Rethinking China: How Manufacturers are Analyzing Right-Shoring to Consider the Benefits and Costs of a Shift in Supply Chains

24 March 2021 Blog
Authors: Kathleen E. Wegrzyn Stephanie M. Cash
Published To: Coronavirus Resource Center:Back to Business Manufacturing Industry Advisor

Even before COVID-19, companies were considering whether China continued to make sense for their offshore manufacturing operations. The U.S.-China trade war caused a sudden and substantial increase in the cost of imported Chinese goods, which catalyzed a shift in U.S. supply chains away from China and toward other countries. In 2019, the total manufactured goods imported to the United States from low-cost countries in Asia (including China), as a percentage of U.S. manufacturing gross output, declined for the first time since 2011. This decline is attributed to reduced imports from China and appears to be correlated with the ongoing U.S.-China trade war.

The global COVID-19 pandemic accelerated and compounded these trends by exposing additional supply chain vulnerabilities. Chief among them was an overreliance on a single, primary source of supply. As some observers correctly note, companies that previously diversified their international supplies in response to the U.S.-China trade war were better positioned to mitigate the effects of the pandemic. But, when a company decides to reduce its reliance on China, where does it go?

To determine the right mix of geographic locations for its operations, a company might engage in a “right-shoring” or “best-shoring” analysis, in which a company assesses the most appropriate and effective geographic location or locations for its processes. Right-shoring is a fact-specific analysis driven by commercial, operational, tax, legal, and regulatory conditions in that company’s industry and for that company’s particular product. Click here to view Foley’s Accelerating Trends: Assessing the Supply Chain in a Post-Pandemic World including more on right-shoring and considerations for rethinking China.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services