Stuck In Customs - and getting schooled on Chinese Export Laws

We've recently had another minor set of setbacks to the OpenBeam Kossel program, and to some slight degree, the OpenBeam product line in general.  We now have 3 shipments with clearance delays and 1 shipment with more serious issues.

Customs clearance delays is one of those risks in businesses that everyone just accepts. They can happen for a wide variety of reasons - your cargo container can just be lucky enough to be flagged for X-Raying - no different from a random TSA search.  Except, depending on the port of entry, X-Raying a container can take anywhere from days to weeks.  Another risk with ocean shipping is that the captain of a cargo ship has every right to scuttle containers off his deck to preserve the life and safety of his crew.  Watch the video below of a container ship navigating the Pacific Ocean during a storm and watch how the ship twists and bow.  We buy insurance on every ocean shipment and just hope that our number doesn't come up.

In our case though, we are finding a very consistent reason for the delays:  Our shipments contains either ball bearings, or mentions ball bearings.  Apparently this is enough to cause all sorts of additional paperwork.  

These delays are annoying, because they throw off our schedule and we are already trying hard to play catch up.  (In the case of the DHL shipment shown above, it contains all the production hardware for the Kossel.  I have been hand machining parts to build prototypes, but this is not feasible for production, obviously.  They also contain the ball bearings used in the ball joints - each Kossel contains 48 ball bearings in just the ball joint linkage itself).  

But perhaps the biggest lesson that we've learned, is the export troubles we have in bringing our latest shipment of linear rails (and glass plates, power supplies, etc) over from China.

Early on in the prototyping process, our friends at Western Tool and Mold were doing us a huge favor by helping us with some cargo consolidation.  My Dad would help me order my engineering sample parts, arrange for delivery to Western Tools.  Western Tools would hold them until I have enough parts, or when I have an order heading towards Seattle, and just drop the parts in.  That's how Johann's first Mini Kossel prototype was built; I essentially called in a favor and managed to find reasonably priced linear rails and other goodies.

Obviously, this process isn't sustainable, so I've asked a friend of mine who runs a contract manufacturing and optical instrument business in China to help with managing the domestic Chinese supply chain.  (Eventually, they will also be kitting the subassemblies, as well as take over the OpenBeam packaging business).  In an attempt to save time, we ordered all the components and had them shipped to our friend in Fuzhou, China, while we were hammering out the trade agreement.  We figured that once we have everything collected, we'll call Expeditors and handle the ocean shipment much like how we handle our regular shipments from our other suppliers now.

Turns out, due to the way tax laws work in China, it is very problematic for that shipment to leave.  Exports have to be declared (as the companies that export have to pay taxes).  Long story short, because my friend's company didn't purchase the parts, they can't declare the export (because at the end of the year when they are audited, there will be no corresponding money trail to support exporting the materials in question.  And without the export declaration, we cannot use a freight carrier like Expeditors.  

To get around the restrictions, we are going to break the packages up so that they fall under the "Small Parcels" guide line - individual shipments, each under $2500.00, and ship via a courier service such as DHL or UPS.  An expensive lesson for sure, but at least it'll get the parts here faster.  (IE:  we originally budgeted and scheduled for ocean freight, there will be no schedule impact because of this).

Image courtesy jangosteve.com

Image courtesy jangosteve.com

So, how have we been dodging this bullet all this time?   Most of these sellers we are buying from are small Mom and Pop shops.  None of them speak English; most of them don't even have English named banks that can accept TT or a Western Union payment.  They've been using a myriad of small parcel services in China to get their goods across the border into Hong Kong (which is a free port and has no trade restrictions).  We've had a couple of isolated incidents where the selected courier service will only deliver to the ground floor and we had to bribe the delivery personnel to deliver the goods upstairs  (Western Tool's entire factory is in an industrial building, 8 stories above ground.  How they got all their machinery up in there is a story for another day).  

Moving forward, our supply chain consolidation will have us buying parts through our friend in Fuzhou, so this will not be an issue.  By kitting the components in China, we will also be importing a completed product, which we can classify under "Hobby, Toys and Models" category, and avoide some more customs headache.

It's been a long, long road to get here.  I'll just be glad to be back to doing engineering and building printers instead of looking up HTS codes.

-=- Terence