oem manufacturing

The component of today's announcement on OEM manufacturing was extremely important - and exciting - but seems to have gone largely unnoticed.

The announcement stated:

"As part of Stage 3, SiYi will seek ISO13485
certification to enable SBL to utilise the facility for OEM manufacturing of OraLine IV
and other devices"

OEM refers to the outsourced manaufacturing for original equipment manufacturers (ie.OEMs). SBL is the OEM that supplies the membrane products for assembly in China under license.

What it means is that HGR has set up an arrangement whereby it can export its IP products (detection membranes) to China without any import duties or VAT, have all its products (saliva and urine-based) assembled under license in a factory paid for by others and earn 15% of end-product revenues (on top of the revenues earned on the export of the membrane components) to any other market in the world (including Russia, Mexico and back to the US).

Massive revenue potential - as saliva based testing catches on around the world - with only minimal capital investment (just a volume upgrade for the membrane producing facilities in New Jersey).

HAS TO BE A GOOD DEAL FOR HGR AND ITS SHAREHOLDERS! And for those sceptical of Chinese Government approvals, see my post just before the announcement re China - particularly the Government's seriousness about its 'war' on drugs. It's a shoo-in!


This August 2003 article "Legal Aspects of OEM Manufacturing and Processing Trade in China" (from Topics in Chinese Law) explains the benefits of OEM manufacturing:

"China’s rise as an international manufacturing base and export juggernaut can in large part be attributed to the country’s long-standing policies of encouraging “export processing trade.� The term “export processing trade�has a fairly well-defined meaning in China and refers to certain government- approved transactions where a foreign party purchases Chinese manufactured goods, or has raw materials and components processed on a consignment basis in China, in both cases with the inputs imported free of duties and VAT. These types of arrangements began in the early 1980s, and were responsible in large part for southern
Guangdong Province’s development and export success. As outsourcing manufacturing for original equipment manufacturers (OEMs) has become increasingly the norm, many such relationships have been structured in the
form of “export processing� arrangements.

The benefits to foreign companies are quite significant. They are able to obtain low-cost manufacturing in China without the need to pay for any Chinese duties or import VAT on imported
inputs going into the product, and often without the need for any capital investment".