Importing from China: Calculating costs, customs fees and import duties

You have found the perfect supplier, the samples have been approved and you cannot wait to place your first large order. But then you discover that the product price shown on the invoice is unfortunately not the same as the amount you will ultimately have to pay.

That is because all kinds of additional costs still need to be added. And these costs often turn out to be even higher than you initially expected.

At Redjumla, we see this happen to almost every new e-commerce entrepreneur. You calculate your potential profits based solely on the product price, only to be shocked by the actual cost once everything has been added together.

That is a real shame, because with the right knowledge, it can easily be avoided.

That is why we will explain how import costs from China are structured and how you can calculate your own import duties.

What are the costs of importing from China?

Before you start making calculations, it is a good idea to understand exactly which components make up your final cost price. These are the main costs you need to consider when importing packages from China:

#1: The product price itself

Naturally, we begin with the product price itself. This forms the basis of your calculation, as it is the amount you pay the factory for the products.

Bear in mind that this will usually be either the ex-works price (EXW) or the price including transport to the port (FOB). Always make sure you know exactly which terms have been agreed upon, as this directly affects the rest of your calculation.

#2: Transport costs

Your products still need to be transported from China to the Netherlands or elsewhere in Europe. You can do this by sea freight, which is relatively inexpensive but slow, or by air freight, which is fast but considerably more expensive. The costs depend heavily on:

• The weight and volume of your shipment
• The chosen method of transport
• Whether you opt for a partial shipment (LCL) or a full container load (FCL)

#3: Import duties

The third point is where many entrepreneurs, particularly those who are just starting out, tend to make mistakes. Import duties are calculated as a percentage of the customs value of your product. This percentage differs per product category. For one product group, you may pay 0%, as is the case with laptops, while another type of product may be subject to a rate as high as 12%, such as clothing.

#4: Import VAT

In addition to import duties, you also need to account for 21% import VAT. The good news is that, as a business owner, you can often reclaim this VAT through your regular VAT return.

If you have to pay this amount upfront yourself, however, it can have a serious impact on your cash flow. In that case, an Article 23 permit can be extremely useful. This allows you to defer import VAT to your periodic VAT return, meaning you generally do not have to pay it upfront when the goods are imported.

#5: Customs and administration costs

You will also need to consider the costs of customs clearance itself. These may include customs clearance fees and possible storage costs if your shipment is held by customs for inspection.

#6: Transport and unloading costs

Finally, there are the costs of transporting and unloading the goods.

Once your goods have cleared customs and been released, you will need to pay for their delivery to and unloading at your warehouse.

Are the goods being delivered in a container? Then you will normally be given a limited time slot in which to unload it completely. If you exceed this time slot, additional waiting-time charges may apply.

Calculating import duties from China step by step

Now that you know exactly which costs need to be taken into account, it is time to get specific. How do you calculate the amount you will have to pay in import duties? The process is as follows:

1. Determine the correct HS code for your product

Every product falls under a specific HS code, or Harmonized System code. This international classification system determines which tariff applies to your product. You can find this code in the Dutch customs tariff database or request it from your customs broker.

Make sure you do this carefully, because using the wrong HS code can have serious consequences. You may end up paying too much or too little in import duties, potentially resulting in an additional tax assessment later on.

2. Determine the customs value

The customs value is not exactly the same as the total price of your products. It is the total value of the goods, including transport and insurance costs up to the EU border. This is also known as the CIF value: cost, insurance and freight.

3. Find the applicable import duty rate

Using the HS code, you can easily look up the import duty rate that applies. This can range from 0% to as much as 20%, depending on the product category.

4. Take special import measures into account

Another point to keep in mind is that special import measures may apply, such as anti-dumping duties. These only apply to specific product categories and certain countries of origin. In some cases, they can significantly increase the total import costs.

That is also why the lowest purchase price is not always the most cost-effective option. A product from a particular country may have a higher purchase price but still be cheaper overall because of lower import duties or the absence of anti-dumping duties.

You should therefore always calculate the total landed cost rather than looking only at the purchase price.

5. Calculate your import duties

The formula itself is relatively simple:

Import duties = customs value × import duty rate

Suppose you have a shipment with a customs value of €10,000 and the import duty rate for your product is 6%. In that case, you will pay a total of €600 in import duties.

6. Calculate the VAT

Import VAT is calculated on the combined total of the customs value, import duties, any other government charges such as excise duties, and all additional costs such as transport and insurance up to the first place of destination.

Based on the example above, the calculation could look like this:

(€10,000 + €600 + €400 in transport costs to the first destination) × 21% = €2,310 in VAT

7. Add everything together

Once you add all the costs together, you arrive at a specific additional amount on top of the product price, purely for import duties and VAT. When you then add transport and customs costs as well, you will quickly discover how much the actual cost price differs from your initial estimate.

8. Have your calculation checked by an expert

Calculating everything yourself is certainly possible, but we still regularly see mistakes being made in practice. An incorrect HS code or an inaccurately calculated customs value can cost you a great deal of money or cause unnecessary problems with customs.

At Redjumla, we take this entire process off your hands and arrange everything for you from A to Z. When you order through us, you always receive a landed price: the total price per product, delivered directly to your door. All costs for matters such as import, transport and handling are already included. This means that, as our partner, you will never be faced with unexpected costs.

Would you like to learn more about what we can do for you? Contact us today!

FAQ

How much do you typically pay in import duties when importing from China?

The amount of import duty you pay when importing from China varies significantly by product category, but it is normally between 0% and 12%. For some specific products, the rate may be even higher. The exact percentage depends on the HS code. You should also take anti-dumping duties, Incoterms, excise duties and other consumption taxes into account.

What is the difference between import duties and import VAT?

Import duties are calculated as a percentage of the customs value of your product. The applicable rate differs per product category. VAT is charged at a fixed rate of 21% and can usually be reclaimed by business owners through their VAT return.

From what amount do you have to pay import duties?

There is no minimum threshold or exemption for container imports from China. Import duties apply from the first euro of customs value unless the product has a statutory import duty rate of 0%.

Which documents do you need to calculate import duties?

At a minimum, you will need a commercial invoice stating the value of the products, a packing list and the correct HS code for your product. A customs broker or experienced sourcing partner will know exactly how to arrange this professionally.

Can you reclaim or offset import duties?

No. Unlike VAT, import duties cannot be reclaimed. This makes it particularly important to calculate your exact costs in advance, so you can take them into account when determining your final selling price.