By Javier Romeu
10 STEPS TO IMPORTING
Broadly speaking, importing goods means introducing goods into one country from a third country (including Ceuta, Melilla and the Canary Islands among others). Goods from the European Union are not considered imported goods but rather intra-Community acquisition of goods. It is not necessary to be a company or a professional to import from third countries, unlike in the case of intra-Community acquisitions, individuals can do it too.
All importing involves a number of risks that it is important to know about and, as far as possible, to mitigate. This article does not intend to be an intensive course for those new to importing but aims to offer a quick insight into the subject as a quick guide.
CHOOSING SUPPLIERS FOR IMPORTING
One of the things that concerns companies most when it comes to importing is whether their supplier will be reliable. Clients who are new to importing regularly ask us if they can trust a particular supplier. In our experience, you have to use a fair amount of common sense and take certain risks. Many clients meet potential suppliers by attending general or industry-specific trade fairs. From there they begin a process of communication by email which can lead to closing a deal. Getting to meet the supplier in person usually gives you a better idea of their company, whether they are solvent, etc. It is not a bad idea to ask them for references from other clients (in Spain).
There are various websites which can help you find trade fairs to attend. Those listing trade fairs in Spain and trade fairs around the world.
It is important to plan your trip thoroughly before you go to a trade fair by looking at the list of exhibitors on the trade fair website, researching their companies on the internet, even getting in touch with them and asking for the contact name of someone who will be at the trade fair, etc. Doing this can save you a lot of time and trouble.
It might seem silly but you need to be well prepared to attend a trade fair. It is essential to wear comfortable shoes (you’ll be walking around for over 6 hours a day), take several pens, a good supply of business cards and something to write notes on. For this last one, some people make themselves “supplier cards” on Excel with a box for each item, stand number, notes, etc. and they staple the business card to it. Some people even take a camera and take pictures of the stands so that after the trade fair they can remember the different companies.
If the trade fair is important, think about booking travel tickets and hotels in advance as otherwise prices can go sky high.
THE BUYING PROCESS FOR IMPORTS
Once you know more or less who you are likely to be buying from, the process of negotiation begins. According to the type of product, the country the supplier is located in, etc., this will be quick and easy or slow and more difficult. The only rule is to use your common sense. It is standard practice to ask potential suppliers to send you samples by courier, as this is quick and cheap. The risk here is that you will have to pay the supplier to make you the samples, but that is normal. And it is better to have problems with the samples than to have them with the final product you are importing.
What are the best Incoterms for importing?
The supplier will probably give you an FOB (Free on Board) price and a CFR (Cost and Freight) price. I would always recommend having control over the consignment which is why I would advise buying under FOB conditions. The price they give you will include the goods, plus all of the costs up to the goods being loaded onto the ship. According to the 2010 Incoterms, you should no longer use the FOB Incoterm for air freight imports but the FCA (Free Carrier) Incoterm instead.
You will have to add the transport costs, as quoted by your forwarder, to the FOB price. If you do not already have a forwarder, we would be very happy to give you a quote.
Generally, I would advise against importing by maritime groupage on CFR terms. The reason being that the costs at destination tend to be very high and completely unknown when you buy the goods. If, for whatever reason, you prefer to receive the goods with the costs paid I would suggest you ask for a DAP (Delivered at Place) price. Although, it will probably end up being more expensive than an FOB plus your transport costs and you will lose control over the consignment.
In order to calculate the overall cost of your imports, you need to know what duties apply to the goods. Your forwarder or customs agent will be able to help you with this. To calculate the overall cost, broadly speaking, you can apply this formula:
COST = (FOB cost + Transport) x (1 + insurance premium %) x (1 + tariff rate %)
If you buy CFR, the first brackets would read (CFR cost + costs at destination). Your forwarder will be able to provide you with these costs. Insurance has to be taken into consideration for this calculation, whether it is taken out or not. Your customs agent will be able to tell you whether a tariff applies or not.
VAT on the imported goods will be calculated on the above cost.
FINANCING THE IMPORTED GOODS
To talk about financing nowadays is almost utopian, and it really depends on the relationships you have with the bank. The supplier, especially in the first transaction, will not offer credit terms and will likely require an upfront payment (20%-40%), with the remaining amount due upon delivery of documents. This means that once the merchandise is shipped, you make the bank transfer for the remaining amount, and then they send you the documents. By documents, it refers to the bill of lading necessary to retrieve the merchandise. Sometimes, instead of sending it to you by courier with the associated cost and risk of loss, you can ask them to arrange a “BL Express,” meaning that the destination freight forwarder will not require the bill of lading to deliver the goods to you.
As a general rule, you will need the following documents in order to import goods:
- Commercial invoice: this is the invoice issued by the supplier in which your company name and address, the supplier’s company name and address, a description of the goods, the price and the conditions of sale (for example “FOB Shanghai” or “CFR Barcelona Port”) can all be seen clearly.
- Packing list: in this document the supplier should provide a precise and clear list of the contents of the consignment, identifying the packages, their individual and total weight, the measurements of each package, and where possible the reference numbers, etc. This is particularly important in the case of groupage.
- Bill of Lading (B/L): this is the document issued by the forwarder to your supplier. Generally, your supplier will get the document to you when you have paid them (or before if you have agreed credit terms with them) and it is this document that allows the forwarder to deliver the goods over to you. You should pay particular attention to the number of originals mentioned on the actual B/L, you will need them all to collect the goods. The exception to this, as explained earlier, is if the B/L is an express bill of lading in which case it is not needed to collect the goods, although it is needed for customs clearance.
- Certificate of origin: If, due to their nature and their origin, the goods are subject to a tariff charge but are also eligible for some sort of relief, then a document proving the origin of the goods will be required. Usually the document required is a “FORM A”.
There are other documents and certificates that may be required according to the type of products involved (foodstuffs, seafood, cosmetics and medical products, personal belongings, clothing, footwear, etc.).
IMPORTING PURCHASES MADE ON THE INTERNET
Some people think buying on the internet means customs regulations do not apply. Nothing could be further from the truth. It does not matter whether the purchase is made online or not when it comes to importing, the same controls and procedures have to be followed whether you are purchasing online or importing five 40ft containers. It is true that sometimes, if the purchase is of something small, a Chinese supplier may declare the shipment as samples resulting in the cost being much lower than it should be. This does sometimes work and people save on customs clearance, tariffs, etc. However, that does not make it any less illegal and can result in high costs if the customs authorities inspect the shipment. It can be very difficult to work out the actual cost of the import (from the payment to the supplier) without the corresponding Single Administrative Document (SAD) which details the correct amount.
Whichever way the goods are purchased, our advice is to always declare what has actually been bought. No reputable forwarder or customs agent, particularly if they are an Authorised Economic Operator (AEO), would offer to deceive the customs authorities, and they would not be doing their client any favours if they did.
CHOOSING A FREIGHT FORWARDER FOR IMPORTING
It is very important to choose a suitable forwarder for importing. These are some of the factors an importer needs to take into account:
- Size: some people think it is safer to choose a large multinational forwarder whilst others prefer to work with a small company because they get a more personalised service. Perhaps the key is to find a medium-sized company in order to get the best of both worlds.
- Countries the company has a presence in: it could be vital, advisable or irrelevant that the company has a presence in the country depending on where the imported goods are coming from. For example, to import from China it is important that the company has its own offices there as it is not always easy to understand the difficulties that regularly arise in this Asian country. However, when importing goods from the United States, for example, where everything is easier it is not as important to have offices there.
- Service: the service is always important. Generally, medium-sized forwarders give a better service than large multinationals or very small companies.
- Prices: this is the most difficult thing to compare and you should be aware that some forwarders’ rates are not very clear. Sometimes, it is better to ask for an “all-inclusive” price.
- Expertise: it is important for the forwarder to be a specialist in the type of goods being imported. Importing construction equipment, for example, is not the same as importing medical equipment, cosmetics, perishable goods or machinery, for example.
Contact us and we solve all your doubts to importing.
INTERESTING LINKS ABOUT IMPORTING
The following are some interesting links about importing: