How do you import goods from China
Importing Goods from China - Guide
The People's Republic of China is one of Germany's most important trading partners. This applies to both exports and imports. In 2016 we imported goods worth 94 billion euros from China - a new record. A good third of this was accounted for by computers and other electronic devices, followed by electrical equipment, textiles, machinery, metal products and leather goods. That alone shows the complexity of German-Chinese trade.
Imports from China now form the basis for many business models. And in the assortments of many retailers - whether e-commerce or stationary - products from the People's Republic have become indispensable. But many industrial companies also use Chinese products as part of their service provision. As attractive as China imports may be, they also have their pitfalls and there are a lot to be aware of. This is about more than bridging great distances - the sea route between Hamburg and Shanghai is a good 12,000 kilometers. Cultural, linguistic and social differences also have an impact and often lead to misunderstandings. Last but not least, numerous regulations must be complied with, otherwise the China business threatens to collapse or at least to become a very costly affair.
So that you are well prepared for your China import, our import guide aims to give you an overview of all the essential aspects to be considered in this context. Of course, this can only be an overview, the devil is in the details and every case is different. Still, it will give you a good idea of what to think about when importing goods from China.
Importing goods from China - opportunities and risks
After opening up to a market economy, the People's Republic has written an impressive success story and is now at the transition from an emerging country to a developed industrial state. Today China competes with the USA for first place in the world economy. In the beginning the focus was mainly on cheap mass-produced products, often imitations, but now the focus is much more on quality. In the future, the People's Republic also wants to make a name for itself as a high-tech provider.
With this in mind, there are many interesting products on the Chinese market that we may also find in demand. Due to lower wages and lower production costs, many Chinese products still have a price advantage that is not offset even by transport costs. As a result, direct imports of goods from China often offer attractive margins, not least because there is no intermediate trade. The negative image of cheap mass-produced goods is becoming less and less important in the face of striving for quality. Nevertheless, there are risks when importing from China that should not be ignored:
- plagiarism is still a problem. China is considered a main country of product piracy. Importing pirated copies and unauthorized imitations is of course prohibited. If such an import is found on you, in case of doubt you are liable and not the Chinese manufacturer;
- Despite ISO certifications, contractual agreements and the evidence provided, there is often a lot of catching up to do in terms of quality assurance and quality control. You must not automatically assume that what has been promised will be delivered exactly. The security standards that apply to us are also not always adhered to;
Coordination - for example of product changes - or adherence to deadlines can sometimes be a challenge, which is not only due to communication difficulties. Especially annoying if you have already planned and calculated with certain deliveries;
- In view of the large number of possible trading partners in China, there are also some “black sheep” there. Fraud is not an outlandish phenomenon and is relatively easy because prepayment is one of the business practices. Taking action against fraud and claiming recourse from here is anything but easy.
Find the right contract partner
With the right partner, you can put your China import on a solid footing. But how do you recognize that when there is no established business relationship? Basically, there are now many ways of identifying trading partners in the Middle Kingdom. Trading platforms and websites on the World Wide Web allow good research (for example: alibaba.com, ccne.mofcom.gov.cn, made-in-china.com). But not everything that is shown and said there has to correspond to the facts. Here's what you can do to check the "quality" of your partner:
- make sure the manufacturer has an export and business license. That is an essential minimum requirement;
- communicate and negotiate as directly as possible with company management, not with employees or agents and intermediaries. If this is not possible, you can at least have proof of the “power of representation”;
- use contacts to the trade departments of the embassies or to the Sino-German chambers of commerce in both countries to identify and assess potential partners;
- Visits to trade fairs - both in Germany and in China - can be a good way to initiate business connections and to get an immediate impression.
What is important when negotiating
Once a partner has been found with an interesting product, the point is to come to a conclusion. This is not a “sure-fire success”, because especially when negotiating, in addition to communication difficulties, cultural differences are also particularly evident. This is "typical" for Chinese negotiating partners:
- emphasis is placed on personal contact. Contact should be made through a well-known middleman, since negotiations with complete strangers are unusual, and negotiations should always be carried out at the same hierarchical level;
- On the Chinese side, the interest is usually more on the business as a whole, while ticking off individual items and to-do lists or defining “timetables” in negotiations are rather uncommon. Promises made in discussions are often less binding than ours and are seen more as discussions than as binding determinations;
- Chinese negotiating partners are usually looking for a long-term partnership; building relationships are the focus of negotiation interests, not the individual business. As a result, negotiations are often protracted and do not seem to follow a clear line. In many cases, the content is also about topics beyond the actual subject. This shows: patience is a virtue;
- Losing face is one of the greatest evils for the Chinese. This must absolutely be avoided in negotiations. That is why there is no “no” in such conversations - with the consequence that a “yes” does not necessarily mean a “yes”. The European must learn to read between the lines here;
- The Chinese attach less importance to contracts than to the business relationship itself. We often see it the other way around.
Despite this “contractual uncertainty”, the mutual rights and obligations should be laid down as precisely as possible in the text of the contract. Precisely here it depends on the exact formulation and different language worlds can prove to be a major hurdle. The Chinese version may contain something different from the German version. To avoid this, the “German-Chinese standard contract for delivery transactions” has existed since 1995, which can be obtained for a fee from Germany Trade & Invest (GTAI).
How you can protect yourself
Trade is always a matter of mutual trust, this also applies to the import of goods from China. But Lenin's well-known maxim “trust is good, control is better” should be followed. This can reduce possible import risks. They can certainly not be avoided entirely. Here's what you can do to protect yourself as well as possible:
- In any case, have a sample of the imported product sent to you in advance. This is a minimum requirement in order to be able to check whether the goods actually keep what is promised;
- Even better, you travel to China yourself and take a close look at the partner company and the local production. You can also carry out more extensive quality controls. Of course, this is only worthwhile in the case of large-volume and long-term business relationships;
- With a sample order you can find out whether the shipping works;
- Prepayment is common for imports from China. However, you should not transfer the entire amount in advance. If possible, down payments should not exceed 40 percent of the requested amount. The rest of the payment should only be made after the final acceptance of the goods, otherwise you will find it difficult to enforce complaints;
- When agreeing the transport modalities, make sure that the transport is your responsibility as far as possible. You can find out more about this in the Transport section.
- In any case, you should not trust information “naively”. Critical, systematic questioning and cross-checking is the order of the day. You don't even have to accuse your partner of having bad intentions. Often the different mentality simply leads to misunderstandings, which should be cleared up in advance if possible.
Which regulations have to be observed when importing
If goods are imported from China to Germany, they are imported from the non-EU area. This is basically not a problem, but requires the customs declaration with presentation of the necessary documents, the payment of customs and import sales tax (19 percent). Until 2008 there were still import restrictions for certain Chinese products, but these have now been lifted.
On the other hand, anti-dumping duties are still a reality for a number of Chinese products. With this, the EU wants to put a stop to cheap imports from China, which owe their price advantage to a large extent to government subsidies. Such anti-dumping duties naturally make imports much more expensive and can call the calculation into question. Currently (as of October 2017) such “artificial price increases” apply to 53 Chinese products or product groups. These are steel products, certain foods (mandarins) and food additives, some chemical substances, a number of everyday objects (including bicycles, ironing boards, ceramic dishes), solar products and a number of industrial products.
Regardless of customs and taxes, as an importer you must ensure that the goods you import comply with the standards we apply with regard to ingredients, environmental protection and technical safety. According to our product liability law, you are responsible as the “distributor” of the goods if problems arise and violations of regulations are found. To rely on the manufacturer in China in this regard and, if necessary, to hope for compensation, would be reprehensible recklessness.
Transport - pay attention to the terms of delivery
In the case of imports from China, the majority of goods are transported by sea. Around 90 percent of imports are made via this transport route - usually as container transport, with 40-foot standard containers being preferred. In the case of urgently needed and high-quality products that are strictly timed, air freight can also be considered, which is naturally significantly more expensive. Smallest quantities - for example samples - are also simply sent with the parcel.
For sea freight, you have to plan with around 30 euros freight costs per cubic meter of goods. For the calculation, you should calculate with around eight to ten percent freight costs based on the value of the goods. These are of course “thumbs up” information, which can look different in individual cases. But as a rough guide and rough estimate of whether importing goods from China is profitable, that helps.
It is important to pay attention to the delivery conditions in the transport context. This is where the so-called Incoterms are used in international trade - standardized trade clauses that are agreed in contracts using appropriate abbreviations. Chinese exporters like to use CIF for sea freight.
CIF stands for “Cost, Insurance and Freight” and means that the seller bears all risks up to loading on the ship, concludes the transport contract and pays the freight and insurance costs. This arrangement seems to be advantageous for the importer because he does not have to bear the “burden of the transport” himself. In practice, however, CIF often proves to be a disadvantage. Because the importer gives up his influence on the execution of the transport at the same time. It is not uncommon for the import to incur surprisingly high fees afterwards, which are not very transparent and make the import considerably more expensive. Therefore, the FOB trade term is generally recommended for China imports. With FOB = “Free on Board”, the buyer, i.e. the importer, is responsible for the transport contract, the freight costs and the insurance. He then also has the corresponding design sovereignty.
Sea, Air, Transport & Service - your partner for China imports
If you are looking for a reliable and experienced transport partner for your China import, you are at the right address with Sea, Air, Transport & Service. We are experts in transport across borders and continents - whether sea freight, air freight or land transport. We have also been present in China for a long time.
We are therefore happy to carry out the transport for you and offer you a comprehensive full service - right through to delivery “to your door”. Of course, we also take care of all formalities, including customs clearance. So you don't have to burden yourself with it. We would be happy to advise you in more detail on how we can support you with the import of goods from China and make you an offer where the price will also convince you. We wish you every success with your imports from the Middle Kingdom!
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