More and more people are looking at importing goods from China and understand that this market can offer huge potential to new and existing businesses. But one question that is usually at the forefront of a first time importer is, “How to import from China?”
As an international freight forwarder and one who specialise with importing from China, we are frequently asked how a prospective client can make checks and assurances on dealing with a new Chinese supplier. Whilst the ultimate decision rests with the importer, we have compiled a list of points to consider when planning to import from China and areas you should be focusing on to ensure you are covering all angles when importing from China.
A wide range of goods and products are available from China, with many of these products being lower priced, when compared to purchasing from other international markets or from a wholesaler in the UK. Importing goods from China, can potentially mean you have a fantastic opportunity to buy goods at a much lower price. Plus when adding in shipping from China and UK customs clearance your overall cost price is still very low, enabling a much greater return on your investment. More and more business are selecting China as their preferred place of import, due to the advance in quality manufacturing and fast lead times. It has been reported that the beginning of 2017, the China to UK import market was the second largest, with a value in the region of GBP £3.7 billion pounds.
Of course deciding to start importing goods from China, is only the very beginning. There is much to understand when knowing how to import from China. We have compiled a brief overview of the ten most important factors we believe you should be looking at when choosing to import from China. Whilst it is certainly not an exhaustive list, we believe that these 10 points are crucial to review and understand, before placing your first import order from China.
Why are you looking to import goods from China?
The first question when asking how to import from China, is why are you looking to import goods from this part of the world? What are the benefits this would bring to your business? How will this develop your business? Perhaps you are looking to source a product you are purchasing elsewhere currently, but wanting to buy at a lower price? Maybe you are looking to bring a new product to UK market that is not currently available?
Finding a reliable Chinese supplier
When searching for a decent supplier, you need to make certain checks as you would do when dealing with any new supplier, whether UK based or overseas. You want to ensure that they are financially sound, learn about their ordering processes and find out about the quality of their products. Samples are usually requested by prospective new buyers, so that the product can be checked, handled and a decision can be made on the suitability of the product. When speaking to a supplier in China, you need to check on whether the company manufacturers their goods “in house” or whether the work is outsourced to another factory in another part of China. It is not uncommon for us to be asked to quote for a shipment from China from one location (say Ningbo for example) but only at the end of the manufacturing process, does our client discover that the goods have actually been made in a factory in a totally different part of China, hundreds of miles away from the supplier’s office.
As with any business transaction and more so when finding out how to import from China, you want to ensure that you are purchasing quality goods at the right cost price. Don’t be afraid to negotiate with your supplier, this is what business is about. After all, you need to consider the profitability of the product for your business. Purchase too high and any profit for your business could be minimal, meaning the whole exercise of importing goods from China could be not worthwhile. Remember to check with the supplier on how many products can be produced per day/week as you need to ensure you are clear as to the lead time for your order. Another point to consider, depending on the cash flow of your business, is to ask the supplier whether a further reduction in price can be offered, if you increase the order quantity of the product? Lastly yes price is important, but give consideration to overly cheap prices. If you discover a supplier is considerably cheaper than several other suppliers, ask yourself why. Have they misunderstood the order, the quantity, the design, the lead time? Just because they are displaying a much cheaper price, does not necessarily mean they are the supplier to go with.
Payment Terms & Incoterms
Before placing your order with the Chinese supplier, you want to be clear with a contract of what you are going to receive from the supplier, when and for how much. You also need to understand what the supplier expects from you; For example how much is the initial deposit payment to begin manufacturing and when is the final balance payment due. It should also state clearly within the contract, what incoterms are being quoted with the order. International Commercial Terms (also referred to as Incoterms) are universally used globally and ensure that both the buyer and the seller understand their responsibilities for the international shipment. We have detailed below an overview of Incoterms:
How will you ship your goods from China?
You should first consult a freight forwarder who specialises in shipping from China to request a quotation for the movement of your goods from China to the UK. Most freight forwarders will be only to pleased to help you with questions about how to import from China. There will be many factors that will determine the price and best method of transport, but a reliable freight forwarding company will be able to assist you with this request. It is always advisable to consult with around 3 different companies, so you can benchmark the quotations you have received. Make sure you have all required information to provide to your freight forwarder, so that they are able to quickly offer you a shipping quotation from China to the UK. When considering how to import from China, give consideration to timings of each mode of transport. For example an air freight service may be very fast, but generally this is the most expensive option. Do you need the goods quickly? Or would a more economical option of shipping from China be more suitable such as LCL (Less than a Container Load) shipping by sea freight.
Once your goods arrive at the UK airport/seaport
Upon your goods arriving at the UK border, whether this is an airport or seaport, a formal import customs entry will need to be made, as the goods have arrived from a Non EU country and therefore it is likely that import Duty and/or import VAT will be payable to HM Revenue & Customs prior to the release of your goods. Your freight forwarder or customs clearance agent will be able to offer guidance and advice on this. However it is important to note, that the importer is responsible for ensuring that certain information is provided to the freight forwarder or customs clearance agent. If incorrect information is provided, potentially this could mean you end up paying more import Duty/VAT that what is required, or worst case, not enough. HM Revenue & Customs can seek payment retrospectively of underpaid import Duty and/or import VAT, by sending a C18 demand. You need to familiarise yourself with the Trade Tariff, which is published online at http://www.gov.uk/trade-tariff and will enable you to search for the commodity code (also referred to as a tariff heading) of the product(s) you are importing into the United Kingdom. The commodity code which is a numerical reference, will also have the level of import duty payable against it, usually shown as a percentage (%) figure. More often than not, import VAT is charged at the standard rate, currently at 20.0%.
As you can see there is considerable details you should obtain answers to, when deciding on how to import from China. But we hope our brief guide has offered you an insight into the ways of importing goods from China to the UK and how you can be sure you have all angles covered.
If you are interested in learning more about how to import from China or would like to request a shipping quote from China to the UK, please contact FPF Global Limited on 01256 861474 or contact us via our website.