The value of imports of goods and services to the UK hit a record high in March 2018 – an astonishing £56 billion in that month alone. Nearly 75 per cent of imports to the UK are goods such as machinery, cars and manufactured items – with Germany, China and the Netherlands being the biggest exporters. The trends are clear – importing is big business, and it’s getting bigger.
However, importing to the UK can be complicated and costly. Getting started can feel like a challenge – but it could be a great way to grow your business. This guide can help you understand the decisions you’ll need to make along the way, to make importing a winning strategy for your business.
Three quick and effective tips for importing
Just starting out? Here are some great ways to make sure your new import business gets off to a good start.
1) Cut costs when paying for your goods
Trading internationally means that the world is your oyster. You can find suppliers – and customers – all over the globe. However, the process of importing products can be costly. You’ll need to take into consideration not only the price of goods, but transportation costs, fees charged by outsourced service providers, and charges levied by government agencies for export/import duty and VAT.
While some of these charges are inevitable, there are areas in which you can cut costs to protect your bottom line. Take paying for the goods themselves. If you pay your overseas supplier’s invoice through a regular bank transfer, there will be fees and costs added – and the exchange rate your bank gives you might not be the best available. These added costs are frustrating – yet many can be avoided with a little research.
There are alternative providers such as TransferWise that may be up to eight times cheaper than UK high street banks.
When you make an international payment with TransferWise, you’ll always get the real, mid-market exchange rate – the one you’d find on Google – and will pay just a small upfront fee for each transfer. TransferWise is regulated by the FCA and has over 3 million customers. In addition, if you’re regularly dealing in different currencies, the multi-currency borderless account from TransferWise can hold up to 40 currencies and will charge you no fees when receiving money.
2) Transporting goods – what are your options and which is best?
Your major cost is likely to be in transporting your goods to the UK. You have several options to choose from.
Air freight is typically used when transporting small, high value items – or things which are urgently required. Goods can be placed in the hold of a regular passenger aircraft, or in a specially designed freight plane.
There are several options, from buying a small amount of freight space on a regular flight, to chartering an entire plane yourself. The costs are typically high, but it’s much quicker to move goods by air than by sea or road.
Prices are calculated based on weight primarily, and then value and volume of goods. Shipping a 50kg box of low value merchandise from Spain to the UK might cost you USD390, while bringing the same box from Bangladesh is likely to cost more like USD550. Read more about air freight costs and timelines.
It’s helpful to know that the cost of import duty to the UK is calculated on the cost of goods + the cost of transportation. VAT is then worked out using the cost of goods + the cost of transportation + the duty paid. This means that paying more for transport also means you’re hit by higher duty and VAT costs later.
Sea freight is often used when importing consumer goods to the UK from the Far East. It’s perfectly suited as it’s a relatively cheap way to move large volumes of product around the world.
Most importers choose to take either a full container – which could be 20 – 45 feet long – or to share space in a container with other shipments, for smaller quantities. It takes several weeks for sea freight to reach its destination, but the cost is significantly less than using air transport – some four to six times cheaper on average.
The costs associated with sea freight are usually worked out based on volume rather than weight, and take into account the type and value of the items being shipped. Moving a 40ft container of low value clothes from Spain to the UK will cost something like USD1200, while the same shipment from Bangladesh could hit USD2500. Everything you need to know about sea freight is in our handy guide, here.
Sea freight is better suited to large volume shipments, over about 100kg. In this case, the costs of sea transport tend to be significantly cheaper than any other method, and the duty and VAT are then also correspondingly reduced.
Rail transport is a cost effective choice in some areas. European rail services are frequent and fast – but they don’t offer the flexibility of road haulage, which can be an issue for importers. Rail transport is environmentally friendly – but usually more expensive than moving goods by road. You’re also likely to need further transport to move goods from the original supplier to a rail depot, and from your destination depot to your warehouse. This can add complexity and cost.
Moving goods by truck is a flexible option within Europe. The road network is good, and using trucks means that it’s easy to move large volumes of merchandise. Costs are reasonable, but you’d have to take into account tolls and fuel prices, which can be high. There are also some risks – longer journeys mean more chance that congestion or or other disruption will cause an issue, and road transport can result in more damage than air freight.
Moving a 40ft container of low value clothes from Spain to the UK will cost up to USD1200, not dissimilar to the price of sea freight – although the arrival time could be quicker.
Road haulage is a popular method of transport, but often used in conjunction with sea freight to move items longer distances at a good price.
3) Should you use a specialist?
Importing can be a complex and daunting process. Luckily there are several options if you want to bring a specialist onboard to support you.
Freight forwarders are specialists in international logistics, and can arrange the transport for your goods from their point of origin right to your door. Many freight forwarders also offer customs brokerage – more on that in a moment – so they will handle everything from collecting the shipment from your supplier to delivering it to your store or warehouse in the UK.
Freight forwarders will use a network of local transport and logistics providers to move your products, wherever in the world they start out. This can be especially helpful if you don’t yet have local contacts where your supplier is based. It also means that you will only deal with one person to manage all the details of your shipment, removing much of the stress.
Freight forwarders do charge for their services – but as they can also negotiate bulk rates with cargo companies, airlines and ports, there are also savings to be made along the way. If you’re considering using a freight forwarder, check out our guide on the topic here.
The role of a customs broker is to help set up the customs documents and licenses you may need for importing into the UK. They’ll make sure you have everything you need to clear customs smoothly, and can help you avoid delays, as well as possible fines and fees if you fail to comply with customs requirements.
If you’re considering using a customs broker, you might choose a standalone agency which offers customs services only, or use a freight forwarder which also covers customs processes. Before you decide, it’s worth getting several, itemised quotes so you can see what different providers can offer for your specific circumstances. Make sure you’re clear on exactly what you’re paying for, and trust your broker. More on what a customs broker can do for your business, here.
How to import
When importing to the UK, there are a number of steps you’ll need to follow. Your freight forwarder or customs broker – if you choose to use one – may pick up some of these tasks.
Don’t forget there will also be processes to follow at the point of origin – declaring exported goods to local authorities where your supplier is based, for example. These vary by location so you’ll need to get specialist advice once you’ve chosen a supplier.
The things you will need to do at the UK end of your import include the following:
- Register for an EORI number – this shouldn’t take more than three working days to arrive
- Get the right commodity code for your goods, which may require you to apply for a BTI ruling. This can take time, so plan ahead.
- Check if you need any import license for your goods, and apply if needed
- Arrange transport logistics – usually done using sea, air or road haulage specialists
- Declare your goods to customs – or have a freight forwarder or customs broker do this for you
- Pay any required duty or VAT before your goods will be released by customs authorities
- Depending on what you’re importing you may be able to subsequently reclaim some or all of the VAT paid
Requirements for importing in the EU vs non-EU countries
The rules for importing goods into the UK vary a little depending on whether you’re bringing in goods from the UK or outside of the EU.
We will look at each of these requirements in turn in a moment.
|Import license||Typically isn’t required||For restricted items|
|EORI||May be needed||Yes|
Commodity codes for UK imports
To import anything into the UK, you’ll need to make sure it has the right commodity code. A commodity code provides details of the goods you’re importing, such as what they are, what they’re made of, how they’re used and even how they’re packaged. This information is used for tracking imports into the country, and making sure that hazardous items are properly treated, but also for calculating import duty and VAT. Using the wrong code can cause serious legal consequences. You might be fined or find you have outstanding duty to pay – and if you’re trying to use the incorrect commodity code to import something restricted or hazardous, you’re liable to prosecution, too.
You can find the correct commodity code using the trade tariff lookup tool, available online. Alternatively you can get specific advice from HMRC, or use the government issued product classification guides to help. There’s lots more information on commodity codes – and how to use them – in our handy guide on the topic.
There are some slight differences to the way VAT is applied on imports coming from the EU, compared to those from outside of the EU.
Paying VAT on imports outside of the EU
If you are importing from outside of the EU, you’ll pay VAT at the prevailing UK rate on most goods – so currently 20%. However, you might be able to get a reduced rate of VAT on some items such as works of art. If you’re importing items but intend to export them again within 2 years, you may also be entitled to reduced VAT, or even complete VAT relief on your imports. Finally you might have different VAT payment requirements if you’re importing things like vehicles or boats.
There are a number of situations in which you’ll be able to claim the VAT paid back as a refund – more on this in the HMRC VAT guide linked in the source section below.
Paying VAT on EU acquisitions
Inside the EU, imports are known as acquisitions. They must be declared by the business which first imports them into the EU area, if they were imported from outside the EU and then moved within the bloc.
VAT paid on goods imported from elsewhere in the EU is known as acquisition tax, and is added to your usual VAT return at the same rate that you might use if making a purchase from a UK based supplier. This is currently 20 per cent. It’s worth noting that Brexit might cause changes in the way VAT on EU imports is managed.
Do I need an import license when importing to the UK?
If you’re importing to the UK from outside of the EU you will need an import license. Within the EU, licenses are usually only required under special circumstances – for example, for transporting goods considered dangerous or hazardous, or specialist areas such as movement of live animals.
However, even within the EU, you might need to register if you intend to move medicines or chemicals, or things like live plants. When you find the correct commodity code for your goods using the EU commodity code lookup tool, you’ll also be shown any relevant licensing requirements. If you’re not sure about what’s needed, seek professional advice.
EORI stands for Economic Operator Registration and Identification. Any individual or business involved in importing or exporting within the EU must have an EORI Number. If your business is VAT registered, you might even have an EORI number already, as it’s often generated automatically when you register for VAT. If not, you can apply online for an EORI number, and get it within just a few days.
You’ll always need to declare your EORI number if you’re importing from outside of the EU. If you’re exporting from within the EU, you may not always need to give your EORI number, but you’re required to register anyway.
It’s useful to know that there are several different application forms for EORI registration – depending on whether or not you’re registered for VAT, and whether you plan to import or export. You can find the forms – and lots of helpful information in our essential guide to EORI numbers.
If you’re importing from outside of the EU you’ll need to complete an import declaration to customs. The main document used is known as a SAD – single administrative document, or C88 in the UK.
It’s quite complicated to complete the required import declarations, which is one of the reasons many importers choose to have a freight forwarder or customs broker deal with this aspect of the process on their behalf.
Whether or not you need to pay duty will depend in part on where your goods originated. Goods coming into the EU from outside are subject to import duty. You can check the duty payable using your commodity code, on the UK government website duty calculator.
If you’re importing from within the EU there is unlikely to be any duty to pay. If the goods you’re dealing with originated from outside of the EU, but are now considered to be in free circulation in the EU, then duty should have been paid on them at the point that they entered the EU. They can now be moved with nothing further to pay within Europe.
Importing into the UK involves quite a few different steps. There can be a lot to learn, and it can feel a little daunting at first. However, there are plenty of resources out there to help – from the advice and guides available online and from the UK government, to the services of specialists like freight forwarders and customs brokers. Get some experienced help on your side and you’ll find it a lot easier to navigate the UK import and export processes.
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