Duty drawbacks

Fleischmann et al. (2006) provide a global production network planning model used at BMW that extends the simpler load planning model proposed by Flenrich (2002). The model is a multi-period, multi-product model with an objective function that maximizes the pre-tax net present value of the network. It includes decisions on product-plant allocation, production volumes, material sourcing volumes by supply region, structural and product-specific investments and use of overtime capacity. A major contribution of the model is the incorporation of the time-distribution of investment expenditures typically observed in automobile production networks. While tariffs are included in the transportation costs, the model does not consider further aspects of international trade such as currencies, duty drawbacks or local content rules which play a major role in practice. 

Kouvelis et al. (2004) present a relatively simple multi-period MILP plant location model for global production network design with investment decisions only allowed in the first period. The production system consists of component-dedicated manufacturing sites and final assembly sites. It is limited to two production levels and one final product. The objective function maximizes the NPV of the production network. The main purpose of the model is to analyze the effects financing subsidies, tax regimes, tariff structures and local content requirements have on optimal network design. The analysis is based on theoretical considerations and a numerical example. More complex aspects of international trade such as duty drawbacks are not considered. 

Duty drawback in Switzerland due to re-export in different condition... 

Equation (3.47) calculates the tariffs that have to be paid for import of raw materials. Duty drawbacks are considered by charging tariffs only for raw materials required for production of intermediate (second line) and finished goods (first line) that are not re-exported. The amount of intermediates not re-exported is adjusted for those intermediates that are transformed into goods subsequently re-exported at the same site. The formulation rests on the assumption that only one raw material source is used per site and that if a required intermediate is available locally the local source is used. Prices are converted from the currency used by the raw material supplier to the currency of the consuming site. Same as with the valuation of finished goods for tariff calculation the full transport costs are included in the tariff value of the raw materials and intermediates. Import tariffs for intermediates imported from another site are calculated in equation (3.48). The formulation differs from the one for raw materials because the source of the intermediates is not predetermined and the transfer price does not contain transportation costs. The net volumes of the intermediates which are not re-exported are calculated by subtracting the quantities contained in exported products from the total quantity imported. A non-negativity constraint sets the value to 0 if the respective intermediate is not imported from site s. ... 

If the final product is re-exported, a duty drawback can be obtained and hence the unit production costs have to be adjusted accordingly. 

In a recent article Oh and Karimi (2004) explore the effect of regulations (bilateral and multilateral international trade agreements, import tariffs, corporate taxes in different countries, etc.) on the capacity expansion problem. They point out that barring the work of Papageorgiou etal. (2001), who explore the effect of corporate taxes in the optimization of a supply chain for a pharmaceutical industry, very little attempt has been made to incorporate other regulatory issues in the capacity expansion problem. However, they point to other attempts in location-allocation problems and in production-distribution problems (Cohen etal., 1989 Arntzen etal., 1995 Goetschalckx etal, 2002), which include tariffs, duty drawbacks, local content rules, etc. for a multinational corporation. 

Oh, H.-C. and Karimi, I. Global multiproduct production-distribution planning with duty drawbacks. AIChE journal, 52(2) 595-610, 2006. 

Duty drawback and duty avoidance are worth modeling. Shown are three ways to take advantage of import duty relief. When printers imported from China enter Europe, a duty of 4.9% is due. Europe also imports LCD displays from Taiwan and motherboards from the United States to manufacture laptop PCs which it exports to Taiwan and the United States. Laptop PCs with printers are exported from the United States to BraziL Because the printers from China went through Europe and were ultimately shipped to Brazil, they are eligible for European duty drawback for re-export in the same condition. Usually the same printers imported into Europe from China need not be re-exported to Brazil they need only be fungible, that is, equivalent. Europe imports LCDs from Taiwan, then re-exports them to Taiwan in laptop computers. It avoids the 4.9% LCD duty due in Europe because of re-e x>rt in a different condition. The LCDs reimported into Taiwan also create an opportunity for duty avoidance for domestic goods returned in different condition. 

Issues related to international operations such as duty drawback and duty relief are also considered. The objective of the problem is to minimize weighted total costs and cumulative production and distribution times. The problem is formulated as a MIP and solved using techniques of elastic constraints (which may be violated at a given linear penalty), and row factorization. It is reported that the results of this study saved DEC over 100 million. 

Duty drawback credit for a product imported into a natirai-gioup from another nation-group and re-exported in the same condition/ different condition... 

Because of low costs in component manufacturing and assembly, most companies prefer to locate these two major processes in the EE. However, to hedge against supply side risk, they may choose to import some of the components from ME at higher cost (Blanco 2009). By assembling the imported components in EE and exporting the finished products to the ME, the manufacturer can take advantage of economic incentives such as the duty-drawback and local-content rules in EE. On the other hand, if the company chooses to use locally produced... 

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