Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So we usually provide a quick general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well, which we generally do on Fridays, like today.
One of the questions our international manufacturing lawyers are constantly asked is where other than in China “should we make X product and can you give us the names of some factories that make X product in any of those countries.” Our answer to that question is usually as follows, we have seen some companies that make similar products go to X, Y and Z countries, but just because they are going to those countries does not necessarily mean that you should or even can. Truth is that the country and the factory you choose needs to be the one that makes your product at the price point and at the quality that makes sense for your business and there is usually no way to determine what country or what factory within any country that will be. Jeans are a great example as we are seeing many companies move their jeans production out of China. SeeJeans Sourcing Landscape Sees Major Changes as China Fade Continues, which describes what is happening with worldwide jeans production as follows:
Imports of the category from China dropped 10.44 percent in the six months through June to a value of $369.97 million. This brought China’s market share of the category–97 percent of which are denim jeans–down to 22.82 percent, a 5.11 percent decline for the year ended June 30.
All of the other Top 5 suppliers posted gains in the amount of denim they shipped to the U.S., with each growing their market share. Mexico, the No. 2 denim supplier to the U.S., inched up on China to hold a 22.16 percent market share. Jeans imports from Mexico rose 14.44 percent to $410.07 million, leading a Western Hemisphere increase of 12.03 percent to $509.74 million, which also included a 28.02 percent gain by Nicaragua to $55.19 million, and a 12.06 percent advance by Guatemala to $16.22 million.
Among the major Asian apparel suppliers, Vietnam and Pakistan are the big winners so far this year, while Cambodia and Indonesia lost ground, and Bangladesh maintained the status quo.
Jeans imports from Vietnam jumped 29.36 percent to a value of $142.36 million. The country’s market share rose 36.39 percent to 8.38 percent for the 12 months, as makers look to capitalize on its apparel manufacturing expertise.
Pakistan, which benefits from also being a major supplier of denim fabric, saw its first-half imports to the U.S. rise 15.49 percent to $119.72 million. The country’s market share increased 16.27 percent to 6.69 percent.
On the downslide, jeans imports from Cambodia fell 8.47 percent to a value of $45.89 million and Indonesia’s shipments were down 2.54 percent to $35.57 million. Denim apparel imports from Bangladesh rose just 1.13 percent in the period to $247.5 million, although its market share grew 4.96 percent to 14.5 percent.
In other words, for jeans, the production leaving China has been replaced by countries literally all over the map, usually depending on each company’s familiarity with a particular country and their price and quality requirements. Our international manufacturing lawyers see the above sort of pattern (really non-pattern) with many sorts of products. But then there are some products where just about everyone leaving China is heading to one or two other countries. Smaller backpacks, for instance, we see going almost exclusively to Vietnam. Wood toys, we see going mostly to Thailand and India and Indonesia. Auto parts to Mexico and Thailand. Electronics to Taiwan, Korea, the Phillipines, Thailand, Vietnam and Indonesia. See The US-China Future: Meet Vietnam, Thailand, Mexico, Malaysia, Turkey, and the Philippines. Oh, and then there are those companies that try and try to move their manufacturing out of China, but end up not moving a single widget. For them, China is the new China. Which always begs the question, Has Sourcing Product From China Become TOO Risky?
In other words, it really just depends.