Importing Supplies Successfully
To import successfully, you need to follow through a carefully thought-out plan of development and action.
This guide looks at the steps you need to take to help make your venture a success.
- Why import?
- How to source suppliers
- Avoiding the pitfalls
- Going ahead with an order
- Paperwork and legal considerations
- Transporting goods
There are a number of benefits to be gained by opting for an overseas supplier.
- Lower priced goods: Lower labour costs or a different tax regime may mean one country’s prices for a particular product are significantly lower than those in the UK.
- Higher-quality finished products: Every country has its specialities and strengths. If you want the very best, it could be to your advantage to import from a particular country.
- Traditional skills and raw materials: It makes sense to take advantage of traditional crafts and skills that have been carried on for generations in some cultures.
- Original products: Originality and authenticity are important in some markets if you want to keep ahead of your competitors.
How to source suppliers
The key to successful importing lies in choosing the right supplier. To do this, you need to do some research. You can get information from a number of sources, including:
- Trade representation in the UK – many organisations with an interest in exporting to the UK have some sort of representation here or whose details may be found by contacting the relevant foreign Chamber of Commerce or commercial departments within an embassy or consulate.
- International trade exhibitions and fairs – these are a good source of suppliers willing to do business with UK companies.
- Trade associations, with their links to companies in the same market as you, can be a rich source of contacts and advice. They may also be able to warn you about specific market issues.
- Trade journals may carry details of exporters wanting to trade with the UK.
- The Internet is another important source of suppliers.
- Overseas agents or exporters – you may need to use an agent based in the country you want to import from to guide you through the necessary procedures.
- The merchandise – if the product you want to import is already available in the UK, there’s nothing to stop you checking the country of origin markings. Then get in touch with that country’s consulate or Chamber of Commerce for information on agents and factories to contact.
Avoiding the pitfalls
International trade may carry more risk than trading with a UK-based company, where it’s easier to look into creditworthiness and quality of goods. You’ll need to take a number of issues into consideration if you want to import successfully…
The reliability of your supplier is crucial. Find out as much as you can via business contacts and consider asking for references from their bank or an international credit reference agency. And, of course, there is no substitute for visiting the company in person.
You may be held liable, under the principles of product liability, for harm caused by goods you have imported. If you are subject to liability you may wish to investigate insurance cover.
Agreeing the total cost
Consider carefully the terms and conditions of the contract. It is essential to check that the price includes everything you agreed, from packaging, insurance and delivery costs.
Fluctuating exchange rates can affect the price of the product and your profitability. A forward exchange contract is one way to protect yourself. This is a binding obligation to buy or sell a certain amount of foreign currency at a pre-agreed rate of exchange, on or before a certain date. This enables you to budget at a guaranteed rate of exchange.
Going ahead with an order
Making an order
The details of the order will need to include:
- Payment terms
A trade association or your legal adviser should be able to advise on typical terms and conditions for your particular industry.
How you choose to pay your supplier depends on a number of factors, not least the level of trust between you.
Orders placed with organisations may be dealt with on an open account basis. The supplier trusts your ability to pay them against their invoice within, say, 30 days. Clearing banks offer fast money electronic transfer systems for such transactions. Or you could open a euro currency account allowing you to trade with countries in the Eurozone using just one account.
Letters of credit
These offer both buyer and seller security and are honoured through the banking system. The conditions are stated on the letter of credit, including the amount to be paid, a description of the goods and what documents the exporter must present to receive payment. The importer’s bank guarantees the exporter that payment will be made if those conditions are met.
Documents relating to the goods imported are sent by the supplier via their own bank to your bank. Your bank receives all the shipping documents and the invoices, which state the methods of payment. The bank will notify you when it has all the documents. The advantage of this system is that you, as the importer, don’t have to make payment for your goods until you have accepted the documents relating to them from your bank.
Paperwork and legal considerations
Import licences and quotas
Many countries aim to limit the quantity of certain goods being exported from their country. If the quota is exhausted, you won’t be able to import that product. This process is normally regulated by the issue of import and export licences.
Member countries of the EU allow unrestricted movement of the majority of goods between them, although you may still need an import licence. For goods imported from outside the EU, the rate of duty is decided by how the goods are classified. For help with Tariff Classification, call the Tariff Classification helpline on 01702 366077.
Import VAT is levied at the standard rate of VAT on the value of the goods, plus related costs including duty, freight and insurance. Companies importing regularly may be advised to obtain a deferment account. Local HM Revenue & Customs advice centres can offer further help.
Product safety and marking
Under UK law, you are obliged to make sure that any products you import are safe and comply with the relevant product standards. This may involve them being tested in an accredited laboratory. Your local trading standards officers are the people to speak to about marking and standards of safety for particular products.
Transporting the products
Terms of delivery and means of transport
Although some suppliers may want to quote for their goods including the transport or freight charges, you wish to take responsibility for your goods early in the supply chain. This allows you to choose the carrier, routing and point of entry into the UK. Always inspect your goods as soon as you receive them.
Arranging this cover yourself allows you to choose the level and extent of insurance. The exporter, for example, might only cover the goods until they reach a UK port. You might prefer the goods to be covered as far as the warehouse gates. It also means you are dealing with a UK-based company that speaks your language if there’s a problem. You can get more information from a specialist cargo insurance broker.
Various terms are likely to be used on documents and by suppliers, shippers, insurance brokers and agents. These are referred to as INCOTERMS (international commercial terms). Go to SITPRO (The Simpler Trade Procedures Board) – www.sitpro.org.uk – the full list of terms. Here are main ones:
EXW – Ex-works
The seller must place the goods at the disposal of the buyer at the seller’s premises or another named place not cleared for export and not loaded on any collecting vehicle.
FCA – Free carrier
The seller must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place.
FOB – Free on board Named port of shipment – Maritime and inland waterway transport only
The seller delivers the goods, cleared for export, when they pass the ship’s rail at the named port of shipment.
CFR – Cost and freight Named port of destination – Maritime and inland waterway transport only
The seller delivers the goods when they pass the ship’s rail in the port of shipment and must pay the costs and freight necessary to bring the goods to the named port of destination.
CIF – Cost insurance and freight Named port of destination – Maritime and inland waterway transport only
The same as CFR except the seller must also procure insurance against the buyer’s risk of loss or damage during carriage.
CPT – Carriage paid to Named place of destination – Any mode of transport
The seller delivers the goods to the nominated carrier and must also pay the cost of carriage necessary to bring the goods to the named destination.
CIP – Carriage and insurance paid to Named place of destination – Any mode of transport
The obligations are the same as under CPT with the addition that the seller must procure insurance.
DAF – Delivered at frontier Named place of destination – Any mode of transport
The seller must place the goods at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export but not cleared for import.
DES – Delivered ex-ship Named port of destination – Maritime and inland waterway transport only
The seller delivers when the goods are placed at the disposal of the buyer on board the ship, not cleared for import, at the named port of destination.
DEQ – Delivered ex-quay Named port of destination – Maritime and inland waterway transport only
The seller delivers when the goods are placed at the disposal of the buyer, not cleared for import, on the quay at the named port of destination.
DDU – Delivered duty unpaid Named place of destination – Any mode of transport
The seller must deliver the goods to the buyer, not cleared for import, and not unloaded at the named place of destination.
DDP – Delivered duty paid Named place of destination – Any mode of transport
The seller must deliver the goods to the buyer, cleared for import, and not unloaded at the named place of destination.
- SITPRO (The Simpler Trade Procedures Board) – www.sitpro.org.uk – SITPRO’s mission is to minimise red tape and make international trade easier and more cost-effective for the UK business community.
- HM Revenue & Customs – www.hmrc.gov.uk – Provides technical advice and information on all import procedures, tariff classification for duties and VAT matters.
Customs, Excise and VAT helpline: 0845 010 9000
Tariff Classification helpline: 01702 366077
- British International Freight Association (BIFA) – www.bifa.org – BIFA help businesses make contact with a customs agent and provides advice on transporting goods.
- BERR (Department for Business, Enterprise & Regulatory Reform import licensing branch – http://www.dti.gov.uk/europeandtrade/importing-into-uk/import-licensing/page9780.html
This business advice article published in association with Lloyds TSB.
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