ES&M are happy to announce their collaboration with Credere Solutions, a leading Research & Development Tax Rebate/Credit company, run by Bev Hopper. Bev works with tax specialists to identify raw R&D costs SME’s can offset against tax and receive tax relief or a refund.

R&D Tax Rebates and Credits are nothing new but what Credere Solutions offer is nothing short of impressive. Very often Bev and her specialist team can facilitate the identification of raw costs which organisations had either missed or were not aware could be included as R&D activity. Through deep dive audits, tax relief claims can rocket from 10’s of thousands to hundreds of thousands of Pounds. For less profitable and smaller organisations, it can eliminate their corporation tax liability or see them obtain a refund.

For example:

Client’s original R&D tax relief claim: £30,000
Credere Solutions auditors identify further raw costs of: £64,000 +
Tax Relief obtained from HMRC after 130% accelerator: Circa £200,000

One of the benefits of working with Credere Solutions is that they will often identify raw costs that organisations have not considered as relevant or eligible for R&D tax relief, for example, the installation, trialling, and commissioning of a new CRM system. What might your company be missing out of your tax relief claim?

Involving Credere Solutions and their tax experts can minimise time, maximises savings and ensures you have a watertight tax relief/credit claim, which is important following the introduction of the latest HMRC Anti Abuse Law!

To learn more about how you might receive R&D Tax Relief or Refund contact:

Charles Firbank: charles@elitesourcingandmanufacturing.com
Or
Bev Hopper: beverly@crederesolutions.co.uk

Relationship building, no matter where in the world you are working, is one of the most important skills you can develop. Without excellent communication, trust and understanding you will find it difficult to move projects forward quickly and efficiently. As one of my former colleagues says, “you can only move at the speed of trust”.

I have worked in China for over 20 years, though the last 18 months have been particularly challenging because of the Covid-19 travel restrictions. However, because of my previous efforts to build and develop robust relationships with clients and manufacturers, it enabled me to grow and develop Elite Sourcing and Manufacturing. Much of the company’s success has been down to the fact that I developed and fostered good business relationships over the years and these are now incredibly valuable to me.

Strangely, as if it were a reminder of how important business relationships are, a factory Director who I last saw before the start of the pandemic in December 2019, called me this morning from China. He wanted to know how my business was progressing  and offered me assistance in me with a few things as well as wanting to discuss a possible opportunity.

The below demonstrates why business owners, project managers and procurement specialists should spend time fostering good business relationships, with the aim of accelerating business growth.

FN Sharp – Supplier of Premium Kitchen Knives

The Task: To manage a design and development project for a range of premium kitchen knives for a US client, FN Sharp. This included material and supplier selection and production process verification and amendment where necessary.

The Solution: I was fortunate enough to work with the FN Sharp team when still based in Shanghai, in 2018. Due to my experience of the testing and design of blades, we were able to develop what I regard as some of the best kitchen knives in the market. Made using premium quality Japanese 67-layer Damascus steel together with a G10 handle, the knives are balanced and sculptured to make them a pleasure to use. The edge on the blade is not only sharp but it is also extremely durable, keeping their sharp cutting edge. To a degree, this is related to the quality of the steel but more importantly, and often not appreciated, the processing and temperatures generated during the grinding and polishing operations determine blade and edge performance.

Our Results: As a direct result of the FN Sharp project, and after building a strong and trusting business relationship with their team, the owners recently approached me, asking if I could help with their latest project, the distribution of their knives in Europe. Again, through my business links, Elite Sourcing and Manufacturing were able to help by involving their partner, Idekek. Working with Idetek we can investigate possible European distribution possibilities for both domestic and industrial equipment.

The team is now:

• Working directly with F.N. Sharp to introduce their products to distributors and buyers in the United Kingdom and Europe.
• Using their long-term industry experience and network to create conversations and meetings with potential distributors and sellers. The aim of which is to widen the exposure of F.N Sharp within Europe, as well as develop long-term partnerships with leading Kitchenware distributors.
• Work is also taking place to find the right pricing and marketing strategy for the company in the European and UK markets.

This project and the possible opportunities it could deliver is exciting for all concerned, FN Sharp, Elite Sourcing and Manufacturing, Idetek and the manufacturer of the knives. All four businesses could benefit significantly though it would not have been possible without the previous effort to building and maintain excellent business relationships with both clients and manufacturers.

In A Nutshell…

Here at ESM, we are committed to developing good client relationships, service, communication, and ultimately developing long-term business partnerships. We are open and willing to refer clients directly to our partners if we feel have not got the core skills and knowledge necessary to ensure the client will receive the best possible service available. On those occasions when a new supplier is needed, we put a great deal of effort into developing the supplier to meet both our needs and client expectations. Extra time spent at the front end of a project can save weeks and months further down the line, therefore developing the correct relationship, trust and respect is essential.

When clients and manufacturers from years past come knocking on our door, as they do, we know we have a great foundation to grow our business as well as assist clients in accelerating theirs.

If you would like to learn more about Elite Sourcing and Manufacturing and how we might be able to accelerate your projects and business, let’s talk.

Call: +44 (0)7770820998
Or
Email: charles@elitesourcingandmanufacturing.com

In a perfect world, shipping goods across the globe would be a simple and easy matter but we all know that’s not the case and more especially with Covid-19 & Brexit considerations. We now find ourselves with new laws, regulations, taxes and tariffs to deal with, as well as a global pandemic to contend with.

With the recent exit of Great Britain from the EU, the way we ship goods to and from Europe has changed, and we are experiencing costly increases in bureaucracy and long delays.

The State of Freight

Simply put, trade agreements are mutually agreed terms. For example:

• Item is shipped from point A.
• Point A must have an agreement with point B for this to happen.
• This agreement could include taxes, quality standards, inspections, etc,.
• No shipping can legally happen between these points until the agreed terms are met.

In the case of shipping within the EU, trade and commerce is free to move. Items made in Germany can ship directly to France tariff free and without delay. This was a benefit GB had when it was part of the European Union.

The idea behind the Brexit Agreement was to allow goods to be shipped into GB from the EU without additional tariffs, (duty fee). This was to work in both directions for both GB and EU countries. However, the actual origin of the product, (or individual components, raw materials and assembly), can change a product’s status from duty free to being subject to swinging tariffs, all because of the “Rules of Origin” we have to adhere to. This has caused quite a stir in recent months as the rules are far more complicated than you might assume.

What Are the ‘Rules of Origin’?

While the official severing of GB from the EU has already occurred, the actual trade agreements are still being negotiated. As it stands, there are extremely complex agreements in place to determine fees and import tariffs on products. This may change in the future, but as of now things look to be convoluted.

‘Rules of Origin’ are a simple set of quality assurance guidelines that the EU has in place against the GB. This strict standard ensures that manufacturing companies in GB cannot source products from countries that are deemed to have an unfair competitive advantage. Products manufactured in certain countries will incur tariffs on top of their normal shipping fees to discourage this practice.

So, in essence, if a product is being shipped from GB into the EU the exporter must be able to prove the ‘origin’ of the product and in some cases it’s individual components, raw materials and its assembly. In the case of consumer electronics for example, this means the origin of each individual capacitor and plastic fastener has to be known and declared.

To put it simply, if a product is manufactured within the EU or GB, it is not subject to import tariffs. However, if more than 50% of the product supplied has been manufactured outside of the EU or GB, it is subject to some tariffs. Though, even this is not a hard and fast rule as there are some cases where this percentage can be higher or dramatically lower.

These overly complicated rules have added to the already new and uncertain situation, even for those familiar with the import/export process. Sara Hutchinson, Managing Director and Owner of RISA (UK) Ltd, has taken the time to lay out some of the more complex ways these percentages can be calculated. For example:

• Raw earth materials such as salt, sulphur and stone is allowed have up to 70% of its mass originate from non GB or EU locations.
• Fertilizers can have only 40%.
• Vehicles such as cars, boats, and planes can have no more than 45%..

These are just some of the ways that the new ‘Rules of Origin’ trade laws have made life more complex for manufacturing and sourcing companies within GB. If you are not able to source the majority of your components and ingredients from GB or the EU, and prove their origin, things can get extremely difficult.

How Rules of Origin Affects Business

So, we know that products need to satisfy rules of origin to meet the GB/EU tariff free criteria. However, as with all complex trade agreements, there have been some oversights that have led to unnecessary complications in the export of goods manufactured in GB and to be shipped into the EU, where component parts have originated from the EU to enable them to be classified as tariff free.

It’s important to note that the ‘Rules of Origin’ only applies to one-way transactions. When a product is made in the EU and shipped to the GB, or the other way around it does not face any tariffs. But, if a product leaves the EU and has a ‘stop’ before being shipped into the GB, it can get quite complicated.

One example of this was mentioned by executives from Marks & Spencer. The famous sweet Percy Pigs is manufactured in Germany. If it is shipped to the GB, there are no tariffs due to the ‘Rules of Origin’ agreement. However, if those sweets are later shipped to the Republic of Ireland, there is an issue. This is because the products left the EU and are now re-entering the EU from a country where they did not originate. This ‘stop’ along the way creates the problem. However, if they were to be unpacked and placed onto a cupcake, for example, there would then be no tariff because they would have been ‘transformed’ enough to meet the guidelines.

This may sound overly complicated and unnecessary, but it is the current situation. If a company is to adhere to the strict regulations of the EU/GB trade agreements, as they are currently written, this will create a lot of headaches for EU/GB shipping and manufacturing companies. If an item is made in the EU, and is shipped to the GB for sale and redistribution, it cannot then re-enter the EU without being considered of ‘Non-GB origin’. So, what is to be done about this?

Ways Around the ‘Rules of Origin’

Details of the current trade agreement on the Rules of Origin can be found in 50 out of the 1,200+ pages of the trade agreement itself. There are no easy ways to navigate around these rules and standards.

The ‘Rules of Origin’ are hitting the food industry harder than any others. This is because the easiest way ‘around’ the problem is to change the product in some way, in many circumstances, such as fruit, it is an impossible task.

However, if only a small  change to an item is made, it may not be enough to circumvent the Rules of Origin. For example, simply changing the packaging of a product is not enough to make it fit within the parameters of the agreement. The item has to fundamentally change, a simple change or rebranding isn’t enough.

An example of this can be seen using raisins. If grapes are imported into GB from Greece, there is no tariff because they originate from the EU. But, in order to redistribute them back to the EU there has to be a change of some kind. Drying them and changing them into raisins will change the texture and flavour of the grapes–thus, they are now a new item that originates primarily from GB.

Unfortunately, the grape example can’t be regarded as a ‘hard-and-fast’ rule. But, it is currently the only way that sourcing and manufacturing companies within GB can avoid the hefty tariffs imposed by the EU/GB trade agreement. An item must fundamentally change in order to re-enter the EU without a tariff being imposed.

What Are the Fines?

The actual tariffs levied against those who break the current ‘Rules of Origin’ can vary. There is a long list of fines and tariff rates outlined in the agreement that can change, based on the type of product being shipped.

In most cases, for non-food items, the tariffs imposed are less than 10% of the value of the import. However, for food items the tariffs can exceed 12-15%. All of this can be found within the guidance information from the GB government. However, some of the tariffs are pretty hefty. This is why so many manufacturing and sourcing companies within GB are doing their best to find ways to adjust, and work around these new rules.

It’s simple enough to avoid products that are made or sourced from countries deemed to have a competitive advantage or allow unethical working conditions. It’s more difficult to navigate the complex web of rules that surround sourcing products that are from the EU itself. That’s why it’s important to familiarise yourself with the new trade agreement, as well as how the ‘Rules of Origin’ can apply to you and your business moving forward.

The formula to calculate the % of maximum non-originating material is:
Landed value of non-originating material divided by the ex-works selling price x 100

There are some exceptions where the maximum amount of non-originating material is not 50%, for example:

• Tariff Heading 25.01 covering salt, sulphur, earth and stone = 70%
• Tariff Heading 31.05 covering fertilisers = 40%
• Tariff Heading 87.05 covering vehicles, aircraft, vessels & associated transport equipment = 45%

NB: This information is for guidance purposes only and should be used in conjunction with the specific rules that can be found at: https://www.gov.uk/government/publications/rules-of-origin-for-goods-moving-between-the- uk-and-eu

Working together Elite Sourcing & Manufacturing and RISA (UK) can handle your sourcing, manufacturing and shipping needs. For further information contact ES&M on +44 (0)7770 820 998 (UK) or via email at charles@elitesourcingandmanufacturing.com or RISA (UK) on Tel: 01784 252444 or via email at: enquiries@risauk.com

Idetek UK and Elite Sourcing and Manufacturing, (ES&M), have formed a strategic business alliance to assist their outsourcing clients to achieve the business diversification needed to successfully compete in today’s new manufacturing world. Both companies have established different international networks, which will offer clients significant and diverse benefits.

The two companies have different skill sets, knowledge, and experience, with Idetek UK specialising in sustainable business growth, investment consulting, international distribution, and franchising, with offices in Rotherham and Istanbul. The company has decades of experience in doing business in Turkey, the Middle East, and Europe. Elite Sourcing and Manufacturing focuses on product manufacturing, from product development to finished product and shipping, as well as IP protection, contract negotiation, and sourcing. The company has a team located in China, as well as decades of manufacturing knowledge and experience of doing business in China, South East Asia, and the USA.

The current economic outlook for companies, either wanting to do business internationally or already outsourcing product and services overseas, is to say the least challenging. Not only because of Covid-19 and Brexit but also the fear of the unknown.

With increased freight prices, trade wars, the introduction of tariffs, travel restrictions and sometimes poor communication, many companies have recently experienced problems or are reluctant to take a step into the unknown. Not only that, but raw materials like steel and plastic have surged to 5 – 10 year highs and show no sign of coming down in price.

The Idetek and ES&M partnership aims to assist businesses with their overseas outsourcing and overcome the points outlined above. With teams located strategically, communication, outsourcing, and distribution will not be an issue. With their knowledge and expertise wrapped into this partnership, each project will guarantee accelerated results, with projects executed efficiently to achieve cost savings and quality product for the client.

The relationship between the two companies will bring a new dynamic, offering businesses greater opportunities when undertaking overseas ventures, as well as delivering world beating competitive advantage to clients.

Any further information please email: info@idetek.co.uk or visit their website at www.idetek.co.uk
Case study: Collaboration with Istanbul Medipol University – IDETEK UK

or

Charles Firbank at: charles@elitesourcingandmanufacturing.com
Website: https://elitesourcingandmanufacturing.com/
ES&M Case study: ES&M help Achieve Cost Savings ca. 34% – China Outsourcing

With pulp prices rising and little sign of any let-up in the near future, we are seeing increases in the cost of corrugated packaging. Many corrugated carton manufacturers have tried hard not to pass on the recent price rises, but with the cost of paper continuing to rise, corrugated packaging costs are forecast to increase further in 2021. So, what has caused the increase?

Here in the UK uncertainty over Brexit, as well as a weak Pound, has been a factor and with the prospect of a no deal Brexit we are being warned the Pound could weaken further.

Globally, over the last 6 to 12 months there has been a substantial increase in e-commerce, brought about by Covid-19. This has put huge demands on Mills and Converters, which are running at maximum or close to maximum capacity. Demand is outstripping supply.

In order to help minimise such increases, users of cartons need to start reviewing how they package and protect their products. They need to work closely with their carton designers and manufacturers, with the aim of identifying possible cost reductions. Things to consider might include:

• Look at labelling rather than printing the carton, especially if date codes and other identifiers are used. This might allow larger volumes to be purchased, leading to reduced freight costs and maximising economies of scale.
• Investigate design changes that reduce the number of processes required to manufacture the the carton.
• Is your supplier using modern, efficient processing equipment? Possibly not, because there’s been little incentive over recent years due to the low inflation rate. Work with your supplier to increase efficiencies wherever possible.
• Depending on the required design criteria, could a higher amount of recycled material be used? Obviously, if heavy items are being shipped, virgin material might be necessary in order to provide the required impact strength. Drop tests will verify this.

Packaging is part and parcel of any outsourcing solution and here at ES&M our clients like us to consider it early on in the development process, not at the last minute as is often the case. However, with increasing costs it’s going to become more important than ever to get the packaging design and specification right.

Should you require any help or just want a pair of “fresh eyes” to review your design and specification, we are here to help. It may be a case of becoming even more creative and looking at different options to a standard carton or retail pack, as the case study in the golf trolley link here shows.

The Task: On joining the company a new car seat had gone into production in China – the output was low, rework and quality levels unmanageable. Operator commitment was low, (they could earn more money on other assembly lines) and in some cases subcontractor performance unacceptable. The product had been well received in the market place and production volumes needed to increase significantly to meet demand. I was asked to “sort it out”.

Initial Ground Work:

1. To identity those people capable of leading and facilitating the project / team.
2. Set-up cross-functional teams. Three teams with one leader heading all three – Assembly Line; Internal Component Production; Externally Manufacturered Components.
3. Get the necessary commitment from the company president and communicate the problem and goal to everyone involved – not so easy when you are working on a Chinese assembly line.
4. To observe, map the current process, measure and record – providing a datum point.
5. Identify training needs.

Project Work:

1. Create a team using key personnel – not popular because the best people were being taken out of their everyday role
2. Start to document the process:
   • Map the process
   • Study the individual workstations – work performed and time taken
   • Set-up communication boards analysis boards – communicate actual v target
   • Start to produce a training plan and matrix for each worker
   • Start to balance the line from the workstation information gathered and the knowledge of the required task times (actual time / required units). This was an ongoing process, partly trial and error.
   • Introduce standard work / flow charts and work instructions – employ Kaizen
   • Product quality plant
3. Redesign the line and make it ergonomically friendly – product sub-assemblies off-line and stored parts next to the line.
4. Standardise and simplify – breakdown the process into bite-sized, equal time tasks with the method including process, check, process, check throughout the line.
5. Train – make people appreciate that capacity increases require quality components in the workplace.
6. Constantly observe, monitor, and verify improvements – this has to become the company culture.

Sub-Contract Manufacturers:

1. Prioritised those needing to make quality or capacity improvements.
2. Visit; Assess; Resource if required.
3. Help train workers; monitor; control

Rewards & Motivation: Celebration! We had a BBQ for all involved.

The Disadvantages: Our competitors benefited from the knowledge we passed on to the manufacturer.

Recommendations: We gained an improving supplier and lay the foundation to negotiate a year on year cost reduction – achieved! As well as carryout the same process at our second car seat plant in China – started but not completed due to company acquisition.

IP protection is one of the most worrisome aspects for all companies doing business in China and EM&S is help our clients protect it.

We work on a 4 Tier Strategy:

1. 1. Documentation & Relationship
      Put formal documentation in place, though a good business relationship is often far more important and beneficial.
      Ensure the following documents are used and signed.
      • Non-Disclosure Agreement (NDA) though preferably a Non-disclosure, Non-use and Non-circumvention Agreement (NNN)
      • Tool Agreement – keep it simple & reference purchase orders & agreements
      • Supplier Agreement
   2.  Sourcing
      If sourcing an assembly, (rather than individual components), best practice is not to single source.
      • Use several manufacturers, ideally in different locations, with the aim of preventing companies recognizing the finished product.
      • Where possible use an assembly company to manufacture finished product, ideally one with no knowledge of your industry).
   3. Drawing Control
      You need to own and control all drawings. Although you might have day to day access to the factory’s manufacturing drawings, you still need to check them for accuracy & tolerance. Reference their ownership in the supplier agreement.
      Try not to pass design & drawing creation to the manufacturer, though sometimes it might be quicker and easier to do so. If you do, have clear statement referencing it in your formal documentation.
   4. Tool Ownership & Control
      A separate tool agreement, defining ownership of the tool and its design is required. It should also include:
      • Direct reference to purchase orders
      • Payment terms
      • Tool life
      • Inspection & Maintenance responsibilities
      • Modification & History
      • Location & Storage (this might be different when the tools are not in use)
      • How the tools are to be permanently identified

IP is a significant asset so do not lose it. If you want help to reduce IP risk ES&M can help.

Only last week the Asia to Northern Europe freight price increased 27% and the pain is showing no sign of ending, with further increases being announced for next month.

Typical announcements from the Freight Forwarders are:

Container availability is continuing to get worse with large surcharges being charged for those who can secure a container. On top of that, the ports are more or less full and unable to take containers.

Further delays and increased costs are expected for UK imports with Brexit only days way, (with or without a Trade Deal), and boarder / Customs chaos is expected.