Cost component analysis for wheelchairs supply
The final cost of wheelchairs for end users in LMICs are estimated at between 28 per cent - 255 per cent, depending on the
shipment route, import tariffs and distributor margins. Four major cost components significantly influence the final price
to the consumer with distributor margins accounting for the largest proportion. Shipment costs are the major cost drivers
due to the bulky nature of the products. While import costs can vary and many countries may have exemptions that are variably
applied.
Table 16: Cost component for wheelchair supply
| Cost Component |
Lower estimate |
Higher estimate |
| Taxes and duties: import duty, custom tax, VAT |
0 per cent |
20 per cent |
| Shipment cost |
15 per cent |
20 per cent |
| Quality inspection cost |
5 per cent |
15 per cent |
| Distributor margin |
8 per cent |
200 per cent |
|
Additional cost
|
28 per cent
|
255 per cent
|
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Import duty, custom tax and value added tax (0 per cent - 20 per cent): Import duties and custom taxes vary by country and depend on the national trade policies, tariffs and import classifications
applied to assistive products. For example, India has a custom duty of 10 per cent, a social welfare surcharge of 10 per cent
on duty, a 5 per cent value-added tax on product value and custom duty and a stamp duty of 0.1 per cent on Cost, Insurance,
and Freight value and total duty.
- Similarly, while Ethiopia has 0 per cent custom duty, there is a value added tax of 15 per cent, a withholding tax of 3 per
cent and a social welfare tax of 3 per cent. Tariffs are typically exempted for import for humanitarian donations. Processing
of import tax exemption usually takes around 20 to 80 man-hours and incur fees of US$100 to US$1,000 dollars. However, demurrage
and storage costs caused by delays in customs clearance can cost up to US$10,000 .
-
International shipping (15 per cent-20 per cent): Wheelchairs are bulky and typically transported by ocean freight. A 40-ft container accommodates approximately 160-300 wheelchairs
depending on the type and size. Specialized posture support devices for intermediate and advanced users are often bulkier
and a 40-ft container can accommodate 160-220 postural support wheelchairs.
- While 250-300 units of standard wheelchairs for basic need can be accommodated in a 40ft container, mixed content containers
with optimal utilization of container space for specific types of wheelchairs is key. For smaller orders, such as a shipment
of 80 postural support wheelchairs, logistics costs can increase to 30 to 40 per cent of the ex-factory price, making the
products significantly more expensive for the consumer.
-
Quality inspection (5 per cent-15 per cent): Many buyers mandate quality inspections carried out in the country of origin before the shipment and at the port of delivery.
In either case, the cost of these inspections, including certification fees, testing, or regulatory approvals, adds to the
price. Typically, shipping paperwork-related costs for wheelchairs range between 5 to 15 per cent. For example, importing
wheelchairs to Kenya requires an Import Declaration Form prior to shipment arrival, a Pre-Export Verification of Conformity
(PVoC) and local inspection and clearance at the destination port.
- The PVoC process, which adds approximately 1 per cent to the product cost, is complex and often requires the manufacturer
to coordinate with a third- party agent on behalf of the customer. After the paperwork is approved, an inspection is conducted
during cargo loading. Upon arrival, local inspection and final clearance through a third party can add an additional 10 per
cent to the product cost, further increasing the overall expense.
- A PVoC is required for shipments to (but not limited) Algeria, Botswana, Burundi, Cameroon, Central African Republic, Congo,
Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Iraq, Kenya, Kuwait, Lebanon, Libya, Mali, Mauritania, Morocco, Nigeria, Qatar,
Saudi Arabia, Somaliland, Sudan, Tanzania, Uganda, United Arab Emirates and Zimbabwe.
- Some countries, such as Georgia and Kenya also require Certificates of Origin that need to be issued by national Chambers
of Commerce and be obtained before shipment.
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Distributor margin (8 per cent - 200 per cent): Wheelchairs typically sold through distributors in-country, who handle storage, marketing and in-country logistics. Typically,
the supply chain for wheelchairs is made of multiple sellers and markups at each seller adds up. Distributor margins range
between 8-10 per cent on the lower side to above 200 per cent of the wheelchair's ex-factory cost at the higher end, depending
on the size of the order, market conditions, and the level of service provided. In regions with less competition or limited
distribution networks, these margins can be even higher.
- The above estimate of markup does not include the assessment, fitting and follow up and maintenance costs which, if not provided
through the government health and education systems, can amount to another 20 per cent of cost.
-
In-country transport (>1 per cent): In-country transportation cost of the wheelchairs to different service locations depends on the number of locations and the
distance from the warehouse. These typically cost more than a few hundred dollars per order and could vary depending on how
remote the place of delivery is. Delivering wheelchairs to very remote areas often requires a main courier and then a local
extension courier to the outlying venue.
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