Charles R. Goulding and Preeti Sulibhavi look at the ramifications of new US policy towards changes in Hong Kong.
On July 16, 2021, the Biden administration warned companies about the risks of doing business in Hong Kong.
As China is pushing to exert more control over the financial and manufacturing hub, the “new legal landscape” poses particular risks for businesses, investors, individuals and academic institutions operating in the city. Essentially, this new increased presence by China is threatening the rule of law and endangering employees in the city.
Hong Kong is home to some of the world’s leading textile, electrical components and appliance manufacturers. We have already noted how textiles, fabrics and even sneakers can be 3D printed, as well as electrical components for antennas, particularly for 5G networks. Our coverage of supply chain issues with Whirlpool appliances explained how 3D printing can help overcome the supply chain bottlenecks due to the Coronavirus pandemic.
With this stern warning that many manufacturers in Hong Kong should heed, 3D printing can play a vital role once again.
Not only does Hong Kong produce products, but it is a major supplier of intermediate components (parts that will be included in the final product of another company). With Biden’s call for caution, U.S. companies need to revise their Hong Kong–related supply chains.
Many manufacturers utilize just-in-time (JIT) inventory methods, so this warning will have a deep impact on production for many manufacturers.
3D printing can help alleviate these predicted supply chain bottlenecks and provide manufacturers in Hong Kong and those that rely on Hong Kong-produced components with a resource for keeping up production levels.
The Research and Development Tax Credit
The now permanent Research and Development (R&D) Tax Credit is available for companies developing new or improved products, processes and/or software. As of 2016, eligible startup businesses can use the R&D Tax Credit against $250,000 per year in payroll taxes.
3D printing can help boost a company’s R&D Tax Credits. Wages for technical employees creating, testing and revising 3D printed prototypes can be included as a percentage of eligible time spent for the R&D Tax Credit. Similarly, when used as a method of improving a process, time spent integrating 3D printing hardware and software counts as an eligible activity. Lastly, when used for modeling and preproduction, the costs of filaments consumed during the development process may also be recovered.
Whether it is used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D Credit eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.
Conclusion
There are many reasons for manufacturers in Hong Kong to take the Biden Administration’s stern warning seriously. But that doesn’t mean it is cause for chaos. There are many roles 3D printing can play in this scenario and the outcomes in this situation can be improved substantially.
