Why Manufacturing is Returning to the US
Guest blog by John Hamlin
Why Manufacturing is Returning to the US
President Trump's new tariff regulations are to bring manufacturing back to the United States. Part of this phenomena will include United States reshoring also called onshoring. This is when companies relocate their manufacturing and supply chain back to the United States. The reshoring process is influenced by many factors. The decisions for Manufacturing companies returning to the United States are based on factors such as:
- Improved quality
- Protection of intellectual property
- Cost reduction
- Escalating labor rates in hosting country
- Total cost of ownership
Other aspects that play a role in the decision of reshoring are pressures to reverse the location because of trade agreement and tariff agreement between offshore countries and the US. There are however many aspects to consider when deciding to reshore.
What are the Aspects to Consider When Reshoring?
The main aspect is to consider how the reshoring process can become operational on how to implement the decision.
Factors that may affect the reshoring process are:
- Industry related -manufacturing cost and logistics
- Product cost
- Access to technology
- Shorter supply chains
- Reduction of total cost of ownership
The Impact of Reshoring on Infrastructure
Bringing manufacturing back to America will have a phenomenal impact on American Infrastructure. International and domestic and business will be totally transformed. More goods manufactured will have a bigger impact on transport infrastructure.
This includes:
- Rail Freight
- Road Freight
- Shipping Freight (inland)
Consideration to infrastructure such as city planning , communications and construction will play key roles in the return of manufacturing to America. This will also lead to development in other sectors and markets of employment.
Legal aspect of Onshoring
Successful reshoring requires extensive analysis and intensive planning before execution. There are numerous legal issues to consider:
- Non – compliance with hosting countries’ exit laws (might prevent future operations)
- Legal due diligence (missteps may cause delays and incur costs)
Some Legal Issues Pertaining to Reshoring
- Freedom of information – public access to government records – This relates to trade secrets and privileged and confidential information
- Confidentiality and Nondisclosure(NDA) – restriction on disclosing information and how it will affect the company leaving the hosting country.
- Tax and structure of business – exiting a hosting country can be fraught with tax like settling outstanding debt and taxes before you leave. Domestic taxes structure can also influence the decision of manufacturing companies returning to the US.
- Real estate – Letters of Intent (LOI) An attorney specializing IN real estate should be contacted.
- Intellectual Property – Reshoring is a key advantage to reduce intellectual property theft.
- Patents – These rights are granted to their owners to exclusively make, sell , offer etc. these products.
- Labor and employment – Employment laws are there to govern responsibilities between workers and employers.
Bringing manufacturing back to the US companies are faced with complex decisions involving numerous considerations over a wide range of issues. The risks can be minimized by employing experts to help analyze and plan moving the company back to the US.
Benefits of Reshoring
- Quality - The American public has grown tired of purchasing goods that are poorly made and in some cases unsafe to use. American consumers are looking for quality and value in products and are willing to pay for it. Goods that are made in foreign countries do not always adhere to the manufacturing laws of the US.
- Innovation – Manufacturing returning to the US will keep America innovative and competitive. Companies will feel pressure to invest in R&D to be able to compete in the global market.
Greater control in production processes - Safe fair working conditions and quality assurance and environmental protection are important processes to protect our society as a whole.
- Supply chain – Goods manufactured abroad goes through a long line of processes to get to the US. This is called supply chain. From manufacturing to delivery can take several weeks or even months. Goods that are American made will have a much shorter distribution process causing less damages and lower cost.
- Creating Jobs – many Americans are still struggling to secure a job although the unemployment is not near as high as during the recession. Reshoring means great things for the US economy that needs the valuable jobs for its skilled workforce.
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