Do Distributors pay customs tax and excise duty on imported products?

Discussion in 'International Business' started by rilojag, Jun 19, 2009.

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  1. PhilBen

    PhilBen UKBF Newcomer Free Member

    363 22
    The cost of the Goods if imported makes a big differance. The Exchange rate is one of the most important things regarding the profit you make on each item. You need to make shure you are being advised correctly and you exchange your funds at the right time. Banks will not give you that advice, they somtimes take a big profit from the transaction.
    Posted: Jun 22, 2009 By: PhilBen Member since: May 21, 2009
  2. rilojag

    rilojag UKBF Newcomer Free Member

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    double post, please delete thanks
    Last edited: Jun 23, 2009
    Posted: Jun 23, 2009 By: rilojag Member since: May 30, 2009
  3. rilojag

    rilojag UKBF Newcomer Free Member

    72 0
    Okay, I have contacted HMRC and got a commodity code. They said the goods are exempt from import duty. But I will have to pay VAT at 15%. This is good news as I thought suddenly the price is going to be boosted up like crazy. I asked if the commodity code given was definite as in if I do import the product and find that I do in fact have to pay import duty, then what happens. They said we cannot be sure, but said that I can write to them describing in full the product details. Then they can issue me a legally binding tarrif in which I can present to customs if they do plan to charge me duty and then customs would have to waiver the fee. Anyway my question to you guys is, is one commodity code sufficient or should I get multiple codes? Is this even allowed?

    I also asked about the VAT number, they said as from the 1 July this will now be called a EORI number (Economic Operators Registration and Identification number). They said to get one you need to first make a purchase then download the EORI application form, fill it in online giving the airways bill, and sales invoice. Then it takes 2-3 days to process at their office and a EORI number will be given. They said it never expires and I keep on using it until I am vat registered which is when I discard it. Now as I have already purchased samples by air freight, can I not use this invoice to get the EORI number or does it actually have to be a sales invoice between me and the retailer?

    Now they told me that if I do not get the EORI number then my goods will stay in customs forever and not be released to me until I have applied for the EORI number, is this true?

    Now I just need to contact a shipping company and get a quote for air freight and sea freight and then get back to my retailer with a price.

    Sorry for all the questions but I do hope you can answer them all

    much appreciated
    Posted: Jun 23, 2009 By: rilojag Member since: May 30, 2009
  4. Wavecrest Ltd

    Wavecrest Ltd UKBF Enthusiast Full Member

    739 137
    Best regards,
    Posted: Jun 23, 2009 By: Wavecrest Ltd Member since: Oct 31, 2007
  5. Beachcomber

    Beachcomber UKBF Newcomer Free Member

    6,730 3,012
    Only thing I can add is to make sure your shipper has your TURN / EORI number and commodity code on all invoices and acompanying paperwork.

    Just speeds up clearance.
    Posted: Jun 23, 2009 By: Beachcomber Member since: Apr 29, 2009
  6. i234i

    i234i UKBF Ace Free Member

    2,284 242
    Does anyone know the best way to pay a USA supplier.. cheap / free!
    Posted: Jun 23, 2009 By: i234i Member since: Jul 16, 2007
  7. Arial

    Arial UKBF Newcomer Free Member

    286 7
    I had dealings with the EORI number and as I did`nt get the details I needed on time they sent my shipment back as they do not hold on to the goods.. this happened 2 weeks ago so they are implimenting it now and not July 1st.

    I have to pay the shipping cost`s for the return of my goods, but hopefully no hassles this time when I get the number through.
    Posted: Jun 23, 2009 By: Arial Member since: Aug 18, 2005
  8. Mister B

    Mister B UKBF Ace Free Member

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    I'm not meaning to put a dampener on things, but so many questions from one so inexperienced? With your lack of knowledge, are you sure that you can bring this off?

    As I said, not meaning to be negative but if you get this wrong, you can lose a lot of money.

    Mister B
    Posted: Jun 24, 2009 By: Mister B Member since: Aug 31, 2007
  9. rilojag

    rilojag UKBF Newcomer Free Member

    72 0
    Sorry guys for not replying... I have been so busy talking to a number of people.

    I have now run into some major problems!!!

    I had some more online stores sign an NDA. Then I shared with them my product and they are very interested in it. Before I shared with them the UK pricing, I went back to my supplier and he isn't giving me the units for the price we agreed upon. He now wants $132 per unit, it was at $120 before. I feel we are going round in circles.

    The recent developments are that I have found my supplier is now selling into Europe directly to their customers through their website. The pricing is ridiculous, on their site they are selling the product at $150 per unit + $67.99 shipping by UPS air mail. Now this is absolutely crazy. He told me this product has a MSRP of $189. He further said that if I order 10-99 units I will get 10% off the MSRP. Order 100-500 units get 20% off MSRP and order 500 unit's or more get 30% off MSRP. well 30% off $189 is $132.3 per unit. But originally before he gave me these prices I was told I would get each unit at $120.

    The funny thing is I had mentioned to my supplier that other online stores in the USA are re-selling his product between $90-$150 per unit. He said to me that if they are doing that they are selling at a loss. Strange thing is that my suppliers website has a section with all their online resellers and this is where I had seen the $90-$150 figures. All the stores are currently saying out of stock. I had mentioned that usually the case with retailers is that they sell at a 50% margin of the product. So to sell at $90 they would be buying from them at $60. My supplier said that they have to be selling at a loss, well if that is really the case this may not be the right product as no one is buying the product which is why they are selling lower.

    Anyway my supplier has said that it costs them $130 to manufacture and that at $132 per unit we are selling at cost. He then says we are selling to retailers at $130 per unit. This can't be right, firstly they do not have any retailers selling their product, but only online re-sellers. As well as their direct to customer selling through their website.

    In the past when I had first got in contact with the company, they said if I invested $150,000 into their company they could redesign the product and then bring the manufacturing price a lot lower so they could sell to me at $90-$100 per unit, but only if I ordered a container of 500 units or more. Then my supplier changed this figure to $200,000. Then said they wanted $100,000 for a sole distribution agreement exclusivity fee. They have said time and time again that their company is on a very tight budget and need the money to succeed. I do believe they are on a tight budget but at the same time I think he must be thinking I am fool which I am not and I don't believe his prices are realistic. I don't think his product needs a redesign, he just want's the money to pay off probably a lot of debts he has from the money spent bringing his product to market which I can imagine must of been very expensive.

    Many months ago he also mentioned that even if I wanted to do a container order I would have to let him know 6 weeks in advance so they could order the $25 parts. Then in later emails he mentioned that there were $23, $33 and $36 dollar parts that were needed to be ordered at the factory to successfully make the unit's cheap enough to give them to me at $110 per unit for minimum orders of 1 container. I think this was a load of complete nonsense, he was just throwing numbers around to make me think these products are really difficult to manufacture. Of course at the same time I have read reviews of the product and interviews between the company and popular magazines and it's been stated many times that the product is expensive to manufacture which is why the expensive price. Americans still believe $150 retail as being expensive for this particular product and the company eventually wants the price selling in stores down under $100. I think all of this is just marketing talk to sell the product and I believe this $130 manufacturing cost that my supplier talks of as utter nonsense.

    Also when I ordered the samples, I only paid the shipping cost. When I received them it shows on the invoice that the manufacturing cost at $50 per unit. My original thought was that their company had lowered the price on the invoice so that I would not have to pay much customs tax and import duty which when they came in I did not even pay at all. But now I think this is not the case as on samples you do not pay tax and import duty. Also a company would not risk lowering the price on invoices as I guess it's illegal.

    So anyway my plan has been to get this product for $120 per unit, pay the shipping, tax and import duty. Then my goal was to sell this product at a £50 profit to the retailers, and then my plan was to set the UK RRP at £230 that would allow the retailers to make up to £80 profit. As I am the only distributor of this product in Europe I could set the RRP and I believed £230 for this product to be acceptable, as similar products to this one sell for around that figure in the UK. Of course I know that with any product anyone can always beat the UK price by importing the product from another country. But what I didn't know is that my supplier would go behind the back of me the distributor and sell their product directly to customers in the UK. I am sure when there are other distributors of this product in other countries they would also be as annoyed as me. Usually the case is that if someone sees a price which they feel is too expensive in the UK, they would try importing it at a lower cost, but the saving they would make is £30-£50 and most think that the little saving is just not worth it. But in this case now the saving would be over £100 if people imported this product I got by themselves. All this because my supplier has decided to sell direct to the customer.

    What I had found was that most online re-sellers selling within the USA would not deliver this product outside the USA as the shipping costs were too expensive, but then some were offering the product with a shipping price of $150 which is very expensive in some cases more than the products retail price. So with that in mind it wouldn't make any difference with my prices to import it or buy it in the UK, as you have to take into fact that customers who import it would have to pay tax and import duty. But now because of my supplier offering cheap delivery it becomes increasingly difficult to get this business off the ground. With their costs of the product and shipping, tax and import duty the price of the product would be £145 direct to customers in the UK. Now the trade price they are offering to me is $132 which is £80, then with shipping, tax and import duty I am looking at £130 per unit when it's in the UK, then my profit would be tiny as I would have to sell it to retailers who would make again £5 or £10 profit rather than the target of £80 I wrote of above and I feel they would not be interested in this product at all once I give them the prices.

    The only way I can see this working is that if I ask my supplier to stop selling direct to customers in the UK. But even if I ask that of him it wouldn't help so much. He would really need to stop selling to all of Europe as this would not help my online stores, they would know even if I supply to them, their customers may not order this product from them as it's expensive and instead import it from other parts of Europe. So my lined up online stores know they wouldn't make any money from this. If my supplier could tell all their current online stores and retailers that they cannot deliver outside the USA and if my supplier stops selling direct to customers in Europe that would work out much better. As then (I) as a distributor can set my international RRP at £230 and as a distributor I could make my profit and the retailers could make their profit. But then of course many people would wonder and at the same time be very annoyed that in the USA the product is far cheaper than their international pricing. But on a lot of product out there this is the case when you compare country of origin pricing to international pricing. If my supplier stops the above then I would think it may work out better for him as right now on his website the amount of units he sells is so small like a few units per month. And I could sell a few hundred units per month if he can agree and stop these retailers and online re-sellers from selling outside the USA.

    Now we could take an example of another product. Let's look at the Nintendo Wii. That was $250 in North America and in the UK at £180 at launch. At the time with the exchange rate that was 2 dollars to a pound. $250 would of been £125 but that's not how they work international pricing out. Companies jump up the price a bit and the Wii sold for £180. Other more expensive products like the PS3 is 400 dollars in the USA and priced at 400 Euros in Europe which is £350 in the UK. I could see eventually this product I got come down to a selling price under £100 in the UK. When it comes to that, the manufacturing of the unit would be dirt cheap and even though at £100 my profit from selling to retailers would be much lower but at under £100 I could sell far more units which would make me about 4x more profit than currently.

    Now I am sorry for the long post, I just wanted to put everything out there that's been happening in these last few months and see if you guys know what's the best way to play this out?

    Any help much appreciated

    Many thanks in advance
    Last edited: Jun 28, 2009
    Posted: Jun 27, 2009 By: rilojag Member since: May 30, 2009
  10. JamieM

    JamieM UKBF Ace Free Member

    2,324 350
    I am slightly confused by many of the points you have raised but from the above your plan doesn't look workable to me.

    Is this what you want to do (ignoring the shipping costs for now)?

    Buy at $120 (£73)
    Wholesale at £123
    RRP @ £230

    You say you think £230 is an acceptable RRP? That is double the US$ RRP.

    You also mentioned that $150 was considered expensive by US consumers. In that case I expect UK customers will find £230 too expensive.

    In my opinion there is not close to enough margin available to distribute this product and unless you can radically negotiate the cost price then there is no point in pursuing it any further.

    By the way, are you 100% sure this is a manufacturer (and not a distributor) you are in contact with?
    Posted: Jun 28, 2009 By: JamieM Member since: Mar 22, 2006
  11. Beachcomber

    Beachcomber UKBF Newcomer Free Member

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    With your supplier changing prices / costs / order quantities all the time I wouldn't think of working with them unless we had a solid contract.

    Don't accept anyones word for it or work on faith as at the end of the day they are a business and if someone comes along with a better offer or a larger distribution deal they will take it.

    Make sure you cover yourself here.
    Posted: Jun 28, 2009 By: Beachcomber Member since: Apr 29, 2009
  12. rilojag

    rilojag UKBF Newcomer Free Member

    72 0
    Hi Jamie,

    Many thanks for your reply

    Yes this is exactly my plan, and yes I am in contact with the manufacturer. The company behind the product is based in the USA and the product is being manufactured by a factory (company) in China.

    The price of £230 RRP does seem expensive at first. But another example to look at is, there is this new hard drive media player that is going to be released next month. The US RRP is $300 (£180) and the European RRP is 350 Euros (£300). Now that is £120 more expensive in Europe than in the USA. So with a price like that in the UK I am sure there will be customers that will rather import it from the USA right?

    Of course even thought the EU RRP of 350 euros is just that a RRP I am sure there will be retailers selling under that price, so the saving of importing it from the USA maybe be £90 but then again you will be paying tax and import duty.

    One thing that I forgot to mention is that the £230 RRP I have set won't be nearly double as you suggest. That's because firstly, this product comes in two models. The first model is the sample that I have got. This model has now been discontinued and replaced by a more superior model which is the one that I am going to distribute. This more superior model is not being sold anywhere in the USA as of yet. Only direct to customers through my suppliers website to the USA and Europe. This model is listed on their website at having a $350 RRP but they say buy now and save $200 and get it for $150 + shipping. Now with that $350 RRP that comes to £212 so that's how I find the RRP of £230 I set as very acceptable and affordable. As if someone imported this £212 model into the UK and payed shipping, customs tax and import duty they would be looking at paying well above £230. Now if only my supplier would stop selling direct to customers in Europe and set this price at the official $350 RRP for all their future retailers. Then this would be the right product I would imagine. Wouldn't you agree?

    Hi Beachcomber

    Many thanks for your reply

    What would be the best way to cover myself here?
    Last edited: Jun 28, 2009
    Posted: Jun 28, 2009 By: rilojag Member since: May 30, 2009
  13. JamieM

    JamieM UKBF Ace Free Member

    2,324 350
    For the supplier to say the RRP is $350 and then sell directly for $150 is completely and utterly taking the piss. As a result the RRP is pretty irrelevant.

    If someone imported from the US they would not be paying more than £230. $150 plus $67.99 shipping is $217.99 which is £131.94. Add VAT and its £151.73 saving them nearly £80. You previously mentioned the product was exempt from duty.

    Even if you get your supplier to stop selling in the UK/Europe leaving you free to set your own RRP I can't see the market standing the equivalent price of $380 (approx) when it is $150 in the US.

    The supplier is either taking the piss or he doesn't have a clue what he is doing. You cannot distribute a product whilst aggressively discounting direct retail sales to a level where your resellers can't compete. It is a conflict of interest and doesn't work.

    Think about this. The supplier is selling you each unit for $18 less than the retail price. There isn't really any retail margin there for you never mind distribution.

    I'll PM you with an example of some distribution costs we are currently negotiating to give you an idea of the way we approach this.
    Posted: Jun 28, 2009 By: JamieM Member since: Mar 22, 2006
  14. rilojag

    rilojag UKBF Newcomer Free Member

    72 0
    Many thanks Jamie for your reply and pm, I will reply to you in a pm
    Posted: Jun 29, 2009 By: rilojag Member since: May 30, 2009
  15. PhilBen

    PhilBen UKBF Newcomer Free Member

    363 22
    Anything you import, you are liable for taxes etc
    Posted: Jun 29, 2009 By: PhilBen Member since: May 21, 2009
  16. rilojag

    rilojag UKBF Newcomer Free Member

    72 0
    sorry to bring back an old thread

    I got a question again about the VAT costs

    I am going to be VAT registered soon

    When I import my first container, do I only pay VAT on the cost of the container? Or when it get's to a UK port will HMRC work out the 15% VAT charge out of the total cost to get the container here, so the container cost of the goods, the shipping cost, the import duty, excise, and then take 15% from all of these costs together?
    Last edited: Oct 6, 2009
    Posted: Oct 6, 2009 By: rilojag Member since: May 30, 2009
  17. PhilBB

    PhilBB UKBF Newcomer Free Member

    7 1
    Hi all -

    I picked up this thread after joining the forum today.

    There is one way to establsih whopays import duties and taxes. That is by reference to the INCOTERM used in the agreement with the seller (or other party to the transaction. The INCOTERM also determines who is the importer. In any given scenario, a customer is not necesarally the importer.

    Best regards
    Posted: Jan 17, 2010 By: PhilBB Member since: Jan 17, 2010
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