Import and Export Procedure

All you need to know about importing and exporting to

Australia

What Will You Be Learning?

• What importers and exporters do

• Contracts and terms of trade

• Cargo insurance

• Shipping goods

• Payment for goods

• Resolving disputes• Documents required• Customs and quarantine requirements

Exporting is Selling goods or services to another

country

e.g Australia exports wool to China

Importing is Bringing goods or services in to a country

i.e.buying

e.g China imports wheat from Australia

Page 7

China sells computers to Australia

Which country is the exporter?

Which country is the importer?

Australia’s imports and exports

                                                                              

                              

                                                                                    

                        

What products does Australia import?• Raw materials

– iron – coal – oil

• Manufactured goods– Cars– Clothing– Pharmaceuticals

Which country does Australia import most of its goods from?

CHINA

Import Procedures

Page 9

Steps to follow when importing goods

1. Make sure there is a market for the goods you are importing.

– Will people want to buy them?– Will they pay the price you want to sell them for?

2. Make sure your company will make a profit!– Cost of goods– “Landed costs”

• Transport• Insurance• Customs duties See page41

Steps to follow when importing goods3. Make sure you have reliable suppliers for

the goods.

4. Find out about the import regulations– If you are working in China, and importing

goods from USA, you must understand China’s import regulations

– If you are working in Australia, and importing goods from China, whose import regulations must you understand?

AUSTRALIA’s!

Importing into Australia

Check with the Australian Customs Service

• Are you allowed to import the goods?• E.g. some weapons are not allowed

into Australia

• Are there any restrictions?• Labels e.g. trade descriptions• Special health requirements e.g plants• Quotas• Treatments required e.g. fumigation

Importing into AustraliaCheck with the Australian Customs Service

• Do you need a permit?

• Some goods, such as wildlife products need a permit

• What documentation is needed? E.g.

• Invoices• Packing lists etc

Importing into Australia

Check with the Australian Customs Service

• How much customs duty and Goods and Services Tax (GST) are payable on the goods?

• The tariff classification number that is required for these goods p 9-10

Why do you need a tariff classification number?

Tariffs, or “duty” are a tax collected at the border.

The tariff classification number tells Australian Customs• If you have to pay duty• How much you have to pay

Who pays the tariff?– The exporter?– The importer? p10

Usually the importer

Why are importers required to pay tariffs?

• To protect the importing country’s industries

• To add to government income

How does it affect the Koala Clothing Company?

See page 10

Does China require importers to pay tariffs? (p10)

Yes – • China’s tariffs are higher than Australia’s• China has tariffs on more goods than

Australia

See examples in your book – page 38, 39, 40

Free Trade Agreement = no tariffs

If two countries have a free trade agreement, there will be no tariffs

– USA and Australia have a free trade agreement so there are no tariffs

– China and Australia are thinking about a free trade agreement

Did you know China also asks Chinese exporters to pay tariffs??

If you export shirts or pants from China, you now must pay a new duty of 4 yuan for each item (since June 1)

It used to be 0.3 yuan

USA is putting pressure on China – they are afraid of the competition from cheaper Chinese products

5. Find out if you can get a concessional rate of duty p10

This means you will pay less duty.

You can get concessions and pay less duty, if you can prove that

– the imported product does not compete with an Australian-made product

– no Australian manufacturer wants to manufacture it

6. Consider using a Customs Broker You can pay a customs broker to:

– prepare customs import forms– help organise clearance of your

goods – organise the tariff classification and

concessions, valuation, duty rates, etc.

– organise transport of cargo from the wharf to the importer’s premises

7. Get a quotation from your chosen supplier i.e. a price for the goods you want to buy

Say what you want:– Price– Quantity– Trading terms– Payment terms– Packaging– Delivery

Page 11

Ask for a packing specification.

So you can calculate charges for

– freight – insurance

Contracts

When your supplier gives you a quotation for the goods you wish to buy, this is a formal offer for the sale of goods.

Remember that the process of offer and acceptance results in a contract.

If you say “Okay” or agree in writing, this results in a contract which is legally binding on both parties.

Contracts

Contracts may be:

Written

Verbal

Non-verbal

8. Make sure that you use the correct trading term (INCOTERM)

Who pays for shipping goods, and insurance when they are being sent from the exporter to the importer?

Trading terms (called INCOTERMS) are used to show who is responsible for paying these costs

Page 11

What are INCOTERMS?

Incoterms are rules that are defined by the International Chamber of Commerce (ICC).

They are recognised all over the world

INCOTERMS show

• What is included in the selling price quoted by the exporter

• What is NOT included

• Where the exporter’s responsibility for the goods being imported ends

• Where the importer’s responsibility for the goods being imported begins

Which INCOTERM will you use?

• It might be different for each transaction and contract.

• You will negotiate this with your supplier

• You must include the correct Incoterm because it shows who is responsible for transport and insurance

EXW –Ex Works (…named place)

e.g EXW –Ex Works (Mr. Wong’s Silk Company, Ming Hang, China)

If EXW is the term used in the contract, it means the price quoted is for supply of goods, packed for export, at the exporter’s premises.

Once Mr. Wong makes the goods available to you, the importer in Australia, at his company in Min Hung, he does not have to do or pay for anything else. You, the importer, will be responsible for all transport and insurance costs.

FOB Free On Board (named port of origin)

e.g FOB (Shanghai)

• Mr Wong, will have to pay for all costs until the goods are actually placed on board the ship in Shanghai. After that, you, as the importer, are responsible for all costs and the risks too.

Steps to follow when importing goods

9. Decide on payment terms

This will be negotiated between the exporter and importer

Page 12 - 13

Common methods of payment

Cash in advance

• Importer pays for goods before they are shipped

Is this a good choice for the importer?

NO!

CASH

SELLER BUYER

CASH

SELLER BUYER

$$$

CASH

SELLER BUYER

$$$

CASH

SELLER BUYER

$$$

GOODS

Common methods of paymentLetter of Credit (Documentary Credit)

• The bank promises on behalf of the importer to pay a certain amount of money to the exporter through an overseas bank, as long as certain terms and conditions are met.

Is this a good choice for the importer?

It is safer, but a Letter of Credit is also expensive

LETTER OF CREDIT

SELLER BUYER

cash

open account

LETTER OF CREDIT

SELLER BUYER

cash

open account

LETTER OF CREDIT

SELLER BUYER

cash

open account

G $

LETTER OF CREDIT

SELLER BUYER

cash

open account

ISSUING BANK

G $

LETTER OF CREDIT

SELLER BUYER

cash

open account

ISSUING BANK

G $

$

LETTER OF CREDIT

SELLER BUYER

cash

open account

ISSUING BANK

NOTIFYING BANK

G $

$

LETTER OF CREDIT

SELLER BUYER

cash

open account

ISSUING BANK

NOTIFYING BANK

G $

$$

LETTER OF CREDIT

SELLER BUYER

cash

open account

ISSUING BANK

NOTIFYING BANK

G $

$$

LETTER OF CREDIT

SELLER BUYER

cash

open account

ISSUING BANK

NOTIFYING BANK

CARRIER

G $

$$

Common methods of payment

Bill of Exchange (Documentary Collection) • The invoice and document of title

are delivered by the exporter to his bank under a Bill of Exchange. 

• The exporter’s bank gives them to the importer’s bank. 

• The importer’s bank gives them to the importer when the importer pays the value of the bill of exchange  

• The bank then transfers the importer’s money to the exporter

Is the Bill of Exchange a good method for the importer?

• Cheaper than a Letter of Credit

• Safe because the importer does not pay any money until the goods have been shipped and his bank has the documents

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

$G

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

$G

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

$D G

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

$G

D

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

$G

D

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

G

D$

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

DG

$

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

GD

$

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

G D$

DOCUMENTARY COLLECTION

SELLER BUYER

cash

open account

letter of credit

BANKBANK

CARRIER

G $

Common methods of payment

Open Account

• After the goods have been sent, the exporter sends the documents directly to the importer who then pays.

• This is the best method for importers, because they usually get the goods before payment is made.

• But is it a good method for exporters???? 

Common methods of payment

Cash in AdvanceLetter of CreditBill of ExchangeOpen Account

Which would you choose if you were • The importer?• The exporter?

Why?

10. Be aware of foreign exchange issues

You are an Australian importer buying goods from an American supplier.Is it best to get the quote in Australian dollars or American dollars?

Another way is to organise a forward exchange contract.

  This will fix the rate at which the bank will buy or sell a fixed amount of foreign currency at a set future date – the rate of exchange won’t matter

10. Be aware of foreign exchange issues

e.g If you were buying Australian chocolate bars for A$1 each, you could agree with the bank that on 30 June, they will sell the dollars for 6.1 yuan each

11. Decide on the methods for overseas transport

• Air?

• Sea?

• Road?

• Rail?

• Parcel post?

What are the advantages and disadvantages of each?

12. Decide on distribution arrangements

When your imported products arrive, how will you distribute them?

• Retail outlets

• Sole distributor – wholesalers

Make sure that you have a contract

Let’s look at all the important steps again!

• Work out the total “Landed Cost” – will you make a profit?

• Make sure your supplier is reliable

• Check import regulations– Restrictions– Permits– Documentation– Customs duty and GST– Tariff classification number

• Check if you can get a concessional rate of duty

• Get a quotation

• Negotiate a contract, with the right INCOTERM

• Decide on payment terms– Cash in Advance?– Letter of Credit (Documentary credit)?– Bill of Exchange (Document

collection)?– Open Account?

• Consider foreign exchange issues

– Quote in your country’s dollars?– Forward exchange contract?

• Choose method of transport

• Decide on distribution arrangements

To study tonight - homework• Do Import crossword page 33• P 10 What are tariffs?

– Who pays the tariffs – the exporter or importer?– Whose tariffs are higher China? Asustralia?

• P10 Concessional rate of duty• P 11 Quotation and contracts• P 11 Incoterms

– what they are used for- FOB and EX WORKS (p12)

- P 12-13 The 4 Payment terms- P 13 What is a foreign exchange contract?

How much can you remember?• Your university buys books from Box Hill

Institute. Box Hill Institute sends them to China

– Who is the exporter?

–Who is the importer?

How much can you remember?• What is a tariff?

A tax or duty collected at the border

• Who usually pays?

The importer

How much can you remember?

• Sometimes you can pay less duty (concessional rate of duty)

• What do you have to prove to get a concessional rate of duty?

• The product you are importing does not compete with Australian-made products

• Australian manufacturers will not manufacture it

How much can you remember?

• A contract results from a process of ……….. and…………?– Offer– Acceptance

How much can you remember?• The seller makes an offer in writing and you accept it in

writing. Is this a contract?

• The seller makes an offer in writing and you ring him on the phone and accept it. Is this a contract?

• The seller makes an offer to your face. You nod your head and shake his hand. Is this a contract?

How much can you remember?• What do trading terms (Incoterms) in a

contract show?

Who will pay the costs of insuring goods and transporting them

How much can you remember?• You are importing goods from Melbourne, Australia.• The INCOTERM is EX_Works Melbourne

Who will pay the costs of insuring goods and transporting them – you or the exporter?You must pay for all costs – the price quoted by the exporter only covers supplying the goods (Packed) at his premises

How much can you remember?• You are importing goods from Melbourne, Australia.• The INCOTERM is FOB Melbourne

Who will pay the costs of insuring goods and transporting them – you or the exporter?The exporter must pay for all costs until the goods are on the ship. You must then pay for transport and insurance from that point

How much can you remember?• What is a Letter of Credit?

This is issued by the bank. The bank promises for the importer to pay a certain amount of money to the exporter through another overseas bank, once certain terms and conditions are met

How much can you remember?• What is an Open Account?

The exporter sends the goods, then sends the documents to the importer

who then pays for the goods

How much can you remember?

• What is a forward exchange contract??

This means the bank agree to fix the rate at which they will buy or sell foreign currency at a set future date

e.g If I was selling you Australian boomerangs for A$5 each, you could agree with the bank that on 30 June, they will sell you the dollars for 6.1yuan each