New tariffs on medical equipment could strain health care and life sciences supply chains

Health care and life sciences organizations’ operations could be affected by recent tariff increases on Chinese medical equipment imports as part of a broader economic regime shift to embrace industrial policy.

The Biden administration, in an effort to address what it calls unfair trade policies and practices, announced an extension of the Section 301 punitive tariffs on Chinese imports and added new items in the health care and life sciences sectors to the list. This includes a 50% tariff on syringes and needles as well as a 25% tariff on certain personal protective equipment, both effective in 2024. By 2026, a 25% tariff will be placed on rubber medical and surgical gloves.

U.S. health care and life sciences organizations rely heavily on China for medical equipment and supplies. As of May 2, the U.S. has imported $14.9 billion of medical equipment, up from $14 billion a year ago, according to recent U. S. Census Bureau data. The Food and Drug Administration has scrutinized supplies, calling out performance issues related to plastic syringes made in China in March this year.

To address these tariff increases, organizations should look within to bolster resiliency to their supply chains which could change whether goods come from domestic or foreign suppliers. The strategic importance of medical supplies, especially following the pandemic, necessitates a strong agile supply chain base.

Leveraging analytics, weighing risks

One way health care and life sciences organizations can be more nimble is to implement supply chain intelligence and analytics into business processes to enhance transparency in their end-to-end supply chain data access. This can help businesses anticipate shortages and can assess the overall health of supply chains.

In addition, organizations should be proactive and conduct risk assessments with key suppliers, according to Mike Morioka, director in RSM’s health care practice.

“Identifying high risk supply categories that are sourced from China should be identified and noted,” he says. “Health care organizations should also be influencing their group purchasing organizations, suppliers and manufacturers to include alternative sourcing plans other than China to help minimize the risk in their supply chains. And finally, supplier sourcing plans should include exploration of alternative sources, either through the United States or from alternative countries.”

In addition, companies should look to evaluate whether any of the imported goods will be used for development, testing, product evaluation or quality control. While the China-specific tariffs cannot be eliminated, companies who are using the above medical devices as “prototypes” may be able to reduce some of the related tariffs.

Leaner practices can help drive value through an organization to improve enterprise value and achieve long-term stability.

Learn more about ways to optimize your organization’s supply chain.

Source link