Dummies Guide to Importing

Also, the massive boom in on-line trading through E-Bay has lead to people doing the same from their home - and many of our customers are home traders.

Depending on comments, I am happy to go into any amount of detail, but I will try to keep this a brief overview at the moment. I will concentrate on imports from China, as they are the largest volume, but the same goes for anywhere outside the EU. India for example, is becoming a real manufacturing powerhouse, and will be challenging China especially for industrial goods.

If you are considering bringing something in from overseas, the most important thing is the product. I am sure there are garages full of products that nobody ever bought..... Market research is vital.The second is the supplier. The third is the supply chain.

I will concentrate on the information needed for Freight rates at the moment, but in following blogs I'll try and pick up on the Market Research and developing the right partner overseas. Freight costs are the largest cost of most imports from China, often more than the goods themselves, so it is very important to be able to get an accurate picture of costs you are going to face.

I often have people coming on to me asking "I've got this idea of bringing widgets into the UK from China - how much will it cost?"

These are the questions that need to be answered first:

Question 1

How much do you have?
To be able to give any real idea of costs, any freight company needs some fairly accurate details. The ideal way is to get weights and dimensions of the whole shipment from the supplier when you are negotiating rates etc. with them. Manufacturers are more than used to giving these details out, and will have them at hand.

Question 2

What are the terms of supply?
You may have come accross 3 letter acronyms such as FOB, CFR, CIF, DDP, DDU, FAS etc. These are vitally important, as they say when the suppliers liability ends, and yours begin. To give an example. If a supplier gives you a term of FOB, they will take responsiblility for the goods to get "Free On Board" the vessel. In other words they will pay for the goods to be delivered from their factory, to the port, and any terminal handling costs at the port as well.
If they say DDP. That means they will deliver to your door, and pay all duties and taxes in the UK. Quite a difference.

Question 3

How quickly does it need to get here?
Does it need to come via Air or Sea? Airfreight can take from 3-6 days, and seafreight can take around 4-5 weeks. This obviously has a bearing on the cost of a shipment. For small amounts (up to 200kg, depending on volume) it is often cheaper to send via Air, as the minimum costs at the ports outweigh the total airfreight rate.

Question 4

How important is cost / transit time?
It is no different to any business. Customers often want the cheapest possible price, for the best possible service. This doesn't work. Especially when dealing in Airfreight this can be a problem. The cheapest rates may only be based on one flight per week, that travels via another airport, and has to wait there for 3 or 4 days before connecting on the final flight to the destination.
The more expensive rates will offer a better service, possibly a daily service, direct to the destination. This is very important to think about before approaching a freight company, as you will rarely be comparing like with like.

Question 5

Have you researched Customs Duties / Licenses etc.?
I have come across a number of people who have called me when their goods are sitting at the port, and they have been faced with a Duty rate of 20% asking me if there is any way round it? The answer is no! Make sure you have your tariff code well researched, and if applicable lodged with customs, so you know what your costs are going to be.
Another one that I have come across recently, was someone that had brought in a load of cotton t-shirts from India via air, but hadn't done any research. He had paid for the goods, and the airfreight and called in a panic because Customs wanted an Import License. Sadly, he had to apply for the license, and wait for it to come through. This took 3 weeks and left him with a hefty storage bill from the airline.

As mentioned previously, freight costs are often the largest chunk of the bill, but what else is there to consider? Most obvious:

Products and Suppliers

When thinking about importing you are probably in one of 3 camps:
1. You have an existing product and are looking for outsourced production to cut costs
2. You have an idea for a specific product and are looking for outsourced production partner
3. You are a "trader" - looking to make money on the transaction of many different types of goods

Existing products:

In the UK we often hear about the decline of manufacturing with many businesses unable to compete with the low cost base of overseas production. This is a fact, and it is not going away. There are still a great number of (mainly) small businesses that are still manufacturing goods in the UK, and there will always be niche areas where production lead times outweigh the emphasis on cost, but there are many that are afraid to look at overseas partners and are facing difficult times as a result. So how can you limit the risk of outsourcing?

Like any business transaction, it has to come down to your trust in suppliers to deliver on their promises. Just because the supplier is on the other side of the world, it makes no difference. Some tips to get started:

# Meet face to face: You can never underestimate the power of going out and meeting potential suppliers face to face, preferably at their premises. It gives you a chance to start building a relationship and getting a feel for the people involved - just the same as you would do if it was a local business.

# Be culturally aware: There is a need to be culturally aware of differences between Western and Eastern cultures as this can be the first stumbling block to building a healthy relationship. Just making the effort to understand is often appreciated by the supplier and can help to build the initial bond. For example, in China it is considered rude to discuss business over a meal, when it is the normal thing to do in Western culture. Also (my favourite) never finish your meal completely in China as it is seen as an indication that you are still hungry! Have a look at www.cybor.com/besite/ for more tips on this

# Use your Bank!: The financial transaction is the most worrying part for most people. If you have a good relationship with your International Trade team at your bank, they can be an excellent source of ideas and information. Trade finance of some type is a pre-requisite for most larger overseas transactions whether it be a Letter of Credit or another arrangement it offers a safeguard for both parties.

New Products:

One of the greatest additional fears of having new products manufactured overseas is the protection of your IPR, and rightly so! There is an excellent article here written by the China-Britain Business Council, and the same is true of any supply overseas. Do not suspend your common sense and business sense. Check your suppliers thoroughly or even better go into Joint Venture or a "Wholly Foreign Owned Enterprise."

Traders:

The key to being a very successful goods trader is spotting the potential in a product before anyone else does! Again, it comes back to the face to face approach. If you are serious about trading goods you need to visit the country you plan to source from and meet your contacts face to face. There are a huge number of trade shows in India, China and many other emerging markets and these are a great place to try and look for the next "big thing." Again, do not suspend your normal due diligence just because of the distance.

Some people rely on a google search or a website link to find a new supplier, and for very small businesses and speculative trading it may work.......but it may not...! The risks lessen considerably if you make the effort to see how things work on the ground and understand them. Do not be afraid to ask people for advice - use your Bank, your Chamber of Commerce, your Logistics company, your friends, anyone with the right experience could save you some painful experiences!

If you have any queries on freight and importing, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.