In Short
- Alibaba connects buyers with overseas manufacturers and trading companies offering bulk goods at competitive prices
- It is essential to verify the supplier, understand the contract terms, and request samples before placing a large order
- Buyers must also comply with Australian import laws, including tax, product safety, and customs regulations
Tips for Businesses
Choose your supplier carefully, check reviews, verify Gold Supplier status, and always request samples. Understand your obligations under Australian law before importing, especially product safety, labelling, and GST requirements. Use written manufacturing or supply agreements that clearly allocate risk and responsibilities. To avoid costly surprises, consult a legal or import specialist before placing your first large order.
Alibaba is one of the world’s leading business-to-business platforms for exporters of goods, predominantly Chinese companies, to connect with businesses looking to source raw materials directly from the supplier. The inherent cost savings associated with dealing with exporters directly can be very appealing. However, you must exercise caution and utilise the platform’s benefits without putting yourself at risk. This article explores how you can buy goods from Alibaba and what you should be aware of before making your first order from the marketplace.
How to Find a Trusted Seller
There are two types of sellers on Alibaba:
- factories; and
- trading companies.
A factory refers to the actual factory that will produce your goods. Many of these factories have their own sales teams who engage with buyers.
A trading company is a middle person that sources the goods from a factory and then sells the goods to buyers.
Which seller you choose will depend on:
- your previous experience with importing goods from overseas;
- the type of relationship you are hoping to have with the seller;
- whether they appear to be a verified supplier; and
- how long you expect the relationship to last.
The following table sets out the advantages and disadvantages of both:
| Factories | Trading Companies | |
| Advantages | Generally more cost-effective | Greater range of goods available for purchase. Able to assist in sourcing the goods from different manufacturers. |
| Disadvantages | May be difficult to find a factory that offers the specific goods you are seeking. Can be challenging if you are buying more than one type of good. | Generally more expensive. |
You can find information about the sellers when searching for products. You must read through this information carefully, paying particular attention to the:
- price;
- number of reviews and their score;
- minimum order quantity;
- time listed on Alibaba; and
- time listed as a Gold Supplier (businesses that a third-party agency has verified).
Business Structure
The majority of Alibaba’s suppliers are manufacturers and trading companies that sell in bulk. As such, they usually prefer to sell to buyers who are running a business. Alibaba does allow users to buy goods without having a business by using the Wholesaler function. However, this limits you to goods available in low minimum order quantities. Additionally, you will be unable to deal with some sellers directly.
Consider what type of business structure would best limit your liability and protect your funds. If you run your online business by yourself, you can operate your business either as a sole trader or a company. While operating as a sole trader is simple and cost-effective, you have the personal liability of your business’ debts. This stands in contrast to running the business as a company where, as a shareholder, you will only have limited liability.
Continue reading this article below the formManufacturing and Supply Agreements
Many Alibaba suppliers will offer their products under a contract. Even where a supplier receives positive reviews or offers trade assurances, you should always review the supplier’s agreement and negotiate any terms and conditions that you are uncomfortable with. This will help to reduce the risk of any legal disputes arising that could become costly and inconvenient.
Alibaba’s trade assurances include:
- applying a credit-rating system; and
- guaranteeing money back in the event a supplier fails to meet the terms of the contract.
The agreement should clearly stipulate who bears the risk for the transportation of the goods, as this is one of the most important steps in the process. A commonly used standard contract term at Alibaba is ‘Free On Board’. This means the seller is responsible for any costs associated with getting your product to the stipulated place of delivery. Often, this is the shipping dock closest to where the manufacturing takes place. Afterwards, you, as the buyer, bear the financial responsibility of transporting the goods to your final place of storage. This may include shipping costs and import taxes.
Trade Mark
You will likely want to sell your goods under your own brand on the Australian market. To protect your brand, you should consider applying for a trade mark.
Before deciding on a brand name and your trade mark, conduct a search of the Australian trade marks register. This will allow you to ensure no other businesses or products are using a similar name or branding.
You should also be aware that goods that pass through Australian customs and infringe trade marks or copyrights under Australian law will be seized. Therefore, you should take every step to ensure the goods are legitimate and are not counterfeited by brand or design.
Import Tax
When importing goods bought on Alibaba into Australia, you should understand what fees and taxes you are liable for. All goods imported into Australia are liable for duties and taxes unless exemptions apply.
For smaller imports, the principal exemption is that there are no duties, taxes or charges to pay if you are importing goods valued under $1,000. Additionally, these goods do not need to be declared if they arrive by international mail. However, if goods arrive by air or sea, you or your agent will need to make a Self-Assessed Clearance declaration.
Tax Payable
The amount of tax and duty payable is based on the value of the goods. Normally, this is calculated based on the actual price you paid for the goods. Therefore, you must show the exact price and currency in which you paid.
Let us explore the taxes and duties you must pay.
Import Processing Charges
These are the fees that customs will charge for processing your import. The fee is based on the value of your goods and is currently between $23 and $192.
Customs Import Duty
The customs import duty is calculated as a percentage of the price you paid for the goods. The duty falls between 0% and 10% depending on the goods, the most common rate being 5%.
Product Compliance and Australian Standards
You must ensure your imported goods meet Australian safety standards and regulations before they reach Australian consumers. Non-compliant products face seizure at customs, resulting in costly delays and potential legal issues.
Regulated Product Categories
Many everyday products require specific compliance measures. For example:
- electronics with lithium-ion batteries are regulated by Standards Australia;
- therapeutic goods require TGA registration; and
- children’s toys or products must comply with ACCC Product Safety guidelines.
High-Risk Import Categories
Wood products require biosecurity treatment certificates to prevent pest introduction. You must provide fumigation or heat treatment documentation. While Alibaba suppliers may provide you with this documentation, it is your responsibility to ensure that you have all necessary documentation for the Australian Border Force.
If you plan to import cosmetic goods into Australia, you must register your business with Australian Industrial Chemicals Introduction Scheme (AICIS) before you import the goods into Australia.
Scenario Example
A business importing magnetic building blocks for children from Alibaba discovered their product contained small high-powered magnets. The ACCC banned these products after children suffered internal injuries from swallowing magnets. The importer’s entire $15,000 shipment was seized at Melbourne customs. They faced additional penalties for importing prohibited goods. The Alibaba supplier had assured them the toys were “safe and compliant” – but Australian safety standards are stricter than many overseas markets.
Goods and Services Tax (GST)
GST is payable by businesses as well as private individuals. This means you must pay GST irrespective of whether you are registered for it or not. However, if you are importing goods for your GST-registered business, you can claim a tax credit for the GST that you pay on those goods.
In order to be eligible for tax credits for the GST you pay on taxable imports, you must apply for an Australian Business Number (ABN) for your business and register for GST.
The GST payable is 10% of the value of the taxable importation, which is the sum of:
- the value of the goods;
- the customs duty;
- the amount paid to transport the goods; and
- the insurance cost for that transport.
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Key Takeaways
Finding the right product is a good start when sourcing material from a marketplace such as Alibaba. Alibaba is desirable for small businesses due to the low prices and opportunities to buy in large quantities. Additionally, the online store can be appealing compared to physical purchasing. However, it is essential you also:
- find the right type of supplier;
- ensure you have a proper agreement; and
- understand the various implications and regulatory requirements for importing goods into Australia.
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Frequently Asked Questions
To find a reliable seller, look for Gold Supplier status and check how long they have been active on Alibaba. Read reviews carefully, confirm minimum order quantities, and request a product sample. This lets you check quality early and avoid issues that could harm your business or brand.
Before you place an order, review the supplier’s agreement and negotiate terms you are uncomfortable with. Make sure the goods comply with Australian standards and trade mark laws. Understand who is responsible for shipping, and factor in taxes, customs duties, and GST to avoid penalties or import delays.
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