Originally published 29th October 2015
When I was first starting out and got it in my head that I was going to start a business manufacturing in China and importing to Australia I thought I would just wing it, how hard could it be, heaps of people do it right?
And it turns out that I was (sort of) right, when it comes to the importing bit at least. The actual logistics of importing aren’t too tricky but when I was arranging my first import I really struggled to find detailed information about the costs and how it all worked. So I thought I would share my experiences with you, maybe it will help you or perhaps you’re just interested to find out how it all works.
I’m not going to go in to the details of finding a manufacturer and dealing with that side of the business right now, this blog is just about the import process, getting goods from China to Australia by sea (air freight is much more expensive) as a small business importing approximately one cubic metre of goods.
HOW DO I IMPORT FROM CHINA?
To get my products to my front door (literally) I work with my manufacturer and a freight forwarder. My manufacturer quotes me a per unit price in USD using FOB pricing. Incoterms like FOB (free on board) determine who is responsible (financially) for each aspect of the import. From my experience dealing with suppliers, FOB pricing is the norm. The summary below provides a good overview of the different terms and where liability transitions from supplier to buyer.
As you can see below, a FOB price for my stock means my manufacturer is including the cost of export documentation, transport to the port and loading of goods on to a vessel in to the unit cost of my product. From here the buyer, a freight forwarder acting on my behalf, takes over and delivers the stock to me.
A list of incoterms, including FOB showing the split between buyer and seller responsibilities. Source: Wikipedia
HOW LONG WILL IT TAKE FOR MY GOODS TO ARRIVE?
An import from Shanghai to Adelaide usually takes 3-4 weeks to arrive by boat. The product development phase can take a while, so these days I usually wait until things are in production before notifying my freight forwarder of a new shipment. From here they will usually take over, liaising with my manufacturer about a delivery date to the port, booking a spot on the next available ship and sending through an estimated arrival date. My delivery date can be up to a week after it arrives in port, depending on the time customs takes and getting it on a truck from the port.
HOW MUCH DOES IT COST TO IMPORT TO AUSTRALIA?
Freight is shipped by the container load FCL (full container load) or partial containers LCL (less than container load). Freight is costed on the number of cartons/boxes and the cubic metres this equates too. Weight is also a consideration. I never know exactly how many boxes, cubic metres or weight of stock I will be purchasing until it is manufactured and packaged. This makes it hard to get a shipping quote beforehand because you are guessing these figures. However, the actual cost of international sea freight is fairly minimal, the bulk of the costs lie in the port charges, inspection fees, duty and GST.
Import duty sucks, just putting it out there. It is charged at a rate between 0%-10% of the FOB value of your import and is determined by the type of goods you are importing. In my case, clothing attracts 10% duty but your freight forwarder can assist in determining the applicable rate.
The other (significant) charge that will apply is GST. Most people will be aware of the GST free threshold for goods under $1000. So if you are importing more than $1000 worth of goods into Australia, you will also pay 10% GST on the total value of your import regardless of whether you are importing personally or for business.
Both duty and GST will be charged on the value of the stock being imported. This is the purchase price you pay to your manufacturer, not the value of the goods at retail. Duty will be 10% (or whatever is applicable) of the FOB value of your goods. GST will be charged at 10% of the value of your imported goods plus freight, insurance and duty paid. But don’t forget it will be calculated on the Australian Dollar value of the shipment, which is a pretty bad deal at the moment with the Aussie dollar performing so poorly against the USD.
There are some goods which are exceptions and don’t incur duty or GST charges and some goods for which additional charges may apply, like alcohol and motor vehicles.
Insurance for the transport of your goods is not included in the standard cost of import, this is an additional charge that your freight forwarder can arrange for you (included in the calculation below).
Here is an example of one of my imports with a breakdown of costs. This does not include the cost of goods, it is just the cost of the import. Freight forwarders tend to only quote for the cost of international freight and the various port and quarantine charges. While they will still arrange and on-charge you the duty and GST once it enters the country, it is not typically included in the initial quote.
The following is based on 11 boxes (54cmx38cmx42cm) of freight equivalent to 1 cubic metre. It weighted 220 kilograms and was shipped by sea freight in March 2015.
|Cost breakdown of one cubic metre, 220kg stock imported by Sea Freight from China to Australia|
|International freight||$ 89.15|
|Port charges etc||$ 218.00|
|Quarantine and AQIS charges||$ 205.00|
|Cartage – standard delivery (from port to my home)||$ 135.00|
|Fuel surcharge||$ 13.50|
|Marine insurance and handling||$ 100.00|
|Total freight charges – freight forwarder||$ 760.65|
|Customs duty 10% (10% of FOB price)||$ 673.24|
|Import GST 10% (10% of FOB price + duty + freight)||$ 724.90|
|Miscellaneous customs charges||$ 73.00|
|TOTAL COST||$ 2,231.79|
*2017 update: The Australia China Free Trade Agreement means many goods can now be imported without duty. Enquire with your manufacturer to find out if they have a licence to export your goods duty free
DOCUMENTATION AND OTHER CONSIDERATIONS FOR IMPORTING
To import your goods under FOB terms your manufacturer will need to supply you or your freight forwarder with three documents. A commercial invoice stating the value of the goods, a packing list with the contents of each box and a bill of lading. It is worth checking with your manufacturer that they are familiar with the requirements of exporting to western countries like Australia, so if you don’t know what you’re doing, at least they might!
There are several other considerations to make as well. Ensure you are not importing goods deemed dangerous, prohibited or restricted. Consider any quarantine issues with your product, which extends to the packaging material. Labelling is another important requirement so it is worth researching what you need to disclose about country of origin etc on your product.
For further information on importing, charges and regulations you can check out these two Australian government websites – good luck :)