Do I pay duties if I import from Vietnam into UK? And do I pay the VAT charged in China?

Question

Hello there!

I am a young entrepreneur based in London- I’m designing my own sleepwear range to be launched online early next year. I plan to sell to the UK, US and EU markets through D2C e-commerce. These sleepwear/ pyjama sets will be made in Asia- I am still needing to decide between two possible suppliers that I am currently doing sampling with. Which brings me to my question on VAT and duties applicable for both scenarios.

1. If I decide to go with the manufacturer in China, this manufacturer has indicated that the price they have quoted me includes Chinese VAT. I am confused by this as I am under the impression that the import VAT will only be charged by the UK once the items enter the country- is it right that I will need to pay for the VAT on the China-side as well?

2. If I decide to go with the Vietnam manufacturer, I have done some research on the duties and it seems that Vietnam is part of the GSP countries, which means there are no duties payable on the making of the garments correct? The only snag here is that the fabric will be coming from China, then going to Vietnam to be made into the sleepwear and then coming to the UK before being sold- that could perhaps mean that the ‘origin’ is officially china, but I doubt it as the fabric would have gone through the ‘substantial transformation’ needed for origin of garment to be from Vietnam.

Apologies, lots of details but hope this is all clear. Looking forward to your feedback,

Nina

Answer

Hi Nina – nice to see you doing your research.

With regard to China the VAT should be exempt if they can provide their authorities with evidence of export from China. If you were intending to buy Ex-Works from their premises they will expect you to be the exporter and therefore it will be treated as a domestic sale and VAT will be due.

Vietnam is a GSP country currently but you are correct that the zero duty rate this can bring at import into the UK/EU is subject to specific rules of origin and manufacture. Check out UK Customs Notice 830 for further information. But generally under a relaxation of origin rules for GSP countries Chinese fabric is ok now. Vietnam has signed a Free Trade Agreement with the EU so we expect GSP to be replaced by this FTA sometime early 2018

Answer

Hi Nina

I echo Sandra’s comments about your research. If the goods are being manufactured in Vietnam they can be declared as Vietnamese origin. In order to check whether GSP is applicable we will need to know the H.S code for the product/s; the manufacturer will be able to give you this. The same rules will apply to any country of import inside the EU (as things stand currently!). For garments it is more likely that you will enjoy a reduced rate in the EU rather than a full waiver With the H.S code we can also check duties & taxes applicable in the US.

If you need local help in China to evidence the export we can also help there too.

Best wishes for your success in 2017.

Menu
Export Action Plan