This webinar discusses various strategies companies can use to reduce risk and costs in their global supply chains, particularly in light of increased tariffs. It outlines areas for companies to consider like leveraging free trade agreements, drawback programs, bonded warehousing, and foreign trade zones. It also discusses alternative sourcing, tariff engineering, and improved demand planning. The presentation aims to help companies assess opportunities to lower costs and mitigate tariff impacts through a collaborative cross-functional process.

1. Reducing Risk and
Cost in the Global
Supply Chain
April 22, 2021 | C-Suite Snacks Webinar Series

2. Welcome & Introduction
Partner, Manufacturing &
Distribution Practice Co-Leader
Citrin Cooperman
jgiordano@citrincooperman.com
631-903-5000
John Giordano
Managing Director
Blue Tiger International
tomcook@bluetigerintl.com
516-359-6232
Thomas Cook

3. • Theory and Strategy
• There are numerous and varied opportunities
to reduce risk and cost in the Companies
Global Supply Chain.
• Blue Tiger has over 30 years experience in
advising companies in this area of opportunity
• Today’s presentation is designed to outline
various areas that your management and
operations team can consider as risk and cost
reduction opportunities
Reducing Risk and Cost in
the Global Supply Chain:
Mitigating the Impact of the
301 Tariffs

4. Landed Cost Calculator
Category
FOB/FCA Cost of Merchandise
Pickup at supplier
Inland transportation to a port or airport
Origin terminal and port fees
Export licensing, documentation, and duties
Ocean, air or truck international freight
Import clearance, documentation and handling
**Duties, Taxes, VAT/GST
Terminal and port fees at destination
Customs review
Harbor maintenance fees
Cargo insurance
Inland transportation to importer’s location
Storage/Warehousing/Distribution
10-25% Additional
Cost(s)
Reducing Risk and Cost in the Global Supply Chain:
Mitigating the Impact of the 301 Tariffs

5. This Photo by Unknown Author is licensed under CC BY-ND
Reducing Risk and Cost in the Global Supply Chain:
Mitigating the Impact of the 301 Tariffs

6. Managing risk and cost and more particularly in
this time of increased tariffs … requires a
“Collaborative Process” internal in every
company:
▪ Purchasing
▪ Supply Chain
▪ Transportation and Logistics
▪ Engineering
▪ R&D
▪ Customer Service
▪ Sales Management
▪ Finance
▪ Legal
▪ Vendors, Suppliers and Customers
▪ And “Senior Management”

7. Today’s Discussion: Areas of
Focus and Emphasis:
- Free Trade Agreements
- Drawback
- Bonded Warehousing
- Foreign Trade Zones
- Alternative Sourcing
- Tariff Engineering
- Demand Planning
Reducing Risk and Cost in the
Global Supply Chain:
Mitigating the Impact of the 301
Tariffs

8. Free Trade
Agreements
• What are they?
• Ex: NAFTA(USMCA), CAFTA, KFTA,
IFTA, AFTA … plus dozens more
• How do they work?
• How can Global Supply Chains
benefit?
• Alternative sourcing, manufacturing
and assembly

9. Free Trade
Agreements
How do they work?
• U.S. enters in a trade agreement
• The agreement has trade
guidelines … timing, products,
exclusions, parameters of
agreement
• When goods enter the country …
the clearance process controls
“preference” program
• Goods enter duty free or at a
reduced rate of duty

10. Free Trade
Agreements
Considerations
• Where do we currently source from?
• Can we leverage “purchasing” by choosing
a country that we have a FTA with?
• Landed Cost modeling evidences our
options
• Along with a host of other criteria … cost,
QC, product performance, lead time, etc.

11. Free Trade
Agreements
Mexico Vs. China
• Acquisition Cost … On par
• QC … on par
• Lead Time … 3 weeks versus 9 weeks
• Freight … 40’ Trailer/Container … $700 vs.
$2,000
• Duties and Taxes … 0 vs 4%
• Vendor Management … a lot less

12. Free Trade Agreements
China versus Mexico Landed Cost Comparison (FTA)
Primary Area(s) of Review China Mexico Comparison
Acquisition Cost $25.00 unit/10,000 units $25.00 unit/10,000 units $250,000 same
Export Charges $0.50 $0.10 $5,000 vs $1,000
Freight (40' unit) $2,000 $700.00 $2,000 vs $700
Duty & Taxes 5.50% 0 $14,025 vs 0
Customs Clearance $100.00 $65.00 $100 vs $65
Estimated Total Transactional $271,125 $251,765 $19,360
Benefit: Two Imports Weekly … $19,360 x 104 = $2,013,440

13. Free Trade
Agreements
• Mexico’s Maquiladora Program:
Creates Significant Leverage to the
American Global Supply Chain

14. Drawback
• What is it?
• How does it work?
• How can your business model and
company benefit?
• How do we assess the opportunity?
• Next step?

15. Drawback
Overview
CBP Program which allows a company to claim a
refund from CBP of up to 99% of duties paid on
goods imported … that are exported from the
U.S. or destroyed.
This includes goods that are imported by the
importer, exported by the exporter as well as well
as goods that are imported and exported through
third parties.

16. Drawback
Drawback Model
Imports Duty Rate Duty Cost Annually
Company Imports $5,500,000.00 annually 4.50% $247,500.00
Company Exports 40% of what it imports N/A $99,000.00
Benefit: 99% of $99,000 = $98,010
**Approximately Admin Cost: 10% of monies
collected

17. Drawback Overview
• On products where duties have been paid (i.e.
NAFTA exclusion)
• Ability to go back three to five years (one time)
• Must be filed through ACE Platform (February
2019)
Additional Considerations

18. Bonded
Warehouses
• What is a bonded warehouse?
• How can Global Supply Chains benefit?
• Parameters of an assessment of opportunity?
• Resources?
• Next Step?

19. Bonded
Warehouses
• A physical warehousing location sitting
outside the U.S. Economy
• Sanctioned by CBP, but independently
operated
• Allows goods to enter (physically) into the
U.S., but not into the economy … not yet
“customs cleared”

20. Bonded
Warehouses
• Can be owned or third party operated
• Goods entering the bonded facility can be QC’d,
inspected, weighed, checked, repacked, remarked,
relabeled … but can not be materially changed
• If it comes in as a “widget” it must go out as a “widget”
• Can be partial or the entire facility (designated area)
• Goods may be stored for up to five years
• Accounting, Security and Personnel Standards

21. Bonded Warehouses
Bonded Warehouse Model
Company Imports $5,500,000.00 annually 4.50% $247,500
Company Exports 40% of what it imports N/A $99,000.00
Company Imports Goods into a Bonded
Facility
No duties are paid at time of
entry
Duty payment is deferred until the
goods are withdrawn from the
bonded warehouse and imported into
the U.S.
Six months after entry into the Bonded
Facility, $50,000 of goods are sold to a
company in Columbus, OH $50,000 x 4.5 = $2250 $2,250
Seven months after entry into the Bonded
Facility, $100,000 of goods are exported to
Toronto, Canada
Goods have never entered the
U.S. economy, therefore no
duties are paid 0
** Huge cash flow as duties are not paid
until point of value (sale is made)
Benefit: Duty Deferral
and No Duties on
Goods Exported

22. Foreign Trade
Zones (FTZ)
• What are they?
• How can Global Supply Chains benefit?
• How do we assess and view this
opportunity?
• Clearly creates a tariff shift …
• Opportunity for reduced clearance charges

23. Foreign Trade
Zones (FTZ)
• Unlike a bonded warehouse, a FTZ allows a
company to materially change the product
• Various electronic components are imported
into the FTZ to assemble a surge protector.
• Duty is not paid until such time the goods are
withdrawn from the FTZ and entered into the
U.S.
• If the goods are exported, duty is never paid
• The rate of duty paid may be based on the
foreign material placed in the zone OR
maybe based on the finished article.
Whichever is to the zone user’s advantage.

24. Foreign Trade
Zones (FTZ)
• Opportunity for reduced clearance charges;
one weekly customs entry may be done as
compared to multiple customs entries
resulting in less entry fees.
• Frequency of imports through the same
inbound gateway
• Reduce Brokerage Charges and MPF Fees
• Case Study: Houston Based Computer
Manufacturer and Distributor

25. Foreign Trade Zones (FTZ)
Foreign Trade Zone Model Lighting Manufacturer
2015 … Company Imports 80m of Finished Product from China Duty Rate on Finished Good: 5.8% Annual Duty Cost: $4,640,000.00
2016 … Company Sets up an Assembly Facility in Mount Olive, NJ FTZ
Company now imports components, parts and raw materials
from various countries
Goods move into FTZ and do not enter the U.S. economy, therefore no duties are
paid
Duty rates for raw materials and components varies from Free –
3%
The manufacturing process includes assembly, testing, QC and Warehousing averages 90
Days
U.S. Labor is utilized to do the assembly work, which adds 0.1%
additional cost
It is determined, by hard data, that the finished products cost is 50% labor and
50% materials
The goods now enter the USA, at point of sale
Duties are only applied to $40m of values of parts, components
and raw materials imported Annual Duty Cost < $2,320,000
Annual Add'l Labor: $400,000
Total: $2,720,000.00
Benefit: $1,920,000 $1,920,000.00
1 Billion of Imports … savings in excess of 24m
Other Benefits: Deferral of Duties, State Tax Incentives, QC,
Cost of doing business and Consistent Resources and USA
Sourcing

26. Alternative
Sourcing
Management
• Concept?
• Issues … Complacency, Comfort Zone,
Awareness of options?
• Why should we consider sourcing options?
• Sourcing Diversity/Multiple …
• How do we assess and view this opportunity?
• Dedicated Sourcing Actions …
• Potential Next Step?

27. Tariff
Engineering
A strategic maneuver some companies use
over one another useful in lowering ELC is
known as tariff engineering. Unlike tariff
evasion, tariff engineering is a legal, allowable
move to manipulate the design, construction,
fiber content, material and principal use of a
product to reduce the duty rate.

28. Tariff
Engineering
The Supreme Court said:
"So long as no deception is practiced, so long
as the goods are truly invoiced and freely and
honestly exposed to the officers of customs
for their examination, no fraud is committed,
no penalty is incurred."

29. Tariff Engineering
The Supreme Court said:
“The general position taken by Customs in
these rulings is that if Customs finds the
article, at the time of importation, is a
commercial reality, then the tariff engineering
will not be considered a fraud or artifice. In
the cases in which Customs has found that
the tariff engineering was a fraud or artifice,
Customs concluded that the article was not a
commercial reality because the article was
not sold or otherwise entered into the stream
of commerce in the condition as imported.”

30. Demand Planning
Demand planning is the process of analyzing,
evaluating and projecting the future
requirements of manufacturing, inventory and
customer needs typically within an IT
environment.
Demand planning deals with the overall use of
a technology infrastructure and resources by
all operations personnel, channel partners,
suppliers and customers to predict future
demand accordingly.
VS

31. Demand Planning
Demand planning is the process of analyzing,
evaluating and projecting the future
requirements of manufacturing, inventory and
customer needs typically within an IT
environment.
Demand planning deals with the overall use of
a technology infrastructure and resources by
all operations personnel, channel partners,
suppliers and customers to predict future
demand accordingly.

32. Blue Tiger International
www.Bluetigerintl.com
Web sites
CBP.gov
DOC.gov
Trade.gov
Export.gov
Websites Useful Links
Resources
1. http://www.tradeready.ca/2017/topics/supply-chain-
management/trumps45-tariff-chinese-imports-avoid
2. Importing into the U.S.: A Guide for Commercial Importers
3. https://www.cpsc.gov//PageFiles/113831/iius.pdf
4. CBP’s Legal Decisions/Publications
5. http://www.cbp.gov/trade/rulings
6. Customs Rulings Online –
7. http://rulings.cbp.gov/
8. Harmonized Tariff Schedule - Online Reference Tool –
9. http://hts.usitc.gov/
10. Protecting your intellectual property rights! –
http://www.cbp.gov/trade/priority-issues/ipr

34. Reducing Risk and Cost in the Global Supply Chain:
Mitigating the Impact of the 301 Tariffs
Creating a
Path to 301
Mitigation …
Reduce
Risk and
Cost
Assessment Operational Model Financial Model

35. Questions?
THOMAS COOK
Managing Director
Blue Tiger International
tomcook@bluetigerintl.com
516-359-6232
JOHN GIORDANO
Partner, Manufacturing &
Distribution Practice Co-Leader
Citrin Cooperman
jgiordano@citrincooperman.com
631-903-5000

36. Thank You
F o r Wa t c h i n g & L i s t e n i n g
UPCOMING WEBINARS:
TAX STRUCTURES TO REDUCE COST AND IMPROVE COMPLIANCE
April 29, 2021 | 12:00 PM ET/9:00 AM PT
Featuring: Kenneth Laks, Partner
CANNABIS: AN OVERVIEW
May 6, 2021 | 12:00 PM ET/9:00 AM PT
Featuring: Mitzi Keating, Partner