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Localized Manufacturing Solution to Overcome Tariff Barriers
I . Background
▶ The US imposes high tariffs on Chinese exported products, which has put Chinese businesses at a disadvantage. Vietnam emerges as an attractive alternative due to its significantly lower tariffs. However, companies must balance the costs of shifting production with the potential tariff savings.
II. Core Strategies
▶ Three-phase localisation implementation path:
Phase 1: SKD semi-knockdown assembly → Phase 2: Localising key components → Phase 3: Full-scale local production
III. Action Plan Supply Chain Restructuring Plan
1. China HQ: Precision Component Production and HS Code Optimisation
▶ Maintain Precision Component Production: Continue producing high-precision components in China to ensure product quality and performance. For example, set up a precision parts processing workshop equipped with advanced CNC machine tools and professional technicians to ensure the precision and stability of component production.
▶ HS Code Optimisation: Conduct a detailed review of product HS codes. Assign dedicated staff to study HS code classification and communicate with customs to ensure accurate HS code declaration. This can reduce tariff impacts through HS code splitting and optimisation.
2. Overseas Hub: Vietnam Plant for Tariff-Sensitive Processes
▶ Leverage Existing Production Capacity in Vietnam: Given that the Vietnam plant already has complete production equipment and assembly lines, fully utilise its existing capacity. For processes like welding and final assembly that are tariff-sensitive, allocate corresponding production tasks based on the Vietnam plant’s equipment and process capabilities. For example, if the Vietnam plant has a specialised welding workshop with welding robots and professional welders, transfer welding processes to it. Similarly, utilise its final assembly line equipped with assembly tools and testing equipment to complete product assembly.
▶ Optimise Production Layout: Based on the production characteristics of Chinese products, further optimise the production layout of the Vietnam plant. Adjust production lines and equipment arrangements as needed to improve production efficiency and product quality. For instance, according to the production process of specific products, rearrange the production lines in the Vietnam plant to achieve more efficient production operations.
IV. Customer Support Plan
1. Transition Support: Dual-Source Supply Guarantee for 6 Months
▶ Production Coordination: During the transition period, coordinate production between China and Vietnam. The China HQ provides production plans and technical guidance to the Vietnam plant. The Vietnam plant gradually increases production capacity to meet dual-source supply demands.
▶ Inventory Management: Maintain safety stock levels at both Chinese and Vietnamese plants to address potential supply disruptions. For example, determine the safety stock levels for key components and finished products based on sales forecasts to ensure timely supply.
2. Certification Assistance: Vietnam CO Processing in 3 Working Days
▶ CO Application Process: Assist customers with Vietnam CO applications. Prepare application materials such as invoices, packing lists, and production process documentation. Submit applications to Vietnam’s authorised authorities and follow up on progress to ensure CO issuance within 3 working days.
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