Importing goods can be a great way to source new products or reduce manufacturing costs. Trading with other countries may have been reserved for larger businesses in the past, but in today’s globalised world, there are excellent opportunities for smaller companies to import goods from overseas as well. This article will explain how importing goods to Australia works and what you need to be aware of before you make your first order.
What Can I Import?
The Australian Border Force and the Department of Agriculture and Water Resources screen all imported goods arriving in Australia. Whether you act as a company or an individual, there is no general requirement for you as an importer to hold a licence to import goods to Australia. However, you need to be aware that depending on the products you plan to you import, you might need to obtain a permit.
The Australian Government has prohibited and restricted the import of certain goods. This means that:
- there is a ban on importing certain goods; and
- you can only import certain goods with written permission.
Importing prohibited or restricted goods without permission or a licence may lead to your products being seized, or worse, you could face penalties up to $525,000 and 10 years in prison. The list of prohibited and restricted goods is extensive and includes a wide variety of goods, such as:
- cultural heritage goods; and
- laser pointers.
A full list can be found at the Australian Border Force website.
What Are My Obligations?
An import declaration is a statement you make as the importer and owner of the goods, which provides the Australian Border Force with information about the goods that you are importing. This information includes details about:
- you and your business;
- how you are transporting the goods;
- what are the relevant tariffs; and
- the value of the goods.
As an importer, you are responsible to ensure that the import declaration is correct. Mistakes can lead to delays in your goods as well as penalties. If this is your first time importing goods, it is a good idea to seek help from an agent such as a licensed customs broker to help you.
Using a Licensed Customs Broker
A licensed customs broker will help you ensure that your shipment meets the legal requirements and that the import of your goods goes smoothly. They can help you determine the duties and taxes that you need to pay and process the payments on your behalf. A customs broker may also help you coordinate the transportation and storage of your goods as well as represent you in any meetings with customs officials.
A large number of imported goods require a so-called ‘trade description’. In short, this means that the products must:
- be marked in English;
- include the name of the country where they were produced or made; and
- include a description of the specific goods.
What Do I Need to Pay for Importing?
All goods imported into Australia are liable for duties and taxes unless an exemption applies. For smaller imports, the main exemption is that there are no duties, taxes or charges to pay if you are importing goods with a value of less than $1,000. However, this exemption does not apply to goods such as alcohol or tobacco, which you will need to declare regardless of their value.
The amount of duty and tax that you will have to pay is based on the value of the goods. Usually, this is calculated based on the price you paid for the goods, so it is essential that you can show the exact amount of money you paid and what currency you used. These duties and taxes include:
- 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. This is calculated as a percentage of the price you paid for the goods. The duty is between 0% and 10% depending on what kind of goods you are importing, but the most common rate is 5%.
- goods and services tax (GST). Businesses, as well as private individuals, must pay this tax, meaning that you need to pay GST regardless of whether you are registered for GST or not. However, if you are importing goods for your GST-registered business, you can often claim a tax credit for the GST that you pay on those goods.
The GST you need to pay is 10% of the value of the taxable importation, which is the sum of the:
- value of the goods;
- customs duty;
- amount you paid to transport the goods; and
- insurance cost for that transport.
What Risks Should I Consider?
Importing goods from another country may involve different risks than buying from a domestic supplier. However, by doing some research and planning, you can minimise some of these risks.
Supplier and Manufacturing Risks
If you are planning to import a large number of products, it is a good idea to take the time to meet the supplier and visit the factory where the goods will be manufactured. This will lower the risk of misunderstandings between you and the supplier and will ensure that the quality of the factory, as well as the production line, is up to your desired standards.
If you are thinking of ordering smaller quantities of goods by using a business-to-business marketplace such as Alibaba, it is important to investigate how long the supplier has been in business on the marketplace and their review history. Regardless of whether you meet your supplier, you should always ask for samples of the goods before making an order. This might cost you some money up front, but it is worth it to make sure that the quality of the goods is what you expect. Additional information, such as references from previous customers and credit checks on your supplier, is also recommended if you can access this information.
It is important to recognise that Australian customs will seize any goods that infringe trade marks or copyright under Australian law. If you plan to import branded goods, you should take every step possible to make sure that the goods are legitimate and that they are not counterfeits.
Transit and Shipping
If you are shipping goods to Australia by sea or air, you should take into consideration that your goods could be lost or destroyed during shipment. You can try to minimise this risk by selecting a carrier that is reputable and has extensive experience in shipping goods from the country of your supplier into Australia. It is also critical that you have transit insurance that covers loss of goods.
What Legal Steps Should I Consider Before Importing?
Manufacturing and Supply Agreement
A manufacturing and supply agreement will include both parties’ obligations as well as the various details and specifications of the goods. The agreement should include:
- payment terms that specify when payment is due; and
- whether you can withhold payment if there are delays or if the goods are not up to standard.
The agreement should also clearly outline who carries the risk of transporting the goods. Many cross-border agreements make reference to free on board (FOB). Under FOB, the seller is responsible for any costs associated with getting your product to the agreed place of FOB. Often, this is the shipping dock closest to where the manufacturing takes place. However, after the goods have reached that location, you as a buyer are responsible for the costs related to transporting the goods from the dock to your final place of storage. When a shipment is stated to be FOB (the seller’s location), then you as a buyer are responsible for the goods and any delivery charges as soon as the goods leave the seller’s warehouse.
You should consider what business structure would be best to limit your liability and protect your assets. For many, the key question is whether to operate your business as a sole trader or a company. Even though it is simple and cost-effective to run your business as a sole trader, you will be personally liable for any debts. In contrast, if you run your business as a company, the shareholders will have limited liability.
Registering for GST
As mentioned above, it is beneficial for you to register for GST as you can often claim a tax credit for the 10% of GST that you pay on the taxable importation. To do so, you need to:
- apply for an Australian Business Number (ABN) for your business; and
- register for GST.
You will likely want to sell your goods under your own brand on the Australian market. To protect this brand, you should consider applying for a trade mark. Before deciding on a brand name and your trade mark, you should search the Australian trade marks register to make sure that there aren’t any other businesses or products with the name that you are considering.
Importing goods from overseas can be a daunting task. However, with research and planning, you can identify the risks and how you can best manage them.
When importing goods, it is important to:
- investigate whether you are allowed to import the product into Australia;
- research your supplier and make sure that you have a reasonable contract in place for the business transaction;
- look at the costs of your import, including GST and all relevant import charges;
- use a reputable carrier;
- sign up for transit insurance; and
- file a correct import declaration as mistakes can lead to delays or even penalties.
If you need help preparing for your import by setting up your business, registering a trade mark or ensuring your contracts are appropriate, you can contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
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