| Import From China Part 4 |
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"Logical Logistics"So, you've found a good supplier and you're going to import some products. How are you going to get them from the Chinese supplier's warehouse to your door? If you are importing from China, your goods will come to you either by air or sea. Air shipments could be express post, courier delivery, or air-freight-containers. By sea it could be "snail" post, or container shipping. Air shipping is fast but expensive, whereas sea shipping is always the cheaper, slower option. You will know for your business how important -- or unimportant - time is. You may think your goods aren't time critical so they can go by sea, but what about price fluctuations and local fixed costs during the month-long voyage? Or you may be opting for fast air delivery when actually your profit margin could be better with a slightly longer delivery time by sea. Overall you should look at different options for each different importing project... and always view the shipping quotes you receive as very open to negotiation! One of the reasons shipping costs are always open to a bit of bargaining is because there are so many variables, premiums, and concessions that can be factored in. I can't give you a big tutorial about logistics here... in fact, some people I know studied logistics at university at Masters level for three years and they still can't explain things clearly to me! But I will give you some pointers so at least you can think about the basics. These are the delivery stages that you need to be aware of because each will involve some costs which will affect your goods' prices:
RESOURCES: Fedex international freight calculator: http://www.fedex.com/ratefinder/home?cc=US&language=en&locId =freight UPS international freight calculator: http://wwwapps.ups.com/servlet/QCCServlet http://www.freight-calculator.com/wholeicr.asp
If you are using a freight company to collect your goods from a factory or warehouse in China and deliver to you, you're going to need the exact dimensions and weights of the cartons containing the products if you want the freight company to quote a price for you. And I do mean "exact" because a slight variance of a couple of mm here and there could increase the cubic weight calculation significantly. Don't be too surprised if the measurements submitted to you by the supplier turn out to be wrong when the freight company collect the boxes, because they might not have measured carefully, might not know how to measure properly, or might have given you a completely guessed carton dimension before the goods were finished and packed. It's just another thing you have to double and triple check especially when dealing with a factory / freight company combination. In such a situation it obviously pays to have a trusted representative on the ground in China, if possible. "Delivered Duty Unpaid"If you buy goods from China to be sent to you, you are importing from China.You're importing even if you're ordering a single item from a Chinese EBay seller or getting a sample of any product from a Chinese company. Every country in the world has some rules about importing, and here are the key basic facts:
"Hey! Why are you charging me tax, Rose?" A lot of our customers at Chinavasion are surprised that they have to pay taxes when they import electronics bought in our online wholesale shop. Some people ask why Chinavasion is adding tax to what they have already paid. But the tax is actually from their own country, not from China. What I say when I speak to customers is: "Import tax isn't about who you are buying from. It usually doesn't matter where the goods are coming from. It just matters that you're trying to bring something into the country from the outside." That's why we ask all our customers to do their own research about their own country's systems and regulations before they place their first order. Import taxes in your country probably are not simple to understand. The rates vary for different items and conditions from 0% up to 50% or even more, depending on country, carriage method, quantity and more, so you NEED to find out this information before you send any supplier your money. Because import tax is about your country, not the country of the supplier, I am not speaking in this section about special provisions importing from China. I am just talking generally about import taxes, so the ideas I am giving here apply to all importing situations even if it's not China. Whether you have to pay import taxes, and how much, will depend on the following:
Import Tax Vocabulary Even if you're a native English speaker, the terminology of tax can be a bit confusing for a newcomer to importing. Here are the key words you will come across:
"Get Import Tax Information From The Horse's Mouth!"Before you start importing -- and I mean, before you even buy samples – you should do some basic research about import rules in your own country. The responsibility is on you to find out this information, not on your Chinese supplier: even if they want to help you it's unlikely that they can give you authoritative facts about such a complex topic, especially when such rules in China are usually different anyway. However, if you have good communications with your supplier, it may be worth asking if they have ever had customers buying the same goods from them to import to the same country as you. It's possible they can give you some anecdotal information that will help your planning. But anecdotal information is not hard fact so please start by finding out the official importing and tax information directly from the government agency source: Sources of import tax information:
"How Can I Pay Less Tax?!"No one likes paying taxes, and if there is some way to reduce import taxes, you want to know about it, right? In fact, after "Can you send electronics to Brazil?", tax questions are the most frequently asked questions for me and the customer service team here at Chinavasion.First, I just want to point out that there is a difference between 'avoiding taxes' and 'evading taxes'. Tax evasion by definition is a crime and I don't think I'll cover advice for that in this mini course!! However there may be many ways you can find -- legitimately -- to reduce or eliminate the taxes you pay on imported goods and improve the profit margins for your import business. The majority of countries have some kind of threshold for goods value under which you won't pay any tax. If you are a small scale importer, e.g. for EBay items, this will be very important to discover. In most countries there are also certain types of goods which don't get taxed - they are exempt. You may be able to find two different allowable categories in which to declare a certain product -- one description would incur a tax, and the other might not. Of course, tax classifications are designed so as not to allow for this sort of thing, but there are an infinite number of different goods being imported so there are always huge grey areas. But I can't get into details here of all the tricks and loopholes which exist in every country. It will pay YOU to spend time researching YOUR country's systems so you know how to get through the tax minefield. Even if you don't find out any special tricks to reduce your taxes, you will at least know enough about how to avoid making mistakes and breaking the rules, which could land you with fines and unnecessary delays. What is the value of these imported goods? If you import goods worth $5,000 you are typically going to pay more tax than if this shipment was worth $2,500. Naturally. But maybe you are already thinking you could import that $5,000 order and simply declare it to be worth $2,500, and pay less tax. Clearly there is an advantage to declaring a lower value, and you may ask "Who decides the value anyway? -- Can't I decide on my own how much these goods are worth?" Well, the declared value of imported goods is always supposed to match the "transaction value". What does this mean? THE VALUE MIGHT BE JUST A MATTER OF OPINION According to what I have read about practices in the USA (and as usual this is not formal advice!), a shipment of goods can be declared at the "wholesale price". This could be a lot lower than the actual price paid by the recipient for the goods. "Wholesale price" is defined in the US as "the reasonable cost of the manufacturer to produce it" which could be a lot lower than what was paid and mean a lot less tax!HOWEVER ! That US concept of declared goods values won't necessarily apply in any other country.IN FACT :- The rules for arriving at the customs value in most countries are based on the "WTO Valuation Agreement" (previously known as the "GATT Agreement"). According to the WTO the declared value of the goods must be, pure and simple, exactly the same as the amount of money paid by the buyer for the goods.According to the World Trade Organization, it's not supposed to be a matter of opinion!Read the full WTO wording here: http://www.wto.org/english
The Power Of Understatement A common tactic to reduce import taxes is under-declaring the value of goods on the shipping waybill and invoice. In other words, you paid the seller $100 for the items, but you tell Customs it's only worth $30, so you pay less tax or avoid it completely. As you've read above, you're not supposed to do this. I am also not advising you to do this. Having said that I would still point out that it is common practice, and it can also be difficult for customs offices to deal with. If the invoice that accompanies goods says a certain amount was paid for them, in many cases the customs office will have no choice but to accept that as the true value for taxation purposes. On the other hand, for many common consumer goods, the Customs officers are extremely experienced in assessing their true market value and will quite easily override your declaration with their own non-negotiable idea of the goods value and tax amount. You will be left crying over spilled milk. Even if your goods are accompanied by the correct invoice, the Customs office will -- in law -- usually have the last word. They decide on the value for tax purposes, not you. And if you are still willing to risk it, consider that with a courier, the amount the goods are insured for is equal to... yes, you got it, the declared value of the goods. So if your $500 item goes missing, and you only declared it for $50, you will only get $50 from your insurance as compensation! Another common thing to do for small orders such as EBay purchases is asking the sender to send the goods as from a private individual (not a company) and declare the goods as a "gift". Again, this is not recommended if you are in fact buying the goods commercially, as it is a misrepresentation in the eyes of most countries' Customs. Whatever approach you end up taking to import taxes and goods declaration, I want to leave you with a warning:Even if the shipping/ customs documentation is filled out by your supplier or by a shipping company or forwarder, YOU are the one who will be viewed as responsible for the goods, as the importer. Therefore if the Customs office considers -- in their own opinion regardless of your opinions -- that the goods declaration is false or misleading, they will tax you according to THEIR idea of the contents and they could end up hitting you with:
"Start Small, Learn From Your Experiences, And Build Up Expertise"Shipping and Taxes are complex issues and may be the crux of whether you succeed in your import business or ... fail to succeed. As you gain experience importing from China and elsewhere you will get valuable knowledge in all sorts of technical areas that will gradually mean you are rising to expert status. And you may not wish to share too many secrets! I am happy to share the knowledge I have, and am still learning from our export business here at Chinavasion. I can't teach you everything in one go, but here are my words of wisdom for you for this part of the mini-course:
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