Importing

Imports

When importing what are the things you should consider? Most importers are interested in their actual delivered cost of goods, how long it will take for the goods to arrive, can they trust their supplier, and who will be responsible for freight charges.

Delivered price:

The delivered price includes:

  • The door to door freight cost - the cost of moving the goods from the origin point to the final delivery point.
  • Import duty - Goods are classified using the EU Tariff - this is used to determine a commodity code (also known as a "HS Code" or "Tariff code"). The commodity code is a 10 digit number which specifies the rate of duty paid on goods. It is critical that you check the import duty rate prior to ordering your goods as some goods do have especially high duty rates.
  • Import VAT - Import VAT (currently 20%) is charged on virtually all imports (there are a few exceptions). If the importer is VAT registered import VAT can normally be reclaimed from HMRC.
  • Goods insurance - We recommend that all goods are insured. In the event of uninsured goods being lost or damaged there will be little recourse for the importer as all carriers liability is severely limited by either international treaty or carriers terms and conditions.

At Allenco we recommend that importers purchase goods from most markets on an FOB (for seafreight) or FCA (for airfreight) basis. This means that the shipper is responsible to get the goods cleared for export on to the vessel or aircraft at the origin port or airport. The importer is responsible for the charges from FOB/FCA. Importers should guard against what appear to be very cheap freight rates being offered by overseas suppliers (particularly in the Far East and India). These rates will appear to get the goods to the destination sea port very cheaply but once the goods arrive, huge charges are applied thereafter.

Transit time:

Airfreight transit times are relatively quick meaning that goods can often move door to door in less than a week. Space issues on certain routes can increase the transit time.

Sea freight transit times are obviously longer and port to port transit times do not reflect the actual transit time. It is sensible to add 2 to 3 weeks to port to port transit times to get a "real" transit time (subject to actual origin point).

Can I trust my new supplier to deliver once I have paid for the goods:

At Allenco this is the question we are asked most about new suppliers and there is no exact answer or guarantee that a supplier will be legitimate. Whilst none of the following will guarantee the outcome of an import, they may go some way to helping put your mind at ease:

  1. Check out your supplier - Does his website look legitimate, does he have a proper email address at the web address, does his stationery look legitimate, ask him to provide references for other importers in your country that he has worked with, consider visiting the supplier.
  2. Ask for samples of the product. Normally samples are free (subject to the ticket price) but you will have to pay for the shipping. On this subject a good sample does not necessarily mean a good shipment. Insist on any shipment being to the same standard as the sample.
  3. Keep the first order small, don't order large quantities until you have an established relationship.
  4. If possible agree credit terms. In reality this is difficult to do with a new supplier but perhaps agree a partial payment of some kind so you withhold some of the funds until you have the goods and have checked them for quality and quantity. Agree a returns policy for product that doesn't meet the agreed standard.
  5. You could consider raising a letter of credit so the payment is only released upon production of certain specified documents to a bank. Letters of credit almost guarantee that you will get your goods but they do rely on the shipper producing the correct documents in a timely fashion. It is possible (although rare) for forged documents to be presented.
  6. You could consider using a buying agency in the country of origin, who, for a fee will check freight over prior to shipment.

It I not possible to remove the risk completely but the use of the above may help you. In reality most suppliers are legitimate but as with all walks of life fraudsters do exist so caveat emptor ("Let the buyer beware").

Who will pay the freight charges and what are INCOTERMS?

Make sure that you are clear what is included in the sellers price and what is not. There is an internationally recognised protocol called "Incoterms" which set out which party is responsible for which part of the freight charge. The latest version of "Incoterms 2010" lists 11 different Incoterms which range from ex works (where in effect the buyer of the goods pays all of the freight charges door to door) through to DDP where the seller of the goods pays all the charges door to door (including import taxes). It isn't possible to go into the nuances of all the Incoterms in this website but we would recommend the following for any importers:

Do not buy Ex Works (EXW) as you don't want to be involved in the export customs formalities in another country.

Do not buy on CFR, CPT, CIP or CIF terms as, whilst you will not be responsible for the freight, you equally will have no control over the freight carrier or their nominated agent at destination. Some unscrupulous agents will take advantage of this situation and load charges upon you the importer.

We would generally recommend that seafreight shipments are bought on a FOB basis and air freight shipments are bought on a FCA basis.

Incoterms also determine where the risk between buyer and seller is transfered.

For further information please feel free to contact Allenco.

Call now on: 0121 685 4445 or email importing@allencoworldwide.com