A Free Trade Zone (FTZ) can be described as a specific region within a nation’s borders where merchandise can be brought in, warehoused, handled, and sent out again in accordance with particular customs rules, typically without the imposition of customs tariffs. These regions are frequently situated near significant maritime harbors, global air terminals, and the nation’s boundaries—locations that possess numerous geographical benefits for commerce.
Small and medium-sized businesses (SMBs) often face a variety of challenges when trying to import goods from China. These challenges range from identifying trustworthy suppliers, navigating regulatory requirements and customs procedures, struggling with language barriers, along with managing logistics and international shipping complexities. Yet, the potential benefits of accessing the world’s largest manufacturing hub make these obstacles worth overcoming. Many of these challenges can be significantly alleviated by partnering with the right digital freight forwarder.
In this in-depth guide, we will be diving into the complexities and nuances you, as an SMB, face when importing from China, and provide you with the necessary information to help you succeed. More importantly, we’ll explore how an expert freight forwarder can help handle these obstacles in the most efficient and effective manner, smoothing your pathway to successful international trade.
Setting up and Understanding Your Import Strategy is the First Step
You’ve identified a fantastic business opportunity, and there’s a Chinese supplier or factory that’s looking forward to doing business with you (for tips on finding new suppliers, read this blog next.) Whether you’ve found this opportunity through a sourcing agent or on your own, it’s time to start the import process.
Let’s first identify the key players involved in importing goods from China before delving into the details. Understanding who these parties are and their roles can significantly simplify the process:
- Buyer/Importer: That’s you, the SMB looking to import goods from China to expand your business.
- Seller/Chinese Factory: They manufacture or distribute the goods you want to import.
- Chinese Customs: They regulate exports from China, ensuring compliance with all local laws and regulations.
- Customs in the USA or Canada: They ensure the imported goods comply with all local import regulations and handle the collection of any applicable import duties.
- Digital Freight Forwarder: That’s us. This is your logistics partner, coordinating all aspects of the shipping process on your behalf, simplifying communication, and reducing paperwork.
As an SMB, you can streamline your shipping operations by effectively coordinating these players. Hiring a freight forwarder as your trusted partner can make this coordination easier, allowing you to focus on what you do best – spotting opportunities, growing and managing your business.
Make Sure Your Supplier Comply with China’s Export Regulations and Compliance
When it comes to importing goods from China to the United States or Canada, in most cases, the responsibility for acquiring necessary export licenses and managing export procedures is on your Chinese supplier.
As the importer or buyer, your main concern is around negotiating the right incoterms, as they define each party’s responsibilities.
Below, we will give a brief overview of the compliance and regulations that your Chinese partners must follow.
When your Chinese partner is exporting goods from China, he or she needs to provide a detailed customs declaration. This declaration must include the following:
- Value of Shipment: The overall value of the goods being exported.
- Category of Goods: A clear classification of the goods.
- Detailed Description: A detailed description of the items being shipped, including any safety warnings or choking hazards.
- Labeling Requirements: Goods are required to be labeled with the manufacturer’s name and address, country of origin, and specific warnings in the language of the destination country.
Export Licenses (Chinese Supplier)
When the Chinese partner exports items from China to you, he/she must adhere to specific regulations and obtain the necessary licenses:
- Business License: Proof of a valid business license is required from your Chinese partner.
- Export License: The Chinese supplier needs an export license to ensure compliance with Chinese regulations.
The Chinese seller is subject to the following taxes when exporting goods from China:
- Value-Added Tax (VAT): When exporting goods from China, certain taxes, including the VAT, may apply. It’s important to be aware that the VAT rate has varied historically. However, the responsibility for handling VAT and other related taxes usually lies with the Chinese seller or manufacturer. It’s also important to note that in many cases, the seller or manufacturer will be able to claim a VAT rebate from the Chinese authorities.
Negotiating Contracts and Incoterms with the Chinese Seller
When importing goods from China, it is important to be familiar with Incoterms such as Free On Board (FOB), ExWorks (EXW), and Free Carrier (FCA).
Incoterms, short for International Commercial Terms, are a set of rules that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. They regulate who is responsible for the cost of transportation, where and when the transfer of risk occurs, and who needs to purchase insurance.
For instance, FOB means the seller is responsible for the goods until they are loaded on the ship. EXW means the buyer is responsible for the goods from the moment they leave the seller’s premises. FCA means the seller delivers the goods to a carrier chosen by the buyer. Understanding these terms can help ensure a smooth export process.
Following are the 11 Incoterms as defined by the International Chamber of Commerce (ICC):
- EXW (Ex Works)
- FCA (Free Carrier)
- CPT (Carriage Paid To)
- CIP (Carriage and Insurance Paid To)
- DAP (Delivered At Place)
- DPU (Delivered At Place Unloaded)
- DDP (Delivered Duty Paid)
- FAS (Free Alongside Ship)
- FOB (Free On Board)
- CFR (Cost and Freight)
- CIF (Cost, Insurance, and Freight)
Learn more about Incoterms here.
As an example, with the Incoterm EX Works (EXW), the seller is only responsible for making the goods available at their premises. The buyer assumes all risks and costs associated with the transportation of the goods from there. In contrast, with the Free on Board (FOB) term, the seller delivers the goods on board the vessel and clears the goods for export. The buyer then assumes all risks and costs once the goods have been loaded on board.
Choosing Your Shipping Options and Handling Logistics
When importing goods from China, you have several shipping options to consider, such as sea freight and air freight. Your choice depends on factors such as your budget, the size and weight of your goods, and how quickly you need them delivered. For larger, heavier shipments that are not time-sensitive, sea freight is typically the most cost-effective method. For smaller, lighter, or urgent shipments, air freight may be the better option.
Sea freight provides options for Full Container Load (FCL) and Less than Container Load (LCL). With FCL, you have exclusive use of a container for your goods only, while with LCL, your goods share container space with other shippers’ goods.
Another factor to consider is delivery options, such as port-to-door, port-to-port, or even door-to-door shipping. This involves the freight forwarder managing the process according to your preference, from the pickup point all the way to your chosen delivery address. It simplifies the logistics operation considerably and saves you the hassle of managing multiple vendors during the shipping process.
Ensuring your cargo is insured is also vital. Cargo insurance covers the risk of loss or damage to your goods during transit.
Additionally, you need to manage various carrier-related documents like the Bill of Lading and other shipping documents, which are essential to all stages of shipment.
How Freight Forwarders Streamline Your Shipping Operations
Freight forwarders play a crucial role in streamlining your shipping operations.
- Researching: Freight forwarders can give you multiple shipping options and additional shipping-related services, such as cargo insurance, customs clearance, and payment options. Their established partnerships and networks with carriers and service providers enable them to negotiate and optimize this process more effectively than an SMB trying to do it alone.
- Execution: They coordinate logistics and shipping processes, ensuring the transportation of your goods from China.
- Cargo Insurance: Some freight forwarders can offer cargo insurance to protect your goods during transit. Furthermore, many forwarders offer tracking, so you can know where your shipment is at any time and be notified if something unexpected happens.
Import Regulations and Customs Duties When Importing Goods from China
Compliance with import regulations and customs duties is critical when importing goods from China. SMBs must adhere to these rules to ensure a smooth import process. The following considerations are essential when importing from China into the US and Canada:
Compliance Considerations When Importing to the USA and Canada
For Both Countries:
- Quotas and Restrictions: Certain goods from China may be subject to limitations that can be imported into the US and Canada. To determine which products are subject to quotas and restrictions, visit the US Customs and Border Protection site for US restrictions and the Canada Border Services Agency site for Canadian restrictions.
- Tariff Classification: It’s necessary to determine the correct tariff codes for imported products from China into the US and Canada.
- Calculation and Payment of Duties: Understanding how customs duties are calculated and how to make payments is vital in the US and Canada.
For the United States:
- US Customs Bond: The United States Customs and Border Protection (CBP) requires importers to obtain a customs bond when importing goods for commercial purposes. This bond acts as a guarantee to the U.S. government that the importer will comply with all laws and regulations, ensuring the payment of all import duties and taxes
- Canadian Customs Bond: The Canada Border Services Agency (CBSA) requires certain importers to obtain a customs bond, also known as form D120, when importing goods into Canada. The bond acts as a guarantee for the Canadian government that the importer will comply with all relevant laws and regulations, which includes the payment of all import duties, taxes, and other obligations imposed on the importer.
- Business Number (BN): To bring commercial products into Canada, whether as a company or a private individual, it’s necessary to secure a Business Number (BN) for an import/export account, which is provided by the Canada Revenue Agency (CRA).
Documents and Other Considerations When Importing to the USA and Canada
Importing to USA and Canada:
- Bill of Lading (BOL or B/L): Serves as a contract between the owner of the goods and the carrier. It is issued by the carrier and details the type, quantity, and destination of the goods being shipped.
- Commercial Invoice (CI): Provided by the seller to the buyer and details the transaction, including a description of the goods, prices, delivery and payment terms, and the names and addresses of the buyer and seller.
- Packing List (PL): Details the specific contents of each package, including the quantity, description, and weight of each item.
- Certificate of Origin (CoO): Certifies the country in which the goods were manufactured.
Importing to the USA:
- Importer Security Filing (ISF): Also known as “10+2”, this is a requirement for ocean vessel shipments. The Importer, or their agent, must submit information about their cargo electronically to CBP in the form of an Importer Security Filing.
- ACE Import Manifest Documentation: This is a digital reporting system managed by the United States Customs and Border Protection (CBP). The parties involved in the movement of the freight must submit manifest data electronically to CBP before shipment arrival. The system allows for advanced screening and risk assessment, thus expediting customs clearance.
Importing to Canada:
- Canada Customs Invoice (CI1): This document is required for all shipments valued over CAD 2500. It provides information about the goods being shipped, the seller, the buyer, and other related details.
- Import Declaration: This document is filled out by the importer and details the goods being imported. It is used by customs to control and manage the importation of goods into Canada.
- ACI eManifest: Canada’s Advanced Commercial Information (ACI) eManifest operates under the authority of the Canada Border Services Agency (CBSA). This electronic submission system requires the parties involved in the movement of the freight to submit pre-arrival cargo details. Like its U.S. equivalent, the ACI eManifest enables Canadian authorities to evaluate the risks associated with inbound shipments and expedite the customs clearance process.
Depending on the type of goods being imported from China, specific documents are needed, and certain requirements must be met, as mentioned in the previous section.
How a Freight Forwarder Can Streamline Import Regulations and Customs Duties Process
Navigating through import regulations and handling customs duties can be complex. But, with a freight forwarder’s assistance, this process becomes far more straightforward. Some freight forwarders offer customs clearance services, which help ensure that all documentation is in order to streamline imports into the US and Canada. Their expertise and understanding of international regulations and customs duties significantly simplify the import process for SMBs.
Ship4wd is Your Trusted Partner for Importing Goods from China
When faced with the complexities of importing goods from China, Ship4wd stands as a trusted partner for SMBs, guiding them through every step of the process. Because we have a long track record of importing a variety of goods from China, we work closely with you to ensure processes and procedures are handled the right way.
As an SMB-focused company, Ship4wd places a strong emphasis on customer service. It acts as a one-stop shop, taking care of all aspects of your shipment so that you can focus on what you do best: growing your business.
In addition, Ship4wd offers additional value-added services such as cargo insurance and financing options, aiming to make your importing experience as straightforward and stress-free as possible.
How to Get Started with Ship4wd
Ready to simplify your import process from China? Ship4wd is here to assist you every step of the way. Whether you’re importing to the US, Canada, or other parts of the world, sign up to our platform to search for instant shipping quotes worldwide. We also provide expert service and 24/7 customer support to meet your business needs and ensure your imports from China are handled as efficiently as possible.
We help SMBs simplify the complex process of importing goods from China. Sign up for Ship4wd today, and let us handle the logistics so you can focus on growing your business.