Importing directly from China is an excellent opportunity to source goods at a fraction of the cost that would be incurred by manufacturing in Australia.
Thousands of Australian businesses successfully import products from China every year. According to the United Nations COMTRADE database on international trade, Australian imports from China totalled $56.95 Billion USD in 2019.
However, importing from China can be complicated and costly, especially for businesses that are new to the importing process.
It’s important to factor in the additional costs, taxes, and duty involved before you import goods from China to Australia. Once you have an understanding of the costs involved, you can apply for trade finance to help you maintain cash flow while your goods are manufactured and shipped to Australia.
Importing goods via shipping freight is significantly cheaper than air freight. Shipping freight is charged by the full container load (FCL) or less than container load (LCL). You will be quoted a shipping fee based on the cubic metres and weight of your goods.
If you are importing a new product, you will need to ask your supplier to provide you with an estimate for weight and cubic metres of your stock once it is packaged and ready for export.
The cost of renting a FCL varies according to the month you plan to import your goods.
For a LCL, the fees can vary according to the size and weight of your shipment. You can expect to pay between $150 to $250 per cubic meter.
The cost of sea freight is generally much smaller than the costs incurred through taxes, duties, and fees. To calculate these outgoings, you will need to determine the customs value of your imported goods.
The customs value is usually based on the free on board (FOB) price of the goods. Free on board is an Incoterm that refers to the point where the goods have been cleared for export and loaded on board the ship, with responsibility and risk transferred to the buyer.
Incoterms are a defined set of commercial terms published by the International Chamber of Commerce (ICC). These terms help to communicate the obligations, costs, and risks that are associated with transportation and delivery of goods. Depending on the arrangement with your manufacturer, you may use a different Incoterm to establish the agreement for the shipping of your goods to Australia.
Free on board price of goods includes:
- Unit Price
- Transportation to the Port
- Export Clearance
- Customs value does not include the cost of shipping the goods to Australia or the cost of shipping insurance.
Custom duty rates vary according to the category of goods you are importing. The majority of goods imported from China are subject to a 5% duty.
The amount you will need to pay depends on the customs value of your shipment.
For example, if your shipment is subject to a 5% customs duty rate, and has a customs value of $20,000, you would need to pay $1,000 in duty.
Goods and Services Tax (GST)
Goods and services tax must be paid on the majority of goods imported to Australia. You are usually required to pay GST even if your business is not GST registered.
For the majority of products imported from China, GST is usually set at 10%.
If you are GST registered, it may be possible to defer GST payment on imported goods if you participate in the deferred GST scheme.
Businesses that are part of the GST scheme can defer payment of GST on imports until they lodge their first activity statement after the goods have been received.
You can check your eligibility for the scheme on the Australian Taxation Office website.
GST Import Cost Calculation
- GST is calculated as a percentage of the total shipping cost, including:
- Customs Value (Free on Board)
- Customs Duty
- Shipping fees
Example of GST Calculation:
Customs Value = $20,000Customs Duty = 5% x $20,000 = $1,000
Shipping Fees = $1,500
Insurance = $50
$20,000 + $1,000 + $1,500 + $50 = $22,550
10% x $22,550 = GST $2,255
Import Processing Charge
The import processing charge is based on the customs value of your shipment.
It is a fixed cost that varies according to the method of lodging your import declaration.
Electronic import declarations are cheaper than document submission.
Since 2016, import processing charges do not vary according to cargo channel.
For your goods to be imported under Free On Board terms, your Chinese manufacturing partner will need to submit the following documents to your freight forwarder:
- An invoice detailing the value of the goods
- A packing list that states the contents of each box
- A bill of lading that shows the type, quantity, and the destination of the goods
If you are working with a manufacturer that has experience exporting to Australia, they will be familiar with the requirements for Free On Board import/export.
Before your manufacturer releases the product for export, you may need to provide a Letter of Credit or complete a telegraphic transfer to the exporter.
You will also need to ensure that the goods you import meet Australian standards and restrictions. Australia regulates several categories of products, including toys, furniture, vehicles, etc.
It is your responsibility as the importer to ensure your products comply with AS/NZS product safety standards and AZO substance restrictions.
You can use the Product Safety Australia website to access the regulatory information concerning products.
The cost of checking suppliers and meeting any requirements should be factored into the overall cost of importing goods from China to Australia.
Licenses and Permits
The majority of consumer goods imported from china do not require import licenses or permits. But there are strict restrictions on the importation of certain chemicals, equipment, plants, and livestock.
You can use the Australian Government’s Biosecurity database to check the import conditions for your goods.
How Long Does It Take for Goods to Arrive in Australia?
Importing from China to Australia will usually take around four weeks by ship. If you use a freight forwarder, they will arrange the delivery of your goods to port in China and provide an estimated date of arrival in Australia.
After your shipment arrives in Australia, it can take up to a week for your goods to clear customs and be delivered to your business location.
If you are looking to import goods from China, you need to be aware of the costs involved and how it will impact your cash flow. Once you have placed an order with a manufacturer, your capital can be tied up for several weeks until your goods arrive at port and clear customs.
ScotPac offers a range of Trade Finance solutions to help you access the funding you need to increase your buying power and negotiate a discounted bulk price with manufacturers. We can provide a cash injection that enables you to boost your stock inventory without suffering from a cash flow gap while you wait for goods to arrive.