Posted on 05/13/2013 7:35:50 AM PDT by Rio
According to a company with a vested interest in the situation, the newly imposed federal excise tax on medical devices is having an unfortunate consequence—relocation of manufacturing from the United States to Mexico. It's not a tax dodge—the tax still has to be paid. Moving to Mexico is a way to cut costs, according to an outfit called Co-Production International, a California company that is glad to help companies make the move.
"We've seen a dramatic increase in online and personal inquiries from medical device manufacturers since the tax went into effect in January," says Enrique Esparza, president of CPI. "Mexico has always offered the better alternative to overseas production, beginning with unbeatable proximity to North American markets, our low-cost & highly technical labor force, to our pro-business environment and the no-tariff NAFTA [North American Free Trade Agreement] provisions enjoyed by Mexico, the U.S. and Canada. It's no surprise the 'Mexico option' has moved to the top of many international manufacturers business plans as they now face a 2.3% increase in the cost to sell of their products due to the (Affordable Care Act) going into effect."
Adding insult to injury, the company has even come up with new jargon to describe the trend—near-shoring. No, it's not offshoring, or reshoring, or onshoring—it's near-shoring.
As I have written in the past, the American medical device industry has been in a two-to-three-year-long drive to adjust to a new business world. The recession of 2008-2009 reduced demand and efforts were in place to dramatically reduce costs before passage of the Affordable Care Act of 2010.
The Affordable Care Act will accelerate those trends. Medical costs in the United States have been a drag on the economy and need to drop. Medical care also needs to become more affordable and more accessible.
“What difference does it make?”
These products are already made by mexicans.
Another industry looking to cash in on the third world labor markets. It’s not cause and effect, it’s lobbying by interests to enact crazy regulations as an excuse to off-near shore. Most people don’t believe that companies actually lobby for more beauracratic red-tape just so they can use it as an excuse to farm out all of the work to china, india, and central america, solely to maximize profits. Like I said before, how can you compete against slave labor? Is your job, business, intellectual property, or livelihood safe from this? No it is not, unless you can buy the right politician, and only for a limited time.
In fairness to Obama (and I can barely believe those words just passed my lips...)these companies likely would have moved production to Mexico at some point anyway.
If I had a 100 million dollar company that made some sort of medical device, could effectively move it "nearshore" (or whatever) to Mexico without compromising quality, and would save 2.3% ($2,300,000), or a fair bit of my yearly profits ......why wouldn't I?
Or, to look at it another way....Remember that companies don't really pay taxes, they just pass them on. Why ask my customers to absorb the additional charges?
In this particular case, I don't blame the companies for playing by the rules, I blame the government for setting up ridiculous rules to begin with.
And this tax wasn’t on profits it’s on sales so it’s even more onerous.
Even better. Purchase a giant parcel of Mexico that abuts the U.S. border and build a gigantic wall ALL the way around it with seriously armed guards on top. One entrance directly into Mexico and one entrance directly into the U.S. Inside: the largest, most modern, best equipped medical “spa” in the world.
Sell pre-paid “spa” memberships, with medical care thrown in for free.
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