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International Subcontracted PO

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Mitchell Locklear, modified 3 Years ago.

International Subcontracted PO

Post Date: 10/31/17 (Bronze, 7 Posts) Recent Posts

For the next 6 months, we will be sending product to Mexico for further manufacturing.  Anticipating 4 shipments.  Long term, they will source material, manufacture, and send back to US.  Our initial shipment we ran as a sales order.  However, we would not like to see this in our sales order line.  And they don't plan on paying because they will perform labor and sell back to us.  It was proposed we do a subcontracted purchase order as an operation on the routing.  I am thinking this would be a good step.  Material never leaves our balance sheet and MX partner can just invoice back for the labor which will mitigate any VAT tax etc.  Also, we are shipping dies to MX.  Based on my history of doing business there, there should be some sort of tax on that even though it is our fixed assets.

Someone must have done this before.  Thoughts?

fixed asset labor subcontracted po maquiladora tax
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Phill Norrey, modified 8 Years ago.

Re: International Subcontracted PO

Post Date: 10/31/17 (Yoda, 1010 Posts) Recent Posts
Sub Contract would work great as long as the value of the materials stays on your books.  Now is the operation in the middle of the routing or is it the last operation.  Reason asking is that QAD really sucks with S/C if you are using PO and WO, but is awesome if you are using Repetitive Schedules with Supplier  Schedules.  With the RS and SS the PO receipt will automatically do the RS backflush and if it is the last operation it will even do the receipt.  If you are using WO and PO then you will need to do the PO receipt first to create the billing for the service and then manually do the WO receipt
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Phill Norrey, modified 8 Years ago.

Re: International Subcontracted PO

Post Date: 11/1/17 (Yoda, 1010 Posts) Recent Posts
As for the dies.  I would probably just create MEMO Sales Orders and "sell" them to MX for the tax purpose.  By doing it as a memo it is going to leave the item on your books so you can still have it on your books.  How are you depreciating it?
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Raymond Chin Kwie Joe, modified 8 Years ago.

Re: International Subcontracted PO

Post Date: 11/1/17 (Rhodium, 825 Posts) Recent Posts
We had companies who did the same kind of subcontracting. In the newer versions of QAD s/c is less cumbersome. The goods are issued on the workorder to a subcontractor and are receipt on a purchase order. The moment the goods are receipt PO), the operation step is reported finished (qty etc). A little bit of testing will confirm if this flow works for you. Financially it will work. 2. Regarding the "dies" the question "who owns the dies" is relevant. should the "issue" of dies to production (MX) be a "cost of production" or a "goods movement" in the GL? These questions will determine the options you have in QAD.
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Raymond Chin Kwie Joe, modified 8 Years ago.

Re: International Subcontracted PO

Post Date: 11/1/17 (Rhodium, 825 Posts) Recent Posts
A special note: do not forget to review if the "paperwork" is sufficient. Without documents the governmentS will tornment you with TAX and VAT audits.
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Mitchell Locklear, modified 8 Years ago.

Re: International Subcontracted PO

Post Date: 11/26/17 (Bronze, 7 Posts) Recent Posts

Thanks - we have not done the testing on this yet.  Phill - the dies will stay on our books and continue to be straight-line depreciation.  For this initial shipment, we created a sales order.  Now my concern is where to move this 'sales'.  maybe a debit to 'Other-sales' to net to $0 with the credit to COS Other - net to $0.  Receivable will still be in sub-ledger.

I will let you know once the testing happens if we have issues.  I need to flow chart out prior to testing.

Regards,

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