Our CEO Brett Curry sits with Jim Kennemer in this latest episode. Jim knows his stuff when it comes to tariffs, supply chain management and sourcing anything outside of China. Brett wanted to bring Jim on the pod to break down the opportunities and considerations of sourcing from Vietnam, Thailand, Indonesia, and Mexico, sharing real examples of how brands like Columbia Sportswear and Converse have legally engineered their products to slash tariff costs. From understanding country of origin rules to leveraging bonded warehouses for cash flow management, this conversation is packed with actionable insights for any brand looking to optimize their supply chain in today's volatile trade environment.

Key Takeaways

• The DDP trap that could destroy your business – Why "delivered duty paid" arrangements are legal but dangerous when suppliers falsify invoices (and why you're still liable even if it's their mistake)
• Tariff engineering strategies – How adding a simple pocket or felt liner can reclassify your products for lower tariff rates, plus when this optimization makes sense vs. when it backfires
• Vietnam vs. other manufacturing hubs – Where Vietnam excels (textiles, wood goods, furniture), what to expect for pricing and quality, and why MOQs are higher than China
• De minimis rules and bonded warehouses – How the $800 shipment exemption still works (except for China), and when custom bonded warehouses can turn a 30% tariff hit into manageable cash flow
• Country of origin compliance – The "substantial transformation" rule, why trans-shipment will get you caught with 50% more audits happening, and how to properly document manufacturing

Whether you're considering your first move away from China or optimizing an existing diversified supply chain, this episode provides the roadmap to do it right without the costly compliance mistakes that are tripping up other brands.

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Well, hello and welcome to another edition

of the E-Commerce Evolution podcast.

I'm your host, Brett

Curry, CEO of OMG Commerce,

and today we are talking about

optimizing your supply chain outside of

China. How do we think about tariffs?

How do we think about supply

chain optimization and what

opportunities are there

for us outside of China? Obviously,

this is very timely and this

is a topic where the game is

changing on the field, daily,

hourly, all of those things.

So we'll try to keep the conversation

pretty high level and also make this

useful regardless of what the tariff

news is when you decide to hit play on

this. But my guest today is Jim Kiner,

and Jim is the founder managing

partner of Cosmo Sourcing.

I met Jim at Seller Summit

in Fort Lauderdale last week,

I guess it was at Steve Choose Events.

Steve and Tony running a great event

down there, one of my favorites.

And so Jim was a speaker, I was a speaker,

and he talked about tariffs

and I was like, man,

I got to get you on the pod because

everybody's freaking out about this or at

least wondering about this. And so with

that, Jim, welcome to the show, man,

and how's it going?

Hey, it's great to be here and doing

great. Yeah, thanks for having me here.

It's been a whirlwind for you.

You picked the right time to

specialize in sourcing outside of

China. I picked 10 years ago,

so to you saw the future

years ago when you map

that out and you've had quite

the couple of weeks, man,

you were on stage before Lauderdale,

you got quoted in the Wall

Street Journal about this topic.

And so tell us a little bit about that.

How did you end up getting mentioned

in the Wall Street Journal?

Yeah, Hannah reached

out to me, Hannah Mao.

She's the reporter for Wall Street

Journal, and she obviously covers tariffs,

supply chain, manufacturing and

Vietnam. So yeah, reached out.

She's doing a six part story

actually about manufacturing Vietnam,

the whole on the ground and whatnot.

But yeah, we helped for the first story,

she visited a couple of factories that

we put her in touch with, and yeah,

she interviewed the factories and

featured one of them pretty prominently in

their story. And then, yeah, the one I

was featured in was the second of six,

I believe so, yeah. But yeah,

it keeps changing with the news.

So.

Keeps changing. We were

just talking about,

so we kind a casual comment the president

made recently that who knows what

that's going to do to the markets,

but I think we're just all our

tolerance level for chaos is

just going to be pretty

high here for the foresee.

Future, future, be adaptable right now.

You've got to be adaptable.

And so I think there's a few

things we're looking at here.

I just record a podcast

with Andrew Ferris,

who's just a legend in terms of

marketing and media buying and e-comm in

general. And he and I were

both talking about, Hey,

in times this times of uncertainty,

there are always opportunities to grow

actually to get better than you were

before. And I think one of the things,

and this is something

that Andrew mentioned,

one of the potential benefits or

silver linings in this is going to

force brands to optimize their

supply chain look for better,

more stable, more affordable ways

to enhance their supply chain.

Every point or couple of points you

can save on your supply chain makes a

huge, huge difference as you can

make your supply chain more stable,

more reliable, that

makes a huge difference.

You increase your quality of product,

that makes a huge difference.

And so it's a time to

look at your supply chain.

And you've been doing

this a long time, Jim.

Oh, absolutely.

When did you first start looking

outside of China and was it because you

were predicting something like this

could happen or was there something else

that was driving that?

Yeah, I moved to Vietnam

and started sourcing from

everybody was sourcing from

China. I just felt like saturated,

there were plenty of people doing

it. And then I visited Vietnam,

fell in love with country, and yeah,

2014 at the time I was trying to get

ahead of the transpacific partnership,

which was at the time the largest

free trade agreement in history.

It ended up not getting

ratified in the past,

but I still had a lot of people reach

out to me about finding manufacturers in

Vietnam. And at that

it was much less developed manufacturing

wise than it's today. I mean,

we were doing industrial wood goods and

some really kind of basic cheap stuff,

to be honest at that time. But yeah,

I mean there's still a demand for it.

And yeah,

definitely kind of saw Vietnam as

being the future early and kind of got

lucky in a sense, but yeah. Yeah.

Love it. You were ahead of the time and

man, it has really paid off for you,

especially now.

For sure.

And so there's a few things

I want to talk about.

We'll talk about minimus with you. We

want to talk about tariff engineering,

we want to bonded warehouses.

We're talk about what not to do.

You really were dropping some bombs of

knowledge in the talk in Fort Lauderdale

that a lot of people were like, wait

a minute, wait, I can't do that.

Are you sure I can't do

that? And you're like.

Yeah, for sure. Yeah, I found

out some people were doing it.

I never named names, but I had awkward

conversations with some people.

I'm like.

Yeah. They're like,

wait a minute. Careful.

So there's several things

to talk about there,

so stay at tuned for that.

But I want to talk a little

bit about why Vietnam,

why did you go there?

But more importantly,

why should we consider Vietnam right

now? Because as I've learned from you,

and actually one of our top

clients in ports from Vietnam,

their product is phenomenal.

Why should we consider Vietnam?

And I know there are other

places to consider as well,

but you've got a special place

in your heart for Vietnam.

Yeah, I mean for Vietnam

mean they definitely,

you have to pick what they specialize

in, but what they do specialize in,

they do excellent job.

And two biggest categories we

do are anything textile cut.

And so based that ranges from clothing,

apparel to bags, luggage, tool belts,

our mutual client that we work with.

And then also we do a lot of

wooden good and furniture.

And they're definitely growing

in several other industries.

We're starting to do electronic

more electronics, OEM, electronics,

but it's definitely, I don't want to

say hit and miss, but it's growing.

It's probably the

fastest growing industry.

But when we're doing a lot more plastic

ejection molding, silicon parts,

we've been doing a lot of industrial

metal projects, St metal goods,

starting to do some car parts too.

And all those industries I

think are definitely growing

more developed industry,

but you really got to figure out what

Vietnam can do and then target in on those

products.

That's great. And so I think it's

always important to understand, hey,

what are maybe the misconceptions about

a country or where are the stereotypes

true or not true?

So any misconceptions out there

about Vietnam right now or

anything you like to set

the record straight on?

Yeah, for sure. I think a lot of people

do private label manufacturing in China,

which is fine.

Just find a factory that

makes a pre-existing products

slap your logo on it and

sell it, which everybody's

been doing for years.

But Vietnam and honestly anywhere

outside of China just does not do that.

So the overall, I mean,

majority of what projects we do is going

to be contract manufacturing where you

supply the factory with your product

specs, sheets and tech packs,

and they'll make it to your specs,

but they're not going to have

existing designs on hand.

Got it.

Got it. That's probably the biggest

one. Other one too, Alibaba.

And those alternatives just aren't

good or don't really exist there.

So when you find factories, you

can't just put an RFQ on a website,

have a dozen factories come to you.

You have to do your own research,

really follow up with

'em and chase 'em down.

I know a lot of people

get turned off by that.

They expect factories to be tripping

over fine or work with clients,

but it's not the case. And

they're also higher MQs.

I know a lot of people say low MQs and

there are kind of boutique handmade

dress factories and whatnot. They

do small, but for the most part,

I would say MOQs tend to be higher

in Vietnam outside of China as well.

Interesting. So higher, MOQ is

a little more legwork upfront.

You're going to have to supply the

specs, it's contract manufacturing,

that sort of thing. But then

what are some of the benefits?

Because I know in talking to our mutual

client who manufactures in Vietnam,

they actually moved from the

US to Vietnam a few years ago,

and they said their quality went up,

cut their cogs by 70%, quality

went up, that sort of thing.

But speak to us about

how does it compare manufacturing Vietnam

for the things they're good at to the

rest of the world.

For what they're good at? I think they

excel because yeah, the tool belt,

I'm not going to name who, but yeah,

the tool belt is pretty high end.

And I mean they have a pretty good,

the quality they have in

place is pretty good. Yeah.

And then, yeah, I mean just overall,

I think the quality is quite good

for a lot of what they excel in.

We do a lot of furniture too,

and we can do some very high

end custom hardwood pieces that

they go for thousands,

thousands for a single piece and go in

literally multimillion dollar homes we're

doing.

Interesting.

The projects in Palm, Palm

Beach, Florida right now.

And then another comes to home builder,

custom home builder out Palm Beach.

So they're doing literally

10 million plus they doing.

All that in Vietnam. Yeah.

They're doing a lot of it, not all of it.

So m OQs are a little higher, but prices,

and I know it's hard to compare prices

talking about it depends on the category,

depends on the good,

depends on so many things.

But pricing general comments on

pricing, how does it compare?

Yeah, pricing for apparel and textiles

tends to be cheaper in Vietnam than China

outright. And same with wooden goods.

Because Vietnam is a tropical country,

there's lots of access to high

quality tropical hardwoods.

And with Asia Association

of Southeast Asian nations,

which all the Southeast Asian

nations have free-trade,

so it's pretty easy to move wood

from one country to another.

So the quality of wood you

get in Vietnam is excellent.

So for that is definitely one

of the big things they sell on.

And pricing for textiles, bags, backpacks,

even shoes we consistently find is be

about the same price and oftentimes

cheaper than China and the

price to quality ratio,

like you're buying a $5 sweatshirt

from Vietnam versus $5 in China,

the quality is going to be higher.

China does have a lot of very cheap low

quality. So people are like, I can get,

we were talking to clients

getting t-shirts for like

83 cents in China and ours

were coming in about one 30,

but the one 30 shirts were

decent versus very low quality

t-shirts for that 83 cents. And

that was as cheap as we could find,

but it is definitely at

the price to quality ratio.

So the cost of quality ratio is really

good there, which goes a long way.

So lots of opportunities in Vietnam and

we'll continue to talk about that as we

go and as we go through our other

topics, we weave that back in.

But what other countries

should people think about?

I know basically you specialize

in anything outside of China,

so what other countries should

we consider and for what?

Yes, for sure. So yeah,

we've been in Vietnam for 10 years and

we've been expanding since last year to

all of Southeast Asia, Mexico, and

looking to expand even more this year.

I mean, Southeast Asia is great.

Indonesia has a lot of great factories.

Thailand, we're doing a lot of higher end

auto parts and appliances in Thailand,

some rubber goods, some natural

rubber. So pretty eco-friendly stuff.

Malaysia does appliances and some really

good metal furniture and Mexico too.

A lot of interest in Mexico.

But I will say Mexico is a

little difficult to source

from because they're very

limited in what they could

produce. Much more limited.

People expect more people want

Mexico work than it's suitable for.

What are those limitations

and why for Mexico?

So we're doing a lot of stamp

metal and industrial goods,

some aftermarket car parts,

some work wear denim,

so we can do stuff like that. But

we get a lot of requests for scrubs,

which we do a lot of scrubs in

Vietnam, and the quality is great,

but then people specifically want

Mexico just for the use of shipment,

but it's just not a good

quality scrub suppliers there.

And there's definitely a few

other products that people

really want to get from

Vietnam, or sorry, from Mexico.

I really think Mexico is going to get

more and more investment over the coming

years just because the

demand is absolutely there.

It's just the supply has not caught up.

And I will say a lot of new factories

are getting or have Chinese backed

investment to Mexico, but there's still a.

Portion of it. Interesting.

Makes sense, right?

China's going to diversify themselves.

They want to avoid the tariffs and so

profit and from what they're really great.

I was just manufacturing.

So makes a lot of sense.

One of the things that I know

has caused some confusion,

you talked about this

during a talk at seller.

Summit.

Is country of origin because I think

there's going to be some creative

things that people are going to try to do.

Oh, for sure.

Skirt around country of origin and stuff

like that. But can you talk about that?

What constitutes country of origin

and what do we need to know there?

Yeah, I mean what's really

kind of annoying is it's

very broadly written in the

law.

Basically the law states that a new

article of commerce has to emerge in the

country. So it'd be, I import raw fabrics

from China having made in t-shirt,

that's a new article,

commerce, and you actually do,

so the fabric making everything

in Vietnam, it's a new article.

Commerce cause T-shirts fundamentally

different from fabric. But yeah,

I mean broadly speaking, you

have to have substantial change.

And I try to advise people

at least 50% of value,

but as long as it me as a new

article of commerce is new,

but you can't simply put a new label

on something. If you get a mug,

you can't just put your logo

on it and ship it from Vietnam,

from China or just add

logos or change colors or.

It was a mug. It is a mug.

You added a logo that is not.

The same thing with

commerce. Same. And people,

I've gotten a request for people to do

repackaging multiple times and I either

turn 'em down or nor 'em. But yeah,

they think you can just have

this product shipped from China,

find a package supplier in

Vietnam, package it in Vietnam,

and then ship it to us is a

new product. But it's not,

the product is still fundamentally

the same thing. So yeah,

I mean you have to have

substantial transformation

of the product and generally

if you get audited, you have

to document it. So I mean,

if you have a factory in Vietnam,

you just simply have the factory write

a certified letter. Yeah, we made it,

here's the invoice, here's the

letter we here's the factory.

You can maybe even take videos of

your product being made in Vietnam.

That's some nice Vietnamese worker saying,

yep, look, I making this. But yeah,

just document it. It'll go through

fine. But if you're just like we said,

doing the repackaging or

pass through transshipment,

it's definitely something to get caught.

And they're definitely with CBP and

Customs of Border Protection who enforces

customs.

They're doing 50% more audits now

just last month more in April,

50% more in April than they were,

I don't know what the timeframe,

I guess probably during

the Biden administration.

And they're planning on increasing that

more and more and they're planted here

and whatnot,

have contracts with CBP now and

countries like Vietnam and most other

countries share import data.

So what's getting imported into

Vietnam is getting shared with CBP,

so they know what's getting shipped in

and then they can hypothetically use AI

or whatever to match it.

So it's definitely, yeah,

don't do transgender just actually

make the product in the country.

It's going get more about the fines are

pretty steep. And once you get called.

Ones, yeah.

Yeah.

Once you get called once you're pretty

much red flagged for the rest for ever.

And they can look back on

previous shipments too,

so it's not like they get caught one time,

they're only looking back

at your previous shipments.

Yeah, yeah. It's just one

of those things where,

and I think one of the

analogies you use is like, Hey,

we would never cheat on our taxes. Right?

Or not file our taxes or something like

that. We know, dude, you don't mess.

I mean, yes, I'm going to

take every advantage, every

deduction that I can take,

but I'm not going to screw around

with the IRS, right? Oh, absolutely.

And CCB P is the same,

maybe going to get more intense and

it's going to be such a huge revenue

generator for the US government tariffs

that they're not going to be messing

around here. And so it makes

sense to do it by the book. Yes,

look for advantages,

but do it by the book.

Yeah, absolutely. You do it by the book.

So make sure everything's compliant.

You've got paperwork and documentation

support, everything you made. Yeah,

I mean they'll look at

payments potentially to the

factory and I mean they have

as much capability,

more or less than as the IRS to

look at your finances and why not?

Yeah, I mean Trump wants to have the

external revenue service, which is,

I mean as far as I'm.

Concerned, basically cvp, right? I mean

they're going to be connected. Yeah.

Absolutely. So yeah, if you don't cheat

on your taxes, don't cheat on shipments,

your taxes, period.

Love that. Love that comparison. I think

that sets the right frame for folks.

Let's talk about di minimis. This is

something that's talked about a lot.

It's come up a lot,

but explain that for folks that

are still maybe a little bit fuzzy,

how has that impacted and what

should we know about that?

Yeah,

so minimis was a rule in place that

basically shipments under $800 in

value, would not have a tariff

duty rates applied to it.

Just at that point they were like $800.

That tax and duty collect is going to

be less than what or less than what the

actual cost administrator calls

to get in and figure stuff out.

Was that rule's gone away

for China and Hong Kong?

But it's still in effect for the rest

of the world. And I do want to get,

the big caveat is definitely something

the White House and the people in charge

have talked about getting rid of some

point in the future, but as of today,

may probably about 10:00 AM a few hours

ago, I'm checking news in a few hours,

it's still in effect.

Any single shipment under

$800, no customs or no tariffs.

There does not apply to China

or Hong Kong. But right now.

But yeah,

you can ship from Vietnam and get

under that $800 value and that's each

individual shipment. So you have to do,

I don't know, it's a lot of people just,

but there are companies like port lists

and whatnot that does warehousing in

Vietnam. You can ship to

the warehouse in Vietnam.

Each time a customer plays it

order to the United States,

they ship each item out to the customer.

And it scripts around as

of now the di minimus law,

assuming your product's lightweight,

but I mean there is cost.

Cause when you ship each individual

item versus the container,

you want to have small lightweight

stuff like t-shirts and small electronic

items. Cause once you get

large heavyweight items,

let's just say flat pack furniture,

the shipping cost per item to do

air shipping, it's going to get.

Prohibitively you worth

to save on shipping costs.

It's worth the 10% tariff for whatever

because you're saving more on shipping.

So you got to kind balance that out.

Great. Well, speaking of warehouses,

I know something you've talked about and

I've heard a few people talk about is

bonded warehouses.

And so explain that and then when should

we consider that versus when is that

maybe not advantageous to.

Us? Yeah, for sure.

So custom responded warehouses

are warehouses that are

more or less connected to

the port.

So what you can do is you can ship a

product to the port and then from the port

will get shipped to the custom

responded warehouse directly.

And then when it leaves the

warehouse, so each shipment,

that's when it gets to tariff

rate applied to it. So yeah,

the sample I use.

So that way if you have a hundred

thousand container with a hundred thousand

dollars worth of goods, I guess new

tariff rate is 30% typically goes to port,

leaves the port through customs.

You pay 30,000 on tariffs

on that shipment at one time

before product sells.

But you can ship that shipment

straight to a cost of bond warehouse.

And then each time a customer

placed an order on a product,

you get revenue from the customer

and then it leaves the warehouse.

So let's just say as a

hundred dollars items,

you pay $30 in tariffs each time the

product leaves the warehouse and you get

cashflow in from your customer.

So there's not that one big hit,

you're going to still pay

tariffs, but it splits it up.

So you pay the tariff as you get cashflow

coming in from the clients or your

customers.

Yeah, it makes a lot of sense.

I know especially when tariff were

154% from China there for a hot minute,

people were like, whoa, bond warehouse,

I'm only going to pay that on a per item

basis as much as I can. That is 30%.

Maybe people are a little more flexible,

but it's so nice to have that flexibility

of it's there now you can absorb

the hit because you got cashflow

coming in from the customer.

So a lot of benefits there.

And if you shipped it in April, like late

April, early May when it's still 145%,

you shifted customs on their

warehouse, you can ship it out now,

pay the 30% tariffs instead of

paying what would've been 145%.

And I know a lot of people are trying,

30% is manageable for a lot of people,

so they just want to get

it out and pay what they.

Need to at the time. It's

still painful but manageable,

especially in comparison.

But so the customs,

modern warehouses are close to a port.

I know there's some extra

costs associated there too.

So what do we need to consider?

When would we not want to do.

This? I mean, for the most part, I mean,

just kind look at your cashflow

and how you want it managed. Yeah,

customs on a warehouse, they're

definitely in demand right now.

So they're going to be more expensive

on a per square footage rate than a trip

to pull warehouse. But I mean,

if you're looking at the tariff rates

and it's more cost advantageous where you

just want to preserve your

cash flow for the time being,

it's definitely going to

be advantageous to do.

And I know a lot of people are

probably shipping out of customs,

modern warehouses like

I mentioned earlier,

just moving a traditional one

and just pay the tariff now.

But it gives you that flexibility to kind

of adjust as the tariff rates changes.

Because right now, as every

day is a new announcement.

Every day, a new adventure for.

Sure, he's going to have new on.

Scores of country check tariff

news. It really is every day.

Totally makes sense. So then

let's look at tariff engineering.

So tariffs, I believe we're here to

stay at least for this administration,

and likely beyond. Just like anything

with the government though, once

Democrats say they don't like tariffs,

but then once they're in place,

if people are okay with it,

it's hard to turn away revenue.

And that's true for

either party. So likely.

Tariffs.

Hearsay. Hearsay.

Yeah. Biden kept to 25% on

China. There is administration.

Exactly. Yeah. So it's like, oh, we're

pretty, well, nobody's talking about it.

Let's just keep it. Yeah. So

let's talk tariff engineering.

How do you coach people or how

do you work with your clients to

engineer tariffs for the least?

Yeah, it a little tricky.

You really have to really dive in deep

on what your product is, the HTS code,

and then look at similar HTS codes.

And what is the HTS code?

Yeah, HTS code. So HTS code

for those aren't familiar,

harmonized tariff schedule is the code

that assigned to pretty much 17,000

different product categories.

And that's going to be what the

tariff rate is determined by.

So there's going to be a list.

So each product falls under a

different HCS code. They're 10 digits.

But yeah,

what you do is you look at your HT S

code and then look at similar ones.

And then if you have a

similar HCS code nearby,

you can make changes to that,

have a lower tariff rate.

You can fundamentally change

your product to get in.

The example I used was Columbia

Sportswear for all their shirts.

They all started adding a little

pocket on the inside of their shirts,

credit card size pocket, I think.

And the difference is the shirt has a

higher tariff rate than a windbreaker.

And so since it has a pocket,

they can actually classify

the shirts as a windbreaker.

That meets the requirement for

windbreaker change, the HTS code,

lower tariff now.

Exactly.

And they engineer the product to meet

the requirements for a windbreaker.

And I'm sure everybody has a shirt.

It's nice to have a little pocket.

Nice little benefit as well.

Yeah. So yeah,

they figure that out and they pay a lower

tariff rate on their shirt shipments

because of that change.

And Converse did that.

They put a felt in liner in

their Converse all stars.

Cause the slippers instead of shoes or

sneakers and slippers have a lower tariff

rate than sneakers. That's probably

one of the most famous examples,

but a lot of people are kind of just

exploring similar products that can

effectively sold the same just

to get a different HDS code.

But this is a little tricky to

do because not every product,

because most of the time products in

the same category get text at the same

array more or less. So

even if you do change.

So not always a lot of opportunities here.

And is this kind of going

back to our IRS example,

this is sort of using deductions, right?

So then it's like do you

fall under scrutiny here if

you're getting too cute or

too creative? Or is this.

Relatively should would cause Yeah, I

mean when you submit it through CVP,

you're going to say, Hey, it's this HT

S code and there's going to be some guy,

literally somebody looking at their

database, checking it, the product,

the materials and whatnot. And if

they say it's something different,

they're like, Hey, we actually

think it's this HTS code.

And then there's going

to be back and forth.

And then ultimately there's

an arbitration court more,

I don't know the exact term,

but I know there's basically arbitrator

where more or less a judge rules on what

the ultimate HS code is. Got

it. We were looking at not,

we didn't do the ruling,

but we looked at a ruling.

We were doing baby carriers for a client.

It was trying to figure out which HT S

code. Yeah, I mean there was a court,

not court ruling, but customs ruling

which is surprising catchall HT S code.

It was all fabric baby

carriers versus of course,

most baby carriers dot have

some sort of structure in it.

Those structured baby carriers are

actually tax at a different rate or

classified as different than fabric.

Yeah.

So I mean, you got to kind of figure

that out. But ultimately though,

it's going to be what the custom

says the product is. And again,

if you get cute, it's not as bad as

fines. It's just straight up lying to 'em.

But they're going to say it's the

HCS code. There's going to be some.

Got to, you don't have

to pay the difference.

Everything they correct got to difference.

If it gets held up, there's some demure,

some storage charges too related to that.

And look,

we got to design our product

for a customer and it's

got to meet our vision and

mission and what we're trying

to accomplish with the product.

But it's just another one of

those things where it's like, Hey,

let me take a look because maybe this

is easy or maybe we have the wrong HT S

code, we need to switch it and

it's going to work better for us.

It's something that take a look at

because we could have a meaningful impact.

A lot of small things too, like

synthetic fabrics and natural fibers,

fabrics are sometimes taxed differently.

So you can look at just changing the

fabric of your product, for instance, but.

Just maybe you can change it and get

better performance and now you get a lower

turf. Right? Yeah. Yeah. Interesting.

So let's talk about what not to do.

And I know there are several caveats

here. This is not legal advice.

You're not an attorney,

I'm not an attorney,

but what are some things that

we need to avoid right now?

Or at least need to be

very, very cautious of?

Yeah, for sure. Yeah, I think the

first thing I mentioned was DDP and I.

If I were redo that talk,

I would say there's a right way to

do DDP and a wrong way to do DDP.

Yeah. And what is DDP.

Delivery duty paid? So DDP is ANCO term,

which means you work with a manufacturer,

they'll give you an invoice

and the manufacturer will

be in charge of making the

product, shipping the product,

paying the dues and deliveries,

everything for you up until it reaches

the ultimate final destination. And

it's legal. It's been a thing

for a while the right way.

So in this case,

you just basically pay the manufacturer

one and they handle everything. I mean,

there's a right way, and like I said,

there's right way and wrong way.

The right way is trust

by verify your supplier,

make sure you get copies of all the

manufacturers, invoice the shipping,

who's shipping what HCS.

What they're classifying is because

what's happening a lot of times,

not all the time,

but a lot of times is the manufacturers

know that they have the lowest

price they're going to go with them.

So they're figuring out ways to

falsify manufacturing invoice so that

because what they use to the bill of

lading or whatnot is what they use to

calculate the tariffs on. So we can

pay 145,000 or 30%, 145, I dunno,

whatever it is today, 30% on

But if they falsify it and say 5,000

and we pay 30% is half the tariff

cost.

And so a lot of manufacturers doing that.

What's happened is ultimately the person

that is legally and liable for it is

the importer, the person

buying the product.

So if you verify that

everything they say is accurate,

the manufacturer's invoice is accurate,

the shipping bill ladings correctly

listed a CS code is correct, it's fine.

So no issue there, but they don't

always supply that information to you.

So a lot of people just turn the blind

eye just accept what everything the

manufacturer is saying is correct.

And they have a lot of times that

they have suspicious low bids.

This what they're probably

doing. Yeah, trust.

To verify.

But I think that's the piece a lot of

people don't dunno is they're like, oh,

no, no, no, it's my factor doing it.

Right? So they're the ones are reliable.

The agent of record is the, or the

manufacturer, and they assume, oh,

since they're agent of record, they're

the one legally liable and responsible.

If anybody gets called, it's going to be

them, but it's not the case. And yeah,

I got a lot of pushback from it. I'm

not going to name names, but yeah,

there were people doing this and I had

to explain how to do it correctly and how

not to, and I was like, okay, probably

gave a few people a heart attack,

so I want to apologize to those people.

And again, it's just sort of one of

those things where it's like, oh, well,

my accountant screwed up my

tax return, not my fault.

I don't have to pay those taxes. Well,

no, you still do. They're your taxes.

Oh, absolutely.

And so you got to look

at it that way. Yeah,

you got to absolutely verify

everyth to do, basically,

you've just got to look at, hey,

what I'm paying per unit or

total to the manufacturer,

is that what they're

putting on the invoice?

And is that what the tariff is being

charged to? And if all that looks good,

then you're fine.

Yeah, yeah. Just trust, verify everything.

Yeah. If it gets caught up as held,

gets red flagged by customs,

they're going ask for documentation,

ask you more or less. And if you

don't have that, you're just, I know,

I just thought they would do a good

job. It's not going fly. They expect.

You to. Yeah, and I think

you mentioned this too,

then once something is flagged

for you, probably future orders,

they're going to be paying attention you,

you're going to be scrutinized from there.

On. And again, they can look

back on passion ship too.

And if they find you were

doing that on passionist,

then you can also get paid

fines for pass shipment.

So just know how to do it correctly.

Yeah, work with customers, brokers,

make sure everything goes through

smoothly. Yeah, I always mean just for me,

I always recommend FOB have your own

freight forwarder and then they'll have

a custom broker and they'll

handle everything and tell

you what to do and give

you advice for the

shipment and all that. But.

I never, what does FOB.

Free on board?

So it means the manufacturer's responsible

for having the product shipped to the

port and the country of origin,

and then the freight forward

will pick over at the port.

Got it. Got it. Okay. Well,

let's talk about you specialize in helping

people diversify their supply chain

or re-engineer their supply chain. And

you're looking at outside of China,

who should reach out to you?

I know everybody's kind of scrambling

and looking just because of the chaos

lately,

but who should reach out to you and what

are some of the things they should be

considering as they're looking at

diversifying their supply chain?

Are you mostly helping people fully shift

their manufacturing to the countries?

Are you looking at, hey, let's diversify,

let's have these things made here and

these things made here. Walk me through.

That. Yeah, I mean, the majority

of our clients tend to shift.

The majority of clients tend have

a couple key products, but yeah,

they're shifting for the most part,

all their manufacturing to Vietnam.

But yeah,

we work with a lot of clients who have

dozens of different product categories,

and we're just, for those clients, we're

going through their list saying, Hey,

these three, four categories we

can definitely do in Vietnam.

These two are maybe, and these

probably can't do in Vietnam.

And then we're shifting some of the

supply chain. A lot of our bigger clients,

like our eight bigger plus clients,

they have the means to

be more diversified.

So they're keeping their suppliers in

China for the time being and then placing

new orders with factories in Vietnam

just for the time being. But I mean,

for the most part, yeah,

we're just ultimately shifting a

lot of clients down to Vietnam,

completely and interesting. A lot

of people, their supply chains,

but they've been buying from China,

so they'll keep 'em for future

orders potentially if things change.

But for the most part,

I think a lot of people

are moving permanently to

Vietnam or permanently away.

From China. What does

the process look like?

So I've now decided I'm going to

start shifting my manufacturing.

Some were all from China to Vietnam or

one of the other countries you work with.

What is that process like? How

much time are we talking here?

Is this a six month plan, an 18

month plan? What does that look.

Like? Yeah, it's definitely

is ballpark six months.

Do you actually get your

first order in hand? Yeah,

once you kind of reach out to us,

we'll let you know if the product

can be made in Vietnam or not.

But once we get that point, our team

will go out, research suppliers verify,

and that we've worked on,

we've probably placed orders with a few

hundred factories already in Vietnam.

So we have pretty good

working relationship on

pretty good idea what they can

and can't do. But yeah, once we get

that, we'll get quotes for our clients,

do direct introductions to the

clients and the manufacturers.

So everything we do is transparent

in that way. And then, yeah,

once they do that, obviously

there's samples to be made,

make sure they can make the product.

Exactly. And then purchase order. So yeah,

you're looking at about four weeks,

actually get the quotes verified that

the suppliers make sure everything's in

line with your expectations a couple

weeks per each surrounded samples.

And then purchase order,

which place purchase order lead

times tends to be about 30,

45 days for most products. Got

it. Yeah. I mean then shipping.

And so realistically,

you're looking at actually having the

product in hand from Vietnam in about five

to seven months once you

actually start a project.

Got it. Got it. That actually

does not sound too bad. I mean,

that still seems very reasonable.

Very cool. So what are you hearing?

I'm just curious if

you have a perspective,

how's the US going to play a part

manufacturing in the us? Is this going to,

are you seeing that there's going

to be a lot more investment in US

manufacturing? Think that's something

you guys will eventually help with?

Yeah.

Is that just definitely

a lot of things expand.

Yeah, I mean,

our ultimate goal is we want to find the

best buyers for our clients no matter

where they are. And you got to have

expertise in each country of origin.

But I'm American, so obviously I want

to find some great suppliers in America.

So actually, if any Eric

Manufacturers are listening to this,

please feel free to reach

out to me. I want to.

Our database. Yeah, reach gym

man. He's connecting people.

Yeah, I know. Yeah. I mean,

we looked to a captain woodworker

manufacturer literally last night,

and I really have a couple projects that

I'm willing to recommend to him and get

quotes as well.

So I think it is going to be a good

time to look at American manufacturers,

but it's still very limited because

what most people need is contract

manufacturers.

Ones you can reach out to with a tech

pack and RFQ and then actually quote and

make it, well, most manufacturers

in the United States

tend to work for brands like

there's auto power manufacturing,

flashing injection warning,

but they're set up by a client to

make it for those specific things.

So there's not as much, even though

there's a lot of manufacturers,

not as much contract manufacturing in.

Place, they're manufacturing

for a specific,

it's manufacturing spun up by a

specific brand and needs type of thing.

Yeah.

It makes sense.

And I mean, people are setting up too.

I know of a laundry sheets manufacturer,

they are buying from all over. They

just weren't happy with the quality.

Started looking into what it would take

to actually build a manufacturer for

laundry sheets, and

they did it themselves.

I know they sell eco-friendly laundry

sheets made out of North Carolina.

So yeah, people are doing that.

Is that true Earth? Or you may not

be able to say who the company is,

but we used to work with True

Earth, which was fun, but yeah.

Oh man, actually name it might be.

Yeah, no worries. But yeah,

this is one of those things.

I know we were talking

about simple, modern,

I was talking about that on another

podcast, one of the founders there,

and they're manufacturing some of their

stuff now in Oklahoma where they're

based, they still get most

of their products from China,

but they're manufacturing a lot in

Oklahoma now. There's some benefits,

right to speed and cash flow and m OQs

if you're manufacturing here and things

like that. So yeah, unit costs

could be higher in the us,

but maybe it's more cashflow

beneficial to you to manufacture.

Here. With manufacturing, everything's

getting more and more automated too.

So a lot of stuff like flexion injection

molding is more or less just get a

mold, a machinery, one guy

knows how to program it.

Yeah, yeah. Pressing buttons at

that point, right? I know. Yeah,

totally makes sense. Well,

Jim, this has been fantastic.

This is one of those things where I'm

glad now that people are getting serious

about their supply chain.

I think anytime you can find

margin in your cost of goods,

that opens up opportunity for you to

grow and has been more and marketing or

just to profit more, and so painful time.

But I think the best operators are

going to come out ahead during this.

And so Jim, for those that are

looking at moving outside of China,

how can they contact

you and Cosmo sourcing?

Yeah, so yeah, you send to my direct

email, which is jim@cosmosourcing.com.

You can get the spelling

back there, sander.

And our website is cosmo sourcing.com

or just Google Cosmo sourcing.

We come up first. Yeah.

Awesome. I'll link to everything

in the show notes as well.

But if you've got questions, chip

is a really smart guy, good guy,

knows what he's doing. He's

worked with some of my clients,

people that I know trust him and so do I.

And so reach out to Jim

if you have questions with

that, Jim, good luck to you.

Congrats on your amazing

timing and predicting the

future that one day there'll

be massive tariffs on China or

we want to be moving out. So.

Absolutely.

Kudos to you on that and

keep doing good work.

Great. Thank you. It's

a pleasure being here.

Awesome. And thank you for tuning in

as always. We'd love to hear from you.

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Share this podcast with someone that

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