International shipping laws specify how many shipments are permitted into a country simultaneously. These regulations will also determine their cost and whether any limitations or bans exist. These laws differ according to the nation’s government. Businesses must be familiar with both the common language and the fundamentals of the rules governing import-export regulations.

Online merchants must remember a few things to prevent fines and delays while sending goods abroad. First and foremost, it’s critical to understand the required paperwork for the country you are delivering to. Second, you must abide by the customs rules in sending and receiving countries. Ensuring packages are insured and properly labeled is always a good idea.

It’s essential to be informed about any changes to the legislation to prevent any possible issues. Managing shipping papers and automating procedures using digital platforms can lower the chance of mistakes and increase productivity. It’s also crucial that your workforce has access to the same data and information to guarantee that all requirements are fulfilled.

The Importance of Import-Export Regulations

International organizations create shipping regulations. Due to its global nature, shipping must adhere to standardized laws. Without it, we would end up with many contradictory national legislation. It would undermine the effectiveness of international commerce by causing administrative confusion and business disruption.

When it comes to importing and exporting, the first thing to know is that each nation has its international shipping regulations. These regulations, which specify which products are permitted entry into the country, are in place for several reasons. Some governments restrict certain items to stimulate their economies and encourage domestic purchases. Other laws are in place to completely prohibit the export of some commodities.

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For instance, exporting specific live animals, plants, and seeds is forbidden in several countries. These laws keep invasive species out of their ecosystem, preventing them from upsetting or eradicating native plants and animals. If other items were not made following national standards or include illegal substances, they cannot be imported into that nation.

Additionally, several carriers have their international shipping laws. For example, the USPS forbids tobacco, lottery tickets, and alcohol transportation within the country.

Import-export regulations include information on the taxes imposed on shipments and rules and limitations. Every item is subject to taxation by the relevant nation, depending on many variables, including the shipment size. Some shippers send smaller goods in batches to avoid paying higher taxes. Some customs authorities impose fines and penalties for this sort of practice.

Compliance with international shipping standards is essential for successful shipping. Businesses should have solid systems and procedures in place to guarantee compliance. Online merchants must be familiar with accurate customs declarations. That means adhering to dangerous product rules and appropriate documentation and labeling. You can also ensure compliance by selecting a reliable carrier and collaborating with knowledgeable shipping partners.

Staying updated with any amendments or changes to legislation is another crucial component of guaranteeing compliance with international shipping laws. It’s vital to routinely examine and update shipping processes and procedures to ensure compliance. Regulations differ per region and can often change.

eCommerce businesses should also think about how their shipping policies can affect the environment. Many nations have laws to reduce the adverse effects of shipping on the environment. These include strict guidelines regarding limitations on emissions and trash disposal. Businesses may lower their environmental impact and guarantee regulatory compliance by employing sustainable shipping procedures.

Best Practices to Comply With Import-Export Regulations

Import and export operations are essential to supply chain management. Businesses must effectively manage these activities to guarantee customer satisfaction, cost-effective procedures, and on-time delivery. By implementing these international shipping best practices, you can reduce risks, increase efficiency, and streamline import and export processes. 

Effective Documentation Management

Documentation is needed for each foreign shipment. Customs papers include information such as the shipment’s origin, destination, nature, amount, and other product details. Proforma and commercial invoices are the two forms of paperwork frequently used concerning shipping legislation.

Successful import and export operations are built on accurate and well-organized documentation. It’s crucial to keep all of your documentation up-to-date and accurate. Examples of essential shipping documents include bills of lading, business invoices, customs declarations, and certificates of origin.

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Ensure that every document complies with international commerce rules and is correctly archived for convenient future access.

Proper Customs Compliance

Maintaining compliance with trade laws and customs procedures is essential for efficient import and export processes. Learn about the laws that apply to every nation where you do business. Note the rules governing import limitations, labeling specifications, and product standards. Regularly evaluate and update compliance practices to prevent fines, delays, or shipment rejections.

Furthermore, establishing a solid compliance tracking system can improve your capacity to remain updated with changing customs and trade laws. Use robust software programs created especially for compliance tracking. Remotely and automatically monitor and oversee your compliance with the many rules found in other countries.

Moreover, a compliance monitoring system aids in maintaining an extensive audit record of your compliance-related actions. It keeps track of and preserves all pertinent information, including shipping records, licenses, and certifications, giving you a thorough history of your compliance efforts. In the event of audits or investigations, this paperwork may be beneficial in proving your compliance and lowering the possibility of fines or shipment rejections.

Understanding Taxes and Tariffs

Taxes and tariffs significantly impact international shipping costs. Businesses need to be fully aware of all the taxes and tariffs that can be imposed on their exports. The best way to handle tariffs and taxes in international shipping is to familiarize yourself with the many types of levies and taxes. Online merchants can work with a customs broker or knowledgeable shipping partner. Study the import rules and regulations of the destination country.

Consider the total value of the items being sent over. De minimis values apply in several countries. Products below a particular threshold are not subject to customs or taxes. You must determine the destination country’s de minimis value to ascertain if your shipment falls under this category.

Be aware of any free trade zones or trade agreements relevant to your exports. These agreements may result in lower or no duties and fees for eligible exports. Researching and understanding the contracts’ prerequisites and conditions is crucial to capitalize on any possible financial benefits.

Clear Communication and Transparency

Effective communication and teamwork are essential for all parties engaged in the compliance of import-export regulations. Create efficient channels of communication with customs officers, freight forwarders, suppliers, and other parties involved. To guarantee seamless operations, clearly express expectations, deadlines, and needs.

To increase transparency, embrace technological technologies that enable real-time tracking and progress updates. To guarantee that everyone in the company sees the same data, importers and exporters may effortlessly share information among teams using enterprise resource planning (ERP) software.

Additionally, customer portals allow you to easily share relevant data with your partners, customers, and other stakeholders. 

Extensive Risk Management

Import and export operations risks include theft, delays, damage, and compliance problems. Furthermore, supply chain interruptions often lead to a 3-5% rise in costs and a 7% drop in revenue.

Complete risk management must be put in place to handle these hazards properly. By conducting in-depth risk assessments, businesses may find possible weaknesses and create strong backup plans to deal with them. Evaluate variables that might affect the efficient flow of products. These evaluations may include trade policy changes, natural catastrophes, geopolitical instability, and transportation interruptions.

Evaluating insurance coverage is a vital component of risk management. Around 34% of small businesses have complete insurance coverage for import and export operations. Purchasing the right insurance can offer a safety net against any losses brought on by theft, damage, or other situations during item transportation or storage.

Through proactive risk management and the utilization of industry data, companies may significantly improve their compliance with import-export regulations. Businesses can secure their operations, uphold consumer satisfaction, and preserve their bottom line by recognizing, assessing, and mitigating possible risks.

International shipping rules are constantly changing. There are some key trends and developments to keep an eye on. Internally, we have the increasing automation of customs procedures, supply chain management, and tracking improvements. Externally, there is a need to monitor changes to import and export laws due to geopolitical circumstances. Businesses should remain up to speed on these trends and changes to ensure compliance with the most recent legislation and preserve a competitive edge.

Import-export regulations can be challenging for online merchants to understand and comply with. Knowing the important variables to consider can guarantee a seamless and effective shipping procedure. It can even help avoid delays or legal concerns. Laws and legal guidelines must be followed. Collaborating with knowledgeable shipping partners is always a cost-efficient solution. 

ZhenHub simplifies your logistics, making it easy to navigate and comply with import-export regulations. Connect with our global network of distribution and warehousing partners. Track all your items in real-time with our multi-channel platform. Sign up for free on our website to get instant access. Contact our fulfillment experts for more information regarding international shipping.

Over the past two decades, China has gone on to expand its economy and become very sophisticated and integrated into global supply chains. Right now though, it appears there’s a global ‘over-dependence’ on China for manufacturing and many businesses are considering reallocation of production units outside of China.

Southeast Asian countries such as Thailand, Vietnam, Cambodia, etc seem the next reasonable choice for businesses considering moving manufacturing from China. But there’s actually more to this than many businesses and individuals are able to see.

Moving your supply chain to Southeast Asia

The recent coronavirus outbreak seems to have shown just how critical the Chinese manufacturing market is to the global supply chain. However, a few events, with some even preceding the recent outbreak, like the prolonged trade war between the US and China, have had many businesses considering diversifying their supply chain out of China.

Diversifying the supply chain out of China seems the next easiest thing to do to avoid disruption to your supply chain. The only problem is that it’s not near as easy as it seems.

Here’s why;

After dealing with Chinese suppliers and manufacturers for more than three decades, many businesses and individuals have become accustomed to doing business with Chinese companies so much so that they expect this would be a similar experience with the other Southeast Asian countries.

While we’d agree that Chinese suppliers are not perfect, a lot of improvements and changes have taken place over the past thirty years. A lot of the manufacturers and suppliers have been trained by their buyers on so many areas aimed at meeting buyer expectations.

Today, Chinese manufacturers are at a greatly improved level as far as quality control, as well as in compliance with globally accepted standards of ethics and sustainability. The opposite is most often the case with the Southeast Asian countries.

Challenges of moving manufacturing to Southeast Asia

The truth is that many buyers are not prepared for the challenges and efforts required to make the move to Southeast Asia as successful as the China experience.

This often requires a new kind of training, monitoring, and, some other commitments that most buyers and businesses are often not prepared to handle. There are four main issues most buyers have to contend with. These challenges are outlined below;

1. Quality control challenges

If you’re new to the Southeast Asia manufacturing market, you’ll find that the defect rate here is far worse than what happens in China. While China itself used to be very poor at this, a lot has improved over the years and product quality has now been considerably improved as well.

But that’s not the case in Southeast Asia.

Product quality in this part of Asia has not seen a significant increase as it had seen in China. The recent exodus of companies to these markets has even caused a greater decline in product quality as the local manufacturers struggle to keep up with the demand from foreign buyers.

The holiday seasons are the most challenging times here.

Some buyers have reported up to 40% defect rates as manufacturers get very busy during these periods. There’s, therefore, a need to have a proactive plan to deal with defects. The best you can do is to get your inspection right, and this is even different from how it’s done in China.

In Southeast Asia, all inspection must be done before your supplies leave the factory for your overseas facility. So, what happens when you discover product defects after the whole production has been concluded?

2. Costs of inspection in South East Asia

A high defect rate can always eat deep into your company profits and revenue.

This is why your best bet when sourcing products from Southeast Asia is a thorough, continuous, ongoing inspection throughout the entire production cycle.

Rather than just discovering defects after your supplies have been transferred to your warehouse for shipment, this type of inspection helps you identify defects at any point in the production process.

For effective inspection, you may need to hire the service of a product inspection agent who would have to visit the factory regularly to monitor production. For very large orders, this may be required every day. The only other option is to get an international inspection company for regular on-site visits.

However, both of these inspections have huge costs and can be unreasonable for most small to medium-sized businesses. More inspection costs add more to product’s costs so the products become more expensive than normal.

3. Scheduling and delivery delays

It’s a common thing for many companies in Southeast Asia to accept order deliveries without any regard for schedules. Many of these manufacturers don’t respect delivery deadlines and may only deliver your supplies long after the most reasonable time.

This is most common during holiday seasons such as the US holiday season.

This late delivery issue has become even more problematic recently with the influx of more buyers into the market. So, if you would be moving manufacturing from China to Southeast Asia, how can you ensure that orders due for delivery by October do not take until late December to arrive?

• First, you need to adopt a realistic approach to your order delivery expectations. This can be done with the knowledge that your order will very likely be delivered late. You may consider cushioning this effect by ordering early. But if your orders arrive very early, you’ll incur additional warehousing costs.
• Secondly, you should consider discussing the issue of late delivery with your manufacturer or supplier beforehand. But many suppliers in Southeast Asia tend to shy away from issues like this. When this happens, you know there’s a high likelihood that your orders will be delivered late.
• Finally, you can get your supplier to commit contractually to a deadline while incorporating some forms of penalty into the contract for late delivery. An example of such a penalty can be in the form of reducing the final purchase price.

Assuming your Southeast Asian supplier will keep to their end of the bargain as far as delivery timing is concerned does not work most of the time. You can also put a monitoring process in place via inspection. This will, however, increase the costs of inspection to make production costs even more expensive.

4. Protecting your product designs

If you’re buying an off-the-shelf product from your manufacturer, you don’t own the design so you don’t have to worry about a thing.

But what if you’re customizing a particular product for your own use, using your own design? You likely would want to enforce a restriction so this design can be exclusively yours. But this can be pretty challenging in most Southeast Asian countries, compared to what you might have been used to in China.

In most cases, there’s no formal arrangement for IP protection.

If you want proper protection for your intellectual property, you may need a separate written contract for this. This arrangement will help you maintain ownership of your product design to effectively prevent the manufacturing company from producing products for itself or other buyers using your own design.

Anything short of this will be like giving out your product design (intellectual property) away to the manufacturer on a platter.

Bottom Line

Your ecommerce business needs a very efficient supply chain for success.

Markets have become globally intertwined nowadays. And while this presents major opportunities for growth, you also need to put in a very effective supply chain management framework to overcome the associated complexities.

Whether you’re sourcing products from China or considering moving manufacturing from China to any of the Southeast Asian countries, ZhenHub offers a range of services such as software services to shipping, warehousing, order fulfillment, and inventory management services that will give your ecommerce business a competitive boost.

If you need assistance with reducing logistics costs, you can reach out to our specialists – hello(a)zhenhub.com or submit an enquiry here.

The order volume of start-up eCommerce businesses is often low, making it easily manageable through self-order fulfillment. On the other hand, scaling online stores often find it much more efficient to outsource the complete order fulfillment process to third-party logistics companies or 3PL providers. 

3PL providers offer full-service solutions for merchants, from the minute a customer checks out their online cart to the moment they receive their orders. Retailers can just focus on turning website clicks into paying customers while letting 3PL providers handle everything from inventory pickup and storage to packaging and shipment. 

5 Signs It’s Time to Switch 3PL Providers

There are more than 20,000 3PL companies in the United States alone. With so many options available for sellers, it will not be entirely surprising if retailers do not get it right the first time. Sometimes, merchants take a terrible service experience to identify precisely what they are looking for in 3PL providers. Here are five tell-tale signs that can tell sellers it is time for them to switch 3PL providers: 

• Disorganized Inventory Management

The way 3PL providers manage inventory says a lot about their brand promise. Disorganized inventory management can lead to messed-up orders, missing or broken items, and shipment delays. Sellers must make sure they have end-to-end transparency of their products, starting from how a 3PL picks it up to how they store and ship it.

• Shipment Delays

It is no secret that delivery speed has a significant impact on customer satisfaction and brand loyalty. Sellers must remember that shipment delays can put their business in a negative light even when poor 3PL service is the root cause. If merchants always receive negative reviews involving late deliveries, it is probably time to switch 3PL providers. 

• Outdated Technology

Both eCommerce and the logistics industry have come a long way in terms of digital adoption. Now, online shoppers expect complete transparency on their orders, which means real-time trackability is no longer a luxury, but a necessity. 3PL providers with outdated technology will make it challenging for retailers to track and monitor shipments.

• Lack of Pricing Transparency

One common issue of merchants with some 3PL providers is they sometimes charge fees that were not discussed initially or included in the contract. As sellers commonly have a set budget for outsourcing to 3PLs, being caught off guard with additional fees can be frustrating. A trusted 3PL provider will have no problem providing a detailed breakdown of costs and specific inclusions associated with it. Hence, merchants have a clear idea of where their money is going.

• Terrible Customer Support

As with any other business, many external factors can affect eCommerce and the order fulfillment process. At times like this, merchants should promptly connect with their 3PL providers and get immediate response and action. With 3PLs serving as middlemen between retailers and their customers, poor customer service can increase order cancellations and shopping cart abandonment. 

Bottom line: 

The best 3PL providers will take the time to understand the needs of their merchant customers. If you need top-of-the-line fulfillment and warehousing services to scale your eCommerce business, do not hesitate to give ZhenHub a call. Let our 3PL experts provide you a tailor-fit quotation based on your requirements. 

The EU recently reached an agreement to extend the Brexit deadline to 31 January 2020. For the businesses importing or exporting to the UK or EU, specific changes can be expected.

But you don’t have to wait until the disruption finally occurs. To avoid disruptions to your supply chain and your entire business, the best time to act is now. Whether it turns out to be a hard (unmanaged) Brexit or a soft Brexit, you’ll be better off prepared for the worst even while you’re expecting the best.

Hard Brexit: The Cold Hard Truths

A hard Brexit may necessitate the sudden establishment of tariff and non-tariff barriers. While this can be expected to affect most RoRo Ferry crossings from Europe and the UK, this will also cause a steep rise in customs declarations, possibly by up to five times as much. Truck traffic in the first 60 days may also be slowed down due to the new controls on the side of the EU, at least within the first three months.

Businesses with their location int the UK for EU operations would also have to register a new location in mainland Europe. Even if your goods aren’t crossing the UK borders, Brexit and the associated implications may still impact your business, somehow. VAT payments aswell may also get some changes, so it’s important to generally broaden your understanding of global trade, for greater ease.

8 Tips for Preparing Your Business for Brexit

It makes sense that the UK customs authority, HMRC, is doing its best to ensure importers are adequately informed to ensure quick entry of goods into the UK after Brexit. Here are some things you may want to consider;

1. Get an EORI that starts with GB

The HMRC says it will only allow non-GB EORI numbers for a limited time post-Brexit. After some time, you’ll be required to get an EORI number that starts with GB import to the UK.

2. Proper classification and international trade requirements

You may consider getting the help of a customs broker in this case. Choosing the correct code from the thousands of possibilities will help you avoid delays of hefty fines.

3. Leverage TSP

The Transitional Simplified Procedure introduced by the HMRC allows importers to make minimal information declaration at ports. The TSP license may also be used to postpone VAT/Duty payment in full, up to six months after import. This is needed if you will be importing or exporting goods to or from the UK from any of the post-Brexit EU27.

4. Knowing your incoterms

It’s important to know what incoterms you use. Whether you’re buying or selling, you may be required to appoint a broker and also provide specific information with which they can act as an agent on your behalf.

5. Be informed about temporary tariffs

HMRC is working on instituting a temporary tariff regime for a year with 0-rate duty on some products. This will apply to both EU and non-EU countries and will be shaped by the WTO law. As of now, the HMRC, Parliament, and the Prime Minister are yet to agree on the specific details of the tariff regime. So, you can either be on the lookout for this or discuss it with your customs broker.

6. Security deposits and duty deferment

The HMRC plans to waive some security deposits. There are also plans to lift certain financial guarantees when you apply for a comprehensive customs guarantee. Establishing a duty deferment will also become much easier as the requirements will be loosened.

7. Changing your approach to VAT

Your tax accounts should be up to date on the latest ways to file and account for VAT. Right now, VAT is paid upon import by a Flexible Accounting System, FAS Account, or deferment. After Brexit, this will be paid later and merely accounted for in VAT filings upon import. With this, there will be no more need for security guarantee or VAT deferment.

8. Expedite exports

You may have to trade goods in which case there is no buy or sell agreement between the different sides of the trade in the UK and EU. In this case, you may need to undertake certain complicated studies to determine your valuation method in line with the WTO guidelines. You can consider getting help from your broker or trade attorney to avoid shipment delays if there is a D1ND.

Bottom Line

Brexit and its implications are quite complicated, especially at it relates to organizational supply chains. However, getting the help of a knowledgeable customs broker or a freight forwarder with integrated customs brokerage may prove vital in the critical times ahead.

ZhenHub is well-positioned to help you navigate the complexities that abound here and in the other major global markets. You can contact us today to see how we can help.

If you need assistance with reducing logistics costs, you can reach out to our specialists – hello(a)zhenhub.com or submit an enquiry here.

China plays a key role in the global supply chain. Its place as a manufacturing hub means that businesses across the world and most especially, ecommerce and retail businesses are heavily reliant on it for their operations. What then happens when a global health crisis of the scale of the recent coronavirus (COVID-19) outbreak threatens to disrupt this key player’s strategic role in the global supply chain?

This guide explains how the recent COVID-19 outbreak in China can impact the global supply chain as well as how ecommerce retailers can mitigate this risk.

China, coronavirus and the global supply chain

China, with a population of more than 1.4 billion people, is the world’s largest economy next to the US. So, aside from being a key consumer market for manufacturers, China lies right at the heart of the global supply chain. The recent coronavirus outbreak in China is, however, affecting these key positions.

Since its outbreak in Wuhan, coronavirus has spread rapidly, killing more than 2,200 people and infecting more than 68,000 in China. There have also been some coronavirus deaths recorded outside China as well, in France and Taiwan.

It’s expected that a condition of this magnitude will have some effect on the global supply chain. This is comparable to some extent with some of the previous pervasive events that have occurred and disrupted this chain from 2013 through to 2018.

According to a Forbe’s publication the Supply Chain Insights LLC, Supply Chain Risk Management (Mar-May 2018), ongoing cyber attacks or computer hacking, along with the West Coast port slowdown of 2015-17, and 2017’s Hurricane Harvey, were the most impactful events to disrupt the global chain during this period.

If we want to learn from history, then we have to brace up for the challenges ahead.

A timeline of supply chain events linked to the coronavirus outbreak in China

January 23, 2020

• The Chinese government imposed a lockdown on Wuhan and the Hubei province for mandatory quarantine to contain the outbreak. This region is home to about 57 million people and 22 million businesses.

February 8, 2020

• Couriers in China were told to resume activities and regain 40% of their handling capacity.

February 11, 2020

• Both USPS and Singapore Post cut mail routes to China due to low capacity. China Post also started disinfecting offices, postal centers, and processing centers, causing a slowdown of personal and commercial mail.

Feb 14, 2020

• DHL and Deutsche Post suspended collection, delivery, and warehousing across the virus-infected Hubei Province. Deutsche Post also suspended shipments to China, Hong Kong, and Macau temporarily.

Feb 18, 2020

• Low demand causes Singapore Airlines and Silk to reduce air flights to Seoul, Tokyo, Frankfurt, New York, London, Los Angeles, Paris, Mumbai, and Sydney.
• Apple admits iPhone supply will be affected.
• Automaker Jaguar admits its supply chain has been disrupted after being unable to get enough car parts being manufactured in China to its UK factories.

Feb 20, 2020

• China’s factories now operating between 50% to 60% capacity.
• Maersk has canceled 50 sailings to Asia since the outbreak.

Feb 23, 2020

• The Baltic Dry Index (BDI) is at its lowest since 2016. An indicator of how the virus outbreak has affected the daily price of the movement of goods.
• The global economy continues to suffer. While the total cost of this is not known, airlines are expected to lose as much as $32.9bn due to the backlog of freight.

Feb 25, 2020

• Several airlines have suspended flights to China, Hong Kong, Macau, Seoul, and other virus-plagued regions.
• Analysts expect intra-Asian trade to be the worst hit by the first quarter of 2020.

There’s so much disruption happening to the global supply channels. This impact will be felt by both small and large businesses alike.

Supply chain impact from the coronavirus outbreak

The government, in its bid to contain the virus, has placed eight cities in China’s Hubei province under lockdown, including Wuhan, the capital seat which is five times the size of London.

According to a Dun & Bradstreet report, the outbreak has affected some of China’s main regions where over 90% of active businesses in China are located.

Many of the 22 million businesses in these regions are subsidiaries and branches of foreign businesses. Some are first or second-tier suppliers to about 56,000 companies across the world.

Here’s the thing;

These things Factory closures and citywide shutdowns can be expected to disrupt manufacturing and shipping in China. The effects will be felt in international trade, as well as in the global supply chain.

Inventory shortages, as well as significant delays and other disruptions to the global supply chain, are already being witnessed.

China’s Minister of Foreign Affairs, Wang Yi admits the Chinese economy will face a temporary slowdown. He is, however, highly optimistic that the economy will rebound once the virus is contained and the epidemic is over.

Coronavirus is no doubt a huge global health crisis. But its impact will reverberate beyond global or epidemiology. The cracks and vulnerabilities in the global supply chain are showing already.

Mitigating the coronavirus effect on global supply chain

The Economist warns that the outbreak could have a lasting impact on the global supply chain should multinationals fail to take the risks of disruption seriously.

What then is the way forward for the ecommerce retailer whose supply chain and entire business are also at risk? Well D&B has some recommendations to help businesses deal with this challenge.

These include;

• Conducting a risk-based assessment process to identify and monitor supply chain efficiency and productivity risks.
• Conducting detailed supplier assessment to be sure the supplier won’t affect the business negatively.
• Ensuring complete visibility of your supply chain and actively monitoring Tier 1 and Tier 2 suppliers to preemptively identify associated risks.
• Consider the possibility of finding suppliers in non-impacted regions.
• Limit your dependence on one supplier in a geographic region.

Bottom Line

You can’t risk leaving your supply chain at the mercy of this virus.

While we greatly hope the coronavirus epidemic will be over very soon, there’s a need to thoroughly understand your supply chain risks so you can devise proactive and effective mitigation strategies. You can also consider increasing your buffer inventory as well.

That said;

ZhenHub provides top-of-the-class software, shipping, warehousing, order fulfillment, and inventory management services. We stand for consistency and efficiency and will help you bring much more value to your supply chain. You can contact us today to get started.

If you need assistance with reducing logistics costs, you can reach out to our specialists – hello(a)zhenhub.com or submit an enquiry here.

How to Calculate Taxes and Duties for Importing Into UK

E-commerce businesses and other individuals shipping goods into the UK should be clear about their taxes and duties liabilities. Although the thought of this tends to drive a lot of people crazy, calculating the taxes and duties due on your shipments should not be much of a challenge when you understand how things work.

We’ll go down into the basics of this in this guide. But before then, let’s first have a brief look at what taxes and duties are, in the first place.

UK Import Duty & Tax

Goods purchased and imported into the UK from outside the EU are subjected to tax and duty payable to the UK Customs Department. Movement of products within the EU are exempted from VAT, although VAT will still be levied on the shipping and carriage costs.

If your goods are liable to VAT and duty charges, they’ll only be released to you upon payment of the due fees. So, while you’re calculating what it will cost to ship your goods from China, you need to factor in both the duty and VAT.

• Understanding the VAT

You may need to pay VAT on the cost of the goods as well as the amount it costs to ship to the UK. So, the VAT is not just calculated on the goods alone, it will, however, be on the total of what it cost you to bring the goods into the UK

• UK Import Duty

Different products have different duty percentages.

This means that you may have to pay slightly different import duties on various products. The UK government has an online tariff calculator on its website. Either you use this to calculate your import duty, or you ask your freight agent to help with it.

How much you pay as import duty will depend on the class of goods you’re shipping.

This is where the HS Codes come into play. Along with a detailed description of your shipment, the goods must also be allocated to the right tariff heading, as errors may attract costly fines and penalties.

• HS Codes

HS Codes, also known as the Customs Harmonized Tariff System Codes, are used in determining what percentage of the cost of the goods will be due as import duty. This must be error-free and noted correctly. The code classification will help you understand the tariff class your products belong to. This will be helpful in calculating your VAT and import duty accurately.

How to calculate VAT and Duty

There are two main methods to calculate duty and VAT.

You can use the CIF or the FOB, depending on how your package is being shipped into the UK. Below, we’ve laid out two examples to help you understand how to calculate your duty and VAT using either method.

CIF – Cost, Insurance, and Freight

The CIF considers the cost of both shipping and insurance and is the most prevalent quote. However, it’s still the method with the higher value when both are compared.

Let’s consider the following scenario for instance;

• Value of goods: £7,500
• Cost of shipping and insurance: £,600
• Subtotal costs (1): £8,100

The duty will be calculated on the subtotal costs (1).

So, let’s assume a duty of 3.5% is levied on the goods;

Then, 3.5% of £8,100 equals £283.5

Therefore, Duty + Subtotal (1) equals subtotal (2)

• Subtotal (2) equals £8,383.5
• The VAT will be charged on subtotal 2
• Assume there will be a VAT of 20%
• 20% of £8,383.5 equals £1,676.7

Total landing cost including duty and VAT equals £9,960.2

FOB – Freight on Board

The FOB quote is the second method used in calculating duty and taxes, and it does not consider freight costs and insurance. Let’s assume the scenario below to understand this;

• Value of goods: £7,500
• Cost of shipping and insurance: £,600
• Subtotal costs (1): £7,500 (does not factor in shipping and insurance)

The duty will be calculated on the subtotal costs (1).

So, let’s assume a duty of 3.5% is levied on the goods;

Then, 3.5% of £7,500 equals £262.5

Therefore, Duty + Subtotal (1) equals subtotal (2)

• Subtotal (2) equals £7,762.5
• The VAT will be charged on subtotal 2
• Assuming there will be a VAT of 20%
• 20% of £7,762.5 equals £1,552.5

Total landing cost including duty and VAT equals £9,815

Paying your VAT and Import Duty

The freight clearance company handling your shipment will usually notify you of your tax and duty liabilities. The process is not that complex. You may get an invoice, so all you’ll need to do is pay, and everything is done.

It’s however, essential to have a clearance agent in place so they can work with the UK Customs on clearing your shipment as soon as it arrives. You can also get copies of the invoice from your overseas supplier to notify your clearance agent beforehand.

There are a few things you have to keep in mind, however;

• Although you’ll have to pay your VAT if you’re registered for it, you can still claim it back with the Certificate C79 obtainable every month from the HMRC
• Sample products of negligible may enjoy duty and VAT relief
• Products with a commercial value above £15 will be subject to VAT
• Products with a commercial value above £135 will be liable for duty
• Products from certain countries under the Generalised System of Preferences (GSP), may pay lower or no duty at all.

Bottom Line

It’s always better to be sure of where you stand as far as VAT and duty payments are concerned. Using the correct HS Codes will help you understand what you’re to pay.

If there is anything you don’t seem to understand, you can find answers from your freight clearance agent or visit the HMRC website.

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E-commerce business transactions tend to involve international shipments.

But the goods being shipped across international borders need to be correctly identified and classified by the customs authority. This is why one needs to understand the HS and HTS codes as they play a significant role in this.

HS/HTS Codes: A Brief Overview

The HS Codes stands for the Harmonized System, better known as the Harmonized Commodity Description and Coding System. These HS Codes are the international standards used in the classification of globally traded commodities. The system is maintained by the World Customs Organization and took effect in 1988.

The HS Convention that was signed in 1983 has more than 205 countries as signatories. All of these countries agreed to classify their HS tariff code and duty structure in line with the standards of the HS Codes. The system was needed to ease shipping globally. The system has categories for about 5000 commodities of six-digit codes which are then broken down into 21 Harmonized System sections, along with 96 Harmonized System chapters and thousands of headings.

Structure of the HS Codes

There are four components to the HS Codes for the US and globally. These are;

• Chapter: there are 92 chapters in 21 sections. There are some exceptions, however, such as chapter 77 which is reserved for future use. Chapters 98 and 99, for example, are also limited for national use while Chapter 99 is reserved for temporary modifications.
• Heading: the heading part specifies the category to which the shipment belongs to within the chapters.
• Sub-heading: the sub-headings are the last two digits of the International Harmonized Code. These define the subcategories of products and are, therefore, more specific.
• Extra digits: extra digits are country-specific and can range from 2 to 4 digits.

Are HTS Codes Different from Schedule B Numbers?

While the US Harmonized Tariff Schedule codes are used for import categorization in the US, Schedule B Numbers, on the other hand, are used for export categorization.

So while you’ll require the HTS for import paperwork and electronic filing, you’ll need Schedule B Numbers for export paperwork and EEI filing.

The US is a signatory to the HS Convention, and it uses the six-digit HS System categorization. But then, some countries still add 1 to 4 digits after the six digits to break down the classification even further. This is often used for statistical purposes and to determine duty rates.

Understanding the HTS Sections

The HS System section is generally the highest level of customs, tariff codes customization.

There are 21 of these sections. This is employed to unify products within a broad category, such as Section II, Chapters 6 -14 that covers different types of vegetables. The World Customs Organization dictates sections. They are universal to countries that are signatories to the HS Convention.

HS Sections Code List

How HS & HTS Codes are used

Logistics providers, as well as customs authorities, use HS and HTS Codes for a variety of uses. These can include the calculation of tariffs and duties as well as making sure that banned or hazardous products are not imported into the country. The most important value, however, happens to be the global relevance of these codes.

Finding the Right HS Code for Your Shipment

Whether you’re importing or exporting, finding and using the right HS code is very important.

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Whenever goods move across international borders, the importing country (or the country receiving the goods) charges the importer a tax as a means to earn revenue and protect local industries from foreign competition. Sometimes, the exporting country (the country sending the goods) may also charge the exporter a tax.

The tax imposed on the importation and exportation of goods is referred to as customs or import duty.

Each country has its own rules and regulations when it comes to:

1. what is allowed to be imported and exported
2. what threshold to begin charging customs duty at
3. the rate of customs duty to be charged.

Why is Import Duty Imposed?

Import Duty is commonly imposed by the governing bodies of various countries on cross-border eCommerce shipping as a way to:

• make sure local businesses are protected, supported, and prioritized over international competitors;
• effectively control supply and demand chain of specific goods and products;
• help increase domestic or local revenue.

How Does Import Duty Affect Cross-Border eCommerce

As an online merchant, Import Duty plays a significant role in your pricing structure especially if you decide to expand and open your business to the global market.

In addition to rates, import duty can also affect eCommerce shipping as it can be a factor that will potentially increase transit or delivery time of shipped products.

Understanding customs duty will enable you to be more transparent with your customers. Managing their expectations in terms of pricing and shipping will lessen or even completely eliminate the probability of irate customers accusing you of hidden fees and blaming you for shipping delays.

How to Calculate Import Duty Taxes

Provided your goods are legal to import and export, you need to first determine the declared value of your goods – the dollar value of the product or commodity that is presented to customs for verification.

• If the declared value of your goods is below the relevant threshold, you do not owe anything in import duty. This is also called de minimis value, a valuation ceiling or threshold where in a particular item will not require import duty and is therefore entitled to immediate release.
• If the declared value of your goods is above the relevant threshold, you are required to pay import duty, which is either specific or charged on an ad valorem basis (based on the declared value of the goods).

• If customs determine your goods to be under-declared (the goods are worth more than you said they are), you will have to pay import duty according to the adjusted declared value and, in certain cases, also face fines.

To find out the threshold and the import duty rate for your goods in a specific country, head to that country’s official customs website (found easily with a quick Google search).

Here are the links to some of the more prominent eCommerce markets’ customs websites.

• United States of America
  https://www.cbp.gov/trade/programs-administration/determining-duty-rates#
• United Kingdom
  https://www.gov.uk/trade-tariff
• Canada
  https://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2018/html/tblmod-eng.html
• Australia
  https://www.homeaffairs.gov.au/trav/impo/clea
• The Netherlands
  https://www.belastingdienst.nl/wps/wcm/connect/bldcontenten/belastingdienst/individuals/abroad_and_customs/receiving_goods_from_abroad/from_organizations_and_companies/how_do_i_calculate_these_import_taxes
• Singapore
  https://www.customs.gov.sg/businesses/valuation-duties-taxes–fees/duties-and-dutiable-goods

Customs duties sometimes dig deep into margins, but the good news is there are options when it comes to who pays them – the seller or the customer.

You can also check out our updated list of Import Duty De Minimis Value per country to use as reference in relation to information about customs duty.

As you take your business global, updating how you approach your eCommerce shipping and pricing can be overwhelming since there is a lot more to consider. If you need any help breaking down your shipping and fulfillment process and requirements, we here at ZhenHub are more than confident and willing to assist you! Send us a message to request a free quote.