The concept of Offshore manufacturing or Offshoring refers to the relocation of the production or assembly of goods to another country.
It is worth noting that when a company establishes a subsidiary in a foreign country to produce goods that will be sold in that country it is not considered ‘offshore manufacturing’.
The Offshoring process can be performed by a subsidiary of the same company or by a new foreign provider.
“Nearshore Manufacturing” or “Nearshoring” differs from “Offshore Manufacturing” in that the foreign manufacturing location is closer to the home country.
These regions are considered to be ‘Nearshore’ for the United States: Central America, South America, the Caribbean, Mexico, and Canada.
The arrival of the COVID-19 pandemic in 2020 uncovered the vulnerability of the supply chain and the challenges resulting when the goods and/or parts or materials needed are imported from far away countries. This disruption has generated immediate interest in nearshoring. Companies in the US are rethinking their sourcing strategies and are coming back to the Americas looking for shorter lead times, lower freight costs, and stability in duty tariffs.
According to the Office of the US Trade Representative, Mexico is the largest ‘nearshore’ US trading partner with $614.5 billion in total trade in 2019, from which 58% are imports of manufactured goods such as vehicles, machinery, optical and medical instruments, etc.
Most of these imports are manufactured using the advantages of ‘nearshoring’.
Nearshore Hub: Central America and the Carribbean
Attracted by the proximity to the US and low labor wages, labor-intensive industries such as apparel and textile products, medical devices, electrical components, etc., have made Central America and some Caribbean countries (i.e. Dominican Republic) their home for manufacturing, especially for quick response manufacturing.
In 2004 the United States signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with five Central American Countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic. This treaty made these countries very attractive to manufacture goods bound to US consumers.
If your business is looking into nearshore manufacturing in any of the above countries, at Promptus you will find the help you need to navigate the export and import processes! Our team is highly qualified to help you understand rules, tariffs, and regulations. We can also help organize transportation and freight forwarding solutions to ensure your goods travel safely to and from their destination country, regardless of size! Contact us today to get a quote for our services.