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The current China trade tariff threats have the entire e-commerce world up in arms and seeking solutions to undercut some of these rising costs. Today’s guest has a perfectly legitimate way to avoid tariffs and import duties for merchant-fulfilled retail models. Bobby Armijio’s company, Baja Fulfillment, offers logistics that help clients shave costs in the fulfillment supply chain.
It’s so simple in it’s execution that it is almost too good to be true.
Third-party logistics solutions in Mexico allow retailers selling B2C products to avoid tariffs and duties in the USA. These retailers are shipping to US customers from Mexican warehouses, where they avoid tariffs on goods that cost less than $800. This is an important episode for the e-commerce business owner looking to increase margins in their supply chain as well as for any buyer seeking an easy and attainable bump in equity.
- Bobby describes the framework of Section 321 and the IMMEX laws.
- Where the savings comes into play for the e-commerce retailer.
- Why FBA cannot work with this tariff saving model.
- Normal e-commerce fulfillment vs Baja Fulfillment.
- Bobby walks us through the process step by step.
- Other logistics and fulfillment services Baja offers.
- Average savings per client.
- The three hard costs of fulfillment.
- Why the model is almost too good to be true.
- How Bobby’s services can kick the can down the road on some duties and increase cash flow for retailers, even FBA.
Joe: Mark, who are you going to vote for the upcoming auction? No, don’t answer that question. If somebody promises that this whole Chinese tariff thing will end, will you vote for that person? Now don’t answer that question I know what you mean. We don’t want to tell people what you mean for that.
Mark: We’re going to get like an explicit rating on iTunes if we start and go ahead in politics so let’s not do that.
Joe: Let’s not do that at all. I got to tell you these Chinese imports, the stock market, people’s emotions in the Internet world and e-commerce world when they’re importing; everyone is dealing with that and actually beyond e-commerce. I had a good friend that sells products to Lowe’s and I’m telling you these companies that are manufacturing, they’re talking about how to move their manufacturing facility out of China to another country so that they can import without tariffs. And then they got to say wait a minute these tariffs may not actually happen and when you know and how do you do it and it’s a royal pain in the butt and everybody is up in arms about it. So if anybody of presidential status is listening; I’m sure you’re listening to our podcast, settle it down, get it done, move on so that we can all rest a little bit better at night. So with that said you’ve got someone that actually has a loophole of sorts; a perfectly legitimate way to avoid tariffs when importing from China. And you had Bobby on the podcast, right?
Mark: Yeah, that’s right; Bobby, and tariffs and import duties as well here.
Mark: Totally legitimate, completely legal, 100% on board, the bad news is if you’re doing FBA probably it’s not going to work for you. But if you’re doing self-fulfilled e-commerce it will work for you and it will save you an absolute bundle of money. And for buyers out there looking for what’s my angle like how can I buy a business and make it more profitable? Pay attention because here is an immediate way that you can make your business more profitable by using this method. A pretty simple set up in theory, in practice it’s much more difficult to do. And Bobby is going to go into what they do. He’s part of a 3PL so we do talk a lot about the services 3PL provides but what I really wanted to get at is how does this work where we can avoid these duties and these tariffs. And the analogy that he used; or not even analogy, the example he uses when he go to an airport you’ll often see duty free shopping, right? You’re able to buy a bottle of liquor and not pay any duty or import fees on that and so you get good deals. Well, the fact is the government has said that if you’re bringing in consumer goods less than $800 across the border it can be brought in without duties or tariffs. That’s fantastic. So what do they do? He’s down in San Diego, they have a fulfillment center in Mexico, they receive everything in California then bring it down to Mexico, they do all the normal 3PL stuff that you would have done any other way, and then they ship it out from Mexico and it’s duty free, tariff-free, immediately introduces a significant savings for anyone that’s doing e-commerce. Now again the logistics of these are more complex. We get into it a little bit. I mean we’re talking about on the trucks some inspections and everything else that has to be done. It’s definitely a specialized service but one of those low hanging fruit areas that if you have an e-commerce business where you’re doing your own fulfillment or have a warehouse where you’re going through fulfillment it’d be silly to not look into an option like this because it’s a no brainer.
Joe: Like you said for buyers as well if you’re looking for a bump in equity; you buy a business and you make improvements like this. And if all you are adding is $20,000 to the bottom line but you bought the business at a 3 ½ time multiple you just added $35,000 on to the overall value of your business. It’s instant equity just a ton of different little things like this. So I’m really excited to listen myself on this one although honestly, I like listening to my own podcast more than you and I know Andrew Youderian feels the same way; shout out to you Andrew thanks for listening to me more than Mark. I appreciate that. Thanks so much. One more thing I wanted to say for folks that are event bound, we’ve got a couple of events that we’re coming up to. Hopefully, this is going to air before both of them but the 1st one is the ManyChat Event. Mark, you know more about that one than I do because you booked that one. That one is going to be September 13th through the 15th in Oaks Lake. It’s going to be attended by Walker, Brad, Chuck, and Chris Moore who is our director of content. Where is that one going to be? Is it Austin?
Mark: I believe that one is Austin. And people who know ManyChat it’s a bot service so this is a company-sponsored conference but it looks absolutely phenomenal. I’m excited for this event. It has a good lineup of speakers as well. So we are going to be there and I figure we’ll meet some clients down there as well. So if you’re going to be there or if you just are in the Austin area around that time let us know.
Joe: Yeah definitely reach out to us; we’d love to get together. Again it’s going to be Brad, Walker, and Chuck that attend. And then the following week we’re going to be at Brand Accelerator Live which is Scott Voelker’s conference. His 1st one and it’s going to be the 18th to the 20th. I’ll be attending that along with Walker, Brad, and Chuck, and our new broker that we haven’t talked about yet. And we’ll just drop the name here and then we’ll move on to the rest of the podcast but Chris Guthrie; a well-known name in the industry. He’s been buying and selling websites. He has his own podcast. He’s a friend of Quiet Light; he has been for years. He’s the newest member of our team. And we’ll have him on the podcast shortly as well.
Mark: Yeah I’m super excited to have Chris on the podcast. Alright so why don’t we get into the episode this week. Let’s talk about duties and tariffs. This is a really specialized episode. It’s not going to be as wide-ranging as some of the topics we cover but hopefully extremely useful.
Joe: Let’s go to it.
Mark: Alright, Bobby thank you so much for joining me. I’m excited to have you on. We had Nathan from Sourcify on. I don’t know when that episode aired compared to this one but probably about a month ago on our real professional podcast here. We have our production schedule, it’s hanging up my wall. No, it’s not. He had mentioned something in that podcast about duties and importing into Mexico to avoid some of these duties and tariffs and I found it really, really fascinating. It was an interesting tidbit in there. And then he introduced us and I think we’re going to a good conversation today. You’re with BajaFulfillment.com, tell us a little bit about what you guys do at Baja Fulfillment and then we can get into probably right away let’s get into this idea of how can we cut out some of the cost with duties and tariffs. But let’s start out with a background on you and your company.
Bobby: Sure. So I have a finance background. I owned a financial planning company for 15 plus years. I got involved in e-commerce some time ago. I realized the opportunity not only in sales online through e-commerce but through my friendships and partnerships and clients; in particular, John Borsini who’s the managing partner of the company. It’s a lasting set up in Mexico. He is experienced in importing goods from China for the last 30 plus years. He had like the perfect remedy to take advantage of the Section 321 so least we partnered up and are partners in the company; two partners in the company in order to basically match up e-commerce companies that need to take advantage of fulfillment across the border in Mexico as well as avoid those duties and tariffs as best how it’s upon the idea of that being said Baja Fulfillment is truly directed across the border. I’m in downtown San Diego right now about 20 minutes to get to our 3PL facility in Tecate, Mexico just to give you an idea. So I think a lot of people when they think we’re a fulfillment they think it’s Mexico based or something really far and it’s literally down the road. Sometimes it may take me longer to get to Northern San Diego than it will be to our facility in Tecate, Mexico.
Mark: So you’re crossing the border what; daily, weekly?
Bobby: I’m crossing the border only when I need to or let’s say bring down a company to tour the facility [inaudible 00:08:56.2] take advantage of this 321 savings we’ve got to be able to talk about. But I’m only down there from the showings to clients of the facility typically.
Mark: Okay, yeah, that makes sense. Alright, you’ve raised throughout the buzzword here; Section 321. It sounds like a countdown. It’s not a countdown. It’s just kind of random that that’s what it is. What is Section 321?
Bobby: Sure. So Section 321 or Article 321 is a rule that allows us as citizens to bring in up to $800 of goods per person per day from overseas of any country. And in particular, this is really important for those that are manufacturing in China because of all the punitive tariffs and the heavy duties in a lot of the categories that people like to buy online. So that being said Section 321 again allows us to utilize that rule to bring goods into the US without paying those duties in the States. And for e-commerce companies, it’s obviously a pretty big deal.
Mark: The way you described it to me just before this podcast hit record, you go to an airport and you can buy something duty-free; no taxes or anything else, and the limit you said is $800. A person can buy up to $800 and bring it across the border?
Bobby: Yes that is the rule. It’s $800. It used to be $200. It was raised in 2016 to $800. So that’s important to know so for e-commerce companies specifically letter B to C because most of the companies that I know that I order from online and I would say about 90% of those companies that exists if not more have an average order value of less than $800.
Mark: Right. Yeah, that makes complete sense.
Mark: Help me through this.
Mark: So a couple of questions; first of all where are we putting the dollar amount? Is it retail value or is it wholesale value?
Bobby: I’d scratch retail value.
Mark: Alright, and then in order to do this you have to be doing your own fulfillment from the Mexico location?
Bobby: Yeah so I’ll walk you kind of through what a normal e-commerce company is probably doing today and the only difference if they’re utilizing a company like Baja Fulfillment in rerouting a container. So what it looks like now is we had a big event yesterday. We had some customers down; potential costumers I should say. Let’s take one whose an apparel brand. They’re a performance apparel brand. Performance apparel, in general, is going to be in the highest duty category without the punitive tariffs. So even if those get negotiated away which I know some people are really hoping that that happens and maybe it will, maybe it won’t; that’s fine. But the duties that people are used to paying before all this Trump punitive tariff stuff, that’s not going anywhere. So let’s just apparel again; specifically sports apparel. They’re paying about 33% on most of their garments in duties and that is on the cost of the good. So if I buy a pair of hands like a performance pair of pants for $100 retail they’re probably paying $30 cost in China to get that made. I’m just assuming something like that. If they’re paying 33% duties on that $30 cost, there’s about a $10 fee that they got to pay just to get that pair of pants into the US.
Bobby: So what they’re doing now is; what they had been used to doing is ordering let’s say 10,000 pairs of pants putting it to a container, bringing that container overseas, and let’s say it’s going to hit the border of Long Beach, that container is then picked up by their trucking company and sent to their 3PL in the US. Once that container hits 3PL in the US it’s unloaded, racked and binned inside that 3PL that they’re paying currently to do their pick and pack. As those daily orders come in, those orders are boxed; picked, packed, boxed, labeled, and shipped out to their customers every single day. But remember when that container hit the port in the US they had to pay their duties and their tariffs to release that container. That is an ideal we’ll never see again. That’s what most companies are doing today. The difference is and how do you take advantage of the Section 321 is we still; we don’t interrupt the supply chain whatsoever. You still have your same manufacturer, you still have all retail factories, the only difference is when that container hits the port; this is really important to understand when the container hits the port we pick up that container with a trucking company in bond; with a bonded carrier. So the bonded carrier thanks that container but it doesn’t actually clear customs so there’s no duties paid. There’s no tariffs paid because it’s picked up in bond by a bonded carrier that same day brought down to our Tecate facility which again is about 2 ½ hours from Long Beach. That container is brought into Mexico; but remember we’re crossing countries now, right? It came from China, we didn’t clear customs in the US but we have controlled the container. We brought it into Mexico because of our Maquiladora License which is very critical to understand. Because our Maquiladora License; our agreement allows us to bring goods into Mexico without paying it within Mexico now. So then we take that container, we take it to our 3PL, unpack it in the same way we would in a domestic 3PL here in the US. It’s racked and binned as does the other e-commerce orders are coming in as same as 100 orders that day. Those 100 orders are individually packaged, boxed, and labeled for individuals. And as long as the average order value is less than $800 it is put on a specific truck for Section 321 crossing back into the US for less than $800 per package. So that’s how you get around paying the duties and the tariffs legally.
Mark: Yeah what sort of oversight or auditing gets done during this process? I mean you’ve described a fairly complex process that needs to be followed by the rules, and I’m sure in practice doing it is probably not as complex as make it may sound just on the surface. What sort of oversight do guys have to deal with and what sort of problems are retailers experiencing if any with this?
Bobby: With the program [inaudible[00:14:56.0] program?
Bobby: The big challenge that we have if I would call it that is I think people want us to solve the duties for all of their items; in particular wholesale, in particular, FBA or Fulfilled by Amazon. You can’t avoid the duties if you’re bringing stuff back from Mexico into the US and it’s over $800. So if you want to ship to an FBA fulfillment center that wouldn’t qualify. It’s only for the B2C. So I think that’s a challenge if any from an understanding more than a national execution of a strategy because it is. That’s the rule. We brought in customs brokers, customs agents to sign off on this. We’ve done our research over the last several years so it’s not something that we just caught up lately. We’ve had that Maquiladora License for 19 years. We’ve had the factory down in Mexico for 18 years. We started out as a t-shirt screen print facility. So we’re bringing goods into the US and bringing it down to Mexico without paying those duties for the last 2 decades.
Mark: Wow, and now; you start outside of e-commerce, right? You were working and doing fulfillments for some pretty large companies that were utilizing this.
Bobby: Yes. So we still have our own brands personally; not e-commerce but more so in retail stores and we still have a very robust t-shirt operation; the screen print operation. We have the capability and capacity to print out about 50,000 shirts a day. So a quarter-million units a week we’re able to do at our facility still. Which kind of happens to be; not to make this a commercial but it kind of happens to be a big value add for a lot of companies that come on board with us from the fulfillment standpoint just because they’re avoiding in some case millions of dollars in duties but also they already do t-shirts, make it and print it somewhere else or screen print it somewhere else so it’s nice to have it right get walked over for one section to another and put right into their stock.
Bobby: But yeah that’s where we got starting again with our own brands that we still have. And we also do licensing and printing and one of our big flash hit companies is Funko. They’re a billion-dollar public company. They didn’t even have an apparel line until they were sort of working with us.
Mark: That’s great. What I love about this is I know a lot of people listening to this podcast have some goal or some mindset to buy an e-commerce business. Now granted a lot of them are doing FBA and does a selling that works, in that model you can’t do FBA. But if you’re going to fulfilled by a merchant this is one way to juice that ROI on the acquisition very quickly because they’re cutting out significant cost. What are we looking at; I mean you broke down one category, but on average what sort of savings are you guys seeing for people that are using this Mexico routed fulfillment chain?
Bobby: Sure. So it’s funny because this is a conversation I started having about a month ago when I was bringing down some customers that in my opinion were the perfect fit; their e-commerce business was like the exact fit and I could see a little bit of hesitation for one reason or another. Whatever it maybe I think the bigger one is people just want to make sure that it actually works. We’re doing it for several companies and have been for a while so it does work and we’re not the only one doing it. It’s not something we created. It’s being done right now. We have competitors. I just think we’re the best. But when I started to see people hesitating I thought to myself like for one I’m putting them in the not so smart category just because why would you not want to save 70% of your duties especially if we’re talking being able to save in some cases millions of dollars a year. That’s true bottom line profit. But I started thinking to myself why wouldn’t I start acquiring these companies that aren’t taking advantage of this? Buy it, reroute containers, have it fulfilled, and save 70% of our duties. I mean that is already that much more profitable and turn around and sell it. So from an acquisition or buy-sell; to me, it just seems like the proverbial no brainer. So I guess answering your question, a case study we did recently was on a performance [inaudible 00:19:11.1] company. They were shipping across with a quarter-million units a year. When I say units I mean actual units of goods, not shipments. And their savings is close to $3M. So they’re probably a $25M or $30M revenue company. That saves them about 10% of their gross revenue.
Mark: Wow. I mean that’s some significant savings that you’re going through there.
Bobby: It’s massive. The easy way to look at it; I’m sorry to interrupt but the easy way to look at it honestly is to look at either your past 12 months of what you paid in duties and tariffs, deduct 70%. That’s the new number you would be paying; that 30% number because there is a cost for us to implement that strategy. It’s going to be very specific. It’s got to be airtight. We have to have dedicated trucks etcetera that need to be only Section 321 that cross the borders. So there is a process; there is a fee for that. But the savings is massive. And so that’s the number I look at and if then you also forecast moving forward okay this is what we did last 12 months but we’re going to 2x our company, we’re going to be 3x our company in the next 12 months. Well, that’s a way to look at that. So make it from an acquisition standpoint I would like to look at all the companies that don’t take advantage of this and pick to buy them and resell them.
Mark: Yeah, absolutely. So anyone that is fulfilled by a merchant, if you’re doing fulfilled by a merchant or if you’re not on Amazon for that matter obviously that would be another option so pretty phenomenal. I love this whole topic of just general savings in general for your supply chain and your fulfillment chain because when you’re looking at a complex asset like an online business you have so many different moving parts and it could be a little difficult to find out where you should attack first to try and get more bottom-line profit. The Section 321 revelation, for me I love this and hopefully some people here that this is the 1st time they’re hearing about it. What other things can we look at here for optimizing the supply chain or rather fulfillment chain past; I mean this is your wheelhouse, this is what you do; where have you seen some easy wins for people?
Bobby: I want to backtrack just a tad too on the FBA because if you’re an FBA only business we’re not going to be a good fit. It doesn’t mean we don’t do FBA prep, we do. Honestly, I don’t know many e-commerce companies that are not some way selling at Amazon; you know very few. So we still do it. It’s just that if you’re only doing that we’re not going to be a good fit. So if you have like a 50-50 split, of course, and if you’re doing wholesale, absolutely. We have plenty of companies that had their own retail footprint as well as [inaudible 00:21:48.8] distributors and wholesale etcetera. So that still wouldn’t fall under that category of the Section 321 but anything B2C inside your guys just or I should say the e-commerce companies sales channels that would qualify. And we’re going to be cheaper on the FBA prep most likely anyway; less expensive. I just want to clarify that. And as far as supply chain thing like you are saying there’s nothing you can do especially if you’re being hit in particular backpacks, duffle bags, luggage. They got hit with that extra 25% duty or the punitive tariff that went into effect. So they are already in roughly I think paying 17% duties plus 25 so they’re in the 42, 43% category on their cost of good packs. So where can you go in your supply chain and say I need to reduce it by 25%, by 50%, by 70%? You can’t go to your carrier and get cheaper shipping. You can’t go to your manufacturer and say look I need you guys to cut my prices in half. It just can’t be done, right? So you’ve got to bite the bullet or you going to go out of business. Especially because you can’t raise your prices on your customer either in particular if you already sold the goods which would had actually happened on some kick-starter campaigns. Companies have done kick-starter campaigns. They have some big orders fulfilled. They bought it at 1 price, sold it at 1 price, and then the tariffs went in and those goods aren’t here yet. Guess what? They’re going to get taxed when they do get here. So from a supply chain standpoint, there’s not much you can do in order to be able to shave off that kind of money and this kind of savings. But from a fulfillment; leading back to your more recent question I guess from the supply chain standpoint on the fulfillment side the biggest savings again we’re going to move the needle the most in the Section 321 savings. That’s [inaudible 00:23:39.6] a lot of people is like look if you want to do fulfillment in Mexico and move your fulfillment to Mexico that’s not a bad idea because the cost savings on just a straight fulfillment; just Section 321 or excuse me just that pick and pack, it’s going to be about 40% less expensive. Because fulfillment has two real hard costs, right? Every 3PL has 2 hard costs; it’s real estate, the cost to warehouse it and then labor. So if we’re in Tecate, Mexico, and our labor we pay our workers well and we have I think 250 employees and our warehousing is a lot less than here [inaudible 00:24:14.0], of course, our pick and pack fees are going to be a lot less as well. So obviously it’s a win-win but that to me is the cherry on top. If I save people $0.40, $0.50, $1 a package on pick and pack great but if I’m saving them $7, $8, $10 per item in duties that’s going to move the needle for them. I just try to warn people about looking at are you going to save me $0.10 in the pick and pack fee versus what we’re really looking at is where is the needle going to be moved. So that’s what I really drive it home for people.
Mark: Yeah I know. In the whole supply chain argument when you look at it from your cost here and your cost there, I find a lot of people try and save their money in areas that are really relationship-based, right? They squeeze their supplier or they squeeze some other group. And you know Nathan was on the podcast, we talked about a little about how like inside of a bad situation where you squeeze that supplier and that supplier has to find another way to get their margin as well. And so it’s not that you should be overpaying for your products but keeping that relationship rich and making sure that you’re protecting them quite a bit can help your business. So find the areas where there’s not a relationship and no one here really has a relationship with the government, right? I think most people are just fine with us taking some savings on that whole process. Let’s talk about location; when I hear fulfillment, 3PL, I think middle of the country, right? How does being located in Mexico granted your stones throw away from the States here but how does that impact shipping times and the ripple effect that that would have on customer service and especially if you have an Amazon seller doing fulfilled by a merchant as opposed to FBA; what impact does that have?
Bobby: Sure. So we obviously have renegotiated rates with FedEx and we have a really strong program that has 3-day guarantee to the USPS anywhere in the country. And to be clear when we bring those items; those orders across from Mexico into the US, those packages and those orders that day for that company are dropped off at the carrier directly. We have a 10 AM as delay so service level agreement, right? If orders are in by 10 AM that order is coming from Mexico into the US that day and getting shipped that day. So it’s just as comparable as being in a domestic 3PL granted yeah I think some people believe that if have my 3PL right in the middle of the country right in Texas let’s say that’s going to be a good thing because then my East Coast and my West Coast are going to be split. But I can promise you that there is a major delay in getting that containers from the coast to the center of the country plus there’s a higher cost to do that. So whereas for us it’s a 2 ½ hour drive from the Port of Long Beach into Tecate, Mexico. And if our orders are coming over same day or even sometimes next day with 2 or 3 days guarantee there’s no real obstruction to the customer experience. All the returns go to our facility in San Diego if the customer chooses obviously. Some e-commerce companies prefer to do their own returns which is perfectly fine by us. But we have warehouses in San Diego too. That’s our pair company. But all the label shows shipped from San Diego. So that’s a really big detail that I think a lot of e-commerce companies don’t want their clients or their customers to know like was this shipped from Mexico. No, it’s not shipped from Mexico. It’s packaged and labeled in Mexico with the UPS, FedEx, or USPS label showing our San Diego address as far as return and where it came from. So that’s pretty critical to understand as well.
Mark: Yeah. How long have you guys been doing the e-commerce side of things?
Bobby: We’ve been doing e-commerce for 3 years. But we’ve been testing this out for 2 of those 3 years before we really launched it. Merely because we knew it existed and competitors have been doing this for a long time but we like most people I think we’re almost too good to be true. It’s like hold on; you’re telling me that if I’m paying x for my duties I don’t have to pay that anymore? And so we had a lot of test runs, we had a lot of brokers, agents, a lot of customers brokers coming to our facility and say are we doing this right way. And again it’s all in the code for what the rules are; it’s allowed. What they’re looking for is when people are doing fictitious addresses and names to try to get underneath that radar. But everything is already cleared [inaudible 00:28:41.9] prior to meeting our facility to go across the border in those daily trips. So our Section 321 specific trucks already have the criteria that are required before it even hits the border.
Mark: That is absolutely fascinating. Well, this is been enlightening, to say the least. How long; remember you said limit to $800 from 200, when was that?
Bobby: I can share some information on that as well.
Mark: Yeah that would be good. We can link to it in the show notes. But before that, it was $200 for history or how long has [inaudible 00:29:21.3] changed?
Bobby: I don’t know. It’s only gone up that I know of but the $800 limit is obviously newer. And actually this reminds me I want to talk a little bit about the FBA side for me to mention this but from a cash flow perspective a company will say I really want to avoid all my FBA or my wholesale or whatever my retail footprint so I got to send all my stuff too and the reality is we can’t. We’re following the rules very stringent; very stringent rules that we need to follow and so we’re not going to go around that. However, from a cash flow perspective, it does help companies because remember those duties are not due until I cross this back into the US. So that container comes from China into Long Beach the duties are due at that point, right? They’re not doing it and we bring them into Mexico. So let’s say that container habits for the B2C business the other half is FBA. Well, the FBA part won’t be due until we bring it back into the US from Mexico. So from a cash flow perspective, you can actually kind of kick the can down the road a little bit. So it does help. I think that’s a big thing. I got off my path sorry what were you asking me exactly again?
Mark: I actually don’t remember but the point that I would just piggyback on that I mean one of the number one problems with Amazon businesses specifically FBA is trying to guess the inventory levels properly; you know estimate them properly, and estimate how long lead time. So, in theory, somebody could use your facility as a holding service and kick that can as you said down the road on some of the costs of doing that. The objection in I mean you really have to look at how numbers play out for each business but in theory, you could ship that into your facility a little bit more than you would normally have and then only incur that extra cost from the duties once you move it into FBA. So that would be an interesting analysis just to see if you can smooth out that inventory issue that so many companies have.
Bobby: Yeah I mean we’re not in the business of storing inventory but it’s something that we have as a value add for our customers that do have the B2C business.
Mark: Okay. That makes sense. What haven’t I asked or what haven’t we talked about with this?
Bobby: Gosh I mean I think people are pleasantly surprised in understanding when they actually visit our facility. I think it’s important to know that again this isn’t new; big brands have been doing this for a very long time. Bose, Panasonic, they’re directly across the border in Tijuana. We are not in Tijuana. We are in Tecate in Mexico; big difference. And if you have been to Mexico you would know immediately the difference. Not to say Tijuana is bad but again Bose is there, Panasonic is there; two pretty big brands and they fulfill a lot it at Mexico. So I think that’s again important to know and I think it’s important know that these are the rules and this is the rules that we’re playing by. And I think it goes back to your question how often would the limits change; 200 to 800? If things were to change let’s say they go down to 400 or back at 200 again, I still think most companies don’t have an average order value of over $200. So I don’t expect that to go anywhere but if you did that just means anything of that value you pay duties. So I think with this is adding one of the other discussions I have quite often is competitive advantage. If you are a company working with us in a space that has a high duty or let’s say a high punitive tariff and you’re working with us importing 70% of those duties and tariffs and you have a major competitive advantage from a revenue standpoint if everything else is equal; revenue, sales, etcetera. Now you have 2 or 3 more million dollars to either allocate towards ad spend, R&D, a retail footprint. So if you’re not doing it to me again you’re putting yourself at a huge competitive disadvantage because we’re not talking about saving 0.5% in revenue here; it’s a big number.
Mark: Yeah, absolutely. Bobby thank you so much for coming on the podcast and sharing this with us. It has been again completely enlightening for me and I’m sure you’re going to get some calls. Where can people reach you if they want to learn more about this?
Bobby: Sure. So obviously BajaFulfillment.com is our main site there. They can inquire and our VP of sales or one of our sales managers would get back to them immediately. We usually return emails within the hour. We’re pretty good about that. If you want to reach out to me directly that’s fine too. It’s [email protected] B-O-B-B-Y, not I-E.
Mark: Not I-E, I wouldn’t even presume and I-E on a bet. Hey, thanks so much for coming on man. I really appreciate it.
Bobby: It’s really a pleasure. Thank you. I hope it helped.
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