The full Value of a 'Local Content' Charger Solution
26 September 2017
Many trading agreements such as the ASEAN Trade in Goods Agreement (ATIGA) aim to achieve free flow of goods among Member States, resulting in a larger market driving economies of scale for businesses and increased trade. For goods to qualify, they must achieve a certain local content from within the Member States. In the case of ATIGA, this is not less than 40%. Utilising a ‘Local Content’ model that complies with this condition would then result in reduced import duty, as determined by the associated product HTS code. For example, a general external power supply (static converter) with HTS code in the 8504.40 category manufactured in Indonesia would be subject to 0% import duty into other ASEAN Member states. This may then have an impact with export to other regions, as with the ASEAN-India Trade in Goods Agreement (AITIGA). This aligns many Indian import tariffs, including HTS code 8504.40 category psu’s which contrasts with 30.2% when importing directly from China. This is clearly a significant potential benefit, and is the one that most usually draws immediate customer attention. However, the TOTAL SAVING MAY BE CONSIDERABLY MORE!
In many instances, the final assembly of an end product may be in one region, but components are sourced elsewhere. This means that the local content of the finished goods may fall short of the requirement as stipulated in the various trading agreements. In the case of portable consumer electronics devices sold with a charger, sourcing locally may ensure that the total local content of the finished goods is >40%. This then has a significant impact on total cost due to the reduction in import tariff % applied to the higher end value. This equates to a potential cost saving which could easily cover the cost of the charger, even for relatively low value appliances.
Salom continues to invest heavily in its local content solutions model with additional manufacturing operations in Indonesia, Argentina, India and other countries around the world to follow.
Due to the potential variation in products manufactured in diverse locations, our model is to keep tight controls on all aspects of the product from conception to completion to ensure consistency of the finished product. This coupled with our vertical integration and LEAN manufacturing processes enable customers to achieve lowest total cost of ownership with additional benefits regarding risk management and contingency planning.
We appreciate that this is a complex area touching on numerous points, but would be happy to explain further and model the potential benefits to your business upon request.