Case Study: High Growth Consumer Electronics Device Manufacturer
International Expansion Project:
Our client, a well-funded private company, wanted to expand internationally. The client used a Chinese contract manufacturer and sold product only in the US. We helped our client expand into Canada, the European Union (EU), and Japan by offering services in international entity set up, regulatory and customs compliance, and shipping logistics.
International Entity Set Up:
Companies assume that the only way to tap into a new country is by setting up a local entity. However, companies can sell in Canada and the EU as a Non-Resident Importer (NRI) without setting up a local entity. This reduces compliance paperwork (tax, payroll, HR, etc.) and the only taxes involved are indirect taxes (VAT in the EU and GST in Canada). Utilizing our previous consulting experience, we set up the client in Canada and the EU in a matter of weeks, as compared to a normal timeframe of three months.
In Japan, on the other hand, an entity needs to be set up. We helped the client in setting up an entity in Japan.
We also advised the client on VAT tax filing thresholds and filing frequency (quarterly versus annually). All this international set up was done at a fraction of the cost of using a big tax advisory firm such as PWC, EY or DLA Piper.
Regulatory Consulting and Package Labeling:
The client was not aware of electronic regulatory certification required to sell product in Canada, the EU, and Japan. We connected the client to regulatory certification authorities and got them the certified for Canada (Industry Canada), the EU (CE, WEEE, RoHS, REACH), and Japan.
We also consulted the client on packaging regulation. This involved translation of package labeling and warranty information in local languages so that the product was compliant with local regulation. For example, the final EU packaging had the appropriate regulatory logos (CE, WEEE) and EFIGS languages (English, French, Italian, German, and Spanish).
As a result, the client was regulatory compliant and the product was not detained at customs and subject to costly fines.
International Customs and Logistics:
We helped the client in proper product classification (10 digit HTS code) for import custom duties. Using our past experience and our network of customs experts, we classified the customs import duty as 2% for the EU and 0% for Canada and Japan.
We assisted the client in both freight forwarding and warehousing. We introduced the client to a freight forwarder to ship product from China to Canada, the EU, and Japan. We did the RFQ for third-party logistics (3PL) warehouses in Canada, the EU, and Japan. We managed contract negotiations and helped in the final warehouse setup.
Using our previous experience, we advised our client to use Netherlands as the location for the EU warehouse due to its central European location and VAT friendly Dutch tax laws. As a result, the 21% import VAT was “deferred” and the client did not pay anything at the time of import.
Benefits to Client:
Because of our “start-to-end” consulting, the client was set up in key international markets in 3 months instead of the typical 6 to 9 months timeframe.
Client saw an increase in Y-O-Y revenue of 300% because of the added new markets. Through our negotiations with freight companies and 3PL warehousing, the client was able to reduce the logistics cost by 20% relative to what it was paying for similar services in the US.