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Business - Import & Export
Import & Export Activities (December 2008)
Introduction

This page is written mainly for the inexperienced trader, although some more seasoned operators may find some parts of interest

As with all International trade, each country has its own Import and Export taxes, plus Customs clearances, and special rules or charges for certain items, and you may need a special licence for things such as live animals and plants etc. If you are unsure it is best to check with Import / Export Agents both at home and in China.

Total charges including shipping will be your major considerations when formulating a business plan, which should also cover your operating costs as applicable at home, and allow you a profit. Don't forget to include leeway for currency fluctuations, and realise that in general over the years, the Chinese RMB is rising against the US Dollar - the standard currency for International trade.

Location is also important, as if you are sourcing from rural areas there may not be suitable roads, or the time taken may be counted in weeks. Inland waterways are commonly used in China, and shallow draft container vessels are quite common. Normally this is not a major consideration.

Exports

The majority of readers will be more interested in Exports, so we will begin here

You will normally be quoted prices in US Dollars, and these are usually either ex-works or CIF. There are a thousand other formats, but we will stick with these main two for now.

Ex-works means the price to you at the factory gate. You are then responsible for arranging all transportation, customs clearances and shipping yourself. In reality this normally applies to small quantities of goods that are to go in a mixed container being loaded elsewhere. Normally the factory will deliver these goods for free, or charge you a few hundred RMB.

By default, containers are loaded at the factory which is supplying the largest volume, although you can vary this with good reason (Multiple destinations in UK being one example).

CIF - When a price is quoted CIF, it means that the selling price includes the cost of the goods, the freight or transport costs, and also the cost of marine insurance. This will be the very basic insurance, and you should pay a little extra for 'All-risks' insurance costing around 0.25% on 110% product value per container

Tips:
1. Chinese packaging is not always suitable for spending weeks at sea, despite factory promises to the contrary. Smaller operators may never have sent goods for export before.
2. Chinese factories do not like mixed containers at all, and may charge you for loading other peoples goods
3. They will not use their export licence to help you get other produce exported - it is against Chinese law. Therefore mixed containers should normally be exported using and Export Agent
4. Container loading starts at 8am sharp, and the container may arrive before 7am. If you are foolish enough to try and delay container loading by a few hours, or book it for say 10am, then it will probably arrive at 7pm, which causes all sorts of problems re labour etc
5. If you are exporting bulky items that have a lot of inherent space - lets take bathtubs for instance - then in mixed containers it makes sense for you to fill the baths with other suitable products. Factories really hate you doing this, to the point of not wanting your business. The alternative is to ship lots of fresh air of course.
6. China Expats have done this in reality, and once managed to exceed the total container CBM with product CBM. It took some clever explaining to officials!
7. Do not expect to get near the total container CBM unless you have experts loading it for you. A 40'HQ container has an internal volume of just over 71 CBM. A good factory will manage to get about 60 CBM into it. Your own loaders will probably average nearer 65 CBM. China Expats once managed 74 CBM by product volume! Until you are sure of your exact product sizes and loading pattern, it may be best to use the standard 60 CBM as your guide, and have extra product ready for loading if there is space left for it.
8. Factory quoted dimensions for packaged goods are normally estimated, not factual, and they may forget to include the wooden or steel framework (If applicable), or pallet feet
9. Chinese do not usually use pallets for loading products, preferring to use cheap labour to do it all physically. This can create off-loading problems in UK where labour is very expensive. Here you need to balance CBM lost for palletisation vs convenience and labour costs, + container fumigation charges.
10. If you do not have a container off-loading dock, then it is always very useful to have the last product loaded set on pallets, so it is easy to forklift off and get onboard
11. You should allow for cartons being larger than quoted, and make a note of how big each one actually is - especially for regular repeat orders
12. Anything with an outer wooded crate for protection will require the container being fumigated prior to loading on ship. This cost is around $80 per container, regardless of size, and is always an extra charge.
13. Always be present for container loading, it does make a difference. Remember to take pictures during loading, and upon opening in your home country
14. Another trick (Which Chinese factories find incomprehensible), is to lay out heavy goods like marble on the container floor, and then cover them with floorboards or plywood sheeting (Doors even). This then gives you a false container bottom to place other goods on top. Left unsupervised, most Factories will put the computer screens on the bottom, and use the heavy marble to fill the gaps at the top = disaster!
15. Printing in China is incredibly cheap, and the quality rages from excellent to superb. However, Paper is very heavy, so a 13' container may be most advisable for a single cargo of product. Now, if you need a few thousand brochures or similar, it does make economic sense to print them in China (Eco-friendly and recycled paper is available), and put a few boxes inside a bathtub. DHL prices make this untenable - So this only works financially if you are using them to fill gaps during container loading.
16. Normally Chinese printers will put your A4 size brochures into the first available box they have, which won't be seaworthy. It is worth paying an extra ¥1 RMB or so to have these put into half reams (?) - The things standard 500 sheets of A4 come in anyway. Then put these inside a plastic bag and tape. These are ideal for filling small gaps inside containers. For Customs clearance, stick one copy on the outside so they know what it is and don't open it
17. Printing large Posters, then expect Chinese manufacturers (or container loaders) to fold them. You must ask for them to be put in a tube specifically

Professional Container Loading

The best way to do this is to do it yourself, and with your own regular team of experienced labourers. China Expats now has a warehouse specifically dedicated to making product ready for shipping, and loading containers. We hire local professional loaders as required, and they charge a set price per container = a few hundred RMB. Local trucks with driver and crew cost about the same for a journey of a few hours, plus off-loading and loading as applicable

Advantages:
* You remain in control of container loading at all times.
* You can load product for multiple drops in destination country.
* Given delivery of products from various suppliers is a few days in advance, you have time to check all packaging and ensure it is suitable for shipping
* You have the option to inspect the quality of all products, which is very useful for odd items from new or irregular suppliers
* You can palletise goods, and use specially made pallets (Cost peanuts) to maximise container usage
* You can open large products and place smaller products inside. Be careful here, as authorities frown upon this practice and immediately think you may be smuggling items. Document everything in each package, and even stick a list on the outside of each box. This not only calms any official inspection teams, but makes it easier for receivers in the destination country. However, the savings in CBM can be very significant! If you exceed 68 CBM for a 40'HQ container, then Customs may take interest, so your documentation needs to show the actual CBM, not the Total Goods CBM. There are ways to do this

Disadvantages are that until they know you, UK Customs may x-ray your containers a lot, and as often as 50%

Other Notes on Exports:

Customs: Some Customs Clearance Centres in China are cheaper, quicker, or less officious than others; whilst time or direct export may be more over-riding factors for you?

Documents: Having precise paperwork is more important when goods reach your home country, especially for containers carrying mixed goods, different tax thresh-holds, and attractive items. Until you are established (Several years), expect UK Customs to X-Ray 50% of your containers at a cost to you of £900 per time = Their Pleasure! Sounds like an unofficial Tax to us, but it also means you wait several days for the pleasure of paying them the money to do this for you, before they release your goods.

Chinese Quoted Factory Prices

These are normally in US Dollars, and larger companies will set these for the coming year in advance. The price goes up as the RMB rises against the Dollar,often every month, thus making a coherent purchasing plan difficult. You can also pay in most other leading currencies such as British Pounds and Euro's. Prices quoted this way may include conversion to US Dollars first, and then into the specified currency, beware!

One way around this is to pay in RMB, where the price will remain static for the whole year (Or term of agreement). This allows you to have confidence in your sales strategy. It is very difficult to do unless you have a WOFE type company or similar in China. A Representative Office cannot make payments to Factories!

Here's what you do:- Make a new company in UK, whose only operation is to transfer money into your Chinese Bank Account, which you open with The Bank of China (only!). Or you can do this via a Hong Kong registered company, which is probably far easier and has many other benefits for you. In both instances you will not suffer horrendous bank charges for the currency conversion and transfers, especially if you use the same International Bank.

HSBC is of course from Hong Kong, and whilst it may or may not be the best, it is very accommodating regards these transactions. So you transfer X thousand pounds into your HK bank account, and then transfer this directly in RMB to your Bank of China account - or transfer XX thousand RMB directly from your new UK company account into your Bank of China account. Both work in practice, but maintaining a UK company costs a lot, a HK one does not

Either way, you now have the facility to pay for Chinese goods in RMB, and via a simple Bank Transfer, most of which can be done online. It beats having to come to China physically, and spend a week or more drawing 10, 000 RMB per day out of ATM's!

If you prefer to pay in cash, then allow an extra day or so for withdrawals, as UK banks have a propensity to forget you rang them to say you would be in China, and consequently decline your card - because it is being used in China! Barclays are consistently bad at this, so bring your card hotline number with you also, and their opening hours in UK

Export Taxes

The standard rate of Export Tax in China is 6%, although some goods have different taxes. This is the tax a Chinese registered company pays the Government

Exports conducted using Export Agencies attract an Export Tax of 17%. They then claim 11% tax back = 6%. Normally they pass this export tax rebate back to you within the export process, and charge you only a commission, which is roughly 1 point added to the exchange rate, per value of goods, if they handle the factory transaction personally, or in the order of $300 on a cargo value of $30, 000

Unscrupulous Agents will keep the tax rebate for themselves, and still charge you for the exportation of goods. Be Warned - although it happens very infrequently, it does happen.

Shipping

This is mainly out of your control, although you can specify: fast, standard, or slow ships + port of departure and arrival. In our experience a fast ship can make the trip from Hong Kong or Shenzhen to Felixstowe in 20 days under perfect conditions. They always quote 21 days, and it normally takes 26 days. A standard ship should take about 29 days, and this is fairly accurate. A slow ship is quoted as taking at least 31 days, although some specify 40 days or more! Most slow ships make the journey in around 30 days. All of these will be severely hampered if there is a strong storm or Typhoon in the South China Sea (Quite common)

Of course, these ships are price banded, and the extra you pay for a fast ship is usually not worth it. If you don't specify the ship's speed, then your goods will probably go on a fast ship anyway.

Pay attention to your Countries International container Ports, and do some independent research. UK for instance has many container destination ports, some inland like Birmingham. In general, Only Felixstowe and Southampton offer reasonable port charges, and special regulations only apply to Felixstowe. All other destinations will be at least twice as expensive, and Scotland more so. You need to balance the UK road transportation charges against the port charges and special incentives - this is a tricky one, and it is your call! If you are even slightly unsure, then name Felixstowe - as you have to know exactly what you are doing for all the other options

Once your ship is in UK you will be excited, but expect there to be several days delay before your container is 'officially unloaded'. From this unloading date you normally have 7 days free storage, which does not include UK Customs clearances. This is a factor if they deem your container is to be queued for X-ray inspection (3-days nominal time). You usually learn about this after the event.

This impacts greatly on your off-loading schedule, especially for small operators. It is also likely that if you delay container arrival at your depot until say, Saturday (When extra bodies are available to help), you may exceed the 7-day free port storage period, and pay horrendous charges. Again, this is your call!

Our advice is to not plan offloading anything until UK Customs release your container, as then you are working with facts and not well intentioned guesstimates.

China Expats also employs the services of an extremely good and efficient Chinese Export Agent. During 2008 we sourced and organised the export of dozens of containers. Several were very complex (Mixed goods, differing tax bands, over 30 major product categories, with hundreds of sub-categories). Our Agent was unfazed, and UK Agents wrote to compliment us on our extremely good paperwork. We are happy to help you also, or simply take our advice above and do it yourself - it is free and our pleasure


Imports to China

Since the Policy of "Openness" some 30 years ago, imports to China have largely been rare and of specific technological value to China as a whole. Perhaps this actually started a little earlier, with exports of massive electricity generating turbines for dam projects from my home town in UK.

Other Chinese imports of the time included lathes and similar machinery. These were copied, and subsequent orders disappeared. Instead the Chinese opened plants to make these themselves. They subsequently improved the designs and functions. This is now history, although Chinese Universities still offer Masters Degree level courses in 'Reverse Engineering', so be careful here if this sort of thing is in your bag-baby?

Today in modern China we are largely past this, and German machines are regarded as the best. Most of the world at large actually concurs, especially for printing presses and similar technology. Nowadays Chinese do not copy the machines, they buy them and also buy the technicians who understand them. They then learn and jump ahead

All these factors have tended to hinder general Chinese Imports, and made the Chinese market hard to crack. This changed dramatically and irreversibly in (2003?) when China joined the WTO. Chinese are a curious people, and like new and different products. Hence there is a small and dynamically growing Import sector.

China Expats also imports small quantities of goods into China, so we know the potential is huge. The timing is also about right, but usually your product must have 'Face' = Very high esteem. It should also be totally Western, and backed by a marketing campaign. You will probably need to be in partnership with a Chinese company to pull this one off for large and immediate profits, so consider a Joint Venture Company as default criteria in most instances

China does have import tariffs, and they are very diligent on inspections of anything that may contravene regulations or be deemed as contraband goods. This is where your partnership comes into its own, as having the right contacts means a smooth passage into China

Summary

This web page turned out to be far longer than I initially imagined, but I hope it gave facts and answered many questions for those of you that are new at this. There is an awful lot I did not write about also, so please email us if you require specific information. Please use our contact page in first instance (Spammer protection), and state subject matter in the Subject line. Thank you and good fortune in China
This information is as supplied by the Chinese Embassy in UK, as dated 20th June 2008, and/or other reliable sources. Please check this information yourself as it may alter without notice, and whilst we try our best to ensure it is correct, please do not hold us responsible for any errors - this is intended as a simple guide only
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