While sourcing a manufacturer or supplier can seem like the hardest part about importing from China, shipping and customs can be where companies face the biggest delays or hidden fees. To make sure British companies are prepared for the China logistics experience, Gary Wilcox from JAG-UFS International answers the most pressing questions about shipping from China
Where and how can you find the right shipping/freight company for you?
Whether you are importing from China or anywhere else in the world, freight forwarders will play a pivotal role in your business. It is important that you choose the right forwarder for you, which can appear to be a minefield. Look for a forwarder that offers expertise and advice. This will give you immediate feedback and confidence that you are choosing the right one for you. While it is always good to get cost comparisons, quality of service and speed of response should give you a better indication of the service levels you will get moving forward – the cheapest isn’t always the best. Liken it to if you were wanting a new kitchen or building work; you would look for a reputable builder to use, you would want a professional, and your logistics partner should be the same.
What are the customs rules and where can you find them?
The freight company you choose (especially if it is a reputable one) should be able to navigate you through all the processes and legislation on the product you are looking to purchase from overseas. While you are ultimately responsible for choosing the right commodity code for your goods, a goods forwarder will offer guidance. There are also departments within HM Revenue & Customs that will be able to advise on correct commodity codes, which dictates the duty you will pay. Your freight company should be able to steer you in the right direction.
What costs and fees are involved?
The final costs you face, in particular, the cost of freight from China, are very much dependent on the Incoterms (International Commercial Terms), a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law, of the sale of the product to you. This will dictate which part of your shipment’s journey you are responsible for. The two most common terms are: 1) Ex Works, where you are responsible for all local charges in China, as well as the freight charges to the UK and UK Local Charges, and 2) Free on Board (FOB), where you are only responsible for the freight charges and UK local charges.
A few important things to note:
- JAG-UFS usually recommends FOB to their clients, as this gives more control of costs and shipping to the UK, whether by air or sea. You are in more control of your shipment and there are no nasty surprises of local charges at origin.
- Beware of suppliers offering to get your shipment to the UK for “free”. Especially for ocean freight shipments: often, the local consolidators for less than container (LCL) loads will offer incentives to suppliers and as the UK importer, you will receive overinflated import costs which will have to be paid before the release of your shipment.
How do payments work (upon order or upon delivery)?
Payment is very much dependent on whether your shipment is by air or ocean and your relationship with your supplier. For air shipments, your supplier would probably expect full payment before releasing the shipment to your chosen forwarder. For ocean freight, ownership of your shipment will only happen when full payment has been received and on production of the original bills of lading. Once paid, the supplier will issue a stamped copy of an original bill of lading which can either be surrendered to the local forwarder in China, who will then either send an “Express Release” and no original will be required in the UK, or the supplier will send the original to you, which you will have to send to your freight company to gain release of the shipment. The payment for ocean freight shipments will need to be done at least a week in advance so that the express release or sending of the originals to the UK well in time before the shipment arrives to avoid shipments being delayed awaiting release.
What are bonded warehouses and where should you store your product?
Bonded warehouses are licensed warehouses that can store goods without duty or VAT being paid at the time of importation, although there still must be an import entry produced at the airport or port of arrival and goods can only be delivered directly to the chosen bonded warehouse. Shipments can then be called off in smaller batches, with duty and VAT being paid at the time orders are needed. Bonded warehouses work well for higher value items or for goods that are going to remain in bonded storage for long periods. However, since the introduction of post VAT accounting, the requirement for a bonded warehousing is not as prevalent as before. If you register for post VAT accounting, this will help you defer VAT payment and you will not have to pay at the time of importation.
This article is part of a series on importing from China. See all the articles in the series below.