Dear Advantech Customer & Partners-
It is our duty to inform our valued customers and partners that the current trade dispute between the U.S. and China is now going to have a tangible effect on the cost of goods.
As announced on September 17th, there will be a 10% tariff on specific goods manufactured in China and imported into the U.S. This includes Advantech's products manufactured in our Kunshan, China facility and will take effect on September 24th, 2018. More information regarding the tariff can be found by clicking here.
As a result, any of our products imported from China beginning on September 24th will be subject to this tariff and the associated costs will be passed on to our customers in the form of a unit price increase. Advantech will be responsible for paying the tariff upon arrival to the port as the importer of record. Existing purchase orders will need to be amended to reflect the tariff. The Advantech team will be working closely with our customers over the coming weeks to make these adjustments and to ensure that the process is as seamless as possible.
Furthermore, the USTR has announced that the 10% tariff will increase to a 25% tariff on the same goods starting January 1, 2019. In order to reduce the impact of these tariffs on our customers, Advantech is evaluating the possibility of using our manufacturing centers in Taiwan to produce the goods currently produced in China. This will be on a case-by-case basis, as some products and customers will more easily make the transition, while it is more complex for others. We will not make any changes in production transfer from China to Taiwan without first discussing with you and receiving the necessary approvals. As products will need to go through a formal Production Validation and Test (PVT) and possibly be re-certified, in many cases, we estimate that the transfer from China to Taiwan will take 6 to 8 months to complete. Our study has shown that transferring manufacturing from China to Taiwan may increase the product cost 5% to 8% on average, so the impact of a manufacturing transfer is not limited to time - but also may have an impact on the unit price.
With the impending 25% tariff, we expect that many customers may wish to increase production output in the final quarter of this year and take a strategic inventory position in the US prior to the January 1st tariff increase date. While Advantech has a warehouse in Milpitas, California - where we can hold inventory, we believe a 3rd party logistics warehouse may be required to support strategic inventory arrangements. Thus, we have begun investigating this type of arrangement as well to help mitigate the business uncertainty if our customers wish to pursue this route.
This is a very dynamic time, and while these tariffs do put additional burdens on all of us, we hope that we can work together through this process to make it as seamless as possible. Please discuss any questions, comments, concerns with your account manager or inside sales contact.
Sincerely,
