Global trade volatility and shifting regulations are pushing many companies to restructure their supplier sourcing strategies to reduce tariff exposure, build resilience, and diversify manufacturing risk. Shifting from centralized to decentralized sourcing, especially out of China, has become a go-to supplier sourcing strategy for procurement and supply chain teams.
But this shift brings complexity. A decentralized sourcing model might look like a win on paper, but without trade compliance at the core, it can create more problems than it solves.
Why Decentralized Sourcing Is Gaining Momentum
Companies are shifting production to countries like Vietnam, Thailand, Malaysia, and Mexico to avoid tariffs and diversify supply chains. This shift is driven by:
- US Section 301 tariffs on Chinese goods
- Geopolitical uncertainty
- The need to reduce over-reliance on a single market
- Growth in nearshoring and reshoring initiatives
Many customers we work with at Dimerco are shifting production out of China in search of tariff relief and sourcing flexibility. Southeast Asia is a top destination, thanks to lower labor costs and participation in trade agreements like RCEP.
But this isn’t just a trend – it’s a new normal. Supply chain leaders are rethinking their supplier sourcing strategy entirely.
Compliance Challenges in Decentralized Sourcing
When shifting production, many assume that simply assembling goods in a new country is enough to claim country of origin (COO) from that country. That’s a mistake.
Compliance rules require substantial transformation, not just final packaging or light assembly. If your product’s core transformation still occurs in China, and you claim it was made in Vietnam, you’re exposing your business to:
- Retroactive duties
- Customs audits
- Shipment delays
- Fines or worse, blacklisting
COO violations are one of the most common and costly compliance missteps we see at Dimerco. And it often stems from a lack of clear planning during sourcing shifts.
Tariff Avoidance Success and Setbacks
Here are two examples from companies that tried to avoid tariffs but ran into compliance challenges:
Example 1: A company’s Chinese supplier claimed production had moved to Mexico. A rep visited the new “factory” and discovered the truth: no machines, no production, just new boxes labeled “Made in Mexico.”
Because the visit happened before shipping, they avoided a crisis. But without early validation, those misdeclared goods could’ve triggered a customs investigation.
Example 2: An electronics brand shifted final assembly to Vietnam, sourcing parts from China. After investing heavily in the move, they learned the transformation didn’t qualify under US COO rules.
Result: They still owed Section 301 tariffs, plus they had absorbed the costs of relocation.
These examples demonstrate a difficult truth: We’ve already seen how costly shortcuts can be. Now it’s time for companies to make compliance-first sourcing decisions.
Supply Chain Tracing
With new regulations like the Uyghur Forced Labor Prevention Act (UFLPA), supply chain tracing is now mandatory. If you cannot clearly trace the origin of your materials, especially for high-risk regions, your shipments can be detained indefinitely.
The US Customs and Border Protection (CBP) now works with tracing software providers and even uses satellite imagery. If you don’t have better visibility into your supply chain than the authorities do, you’re already at a disadvantage.
At Dimerco, we help customers implement digital tools that strengthen supply chain tracing and transparency. Our MyDimerco portal delivers real-time visibility, event tracking, and performance dashboards so your sourcing decisions are backed by data, not assumptions.
Best Practices for Compliant Supplier Sourcing Strategy
Too many companies make sourcing changes without proper planning up front and then face compliance issues that could’ve been avoided. Before you shift sourcing to a new country or supplier, slow down and take these critical steps:
1. Start with a compliance audit
Determine if the new production process will qualify under FTA or COO rules. Get legal or consulting support early.
2. Ensure available infrastructure
Confirm the new location has the logistics, workforce, and customs infrastructure needed to support sustained operations. A low-cost location means nothing if it can’t support your volume or timelines.
3. Map your supplier chain
Understand where components originate. Use digital recordkeeping and tracing software to track and verify each input.
4. Vet your suppliers rigorously
Confirm their capabilities go beyond assembly. Review their ability to produce documentation and prove transformation.
5. Collaborate across departments
Legal, logistics, procurement, and customs teams should align on the sourcing plan. It’s not just an ops decision.
6. Work with a partner who’s been there before
At Dimerco, we’ve helped companies restructure their supplier sourcing – not just to save costs, but to do it right. For example, we recently worked with a customer planning a relocation. We reviewed their bill of materials and advised on what transformation steps were needed to qualify for duty-free status.
This kind of strategic guidance only comes from first-hand experience.
It’s Not Just About Cost. It’s About Control.
Yes, cost matters. But in today’s trade environment, sourcing compliance and supply chain visibility matter more. Compliance has become a sourcing requirement, not a back-end audit step.
Companies that build supplier sourcing strategies on compliance, documentation, and data will be the ones able to pivot quickly, reduce tariff risk, and grow with confidence.
And companies that go it alone or wait too long risk costly mistakes they can’t undo.
Navigate Sourcing Complexity With Dimerco
Dimerco isn’t just a freight forwarder. We’re a logistics partner with deep roots in Asia-Pacific and the expertise to guide you through:
- COO validation
- Trade agreement qualification (like USMCA, RCEP)
- FTZ planning
- Supply chain tracing and documentation
- Customs documentation and compliance reviews
With over 130 offices across Asia and a global operations platform, Dimerco connects Asia with the world like no other global 3PL.
You’re not just looking for lower costs. You’re looking for a growth engine you can trust. Dimerco is built for this moment. Let’s talk before you make your next move.
