Guest Post by: Fredrik Gronkvist, ChinaImportal.com
Europe is back in business, and the ecommerce market is growing at double digits across the European Union. Some may say it’s too late to get into ecommerce at this point.
I don’t believe that. I believe 2018 is the perfect time to get started in ecommerce.
While some may source products in Europe, or the US – others are looking to suppliers in China.
Price is one reason, but also the wide range of manufacturers, for all sorts of products.
In this guide, written by Fredrik Gronkvist – co-founder of www.chinaimportal.com – you will get a crash course on importing products from China, and selling in the EU.
Keep reading to learn how to find the right supplier, why you must comply with EU safety standards – and why you should not trust your supplier to handle your shipping.
1. What do I need to look for when sourcing suppliers as an EU buyer?
First, you should always look for suppliers that are specialized in your product area. Suppliers offering products in different categories, are more likely to be traders or agents – rather than manufacturers.
So why is it important to work directly with a manufacturer? Let me explain:
● You need to communicate your quality requirements somehow. A middleman only increases the risk of misunderstandings (and thus, quality issues).
● You have fewer design customization options if you work with a trading company. It’s hard to be successful in today’s ecommerce market, if you only sell generic products – even private label goods sometimes.
● Traders don’t work for free. They add their share on top of the factory price.
But that’s not all – you should limit your supplier selection to those that are already exporting to the EU and the US.
This is only a minority of the suppliers out there, and they are not necessarily the cheapest.
So why does that matter? Because you should only work with suppliers that can make products that comply with EU safety standards. Keep reading and you will learn why.
2. Do I need to comply with EU product regulations?
Some may say that the EU is too regulated, but few give the EU credit for its clear product regulations framework.
In short, all products are regulated, and must comply with one or more of the following:
● Product directives (i.e., EN 71)
● Chemical restrictions (i.e., REACH)
● Labelling requirements (i.e., CE mark)
● Document requirements (i.e., Declaration of Conformity)
● Lab testing
But the manufacturer will sort this out, right?
Not at all. It’s the Importer’s responsibility to ensure compliance with all applicable regulations – not the supplier.
Why? Because EU regulations do not apply outside of the EU.
If you import non-compliant products (i.e., without the correct labels or documents), then the customs authority can seize and destroy your products.
Or worse, if somebody is injured, you are looking at a far more severe penalty.
This is a huge issue right now as the EU is flooded with non-compliant products. Much are purchased on B2C websites, but many companies importing from China to the EU completely neglect product compliance.
Often, it’s based on the assumption that ‘the supplier should know’.
3. How do I make sure I get the right product quality?
Quality issues in China are real and often caused by the importer. Manufacturing is a world of dimensions, specifications, technical standards and tolerances.
Even the most simple product (like a t-shirt) must be defined in product specifications.
The design, materials, dimensions, labels. Everything, must be on paper (or at least a PDF).
In China, you get what you specify. Hence, if you leave important product details out, such as a colour tone or a material type, you will not get it the way that you ordered it.
The key to getting it right with manufacturing in China, is to provide the supplier with overly clear product specifications.
And, follow up with a quality check in the factory, before shipment.
4. How do I get the products shipped from China to Europe?
There are two primary options; Sea freight or Air freight.
Air freight is faster, taking only around 7 days. However, you pay for that speed. The cost is often around $4 to $5 per kilogram.
Sea freight takes a while. 30 to 32 days to be specific, to most ports in the European Union.
On the other hand, the cost per volumetric unit is much lower, as long as you ship more than 2 cubic meters.
You can either book the shipment through your supplier, or work with a European forwarder, with offices in China.
I strongly recommend the latter, for the following reasons:
● Most Chinese suppliers ship according to CIF terms, which results in high port fees when the goods arrive in Europe. Shipping quotations are based on incoterms, so you need to know what’s included.
Instead, I suggest that you only order according to FOB terms from your supplier.
● If you work with a forwarder, you have much more control and transparency of the process. You can book shipping all the way to your address, make sure the goods are properly insured and so on.
● You should work with an EU forwarder that knows how to declare the customs value, and how the import duty and VAT declarations should be handled.
5. How and when do I pay VAT, import duties and other taxes?
First, the import VAT and other taxes are calculated based on the customs value. In the European Union, the customs value includes the following:
● Product cost
● Shipping cost (to the EU)
● Product samples, tooling and samples
● Design fees and other fees paid to the supplier (or related party)
The import duty is a percentage that is calculated based on the customs value. How much you pay, depends on the HS code. For example, for Product A, you may pay 4%, while you pay 2% for Product B.
Most products are in the range between 2% to 6%.
Customs Value: €10,000
Duty rate: 5%
Total: 10,000 x 5% = €500
As you may already know, the VAT rate is set by each member state. The VAT you must pay is based on the sum of the customs value and the import duty. You can find out more information about your VAT obligations by contacting SimplyVAT.com.
Customs Value: €10,000
Duty rate: 5% (€500)
Total: 10,000 x 5% = €500
VAT = 20%
Total: (€10,000 + €500) x 20% = €2100
I recommend that you let your forwarder manage the customs and VAT declaration for you. Thus, they will handle all the paperwork and send you an invoice that include both the VAT and the import duty.
Do you have questions about importing products from Asia?
Feeling overwhelmed? You’re not alone.
The truth is that very few importers succeed with manufacturing in Asia, when trying to figure everything out on their own.
There are so many pitfalls waiting out there. Many of which, I have stumbled on myself.
But you don’t have to.
On Chinaimportal.com, we have a Knowledge base, with more than 250 free articles and interviews – on everything related to importing products from Asia.
We also offer free webinars, forums and eBooks.
You can sign up for free on www.chinaimportal.com.
Are you importing from China and need help with your VAT obligations? Our team is here to help! Book a call with a team member today to make sure you are remaining VAT compliant.