Some Companies Are Relocating From China Over Trade Tensions, Survey Says
The American Chamber of Commerce in the People's Republic of China surveyed more than 430 member companies between Aug. 29 and Sept. 5 and found that about 30 percent of those businesses were seeking to relocate their China-based supply chains. That will mean more work for trade lawyers and the companies' general counsel.
October 31, 2018 at 06:09 PM
4 minute read
“Made in China” tags might be getting a little less ubiquitous as trade tensions drive some companies to move their supply chains or manufacturing facilities outside China. And as that happens—a new study suggests that a small movement is already afoot—many of those same businesses will be turning to international trade lawyers for guidance.
“Our lawyers are working like they've never worked before,” said Dan Harris, a partner at Harris Bricken in Seattle and an expert in Chinese business laws. Harris said he and other trade gurus at his firm have been busy helping clients leave China and set up shop elsewhere, usually in Southeast Asia.
Many of those companies were ready to pack their bags before the U.S.-China trade war, but the tariffs provided them with the “last straw,” according to Harris.
What Harris has been seeing might be indicative of a nascent trend: AmCham China and AmCham Shanghai, the American Chamber of Commerce in the People's Republic of China, surveyed more than 430 member companies between Aug. 29 and Sept. 5 and found that about 30 percent of those businesses were seeking to relocate their China-based supply chains. About half of those companies are in the automotive, machinery and equipment industries.
While some companies are looking to move supply chains, more than 18 percent said they were considering the more drastic option of relocating a portion or all of their manufacturing out of China. But about 64 percent planned to stay.
“They're not looking because they don't really have many options,” Harris suggested, based on his talks with clients.
But just because a company plans to relocate part of its supply chain or manufacturing from China doesn't mean that it will abandon the country completely. Pulling off a clean break is tough because “no country comes close to China in terms of contract manufacturing,” Harris said.
So when a company decides to relocate part of its operation, it typically has one big question for its trade lawyer: How can the business structure its supply and manufacturing chain to keep some of the operation in China while avoiding the “Made in China” tag and the tariffs that go along with it?
The answer hinges on whether the product can pass the “substantial transformation” test, which often involves a complex analysis of the supply chain—the kind of analysis that keeps certain trade lawyers busy these days.
“Is the product substantially transformed in China or another country? It's kind of subjective depending on the facts,” said Lars-Erik Hjelm, a partner at Akin Gump Strauss Hauer & Feld in Washington, D.C., who specializes in customs law and policy.
“You might source auto parts and export them to Taiwan and perform some manufacturing operation of assembly. Is it now a new article of commerce that is different than the parts imported into Taiwan?” he said. “For auto parts, generally a simple assembly, such as putting screws into Chinese parts and repackaging and shipping, that's not going to be a substantial transformation.”
Many of the companies that are not thinking about leaving China are in the pharmaceutical industry or make high-end electronics and medical devices and have high margins, according to Harris. He said those who have left China make clothing, furniture, toys and housewares. And the companies that are wanting to leave are in what Harris calls the “middle ground” and make more complicated products, including auto parts and charging devices.
For those who planned to relocate, the most popular destinations were in Southeast Asia including Vietnam, where more than 18 percent of the companies said they were headed. Six percent said they'd go to the U.S. And about 4 percent had their sights on Europe.
Read more:
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllContract Software Unicorn Ironclad Hires Former Pinterest Lawyer as GC
2 minute readHow Amy Harris Leverages Diversity to Give UMB Financial a Competitive Edge
5 minute readAuditor Finds 'Significant Deficiency' in FTC Accounting to Tune of $7M
4 minute readDog Gone It, Target: Provider of Retailer's Mascot Dog Sues Over Contract Cancellation
4 minute readTrending Stories
- 1Gibson Dunn Sued By Crypto Client After Lateral Hire Causes Conflict of Interest
- 2Trump's Solicitor General Expected to 'Flip' Prelogar's Positions at Supreme Court
- 3Pharmacy Lawyers See Promise in NY Regulator's Curbs on PBM Industry
- 4Outgoing USPTO Director Kathi Vidal: ‘We All Want the Country to Be in a Better Place’
- 5Supreme Court Will Review Constitutionality Of FCC's Universal Service Fund
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250