AR-1 export to China

fara

AR-1 gyro manufacturer
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Hi All:
So we are next week shipping 3 aircraft to China by air shipment (folding mast and a tail junction allows that and reduces shipping time to days rather than months).

Here are some interesting tidbits.

1) Shipping cost by air to Shanghai is almost the same as shipping via 40 foot container. The extra cost is making the metal framed crates and re-assembly
2) The Chinese government collects VAT (Value Added Tax) at 18% or so while you clear customs even if you are a company to resell there. They take their cut right off the top. Even Chinese manufacturers who make things there have to pay VAT as soon as they finish the product and it goes into inventory.
3) But if you were a Chinese manufacturer and had a PO from the US to build something, you do not then have to pay VAT on that and then when you show the (Chinese) government that you finished and shipped/exported items on that PO, the (Chinese) government will kick you back 18% on the back end for exporting to the US.

HOW IN THE HELL IS THAT FAIR TRADE????

You could make something and sell it at cost and make 18% margin.
No wonder all these businesses put factories in China. Of course this can't be sustained once their currency opens up for too long.
 
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AirCommandPilot

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I'm glad people are starting to see these "fair trade" laws we have are B.S.!
 

Rehan K.Janjua

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Congrats Fara
Glad you are getting closer to the main trade. SilverLight International.
Specially US made product still carries its weight. Made in USA means a lot.

Currency has been opened and has sustained since decades by now, perhaps too long for the Americans to realize. Go for it, China is it.

Just trade, when in Rome do what the Romans do.
Wish you all the success.

Best Regards.
 

fara

AR-1 gyro manufacturer
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Congrats Fara
Glad you are getting closer to the main trade. SilverLight International.
Specially US made product still carries its weight. Made in USA means a lot.

Currency has been opened and has sustained since decades by now, perhaps too long for the Americans to realize. Go for it, China is it.

Just trade, when in Rome do what the Romans do.
Wish you all the success.

Best Regards.
Hi Rehan:
Do you mean that Chinese currency is no longer manipulated by Chinese government? I thought they still hold a pretty close control of it and keep it somewhat artificially low to encourage exports.
 

chrisk

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Hi All:

3) But if you were a Chinese manufacturer and had a PO from the US to build something, you do not then have to pay VAT on that and then when you show the government that you finished and shipped items on that PO from the US, the government will kick you back 18% on the back end for exporting to the US.

HOW IN THE HELL IS THAT FAIR TRADE????

You could make something and sell it at cost and make 18% margin.
No wonder all these businesses put factories in China. Of course this can't be sustained once their currency opens up for too long.
Looking up VAT and China I found
D. VAT refund for exporters
In case of 0 rate applicable to the exported goods, the exporters may apply to the tax authorities for the input tax refund on those goods exported. At present, the refund rates consist of 3%, 5%, 8%, 13% and 17%.

So, it sounds like you would get taxed on the input side, and a refund on the export side. On the other hand if I am wrong, you may have found a good market for a final gyro inspection.
 

EdResnick

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Congrats Fara
Specially US made product still carries its weight. Made in USA means a lot.
I have heard this too from Chinese people (in China). Generally speaking, American or European products are regarded there as much higher-quality than Chinese, for obvious reasons often.
 

DavePA11

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Don't you also have to have China rep inspect your manufacturing facility? Interesting how they steal production and design information so they can make the product in China.
 

Fly Army

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So I guess we'll be able to buy Chinese AR-1 clones soon for about 30% cheaper ? ;)
 

fara

AR-1 gyro manufacturer
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Talking to Darin Hart (CEO of American Legend Aircraft Co) who actually co owns a factory in Bejing, it does seem true about the kick back on export. Darin's factory there actually makes fuel tanks for fuel trucks and also does Aluminum extrusions etc.

Chinese AR-1. I don't know about that. The only thing you can save in China is labor. As your volume gets a bit higher and your processes and travelers mature a bit, the labor cost is a certain percentage of the COGS anyway. There is no way it can amount to 30%. BtW Chinese labor cost (good skilled manufacturing labor) is almost the same as labor cost in Eastern Europe like Hungary, Poland etc. The kick back is nice though but how long can it continue. It's not sustainable and Chinese economy is slowing down after their real estate development bubble started bursting. I saw full sky scrapper towns there that seemed almost deserted. Hardly anyone was there. Very few people.
 
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