We recently started talking about importing; we went over some of the basics and introduced you to the realities faced by importers. This week, we are going to get a little more specific and talk about the costs involved with importing.

As we mentioned, understanding the costs involved with importing is crucial to your market research. Unless you know exactly how much it will cost to get the shipment to your door, you can't possibly know if you can make a profit.

There are four major costs associated with importing goods:

1. The price of buying the items from the supplier
2. The cost of shipping the items to your country
3. Shipping insurance
4. Any Customs duties or import taxes you might incur

You might also need to use a Customs broker or freight forwarder, which will incur an additional cost.

Let's jump right on in and talk about each of these costs individually.

The Cost of The Items

This one is fairly straight forward. Prices will vary hugely depending on what you buy and what quantity you buy them in. Often, sellers new to importing are shocked by how cheaply they can buy goods; there is something so exciting about being able to buy items at below retail! $9 sneakers? Yes, please!

However, when researching possible overseas suppliers, remember that advertised prices are rarely the price you will be paying. The advertised price is often the price for a single unit, and doesn't take into account any bulk discount. For this reason, it is essential to email the supplier and talk with them about what discounts they can offer you for the quantity you wish to purchase. If you simply look at the listed prices and compare them with the selling prices on eBay, you'll be searching for a supplier for a long time!

Price also depends on the size of your order: You'll get a different price per unit when you order 2,000 units compared to ordering just 150. This means importing is more cost effective when you buy in large bulk.

Shipping

This is probably something you will negotiate with your supplier during your initial negotiations about the cost of the items, depending on the size of your order.

If your import is small and under 60 pounds (30 kg) in weight, then you could potentially get it sent to you via courier. Lots of importers start out this way, and in fact, some small online businesses continue to import in small quantities - it's certainly much easier, as the courier company will include Customs duties in the fee, and provide tracking. However, if you are importing something heavy, then this option can be pretty expensive!

If your import is medium too large, then you'll need to get it shipped by sea in a container, either a partial container load or a full container load. A container is either 20 or 40 foot long and can be filled with any assortment of goods you choose. A partial container load is not as economical as full container load because they require more packaging and more labor loading and unloading at both ends.

 For most imports, the shipment will need to be transported from the supplier's warehouse to the local port then loaded onto the ship and shipped to your country. When it arrives, the shipment may be inspected by Customs

There are several different shipping terms used in importing contracts. As an importer, the goal is to have the supplier take on as much of the responsibility (and risk) as possible, although the most common terms are FOB and CIF.

Ex-Works: You are responsible for all costs once merchandise leaves the supplier's door. All the supplier does is makes sure the items are packaged and ready to go when they are due for pickup.

FOB: Supplier pays for everything up to the Port of departure, including the export charges. Once the shipment arrives in your country, you the importer are responsible for the order. This is the most common of the shipping terms.

CIF (Cost, Insurance & Freight): Supplier pays to send the goods to the port of destination and arranges the minimum cover marine insurance. The importer must arrange insurance for once it arrives on land.

DDU (Delivered Duty Unpaid): The supplier pays for all costs to deliver to the buyer's door, with the exception of duties.

DDP/CARRIAGE PAID (Delivered Duty Paid): The supplier delivers to the buyer's door and pays all of the costs including duties.

Obviously the latter is the best option for retailers, but it's not the most common option and unless you are spending mega bucks on an order, you are unlikely to be able to negotiate these terms.

Shipping Insurance

Shipping insurance is just as important as any other form of insurance; without it, you could find yourself in big trouble if something goes wrong. Insurance is particularly important when you are importing goods from overseas. Goods frequently go missing. You would be surprised to know how often an entire container goes overboard!

Shipping insurance varies from package to package and it depends greatly on the value of the contents of the shipment, as well as the origin and the destination.

Quite often, your supplier might be able to recommend a company you can insure your goods with. Some suppliers will cover insurance cost, but you should never assume that their insurance is comprehensive - make sure you check it thoroughly yourself. If the supplier does not provide insurance, your freight forwarder will help arrange it when they book your shipment.

Customs Duties and Taxes

Whether or not you need to pay duties and taxes depends on where you are importing to and from. Most Customs agencies in countries including the US, UK, Canada and Australia will charge taxes on goods imported from overseas.

Generally, Customs duties and taxes are lower on items which are unavailable or not manufactured in your country. This is to help your country's economy by keeping prices stable. Your supplier may have some basic information about the costs involved, but it is always best to call your local Customs authority directly and ask them for an estimate. You can also check the Customs website - these days most have an online tariff schedule. But be warned, it's VERY complicated deciding what tariff is the right one for your item, so the best idea is to ask directly. Another way to help determine what duties you need to pay, and which duty category your goods fall under is to make use of a Customs broker. We strongly recommend using a Customs broker for your first major import.

Customs Brokers

Customs brokers really are a first-time importers best friend. They go a long way in helping to ensure that your import goes smoothly. They can take care of paperwork and make sure that it is all filled in correctly.

While hiring a Customs broker does incur a fee, most importers find that in the long run, they save money by using them. This is because brokers know all the ins and outs of dealing with Customs and making sure you only pay the duties you really need to.

All US sellers will appreciate the help of Customs brokers when it comes time to having their order inspected by Customs. Since 9/11 there has been a big crackdown on border security and if you don't declare everything you need to, there can be big delays and serious penalties such as fines.

US importers may need to give their broker Power of Attorney, because they need to sign for or declare information about the shipment. Your broker will let you know if this is required. For a Customs Power of Attorney form, download from the UPS website here: http://www.ups-scs.com/tools/forms/POA_SCS.pdf

To find a Customs broker, you can try Googling 'Custom's broker + your area' or check out The National Customs and Forwarders Association of America for a list of brokers.

Freight Forwarders

Another helpful service provider for importers is the freight forwarder. Freight forwarders arrange the logistics involved with moving cargo internationally. Good freight forwarders have the expertise to ensure that your shipment arrives to your doorstep safely and quickly.  They can also have lots of nifty tricks to help you save money, such as selling extra space in your container to other small importers. To find freight forwarders try Googling 'your area + freight forwarder' or try one of the following options:

In the US

All US freight forwarders must be licensed by the Federal Maritime Commission or the International Air Transport Association (if they are an air freight forwarder).

Visit http://www.worldclassshipping.com to get free quotes on shipments (you may need to know the terms of shipping before you can fill in the form completely, e.g. you need to know if you require door-to-door, port-to-door or port-to-port service). Or call them on 1-888-465-8861 for more information.

In the UK

Visit British International Freight Association. You can find members on their site.

In Canada 

Canada has its very own Canadian International Freight Forwarder's Association. You can check out their membership directory of freight forwarders and Customs brokers here: http://www.ciffa.com/members_directory_view.asp?usedb=8

In Australia

Visit the A-Z list of Australian Freight Forwarders here: http://www.azfreight.com/azworld/aw10705.cfm

New Zealand

Visit the Customs Brokers and Freight Forwarders Federation of New Zealand to view their membership directory: http://www.cbaff.org.nz/

Quick Recap:

• Until you know all of the costs involved with getting your shipment from your supplier's warehouse to your doorstep, you cannot know if importing a particular product will be viable.
• In addition to the wholesale cost, shipping, shipping insurance, Customs duties and Customs brokers and or freight forwarder fees will determine the cost of your shipment, and therefore whether it is a viable option.
• Freight forwarders and Customs brokers are essential for your first big import (that is, an import that cannot be couriered).

Next time, we will discuss how to stay safe when importing and avoid the scam artists! Plus we'll tie everything we've covered about importing so far together and give you an easy to follow checklist of everything you need for successful importing!