This lesson covers the logistics of importing goods from China to your country. If your shipping terms are Delivered Duty Paid or Cost, insurance & Freight, then you won’t have to do anything until the merchandise arrives in your country. But if your terms are Freight on Board, it will be up to you to organize a large part of this process yourself. And remember, even if you are lucky enough to get DDP or CIF now, it might prove impossible to negotiate on subsequent imports from different companies.
Arranging logistics can be tricky to set up at first, but if done well, can save you a lot of money.
Your first priority is to make sure everything runs smoothly and that every participant in the process is reliable. Your second is to ensure that every stage of the process is as cost-efficient as possible because this is where your costs can really add up. It’s vital to research the best freight company, transportation and storage options. You might not get it right the first time, but when you do, you’ll be able to enhance your profit margins significantly.
Below is an outline of who's involved with each stage in the Import process:
You pay the manufacturer for the cost of your goods and any packaging. The manufacturer will also prepare export documentation. As we saw in the last lesson, shipping terms such as Delivered Duty Paid (DDP) and Cost, Insurance & Freight (CIF) are much more advantageous than Freight on Board (FOB). The idea is to get the supplier to handle the inbound risk and just pay the cost for a delivered product. If you do get DDP, then you will not have to concern yourself with the following process, however FOB and CIF are much more common.
TIP: Whatever terms you get, don’t forget to check the insurance terms. You need to make sure your container is insured for 110% of the FOB cost.
2. Road Haulage Company
Collects from supplier and delivers to docks/airport.
3. Sea Freight Company
You (or the supplier if CIF, DDU or DDP) negotiate a rate with the company to transport your goods. If you need less than a container load, contact a freight forwarder. The Sea Freight Company then checks goods/documentation and loads onto the vessel. Approximate cost can be anywhere between $1500 and $4500, depending on the volume of the shipment.
Most freight associated charges are calculated per kilo on the Volume weight of your goods and small lightweight consignments are often subject to minimum charges. A professional freight agent will advise you of these charges when they quote you for shipping your consignment.
In your country: Goods are unloaded and if all documentation is in order Customs clears goods. You pay any duty and tariffs required. Remember than unless you have set up credit facilities in advance with your shipping line and Customs, everything has to bepaid before your goods are released and additional storage charges are applied to any delay.
For example, if you wish to pay a shipping charge by check, it will take 5 working days to clear. In the meantime your goods are charged storage at an average rate of $0.14 per kilo per day. A consignment of 1000 kilos stored for 4 days would attract storage charges of $560.00. (Note these amounts are not based on real data. Actual costs may be more or less than the example).
There are normally several payment options you can choose from, the most common being:
- Deferred payment — only available to importers who are holders of a deferred account. (See your Customs office to arrange).
- Broker deferred — available on the request of an agent who holds a broker deferred account.
4. Transportation to Warehouse
You need to arrange collection from docks/airport with a freight company.
5. Warehouse Storage
Warehouse will charge to receive the product (cost of labor involved in handling the goods), plus there is long-term storage costs. If you use a broker and/or a freight forwarder you will need to budget for another couple of hundred dollars on top of that.
It is possible to negotiate the cost of all stages of this process and shopping around can ultimately save you a lot of money. For example, the location of your warehouse makes a lot of difference. In the USA, some parts of the country have much cheaper warehousing than others.
Customs Duties and Taxes
Every country has different duties and taxes on imported goods. As you are importing goods from another country – such as China, Hong Kong, India etc - you will very likely pay import duties, although there are some exceptions. Very generally, tariffs and duties are lower on goods that are unavailable in your own country, while anything coming under FDA jurisdiction can require special licenses and is often more complex.
The best way to find out how much you have to pay is by visiting your country’s customs website and reading the information there. You will also find phone numbers and contact details for help with more specific information.
A broker is a must for a first time import. Categorizing your product to ensure it gets the appropriate tariff/duty is a complex task and a broker will help to ensure you don’t end up paying more than necessary. Also, if a portion of your documentation is incorrect, the delay that will inevitably occur can be cripplingly expensive. As you won’t be able to move the product while the documentation is being amended you may end up paying demurrage - a hefty fee for storing your item in docks/yards for more than the couple days they are allotted.
For subsequent imports - when you are comfortable with the requirements - you can choose to save the fees and do it yourself.