DDP: Delivered Duty Paid! It sounds like a dream come true for so many Amazon sellers importing products from China! Isn’t it great that you can pay a slightly higher price for the product and get it delivered to you with all taxes already paid for? Perfect! Or… is it?
I’m afraid that when it comes to offers like these, we always come back to the age-old truth that if it looks too good to be true, it probably is. And DDP is no exception.
If you’re importing goods from China using Alibaba.com to sell on Amazon, eBay or anywhere else, you should read this article very carefully, because the chances are you’re currently breaching the law and could be facing severe problems due to tax evasion.
Sounds terrifying? I agree. So, let’s clear the air once and for all and learn about DDP Incoterms and how you CAN and CAN’T use it in your importing business.
Chinese New Year is around the corner, and you have to act fast to get your goods dispatched before your supplier switches off for several weeks.
I’m pleased to see that more and more people are following my advice on doing pre-shipment inspections in China. Ten years ago no one was doing this for small-scale orders as we didn’t have such cheap and accessible inspection services available like we have now. Today, when you can have an inspector to work for you for one whole day for just $100, it’s utterly stupid not to use this opportunity and check goods quality before they leave supplier.
Speaking of quality of the goods coming from China – please do understand that there are various standards in manufacturing and it’s not that Chinese manufacturers have problem manufacturing products up to highest standards. They can! At least most of them can.
The problem is that most people always try to negotiate the lowest possible price with the supplier, which results in a product of substantial quality where the supplier has cut cost on materials, labour, quality check or testing.
To avoid problems, you need to communicate with the supplier from DAY ONE that you’re after the highest quality/grade product they can offer. Inform them clearly, before placing the order, that you will be doing pre-shipment quality control inspection and goods with defects won’t be accepted.
I have some really good news to share with you—some REALLY good news! I have been waiting for this moment for years now and it has FINALLY become a reality. Transferwise is now supporting USD payments to China! BINGO!
This means we no longer have to overpay our banks for sending USD to our suppliers in China, and don’t have to use shady online currency exchange places, etc. It’s all gone, forever! We can now make simple, quick and cheap international USD payments to Chinese suppliers (and many other countries), and all for a very low fee with guaranteed currency exchange market rates!
If you have been importing your products from China, you will know that banks can charge £20 or even £30 for international bank transfers to China—even if the amount is very low, like £1000. Plus, they never use actual market rates for exchanging GBP to USD (the market rate is basically the BEST exchange rate you can get, which gives you most dollars for your pounds). That means that you’re overpaying twice:
1) The high fee for making the payment
2) The bad currency conversion rate (which can be as much as a 2% difference)
Combining these two, you can actually lose 5% (or more!) on a GBP to USD conversion and transfer to China, which is SHOCKING! Obviously, the more money you send, the lower the percentage because the transfer fee per £1 decreases as the sum increases. Still, why pay even 3% to a bank when you can put that money in your pocket? Exactly!
As small business owners, we are always looking ways to save money and efficiently cut costs, and bank fees and transfers are an area where you can cut costs with absolutely no impact on your product quality or customer service. You should never be overpaying on fees and you should always seek out the cheapest, most efficient cost-saving processes for services that don’t affect your customers. (more…)
It’s Friday today and that can only mean one thing – it’s time for this week’s Reader’s Question post!
Today I’ll be answering an email sent in to me by Steven, who is looking to start an importing business, but needs some help. And that’s exactly what I’m here for – so let’s get to it!
I don’t want to bother you with a lengthy email as I’m sure you’re incredibly busy but I wanted to ask just one question about something that I just cannot find the answer to…
I’m starting to import homeware goods like throws, rugs, furniture etc. and I’m concerned with laws governing the import of fabrics. I’ve heard there are laws stating textile goods have to comply with standards i.e. fire retardant materials etc. but I’m struggling to find any info on it and don’t want to get the goods to customs and be told I can’t have them or be told that I’m not able to sell them on my site. Have you had any experience in this kind of work Andrew and can you shed any light?
I also wanted to say a quick thank you for all of your business related help, out of all of the blogs, Facebook pages, and YouTube channels out there, I find your content has explained queries the most clearly and to the point. Coming from a haulage background into this world has seemed daunting for me if I’m honest but I’m gonna give it my best shot!
If you get a moment to reply to my email, that would be brilliant!
Thanks again mate! Steven
Thanks for your email & question Steven. And thank you for your kind words – I obviously put a lot of time and effort into this blog but it’s all worth it if I can help people achieve their dreams and create their own online business, so I’m very happy to hear that it’s been helping you.
Moving on to your question and yes – you’re 100% right, there are laws in place regarding the fire safety of furniture and related goods that you, as an importer and seller of such goods, have to comply with.
These Regulations are UK Law “designed to ensure that upholstery components and composites used for furniture supplied in the UK meet specified resistance levels and are suitably labelled” and they’re enforced by the Trading Standards Department.
These regulations were created because the number of fire-related deaths in the home had increased to more than 700 a year in the 1980s and it’s estimated to have saved nearly a thousand lives so please take this seriously! Failure to comply with these regulations is an offence under UK Law and pleading ignorance “is not accepted as a defence.” (more…)
First things first – what is Alibaba Trade Assurance?
Well it’s a service run by Alibaba that’s “designed to help create trust between buyers and suppliers.” Trade Assurance covers eligible orders on Alibaba.com with full payment protection if either:
The quality of your products do not conform to the agreed standards;
The supplier fails to ship your products on the agreed shipment date.
Sounds good, right? But, how much does Alibaba Trade Assurance cost to use?
It’s 100% FREE – and by free, I actually mean free – for both buyers and sellers, so it doesn’t add any cost to your order at all even though it’s basically an insurance in case anything goes wrong.
However, Trade Assurance doesn’t cover all orders on Alibaba – as it’s only eligible for suppliers who have signed up to the service and promise to abide by the Trade Assurance rules.
You can easily see which suppliers/products are covered by Trade Assurance by looking out for the Trade Assurance logo when searching for products and suppliers on Alibaba.
In this example search (and no, I don’t suggest you actually start selling iPhone cases!) you can see that while the first listing isn’t covered by Trade Assurance, the second one is:
When you hover over the Trade Assurance logo, you’ll be able to see another very important piece of information – the coverage amount for that supplier:
This is also known as the supplier’s Trade Assurance limit and this amount is set by Alibaba, not the supplier! It’s based on the supplier’s qualification status and also their historical sales volume, so the higher this amount the better really. (more…)
If you’re new to my blog, this is a 4 part post series in which I’ll cover the most important terms used in the online business world. Each week I cover a specific topic – last week it was General Business terminology, today it’s Importing & Shipping and in up-coming weeks I will also cover eBay & Amazon, as well as eCommerce.
Without further ado – let’s get started!
Importing – when you buy goods and ship them from another country. Quite often we don’t the use word Importing when buying goods from another European Union country because when you buy from another EU country, there is no customs procedure and we don’t have to pay VAT/import duty. But in general, when you buy from a supplier located in another country, this is called Importing.
Exporting – when you sell goods and ship them to another country. Just like with Importing, when you sell to another EU country, we usually don’t use the word Exporting as there will be no customs procedure in place due to the Free Goods Movement Act all EU countries have accepted.
Shipping – simply means sending goods from one place to another. There are various shipping methods available which we’ll cover later on in this post.
Stock – term used to describe products/items for sale.
B2B – Business to Business. This term is used to describe a transaction between two businesses. Many suppliers will state on their websites that they deal with B2B customers ONLY. This means that they won’t sell directly to end customers, in quantities of just 1 unit.
B2C – Business to Consumer. When a company sells directly to Consumers. Basically any business selling online to retail customers follows a B2C business model. This term is not as widely used as B2B as if it’s a normal online store, it’s obvious that it’s B2C. However, B2B businesses on the other hand are usually clearly “labelled” so that consumers who are looking to buy just 1 item know that this is not the place to look.
MOQ – Minimum Order Quantity. This is a very important term you use when communicating with suppliers. It states how many units you need to buy from a supplier to even get a deal. Sometimes you can negotiate MOQs, as covered in my post here.
There can be product MOQs as well as order MOQs. Product MOQ means how many units of that particular product you need to buy and order MOQ means the total order quantity you need to reach to be able to buy goods from that supplier. (more…)
Have you ever worked within the sector before? Do you have any advice on best practice i.e. ensuring the supplier has all the certificates, and that they’re real!
As my buying power is rather small. £5,000 should I look at something “less risky”?
In terms of legal requirements and responsibilities, you’ve chosen one of the hardest niches possible – cosmetics.
Anyone selling cosmetic products in the UK has to comply with EU wide safety regulations – this includes manufacturers, importers, wholesalers, and retailers (whether you’re a large limited company or a small sole trader). However, if you yourself manufacture the product or you’re the first person to import them from outside the EU, then you’re deemed to be a responsible person under UK law and greater requirements and responsibilities apply to you.
The main legal requirements as set out by the Regulations, are that:
It is a criminal offence to supply cosmetic products that may cause damage to human health when applied under normal or under reasonably foreseeable means of use.
The use of certain substances in cosmetic products is prohibited.
The use of certain substances in cosmetic products is restricted.
Cosmetic products must comply with detailed labelling requirements.
Certain information and records must be maintained by the “responsible person” and available for inspection.
But before we go into these rules in more detail, I want to quickly cover what qualifies as a cosmetic product, as that’s obviously very important. And there is a specific definition as set out by the EC Regulation, so you can’t just say it’s not a cosmetic product and by-pass all the requirements! (more…)
“Alibaba is a SCAM” – you see this everywhere! And yes, you may get scammed on Alibaba IF you don’t use common sense… just like on ANY OTHER online marketplace.
Really I kinda feel sorry for Alibaba as I know for sure it is not a scam. Alibaba is simply a platform where buyers and sellers meet. Yes, there are of course scammers on Alibaba but that doesn’t mean Alibaba itself is a scam.
With that logic you can then say that eBay, the Yellow Pages and even your local business directory are scams as you can find MANY unscrupulous businesses there too.
The biggest problem this ‘Alibaba scam’ myth creates is that people who are new to importing are too afraid to even start their research process as they have that one line repeating in their heads – Alibaba is a scam, Alibaba is a scam, Alibaba is a scam…. that’s why, with today’s blog post, I want to clear the air once and for all and give you a step by step filtering system you can use to avoid 99% of scams on Alibaba and unlock one of the world’s biggest online marketplaces.
But before we go into the actual verification process; let me quickly remind you that you cannot get any kind of branded items wholesale from mainland China. I’m talking about electronics, DVDs, software, designer clothing, shoes and similar items. If you’re looking for anything branded, China is NOT the place to go as you’ll either get scammed or at best, receive fakes.
What is a BRANDED product?
By branded products I mean products that are manufactured by well known companies, like:
These are brands that are well known to everyone and even though most of their products are manufactured in China, you CAN’T buy them in wholesale from Alibaba and other such similar sites – you simply cannot!
Companies with manufacturing operations in China have very strict distribution policies in place and it’s not like someone can walk out of a Foxconn factory (they do most of Apple’s products) with 10 iPhones in their pockets to sell on Alibaba. It’s not possible to buy iPhones directly from Foxconn, even though they’re the ones who manufacture them.
This is NOT how things work in China!!
All those brands distribute their goods in tightly secured, official channels and you won’t find these products advertised on Alibaba. If you do see ads for such products, there’s a 99%+ chance that it’s a scam! (more…)
A little while ago I took a look at one of Alibaba’s new tools – the AliSource Tool. You can check out my full review of that here: Alibaba’s AliSource Tool – Does it Work?, but basically it’s a tool that allows you to automatically post a buying request for any item you find on Alibaba, AliExpress, Amazon, or eBay.
And in my review I spoke a little bit about how I personally don’t use buying requests and instead prefer to search for suppliers for a product manually.
There are a number of reasons for this, such as:
It allows me to apply my filters when looking at potential suppliers;
I can do some preliminary supplier verification;
I can ask specific questions;
Quality over quantity – this is really the main reason! I prefer to select and talk to a view different companies so I can get a proper feel for them, makes notes etc. rather than just being contacted by countless companies that I know nothing about.
BUT, this is all personal preference, it’s how I prefer to source products and find suppliers but for some people the ease of posting a buying request may be more beneficial.
So today I want to do a little test – I’m going to put buying requests up against manual searching and see which comes out on top!
I regularly receive emails & blog comments from people who have imported something from China – shipments that should have been declared through customs so that import duty and VAT are paid – but they arrive without any such charges.
This usually happens because Chinese suppliers UNDER-DECLARE the value of the goods sent to you. E.g. you bought something for £200 but the supplier marks the package as a GIFT and puts $20 as the value, which by law means there are no taxes to be paid.
For personal use this doesn’t create much problems BUT if you’re a business owner or sole trader, this is a big issue as you can’t properly book the transaction as you haven’t paid any taxes. And even if you do, if you get an audit from HMRC they will quickly find out that you haven’t paid taxes on these purchases which could lead to penalties.
If your goods are delivered via sea freight or air freight, then there usually won’t be any problems as the shipping company will by default process your shipment through customs.
Problems usually occur with courier companies and Royal Mail (airmail deliveries).
First, I will give some advice on what to do to PREVENT situations like these from happening:
1) Always, always ask your supplier to attach the REAL invoice with the REAL value listed on the outside of the package and to fill in any attached customs forms properly. In many cases this will help but it’s still quite common for Chinese suppliers to under-declare your shipment, even if you’ve asked them not to.
2) If your goods are being sent via courier (DHL, FedEx, UPS etc.) then once it’s been dispatched and you have the tracking information to hand, you should call the courier and inform them that this shipment requires customs clearance. They’ll usually give you the contact details for their customs department, who you can send the invoice and proof of payment to. This way, once the shipment arrives in the UK they’re already prepared and ready to do the proper customs clearance.
Now, let’s cover situations when you receive your goods without paying any taxes:(more…)