assume, oh, 571 00:29:46,150 --> 00:29:49,210 since they're agent of record, they're the one legally liable and responsible. 572 00:29:50,080 --> 00:29:53,920 If anybody gets called, it's going to be them, but it's not the case. And yeah, 573 00:29:53,920 --> 00:29:56,680 I got a lot of pushback from it. I'm not going to name names, but yeah, 574 00:29:56,680 --> 00:30:00,010 there were people doing this and I had to explain how to do it correctly and how 575 00:30:00,010 --> 00:30:03,040 not to, and I was like, okay, probably gave a few people a heart attack, 576 00:30:03,040 --> 00:30:04,480 so I want to apologize to those people. 577 00:30:05,560 --> 00:30:07,870 And again, it's just sort of one of those things where it's like, oh, well, 578 00:30:07,870 --> 00:30:11,380 my accountant screwed up my tax return, not my fault. 579 00:30:11,380 --> 00:30:14,980 I don't have to pay those taxes. Well, no, you still do. They're your taxes. 580 00:30:15,070 --> 00:30:15,903 Oh, absolutely. 581 00:30:16,210 --> 00:30:18,280 And so you got to look at it that way. Yeah, 582 00:30:18,280 --> 00:30:20,290 you got to absolutely verify everyth to do, basically, 583 00:30:20,290 --> 00:30:21,430 you've just got to look at, hey, 584 00:30:21,430 --> 00:30:25,870 what I'm paying per unit or total to the manufacturer, 585 00:30:25,870 --> 00:30:27,490 is that what they're putting on the invoice? 586 00:30:27,490 --> 00:30:30,820 And is that what the tariff is being charged to? And if all that looks good, 587 00:30:31,600 --> 00:30:31,960 then you're fine. 588 00:30:31,960 --> 00:30:36,850 Yeah, yeah. Just trust, verify everything. Yeah. If it gets caught up as held, 589 00:30:36,850 --> 00:30:40,240 gets red flagged by customs, they're going ask for documentation, 590 00:30:40,240 --> 00:30:43,970 ask you more or less. And if you don't have that, you're just, I know, 591 00:30:43,970 --> 00:30:46,810 I just thought they would do a good job. It's not going fly. They expect. 592 00:30:46,820 --> 00:30:48,400 You to. Yeah, and I think you mentioned this too, 593 00:30:48,610 --> 00:30:53,020 then once something is flagged for you, probably future orders, 594 00:30:53,020 --> 00:30:54,370 they're going to be paying attention you, 595 00:30:54,370 --> 00:30:56,440 you're going to be scrutinized from there. 596 00:30:56,440 --> 00:30:58,870 On. And again, they can look back on passion ship too. 597 00:30:58,870 --> 00:31:00,970 And if they find you were doing that on passionist, 598 00:31:01,030 --> 00:31:03,340 then you can also get paid fines for pass shipment. 599 00:31:03,340 --> 00:31:07,810 So just know how to do it correctly. Yeah, work with customers, brokers, 600 00:31:07,810 --> 00:31:11,290 make sure everything goes through smoothly. Yeah, I always mean just for me, 601 00:31:11,290 --> 00:31:16,240 I always recommend FOB have your own freight forwarder and then they'll have 602 00:31:16,240 --> 00:31:19,630 a custom broker and they'll handle everything and tell you what to do and give 603 00:31:19,630 --> 00:31:21,430 you advice for the shipment and all that. But. 604 00:31:22,330 --> 00:31:23,260 I never, what does FOB. 605 00:31:24,370 --> 00:31:25,030 Free on board? 606 00:31:25,030 --> 00:31:29,020 So it means the manufacturer's responsible for having the product shipped to the 607 00:31:29,020 --> 00:31:30,640 port and the country of origin, 608 00:31:32,230 --> 00:31:33,970 and then the freight forward will pick over at the port. 609 00:31:34,810 --> 00:31:36,760 Got it. Got it. Okay. Well, 610 00:31:37,120 --> 00:31:41,260 let's talk about you specialize in helping people diversify their supply chain 611 00:31:41,260 --> 00:31:45,310 or re-engineer their supply chain. And you're looking at outside of China, 612 00:31:46,540 --> 00:31:48,220 who should reach out to you? 613 00:31:48,610 --> 00:31:51,940 I know everybody's kind of scrambling and looking just because of the chaos 614 00:31:51,940 --> 00:31:52,210 lately, 615 00:31:52,210 --> 00:31:55,900 but who should reach out to you and what are some of the things they should be 616 00:31:55,900 --> 00:32:00,640 considering as they're looking at diversifying their supply chain? 617 00:32:00,640 --> 00:32:05,560 Are you mostly helping people fully shift their manufacturing to the countries? 618 00:32:05,560 --> 00:32:07,480 Are you looking at, hey, let's diversify, 619 00:32:07,480 --> 00:32:11,290 let's have these things made here and these things made here. Walk me through. 620 00:32:11,290 --> 00:32:14,080 That. Yeah, I mean, the majority of our clients tend to shift. 621 00:32:14,140 --> 00:32:17,290 The majority of clients tend have a couple key products, but yeah, 622 00:32:17,290 --> 00:32:20,140 they're shifting for the most part, all their manufacturing to Vietnam. 623 00:32:20,170 --> 00:32:20,590 But yeah, 624 00:32:20,590 --> 00:32:23,500 we work with a lot of clients who have dozens of different product categories, 625 00:32:23,500 --> 00:32:27,670 and we're just, for those clients, we're going through their list saying, Hey, 626 00:32:28,180 --> 00:32:30,550 these three, four categories we can definitely do in Vietnam. 627 00:32:30,550 --> 00:32:34,150 These two are maybe, and these probably can't do in Vietnam. 628 00:32:34,150 --> 00:32:37,360 And then we're shifting some of the supply chain. A lot of our bigger clients, 629 00:32:37,360 --> 00:32:39,350 like our eight bigger plus clients, 630 00:32:40,340 --> 00:32:43,100 they have the means to be more diversified. 631 00:32:43,100 --> 00:32:46,490 So they're keeping their suppliers in China for the time being and then placing 632 00:32:46,490 --> 00:32:50,990 new orders with factories in Vietnam just for the time being. But I mean, 633 00:32:50,990 --> 00:32:51,890 for the most part, yeah, 634 00:32:51,890 --> 00:32:56,300 we're just ultimately shifting a lot of clients down to Vietnam, 635 00:32:56,300 --> 00:32:59,960 completely and interesting. A lot of people, their supply chains, 636 00:32:59,960 --> 00:33:02,210 but they've been buying from China, 637 00:33:02,210 --> 00:33:05,150 so they'll keep 'em for future orders potentially if things change. 638 00:33:05,150 --> 00:33:06,620 But for the most part, 639 00:33:06,620 --> 00:33:10,400 I think a lot of people are moving permanently to Vietnam or permanently away. 640 00:33:10,410 --> 00:33:12,080 From China. What does the process look like? 641 00:33:12,080 --> 00:33:16,340 So I've now decided I'm going to start shifting my manufacturing. 642 00:33:16,340 --> 00:33:20,840 Some were all from China to Vietnam or one of the other countries you work with. 643 00:33:21,350 --> 00:33:25,700 What is that process like? How much time are we talking here? 644 00:33:25,820 --> 00:33:30,230 Is this a six month plan, an 18 month plan? What does that look. 645 00:33:30,230 --> 00:33:32,480 Like? Yeah, it's definitely is ballpark six months. 646 00:33:33,260 --> 00:33:35,240 Do you actually get your first order in hand? Yeah, 647 00:33:35,240 --> 00:33:36,590 once you kind of reach out to us, 648 00:33:36,920 --> 00:33:39,560 we'll let you know if the product can be made in Vietnam or not. 649 00:33:39,560 --> 00:33:42,560 But once we get that point, our team will go out, research suppliers verify, 650 00:33:42,560 --> 00:33:43,820 and that we've worked on, 651 00:33:44,450 --> 00:33:47,720 we've probably placed orders with a few hundred factories already in Vietnam. 652 00:33:47,750 --> 00:33:51,560 So we have pretty good working relationship on pretty good idea what they can 653 00:33:51,560 --> 00:33:54,980 and can't do. But yeah, once we get that, we'll get quotes for our clients, 654 00:33:54,980 --> 00:33:57,770 do direct introductions to the clients and the manufacturers. 655 00:33:57,770 --> 00:34:01,370 So everything we do is transparent in that way. And then, yeah, 656 00:34:01,370 --> 00:34:03,530 once they do that, obviously there's samples to be made, 657 00:34:04,610 --> 00:34:08,420 make sure they can make the product. Exactly. And then purchase order. So yeah, 658 00:34:08,420 --> 00:34:09,320 you're looking at about four weeks, 659 00:34:09,380 --> 00:34:13,790 actually get the quotes verified that the suppliers make sure everything's in 660 00:34:13,790 --> 00:34:17,240 line with your expectations a couple weeks per each surrounded samples. 661 00:34:17,240 --> 00:34:18,830 And then purchase order, 662 00:34:19,280 --> 00:34:21,800 which place purchase order lead times tends to be about 30, 663 00:34:21,800 --> 00:34:24,860 45 days for most products. Got it. Yeah. I mean then shipping. 664 00:34:24,860 --> 00:34:25,790 And so realistically, 665 00:34:25,790 --> 00:34:29,330 you're looking at actually having the product in hand from Vietnam in about five 666 00:34:29,330 --> 00:34:31,280 to seven months once you actually start a project. 667 00:34:31,290 --> 00:34:34,160 Got it. Got it. That actually does not sound too bad. I mean, 668 00:34:35,740 --> 00:34:40,070 that still seems very reasonable. Very cool. So what are you hearing? 669 00:34:40,070 --> 00:34:41,480 I'm just curious if you have a perspective, 670 00:34:42,560 --> 00:34:46,370 how's the US going to play a part manufacturing in the us? Is this going to, 671 00:34:46,370 --> 00:34:48,710 are you seeing that there's going to be a lot more investment in US 672 00:34:48,710 --> 00:34:52,670 manufacturing? Think that's something you guys will eventually help with? 673 00:34:52,700 --> 00:34:53,150 Yeah. 674 00:34:53,150 --> 00:34:55,670 Is that just definitely a lot of things expand. 675 00:34:55,670 --> 00:34:56,030 Yeah, I mean, 676 00:34:56,030 --> 00:34:59,060 our ultimate goal is we want to find the best buyers for our clients no matter 677 00:34:59,060 --> 00:35:02,930 where they are. And you got to have expertise in each country of origin. 678 00:35:02,930 --> 00:35:06,710 But I'm American, so obviously I want to find some great suppliers in America. 679 00:35:06,710 --> 00:35:09,230 So actually, if any Eric Manufacturers are listening to this, 680 00:35:09,320 --> 00:35:11,000 please feel free to reach out to me. I want to. 681 00:35:11,420 --> 00:35:12,980 Our database. Yeah, reach gym man. He's connecting people. 682 00:35:13,280 --> 00:35:14,510 Yeah, I know. Yeah. I mean, 683 00:35:14,510 --> 00:35:18,620 we looked to a captain woodworker manufacturer literally last night, 684 00:35:18,620 --> 00:35:22,520 and I really have a couple projects that I'm willing to recommend to him and get 685 00:35:22,520 --> 00:35:24,170 quotes as well. 686 00:35:24,560 --> 00:35:28,190 So I think it is going to be a good time to look at American manufacturers, 687 00:35:28,190 --> 00:35:32,540 but it's still very limited because what most people need is contract 688 00:35:32,540 --> 00:35:33,050 manufacturers. 689 00:35:33,050 --> 00:35:36,470 Ones you can reach out to with a tech pack and RFQ and then actually quote and 690 00:35:36,470 --> 00:35:38,730 make it, well, most manufacturers in the United States 691 00:35:40,640 --> 00:35:43,530 tend to work for brands like there's auto power manufacturing, 692 00:35:43,530 --> 00:35:44,370 flashing injection warning, 693 00:35:44,370 --> 00:35:48,780 but they're set up by a client to make it for those specific things. 694 00:35:48,780 --> 00:35:52,440 So there's not as much, even though there's a lot of manufacturers, 695 00:35:52,440 --> 00:35:54,390 not as much contract manufacturing in. 696 00:35:54,390 --> 00:35:56,400 Place, they're manufacturing for a specific, 697 00:35:56,790 --> 00:36:00,870 it's manufacturing spun up by a specific brand and needs type of thing. 698 00:36:01,440 --> 00:36:01,620 Yeah. 699 00:36:01,620 --> 00:36:01,980 It makes sense. 700 00:36:01,980 --> 00:36:05,670 And I mean, people are setting up too. I know of a laundry sheets manufacturer, 701 00:36:06,750 --> 00:36:09,210 they are buying from all over. They just weren't happy with the quality. 702 00:36:09,540 --> 00:36:12,240 Started looking into what it would take to actually build a manufacturer for 703 00:36:12,240 --> 00:36:13,950 laundry sheets, and they did it themselves. 704 00:36:14,970 --> 00:36:18,690 I know they sell eco-friendly laundry sheets made out of North Carolina. 705 00:36:19,200 --> 00:36:20,490 So yeah, people are doing that. 706 00:36:20,840 --> 00:36:23,460 Is that true Earth? Or you may not be able to say who the company is, 707 00:36:23,460 --> 00:36:25,680 but we used to work with True Earth, which was fun, but yeah. 708 00:36:25,770 --> 00:36:27,840 Oh man, actually name it might be. 709 00:36:29,040 --> 00:36:31,820 Yeah, no worries. But yeah, this is one of those things. 710 00:36:31,950 --> 00:36:34,380 I know we were talking about simple, modern, 711 00:36:34,380 --> 00:36:37,890 I was talking about that on another podcast, one of the founders there, 712 00:36:37,890 --> 00:36:41,490 and they're manufacturing some of their stuff now in Oklahoma where they're 713 00:36:41,490 --> 00:36:43,590 based, they still get most of their products from China, 714 00:36:43,590 --> 00:36:46,710 but they're manufacturing a lot in Oklahoma now. There's some benefits, 715 00:36:46,710 --> 00:36:51,210 right to speed and cash flow and m OQs if you're manufacturing here and things 716 00:36:51,210 --> 00:36:54,540 like that. So yeah, unit costs could be higher in the us, 717 00:36:54,540 --> 00:36:58,920 but maybe it's more cashflow beneficial to you to manufacture. 718 00:36:58,920 --> 00:37:02,370 Here. With manufacturing, everything's getting more and more automated too. 719 00:37:02,400 --> 00:37:05,490 So a lot of stuff like flexion injection molding is more or less just get a 720 00:37:05,490 --> 00:37:08,550 mold, a machinery, one guy knows how to program it. 721 00:37:08,640 --> 00:37:12,060 Yeah, yeah. Pressing buttons at that point, right? I know. Yeah, 722 00:37:12,060 --> 00:37:14,730 totally makes sense. Well, Jim, this has been fantastic. 723 00:37:14,730 --> 00:37:19,500 This is one of those things where I'm glad now that people are getting serious 724 00:37:19,500 --> 00:37:20,610 about their supply chain. 725 00:37:20,610 --> 00:37:24,300 I think anytime you can find margin in your cost of goods, 726 00:37:24,600 --> 00:37:28,140 that opens up opportunity for you to grow and has been more and marketing or 727 00:37:28,140 --> 00:37:30,810 just to profit more, and so painful time. 728 00:37:30,810 --> 00:37:34,290 But I think the best operators are going to come out ahead during this. 729 00:37:34,290 --> 00:37:37,740 And so Jim, for those that are looking at moving outside of China, 730 00:37:38,010 --> 00:37:40,650 how can they contact you and Cosmo sourcing? 731 00:37:41,010 --> 00:37:45,810 Yeah, so yeah, you send to my direct email, which is jim@cosmosourcing.com. 732 00:37:45,960 --> 00:37:48,270 You can get the spelling back there, sander. 733 00:37:48,570 --> 00:37:52,620 And our website is cosmo sourcing.com or just Google Cosmo sourcing. 734 00:37:52,620 --> 00:37:55,290 We come up first. Yeah. 735 00:37:55,440 --> 00:37:57,750 Awesome. I'll link to everything in the show notes as well. 736 00:37:57,750 --> 00:38:01,080 But if you've got questions, chip is a really smart guy, good guy, 737 00:38:01,080 --> 00:38:03,570 knows what he's doing. He's worked with some of my clients, 738 00:38:04,470 --> 00:38:07,380 people that I know trust him and so do I. 739 00:38:07,380 --> 00:38:11,550 And so reach out to Jim if you have questions with that, Jim, good luck to you. 740 00:38:11,550 --> 00:38:15,330 Congrats on your amazing timing and predicting the future that one day there'll 741 00:38:15,330 --> 00:38:18,330 be massive tariffs on China or we want to be moving out. So. 742 00:38:18,660 --> 00:38:19,110 Absolutely. 743 00:38:19,110 --> 00:38:21,990 Kudos to you on that and keep doing good work. 744 00:38:22,410 --> 00:38:23,790 Great. Thank you. It's a pleasure being here. 745 00:38:24,480 --> 00:38:28,980 Awesome. And thank you for tuning in as always. We'd love to hear from you. 746 00:38:29,430 --> 00:38:33,810 What would you like to hear more of on the podcast if you have not done so? 747 00:38:33,810 --> 00:38:35,040 We'd love that review on iTunes. 748 00:38:35,110 --> 00:38:38,710 Share this podcast with someone that you think would enjoy it or benefit from 749 00:38:38,710 --> 00:38:41,320 it. Somebody that's thinking about what do I do with my supply chain or my 750 00:38:41,320 --> 00:38:45,850 manufacturing share with them this episode. And with that, until next time, 751 00:38:45,910 --> 00:38:46,840 thank you for listening.