Importing & Taxes Question

[Jnel]

Hey All,

Not sure if someone on here may be able to help with some confusion I’m in. It is with regards to importing, tax & duties and who is liable for them. I’ve done a lot of importing from China so very familiar with all correct terms, payment etc. if it is straight forward as me as the buyer.

However, this one might be different but it may not be…….I have a feeling I know the answer but wanted some other thoughts.

Initially, just to let you know what I do. Company is call Muztag Outdoor Fire Ltd & I import outdoor fires to sell to retail & trade (not consumers). The factory in China is a joint venture.

Situation 1

I have a slightly larger retailer wanting to buy the product in volume, 20ft or 40ft, so wants a better price than the standard trade delivered price.

However, I do not want to process the order direct with our Chinese factory.


So, they will place an order on Muztag Outdoor Fires in UK, then Muztag Outdoor Fires will place order against our factory in China.

Muztag Outdoor Fires work FOB with my factory in China.

I want the container to be delivered direct to the customer. It isn’t a problem if the end user sees the shipper on BOL, as they know that it is coming from China & if they tried to make contact/order with my production factory direct the factory would refuse.


So here are the questions:

1) Would Muztag UK have to deal with the shipment once its loaded onto the vessel at origin port to destination port & then pay all the shipping duties/VAT etc.?

2) Could the end retail customer pick up the responsibility once its loaded onto the vessel at origin port to destination port & then pay all the shipping duties/VAT etc. although the order was between Muztag & Chinese factory?


If the answer is 1, which I think that it is, as Muztag are technically the importer because the order is between Muztag & the Chinese factory, then how would you quote this?


- Possibly quote the unit price, then charge the shipping, duties & VAT separately?

- If we did it that way, do I still need to charge VAT on the unit price to the retailer, as they would have technically paid Muztag UK VAT for these products during import?



Situation 2

Similar (ish) scenario but I’ve got a large Swedish wholesaler wanting to buy container loads of the product.

Again, I want to process it through Muztag UK instead of direct through our China factory.


So, they will place an order on Muztag Outdoor Fires in UK, then Muztag Outdoor Fires will place order against our factory in China.

Muztag Outdoor Fires work FOB with my factory in China.

I want the container to be delivered direct to the customer. It isn’t a problem if the end user sees the shipper on BOL, as they know that it is coming from China & if they tried to make contact/order with my production factory direct the factory would refuse.


So here are the questions:

1) Would Muztag UK have to deal with the shipment once its loaded onto the vessel at origin port to destination port & then pay all the shipping duties/VAT etc. in Sweden?

2) Could the end wholesaler pick up the responsibility once its loaded onto the vessel at origin port to destination port & then pay all the shipping duties/VAT etc. Sweden although the order was between Muztag & Chinese factory?


For this one, I think its actually 2, because I wouldn’t be charging any VAT to Sweden anyway, nor would I be paying any import duties because its not landing in the UK or being used/sold in the UK.


Not sure if any of you may have had similar situation that you can offer any thoughts.


I really appreciate any advice on this.

 

[billmccallum1957]

I suspect you already know the answer, as Muztag UK are the importer, the duties fall upon them, and then recharge to your customer.

 

[Jnel]

I did suspect this. Appreciate the advice.

Would it be the same for the Swedish option?

 

[billmccallum1957]

Any option, where the company is the importer.

 

[MOIC]

My advice is to do the following if you have container load orders to be delivered to customers, whether in UK or elsewhere in Europe, or Globally:

1. DO NOT have your supplier as your consignor/shipper on the B/L.

2. Offer your customers (who want to buy in container loads) an FOB price. Discount the price to allow for the shipping costs. I suspect they will negotiate a better price than your normal retail price.

3. The container gets delivered directly to the end customer, who is also responsible for clearing the container (or you can arrange this).

4. The end customer pays all the destination fees, Import Duty & VAT.

I want the container to be delivered direct to the customer. It isn’t a problem if the end user sees the shipper on BOL, as they know that it is coming from China & if they tried to make contact/order with my production factory direct the factory would refuse.

What safeguards/guarantees do you have in place to prevent the above from happening?

Rule Number One: Don't believe what a China factory tells you.

 

[Jnel]

billmccallum1957 - thank you for all of your advice.


MYOFFICE IN CHINA - again thank you for your advice so far


A few follow up questions/comments:


My advice is to do the following if you have container load orders to be delivered to customers, whether in UK or elsewhere in Europe, or Globally:

1. DO NOT have your supplier as your consignor/shipper on the B/L.
Thank you for this. It is easy enough to arrange to have Muztag UK names as the shipper.


2. Offer your customers (who want to buy in container loads) an FOB price. Discount the price to allow for the shipping costs. I suspect they will negotiate a better price than your normal retail price.
As you are probably aware, this isn’t always the easiest way as I could base my price on current container rates. However, if the customer doesn’t order or is not shipped for several months, with the current shipping market & changes in the shipping lines this could change enough to have a negative impact.

Could it work that I arrange with the customer once goods are ready for shipping I/we between us obtain the best container rate, which Muztag UK then pay for & pass the shipping costs on to the customer separately?


3. The container gets delivered directly to the end customer, who is also responsible for clearing the container (or you can arrange this).

4. The end customer pays all the destination fees, Import Duty & VAT.
The above 2 questions answer some of the biggest confusion I had.

So, just to clarify, once the container arrives at destination port, the end customer would then pay all costs for clear customs, import duty & VAT, although the order was between Muztag UK & the Chinese factory?




I want the container to be delivered direct to the customer. It isn’t a problem if the end user sees the shipper on BOL, as they know that it is coming from China & if they tried to make contact/order with my production factory direct the factory would refuse.

What safeguards/guarantees do you have in place to prevent the above from happening?

Rule Number One: Don't believe what a China factory tells you.


I’ve been working with China for a long time so appreciate the advice on trusting them……..as a general rule I would always follow this

The safeguards I have on this one. The Chinese factory is a joint venture. I have what form I can of investment in the factory & my business partner in the UK is also the owner of the factory in China. So we have written agreements in place to stop this & also he would be stupid to steal the business as if would affect his company in the UK.

 

[Jnel]

Also, could the final customer arrange their own shipping from origin port, once loaded to final destination so they instruct their own shipping agent?

 

[MOIC]

If you are satisfied that there are no issues with including the factory name as the shipper, then that's fine.

With regards to how best to supply/invoice your customers who are ordering in container loads, this will depend on the customer's requirements.

Some may be happy to be the importer of the product and accept all the responsibilities involved. (UK clearing, certificates, labelling, legal issues, etc).

Others will prefer to buy from a "UK" company and not be involved in being the importer.

Both scenarios will have different costs involved as well as responsibilities and this is best discussed & negotiated on an individual basis with each customer.

 

[MOIC]

Also, could the final customer arrange their own shipping from origin port, once loaded to final destination so they instruct their own shipping agent?

Yes, if they are happy to be the importer.

 

[Jnel]

Thanks again for this. It has been really helpful