The 7 Most Common Mistakes Made by Importers (And How To Avoid Them)
Running a business involving international trade can be challenging and there are many hoops to jump through. If you manage to identify these hoops early on, it’ll make running your business much easier. Below we’ve put together a list of the 7 most common mistakes made by importers. They’re quite simple and easily preventable, so read on and stay on top of the right and wrong practices.
Mistake #1: Not Understanding Shipping TermsThere are a mammoth amount of shipping terms. In fact, we’ve made a whole glossary trying our best to define many of them. Failure to understand Incoterms is a major issue for first-time importers and even regular shippers. Incoterms are laws that regulate the whole of the shipping industry. They’re always used in contracts for international trade. If you don’t know what they are, you’ll risk getting underpaid, getting hit with an unexpected bill, paying someone too much or perhaps even get sued. Case in point: we’ve seen importers order on “CFR” terms (see our beginner’s guide on Incoterms to find out what that means) and get hit with high and unpredictable bills at the port on arrival. Importers have also ordered goods on “EXW” terms not realising they have to pay for everything end to end! Once you’ve got your head around incoterms, there is also a mammoth amount of shipping terminology that may be used in reference to your shipment. In fact, we’ve made a whole glossary trying our best to define many of them. Different terms are used across borders – somebody in the U.S. might say one thing when a different term is used in Australia. Using our glossary as a quick reference, you will be well prepared for shipping across the world.
Mistake #2: Forgetting to book in advanceNow that we’re in shipping peak season, you should really book at least four weeks in advance to secure your sea freight shipment. During this period, shipping lines will be fighting much demand. They will take more bookings than they can carry and roll some of the containers to the following week to maximise return. If you’ve got an urgent shipment, preparation is key.
Mistake #3: Not preparing paperworkIt’s boring, but could mean the difference between making money and losing money. Paperwork must accompany every consignment that comes into Australia. This includes a whole range of documents like Commercial Invoices, a Packing declaration (i.e. a letter telling customs the kind of packing material used in your goods – generally only required for sea freight shipments) and, if working with a free-trade country (see the next Mistake), a Certificate of Origin (i.e. a document certifying the place of your goods are made). Get your paperwork sorted before shipping your goods to minimise delays or extra nasty charges should cargo go into storage on arrival.
Mistake #4: Forgetting about Free Trade AgreementsAustralia’s benefits from a range of free trade agreements with other countries. Some include an agreement with China and another with Malaysia. Why does this matter? Because there are benefits when trading with those countries you can take advantage of. There are also rules you must follow. Case in point: Some clients import their goods and then forget to produce a Certificate of Origin before the goods arrive. The result? Well, the good news is that they can still get a duty refund but now they will need to hire a broker to arrange this for them and you guessed it, this introduces additional cost. To save time and money, always check out any free trade agreements before shipping and prepare all the paperwork in advance.
Mistake #5: Not allowing enough time upon arrivalThere are two steps when your goods come into the country. There’s handling by the airline/container line. Then there’s the review by customs. Both of these steps affect the time before your cargo becomes available for a forwarder to collect. Notice how your documents might say an ETA (Estimated Time of Arrival) date and time? That’s ETA to the point of destination. The destination is the airport or port of arrival, not your warehouse door. You should allow at least 2 days for full container deliveries, 3-6 days for loose container deliveries and 1 day for airfreight deliveries after ETA. This is all subject to a clear customs status and no inspections required.
Mistake #6: Forgetting about customs chargesWhen importing into Australia your forwarder will normally provide you with a rate excluding duties and GST. This means that you need to account for additional charges on arrival levied by customs. These are based on the value of your goods, your commodity and the country of origin. You can use the below as a rough guide to calculate your additional charges:
- Duty 5 % of the FOB (Free on Board) Value
- GST 10% of the CIF (Cost and Freight) plus Duty value
- IDPF (Import processing declaration fee levied by customs) AUD85.00 up to AUD 200.00 based on the FOB value