Concept of Import/Export when manufacturing in China

Question posted by Jon Egia

We are a small start-up company that will be selling board-games in the near future. The games will be funded by Kickstarter and manufactured in China. Then they will be imported to UK and exported to USA.

Taking into account that we are UK based, I wonder what is the real condition of these imports/exports.

When the items arrive from China to UK, that counts as importing, right? But when shipping from China to USA... is that an UK export? How should it be treated regarding legislation? For instance, where should the VAT be paid, and what ammount? What other variables should we take into account?

Thanks,

Jon

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I have just noticed that a previous question has answered my query.

Michelle@MKK Consulting: "As the goods are not physically in the UK, these can not be treated as UK exports, and will be treated as an export from the country from where they will be shipped from.
Presuming your supplier will act as the exporter of record from the despatch country, and the customer will act as the importer into their non-EU country, then you will be buying and selling whilst "in-transit" and therefore this would be outside of scope of VAT."

Could you elaborate a bit in this direction? I still have trouble figuring out our role in the process... if it does not count as an UK export... then what is the nature of our "exporting" to USA? How do we fit in the process as a Uk based company?

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Hello Jon,
If shipping directly from China to customers in USA take care with the documentation - otherwise your customers will see your supplier and your buy-in prices and might seek to cut you out of the deal or at least renegotiate your sales price.

The Chinese manufacturer will have to be the exporter from China and will have to produce all the paperwork needed. Your buyer in USA will have to be the importer.

You need to ensure that the freight agent is given your paperwork (particularly the sales invoice) so that your paperwork is used for the import to the USA. Whilst this is perfectly possible it can be risky - it only takes one clerk to forget and use the wrong the document and the wrong import duty etc. will be paid and the customer will see all the Chinese information.

It is also important to tell the Chinese supplier not to put his documentation inside the packing boxes.

If you bring the items to the UK first you don't have to pay UK import duty and VAT there are customs procedures that permit you to avoid that if you are going to re-export.

Let me know if you need further information or training.
Regards,
Susan

enquiries@morley-consulting.co.uk
www.morley-consulting.co.uk

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Hi Jon,
If you are just landing the goods in the Uk and forwarding onto the USA I would think it can be classified as 'bonded'. In other words it dosent enter the UK for tax reasons. Its quite possible you may be wanting to change something with the product like packaging or instructions etc. This is also possible to do this work in a 'bonded' warehouse. There are plenty in the UK especially at Heathrow and a good freight forwarding company could help you.
Good luck with your business,
Steve Smith
Hartwell Smith Associates.

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Thanks for the prompt answers!

@Susan: we are shipping the games from China to Amazon USA. They will then procede to distribute it. Is Amazon the importer in that case? Plus thanks for making us aware of the issues concerning delicate information...

@Steve: what happens if we ship directly to USA? Where do we collect VAT and where do we declare it?

@both: do you recommend making a stop-gap in the UK in order to avoid potential problems?

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Jon
I definitely think you could use the services advice of a freight forwarder or logistics company.
My views are guidance more than gospel!
1) Yes Amazon are the importer into to the USA and will have set rules in place of what they expect their suppliers should do in this situation. You may want to ask them for these?
2) I dont believe there is any VAT involved here. There would / could be 'import duties' if you imported to either USA or UK which is different from both UK VAT, or USA sales tax.
3) Difficult to advise you on that without knowing the details of the business and the background. If you are acting as a 'middle man' as such and have no requirement to make changes then no I dont see a reason to bring it here. The only other reason might be if you wanted to QC ( Quality Control) the shipment and make checks or changes to ensure your customer was getting quality product.

Again, I want to stress these are guidance notes based on my experiences and you should continue to seek proper advice.
Hope this helps

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Thank you so much for this great response. I now have a clearer picture in mind, but the prospect seems daunting. I am open to suggestions regarding a logistics company or freight forwarder that may fit our needs as a start-up company.

Jon Egia
Burning Games LTD
burning.games.uk@gmail.com

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Morning Jon,
Glad it helped you. All of this will take time.
You may best to look for logistics and freight forwarders that best meet your needs.

If you need help with Sales & Marketing and finding channels to market in the UK, please let me know. I specialise in helping new start ups or new ideas find retail.
One other thing..
If you are dealing with Amazon USA you should also be dealing with Amazon UK. They are very big in the UK. According to a survey this morning the UK buys half its 'on line' needs via Amazon. The UK office is based in Slough, Berkshire. 5 miles from Heathrow.
All the best,
Steve

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Peter Doherty, on behalf of Business First China in WC1B.

Hi Jon,

If the UK company is an independent entity, that found a producer in China for their board-games and after production the items are sent back to the UK company, this is called straight forward export/import where a Chinese company exports to a UK company.

If you're US client imports your product straight from China, then the US customer pays the tax, not you.

The VAT has been addressed by previous emails.

If you were a bigger company we would advise you to set up a HK office to control export, sender's details etc. That will be financially beneficial and safer.

I strongly agree with respondents who have warned you to keep control of things and try to ensure that your Chinese producer doesn't contact your US client directly. They can sell a similar product at a reduced price under a different name.

Yes you can import and re-export to the US. It's a bit laborious and wit the additional freight charge I can't believe it's not going to have a knock on affect on your pricing. Unless you are on-the-ground in China you may have to play it safe and follow this route.

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Thank you very much Steve,

We are actually dealing with Amazon UK too, it's just that it seems like a slightly less daunting task to handle things at "home".

Thanks for your time and I will be contacting you if we need an extra push on the sales and marketing areas!

Jon

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