You’ve decided that you want to import a product from China to sell on Amazon FBA. You are however confused about the importing process, and you are not sure what commodify codes are, what customs duty and taxes you will need to pay or whether you should use air, sea freight or just use a courier to import your product.

This post will help demystify the importing process. It will provide an overview of the best ways to import your products to sell on Amazon FBA or eBay.

Import Options (Courier/Air-Freight/Sea-Freight)

You have decided on your product that you want to sell on Amazon/eBay and you have found your factory on Alibaba. The products have been manufactured and they are ready to be shipped. Do you use air-freight, sea-freight or just use a courier?

This decision will largely depend on the size of your products, quantity ordered as well as the urgency for receiving them and the all-important factor of costs.

UK Trade Tariff for Importing

Shipping costs can amount to a large proportion of your total product costs. In order to keep your profit margins as high as possible, it is vital to keep shipping costs low. Ordering as large a quantity as possible will reduce your shipping costs per item which will generally mean higher profits for you the seller!

The below table explains the differences between the 3 methods of shipping your product.

Generally if you’re importing bulkier items in excess of 100kg it’s advisable to use sea freight as it’s normally cheaper.

 CourierAir Freight
Sea Freight
Suitable ForSmall shipments which are not bulky (less than 50kg)50kg -100kgItems over 100kg. Bulky items
General Costs£5 per Kilo£3 per kilo for shipments of around 100kg£150 per pallet
Shipping Time to the US/EU3-5 business days5-10 days30-45 days
BenefitsFedEx, UPS, DHL, TNT offer on-line tracking.

Perfect for shipping samples.
Cheaper than courier.Costs are low.

Can use less than container load or full container load to keep shipping costs as low as possible.
NegativesCan work out expensive for bulkier items.

Less control over clearance.
You need to take care of the relevant documentation, although you could use a freight forwarder to help with this.Long delivery times.

You have to take care of extra costs such as port fees, bill of lading, clearance fees, storage fees etc. You could use a freight forwarder to help with this.

As you can see from the above table, using air or sea freight does involve extra charges as well as paper work. In order to save time and effort, you can use a freight forwarder who will deal with your air or sea shipment.

Freight forwarders are used by anyone from one-person businesses to large corporations. They offer competitive pricing and they will be able to provide you with a door to door delivery quote without any hidden charges so you won’t get any nasty surprises. Freight forwarders that we recomment are Freightos and Zencargo.

Deciding on the Incoterms (EXW/CNF/CIF/FOB)

When dealing with manufactures/suppliers in China, you’ll often be provided with different types of quotes. These can include CNF (Cost, no insurance and Freight), CIF (Cost, insurance and Freight), EXW (Ex-Works/Ex-Factory) and finally FOB (Free on Board/Freight on Board).

These Incoterms (International Commercial Terms) lay out who is responsible for the different aspects of the importing process (see the below tables which summarises these terms).

These can range from anything from who is responsible for delivery to the local port, to who is liable for the insurance.

EXW

You’ll find EXW quotes will be cheaper than FOB. You will be liable for all the transportation costs and also you will bear all the risks of the bringing the goods to their final destination, this can entail lots of hidden charges. EXW can involve a lot of work and can often be a rather complex process if you don’t speak the local language and have no local contacts.

CNF & CIF

While for CNF and CIF, even though the seller assumes responsibility for delivery of your goods to the destination port, you will be still liable to organise the handling at arrival, local customs clearance and finally delivery to your door/warehouse/Amazon FBA’s warehouse.

FOB

It is recommended that you ask your supplier for a FOB quote so you won’t get stung for any hidden charges. With FOB, the seller will deliver the goods to the local port, cleared for export at the port of origin. Your freight forwarder will then take over from there.

 CNF (Cost, no Insurance, Freight)CIF (Cost, Insurance and Freight)EXW (Ex-Works/Ex-Factory)FOB (Free on Board/Freight on Board)
DefinitionSeller pays the costs and freight to transport the goods to the named port of destination (does not include any insurance).Similar to CNF but insurance is also included by the seller.Seller makes the goods available, normally packaged at their factory or depot and the buyer takes over from there.Seller delivers the goods to the port. Cleared for export on board the vessel at the named port of origin.
Risk Transfers to the BuyerWhen the shipment reaches the point of origin.When the shipment reaches the point of origin.As soon as the goods leave the factory.Once the goods have been loaded on board, buyer will bear all risks and costs thereafter.
BenefitsSeller pays the necessary costs and freight to bring the goods to the destination port.

Seller delivers goods to the port of origin, cleared for export and loaded on board the vessel.
Seller pays the necessary costs and freight to bring the goods to the destination port.

Seller delivers goods to the port of origin, cleared for export and loaded on board the vessel.

Seller purchases insurance.
Supplier can’t add a margin to the shipping.

Buyer is in control of the entire shipment.

Supplier may not have an export licence so Ex-Works is the best option.
Factory will handle the paperwork, customs fees and ports fees at origin.

No hidden fees.

Supplier takes care of half the process.
NegativesMay be stung for the other charges such as:

Document fees
Agency fees
Need to organise insurance
May be stung for the other charges such as:

Document fees
Agency fees
Insurance paid by the seller maybe inadequate for the cost of goods
Responsible for all risks once the item leaves the supplier factory.

Costs are not clear, can be difficult to estimate total costs especially customs in the country of origin.
Supplier could increase the cost of goods.

Supplier may add a margin to their costs.

Your supplier may refuse to pay the local fees even though they have been agreed upon.

Incoterm terms

Obtaining a FOB Door-to-Door Quote from your Freight Forwarder:

In order to get a quote from your freight forwarder you will need to supply them with the following information:

  1. What the goods actually are, supply the commodity code for your product (this will be covered in the next section).
  2. The total weight of your shipment (kg).
  3. The dimension of the cartons (length x weight x height) and the total number of cartons.
  4. Shipment collection details i.e. which Chinese port in the case of FOB.
  5. Destination details i.e. your home/office/Amazon FBA warehouse.
  6. Total value of your shipment required to calculate insurance.

Calculating Taxes

Importing from Outside the EU

When you import from outside the EU i.e. China, you will need to pay import duties as well as Value Added Tax (VAT).

Import duties range for the type of products you’re importing. Each product carries a different duty percentage that you will need to pay.

To check the correct duty percentage payable on your product, you can use the free UK government duty calculator http://www.gov.uk/trade-tariff.

Worked Example:

For example, if you’re thinking of importing fishing rods into the UK from China, you first navigate to the Government Duty site and type into the search box “Fishing rod”. Next, click through until you filter down to an exact description for your product.

As you can see below, fishing rods are subject to import duties of 3.70% from outside the EU and the standard VAT rate is 20%. It also lists the commodity code (9507100000) for fishing rods.

Ensure you have the correct commodity code for your product.  Using an incorrect commodity code could result in being fined or have outstanding duty to pay.

If you need help in classifying your product, you can always email HMRC classification.enquiries@hmrc.gsi.gov.uk. Commodity codes for imports from outside the EU are ten digits long.

UK Trade Tariff for Importing

Now we know the correct import duty rate to import fishing rods into the UK. We can work out the UK duty and VAT rates which we will need to pay.

Let’s assume you’ve paid your supplier USD$5,000 (with the current exchange rate that’s £3,840), the UK Duty rate is 3.70% for fishing rods and your freight forwarder has quoted you £180 for a FOB door-to-door shipment.

UK Duty = 3.7% of £3,840 = £142.08

VAT = 20% of (UK Duty [£142.08] + Shipping [£180] + Cost of goods [£3,840]) = £832.42

Total duties and VAT = (£142.08 + £832.42) = £974.5

Total costs to you = £974.5 (Duty & VAT) + £3,840 (Cost of goods) + £180 (Shipping) = £4994.50

So the final total cost to you will be £4994.50. VAT payable is calculated on the amount that you pay for your goods, plus the shipping costs and the UK Duty.

If you’re using a freight forwarder, they’ll declare the goods to customs and pay the relevant UK Duty and VAT liable on your behalf. They will then normally send you the invoice for this and forward their freight invoice. Once you’ve paid this, they will then deliver the goods to your named destination.

How to Get a EORI Number?

In order to import into the UK you will need an EORI (Economic Operator Registration and Identification) number. If you are VAT registered, you may already have one as it’s automatically generated for you when you register for VAT. If however you don’t have one, you can register for one by going to the HMRC site (https://www.gov.uk/eori).

A EORI number is normally issued within 3 working days. You should request one well in advance of you shipment reaching your destination. You will only need to register once for an EORI number and it can be used for all future imports.

10 Tips for Importing from China

1. Never attempt to import counterfeit goods into the country

This is illegal and your shipment may get impounded and destroyed.

2. Never misdeclare the value of the goods on the commercial invoice

If the declared value on the invoice looks unrealistic, HMRC will hold the shipment until valid proof of the actual value paid has been shown.

3. Always ensure you know the correct commodity code

If you’re unsure, ask UK customs as they’ll know the correct commodity code for your product. You can now also send an email (classification.enquiries@hmrc.gsi.gov.uk) to them so include a photo of the product you’re thinking of importing.

4. Don’t assume that sea freight costs will be the same for all Chinese ports

One port maybe cheaper than another.  It’s wise to check with your freight forwarder in case your supplier gives you the choice of ports to ship from.

5. Check whether you may need an import licence

For some goods, such as food, textiles and firearms there are import controls so you may require an import licence.

6. Before deciding on a product to import always ensure you know the full costs

Always calculate the import duties, taxes and transportation fees. These can add up and cause a product to be unprofitable.

7. Ensure you have your EORI number if this is your first import

Remember to apply online for an EORI number without this you can’t import.

8. Even though EXW, CIF, CNF quotes provided by your supplier may appear cheaper initially they are often not

It’s normally advisable to get a FOB quote from your supplier.  Ask your freight forwarder for a FOB door-to-door quote. This way you know the full costs involved.

9. Expect to wait at least 4-6 weeks if shipping by sea-freight

While sea-freight is an economical way to ship bulky items, expect to wait 4-6 weeks before they arrive at your destination.  You can always ship half by air-freight and the rest by sea-freight if your product you’re selling on Amazon FBA is running low.

10. If in doubt always contact your freight-forwarder

Freight-forwarders are experts in the importing process. If you have any queries they will be able to advise and guide you on any matter you may have.

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