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Background
Across industries, manufacturing outsourcing
isn’t a new concept for Original Equipment Manufacturers (OEMs).
In fact, it’s hard to find any company that completely manufactures
its own products these days. However, electronics manufacturers
are relatively new to the concept. Today, electronics manufacturers
are considering a wide range of deeper, more collaborative business
relationships that could help improve cost effectiveness and reduce
time to market while sustaining or improving product quality. As
they do so, these companies are finding that such relationships—while
carrying huge potential benefits—are significantly more complex
and challenging than the simpler contract manufacturing arrangements
of the past.
Customs and international trade issues
Contract manufacturing and commissionaire
structures: Some businesses enter into arrangements where sales
of the processed goods are made by commissionaires, i.e., undisclosed
agents. It may even be the case that the contract manufacturer
will act in this capacity. This raises a number of customs issues,
such as: the use of duty relief’s; the treatment of agents;
and the customs and VAT liability of supplies by the principal,
the commissionaires and the contract manufacturer.
Waste electro-scrap laws: (embodied in
The WEEE Directive) place the following main responsibilities on
overseas manufacturers, and their importers (collectively referred
to as "producers"):
- Producers have to set up systems
for the treatment and recovery
of waste electrical and electronic equipment (WEEE) - individually
and/or collectively.
- Producers, either individually or
on a collective basis, have to
set up systems for the recovery of WEEE. Recovery includes
recycling and using waste as a
fuel or to generate energy. In
this connection, by 31 December 2006, producers have to ensure
recovery of a minimum percentage
of each end-of-life good, e.g.,
75% of a video camera or television set.
- Producers have to finance the following
operations: the collection, treatment,
recovery and environmentally sound disposal of WEEE from private
households deposited at
collection facilities.
- For products put on the market after
mid-2005, each producer will be
responsible for financing the operations relating to the waste
from his own products.
The producer can fulfill this obligation
either individually or by joining a collective scheme. For "historical waste",
producers will be forced to pay a flat rate, based on market
share.
- Each producer will also have to provide
a guarantee when placing a product
on the market showing that the management of WEEE will be
financed.
- Producers will have to supply information
to consumers including the need
to separately discard WEEE from other waste.
Solutions to help you succeed
Contract manufacturing and commissionaire
structures: In most instances, the functions of the contract manufacturer
are deliberately kept to a minimum to minimise the risks faced
by it. The rewards to the contract manufacturer are therefore
kept to a minimum. This is in line with the intended objective
of tax savings as the contract manufacturer is normally located
in a high tax jurisdiction. The principal and/or its sales units,
which should be located in comparatively low tax jurisdictions,
would retain most of the risks associated with the overall process
(research and development, distribution, marketing) and naturally
should be entitled to the lion's share of the rewards. We can
ensure that the customs function is aligned with and supports
that strategy. We can also ensure that maximum use is made of
duty relief’s and customs warehousing without compromising
the other objectives, particularly any risk of permanent establishment.
Waste electro-scrap laws: We can assist
producers to begin preparing for their share of the responsibilities
e.g., by examining the various collective schemes in the different
EU Member States.
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