Buying imported goods can be a great move for many small businesses. You may be able to find better products – or cheaper prices – abroad, improving your company’s offerings and its margins. However, shipping imported goods can be complicated as you’ll need to make arrangements for the entire journey.
"It has never been easier for entrepreneurs to source fantastic ranges of products to sell," said Professor Roy McLarty of the University of East Anglia (UEA). "The web is magnificent for locating suppliers, but it's essential to check samples thoroughly and to get sound references on the supplier. Be prepared for delays in decision making too, and remember language issues makes negotiation tricky."
To get an accurate shipping quote, you’ll need to know the proportions – specifically dimensions and weight – of the goods you wish to ship. The manufacturer will be able to provide these details, which can then be passed onto the shipping company. If your supplier is paying and arranging transportation costs then you won’t have to worry about the dimensions, although for logistical reasons it is useful to know. When the handover happens, you’ll need equipment capable of handling the goods safely.
Imported goods can be sent by either sea or air, with the latter being more expensive but arriving within a week, far quicker than the month or so for sea freight. Both methods have weight restrictions. It may be uneconomical to send smaller packages by sea due to minimum weight requirements and port taxes. The method you use will also depend on your industry and your lead time; keeping on track of customer requirements may allow you to order goods at an earlier opportunity, and therefore keep costs down by using a slower and cheaper transport method.
One of the most important considerations when arranging shipping is who handles the physical transportation of the goods at each stage of the journey, and when liability for the transported goods shifts from the supplier to the buyer.
This is normally noted with a three-letter acronym under the Incoterm
system. These are the most common acronyms and what they mean to the buyer:
General shipping terms
- EXW – stands for ‘ex works.’ This is the minimum obligation on the seller legally allowed. Risk and responsibility for all costs pass from the seller to the buyer at the seller’s premises or a named third party location.
- DDP – stands for ‘delivered duty paid.’ This gives the seller the maximum legal obligation. The seller delivers the goods to an agreed destination in the buyer’s country and is responsible for all risk, customs charges, licenses and insurance up to that point. This is hassle-free for the buyer but obviously more expensive.
- DAT – stands for ‘delivered at terminal.’ The seller pays for transportation costs to the destination terminal, except for import clearance costs. Risk transfers to the buyer once the goods are unloaded at the terminal.
- DAP – stands for ‘delivered at place.’ The seller must pay for delivery to a named place, apart from import clearance costs, and assumes all liability for the goods until the goods are ready to be unloaded by the buyer
- FCA – stands for ‘free carrier.’ The seller hands over the goods, which will have been cleared for export, into the first carrier’s custody (organised by the buyer) at a named place. The seller pays for carriage to a named point of destination, but risk shifts to the buyer once the goods are passed to the first carrier.
Sea freight terms
- CFR – stands for ‘cost and freight.’ The seller pays the cost to deliver the goods to the port of destination, but risk transfers to the buyer once the goods are loaded onto the ship. Insurance is not included, and is at the cost of the buyer.
- CIF - stands for “cost, insurance and freight.” The seller will pay for the goods to be delivered to the port of destination and will also pay for insurance , but legal liability for them is down to the buyer once the goods have passed the ship’s rail at the port of shipment.
- FOB – stands for “free on board.” The seller pays the cost of transportation to the destination port, customs clearance, port handling charges and loading costs onto the vessel. Risk and responsibility shifts to the buyer once the goods pass the ship’s rail at the port of destination.
- FAS – stands for “free alongside ship.” The buyer is responsible for all transportation costs and liability for the goods, but it’s the seller’s responsibility to clear the goods for export and deliver them alongside the buyer’s ship at the named port.
Licenses and customs charges
Some goods require a license in order to clear customs at a British border. Check in advance to see if you need one as no allowances will be made, and the application process can be long-winded. If your goods reach customs and you don’t have the necessary licenses, you will then need to apply for one, and pay considerable costs to the air freight company for storing your goods at the airport.
Customs charges can be quite complex so it’s worth checking with HMRC
in advance of your shipment to see what you will be required to pay. As with licenses, no allowances will be made so you must budget for the associated customs charges before you instruct a shipping company to send your goods.