Once the difficult task of identifying a supplier in China has been accomplished, the import procedure into the United Kingdom is relatively straightforward.

While the price of the goods that the supplier is offering is important, it is also essential to invest in a quality assurance agency. A quality assurance agency will conduct investigations of the supplier, covering factors like physical location and premises. The agency will also confirm that the sample is truly representative of the bulk goods that the supplier will send.

Importing into the UK from China requires a tentative time line of approximately 3 to 4 months. This covers the entire process, from inquiry to shipping. After an initial inquiry is made, preliminary quotations are given. This entire process will take about two weeks of negotiations, depending on the individual supplier. During this time, there will be a lot of communications back and forth including price negotiations, details of the product and so on.

Sampling is the next logical step forward, and this can also be a red flag if the supplier refuses to provide samples. It is not advisable to transact with a supplier who is not willing to provide samples, also this factor considerably lowers credibility. However, once a reliable supplier is found, sampling should take about 4 weeks in the overall process.

The next stage is production which should cover the next 4 weeks of this process. This is an important step, as getting consistent and good quality from Chinese manufacturing companies can be difficult.

In the past, there have been instances of a few UK businesses that have received imported goods of substandard quality. Some businesses prefer to have someone posted in the country to oversee the manufacturing process, and ensure that the standards of quality are met at all times. An ISO certification is not a very reliable indicator, as these can be bought to suit the needs of the Chinese business.

The actual shipping is a rather complicated process, and this is perhaps best handled by a good broker or shipping agent. Most Chinese manufacturers do not have their own export licences and employ a broker to handle this aspect for them. These handlers typically charge 2% to 5% of the total value of the shipped goods. The Chinese companies also offer FOB (Free on Board) shipping, which covers all shipping expenses right up to the port of destination. This will include collection costs, loading and delivery fees from shipper to port, documents related to exports, storage and consolidation as well as terminal handling charges.

The importer will also need to consider costs such as the terminal handling, destination port charges, customs clearance charges, import duty and value added tax (VAT) and transport.

Most people have no idea of what a Customs Broker is or what they do. The truth of the matter is that they have achieved the highest professional degree recognized in the transportation industry and earn a very respectable income.

The history of Customs Brokers goes back to shortly after we became a nation in the late 1700′s, yet few people know about the profession. I have been asked to provide a brief explain, in laymen terms, what a Customs Broker actually does.

A Simple Example

Let’s take a scenario where a large company imports into the Untied States a large piece of machinery for their factory. The machinery arrives via vessel and the company sends a driver to pick up the machinery and take it back to the factory. But there is a problem – U.S. Customs will not release the machinery to the driver. Merchandise, just as passengers, must pass through Customs before being released into the United States.

This is where the Customs Broker comes into the scenario. U.S. Customs will advise the company that they need to hire a Customs Broker to “clear” the machinery through Customs, and then they will release the machinery to the factory.

Why a Customs Broker?

Technically, the company (importer) can clear the shipment through Customs, but where do you begin? There are literally hundreds of government forms, which ones do you fill out, how do you fill them out, do you pay duty, etc etc.

Actually it’s more than forms alone. The Customs Broker will determines if this article is eligible for admission into the United Sates, the Country of Origin, determines a Duty Rate or if the merchandise qualifies for any of the Duty Free programs that are available for certain products. The Customs Broker will also issue a surety (Bond) to the government on behalf of the importer that the importer will adhere to all Customs demands, including demands that may occur after import.

A skilled Customs Broker can also advise the importer of options on future imports to legally avoid paying duty. Certain imports that are normally dutiable, with slight manipulation abroad, can be imported into the Untied States duty free by taking advantage of the many programs that are available to importers.

How to Become a Customs Broker

Customs Brokers are issued a Federal license jointly by the U.S. Treasury Department and Customs and Border Protection.

To obtain a Customs Broker License, an applicant must pass an exam of eighty questions. The Customs Broker Exam is given twice each year – on the first Monday of April and the first Monday of October. The Customs Broker Exam is based on the Code of Federal Regulations Part 19 (CFR 19 Customs Duties) and the Harmonized Tariff Schedule of the United States. The applicant is given four hours to complete the 80 question exam. The American Customs Association provides courses to prepare applicants for the Customs Broker Exam.

Career Outlook

A Customs Broker is very similar to an attorney; they can work independently or go to work for a firm with several Customs Brokers on staff, with each Customs Broker specializing in a particular field.

The future outlook is directly correlated to our nation’s importing trends. The difference between what we export and what we import is measured by our trade deficit. For the last few decades, we have imported more merchandise than we exported and there are no signs of any slowdown of that trend. 2007 shows record level trade figures and the ratio of import to export is 4:1 in favor of imports.

I would suggest anyone in the transportation arena to get a Customs Broker license. One interesting fact is that the license is issued for life, even if you choose not to use it right away. Many people pursue the license as a way of validating their knowledge and skills in the transportation industry – and not to mention that an education is something that you keep for life.

Import duties continue to be significant elements in the cost of international trade. Yet many companies and businesses still pay more duties than the law requires – which impacts adversely on landed cost and ultimately on business profitability. A planned approach to managing customs duty costs would look to eliminate, reduce and delay payment of customs duties.

How to reduce customs duties in your business

There are many ways to reduce customs duties. The amount of duties paid depends on four “whats”. Managing the impact of any of these “whats”, will improve business profit.

1 What the goods are, (i.e. their nature and characteristics) determines tariff code and therefore the duty rate

2 What the origin of the goods is, (i.e. where dug up, grown, farmed, further manufactured or processed NOT just shipped from) determines whether preferential, standard or additional duties are payable

3 What the structure of the transaction is (i.e. whether sale, leased, loaned, free of charge, under warranty or repair arrangement), determines customs value

4 What happens to the goods once imported (i.e. sold, further manufactured, repaired and returned, stored and re-exported) determines whether various reliefs are available.

How to use a key opportunity in customs valuation planning

A major under utilised approach to reducing duties is to look at the customs valuation. A key provision in both US and EU customs law permits the customs value to be based on any earlier sale of the same goods in a chain of transactions prior to importation. For this reason it is variously described as the “prior sale”, “earlier sale” or “chain of sales” opportunity. They all mean the same thing, i.e. lower duty!

How does this work? For example, if goods are sold by a manufacturer in the US for $60 to a US export company which, in turn, sells them to an importer in the EU for $100, duty can be paid on a value of $60, providing certain conditions are met. The savings achieved are the difference between duty on the £100 and the duty on $60. Savings of up to 40% on the duty costs are possible.

What are the benefits? The chief benefit of the approach is to save customs duty by excluding the costs and profits attributable to the non-manufacturing activities undertaken in the country of export from the customs value declared at import in the destination country (US or EU).

The approach also uncouples the value of the imported goods for customs valuation purposes from their inventory value for corporate income tax purposes. That’s good because tax and customs values are often in tension. Tax authorities tend to favour a low import value (i.e. more profit to tax), whereas customs favour a higher import value (more import duty to collect.) Using an earlier sale approach, the price paid by the importer is no longer relevant for customs purposes, so that any increase in that price will not cause an increase in the amount of customs duty.

Who can benefit? Any company or business importing goods into the EU or US can benefit from the opportunity providing there has been an earlier sale and the exporter is willing to provide the relevant invoice relating to the earlier sale. Since this involves disclosure of margins by the exporter, the approach is more attractive to international groups of companies where such disclosure is not an issue and to industries where margins are already widely known. However, exporters can still realise the benefits by importing goods into the US and EU on their own account.