Updated on 16th September 2024
Disclaimer: This article is for general information purposes only and is not intended to serve as professional advice. The data and information provided are accurate at the time of writing, but we recommend verifying details and consulting with relevant professionals before making any decisions.
For businesses looking for an excellent opportunity to source goods at a fraction of the cost that would be incurred by manufacturing in Australia, importing from China could be just the answer.
Thousands of Australian businesses and trading companies successfully import products from China every year.
According to the United Nations COMTRADE database on international trade, the value of Australia’s imports from China totalled US$71.82 billion during 2023 and US$83.73 billion in 2022.
However, importing from China can be complicated, and in some cases, it can even be costly. This is especially true for businesses that are new to the importing process and trying to get established.
Source – Trading Economics
It’s important to factor in the additional costs, taxes, and duty involved before you import goods from China to Australia.
Once you have an understanding of the costs involved and have the information required to get started importing, you can apply for Trade Finance with ScotPac. The right financial solution can help you maintain cash flow for ongoing operations without affecting or disrupting the manufacturing and shipping of your goods to Australia.
What are the Shipping Costs?
Importing different goods from China can be done by sea or by air, depending on the local companies, products or manufacturers. One of the key considerations for an importer is the difference in costs: shipping via sea freight is significantly cheaper than air freight.
Understanding Sea Freight Cost Calculations
Sea freight is charged by the full container load (FCL) or less than container load (LCL).
In most circumstances, you will be quoted a shipping fee based on the cubic metres and weight of your goods by your shipping company.
If you are importing a new product or otherwise don’t have access to the required information to obtain a quote, you will need to ask your supplier to provide you with an estimate for the weight and cubic metres of your stock once it is packaged and ready for export.
The cost of renting a FCL varies according to the month during which you plan to import your goods.
Source – Freightos China to Australia
The average price for shipping a 20-foot container from China to Australia can range depending on the Chinese port of origin. On average, costs range from around US$1,050 to US$1,850 per month.
As of August 2024, Shanghai to Australia: the average price for a 20-foot container from Shanghai is around $1,150 for a 20ft container. From Shenzhen it’s from $1,250, and from Tianjin it’s from $1,050.
For a LCL, the fees can vary according to the size and weight of your shipment. You can expect to pay between $150 to $250 per cubic metre.
The cost of sea freight is generally much smaller than the costs incurred through taxes, duties, and fees. To calculate your total outgoings, you will need to determine the customs value of your imported goods.
Understanding Air Freight Cost Calculations
Air freight is charged based on chargeable weight. This can be either the weight or volume of the shipment – generally determined by whichever is greater.
These rates can be influenced by many factors, such as distance, route, fuel costs at the time, airport handling fees, and other customs taxes. Air freight costs can be charged as either a flat rate or per kilogram of chargeable weight.
What is the Customs Value?
The customs value is usually based on the free on board (FOB) price of the goods. Free on board is an Incoterm that refers to the point where the goods have been cleared for export and loaded on board the ship, with responsibility and risk transferred to the buyer.
Incoterms are a defined set of commercial terms published by the International Chamber of Commerce (ICC). These terms help to communicate the obligations, costs, and risks that are associated with transportation (especially sea freight) and delivery of goods. Depending on the arrangement with your manufacturer, you may use a different Incoterm to establish the agreement for the shipping of your goods to Australia.
FOB price of goods includes:
- Unit Price
- Transportation to the Port
- Export Clearance
- Customs value does not include the cost of shipping the goods to Australia or the cost of shipping insurance.
Customs Duty
Custom duty rates vary according to the category of goods you are importing. The majority of goods imported from China are subject to a 5% duty, but it can range from 0% to 10% depending on the specific item.
The amount of import duties you will need to pay depends on the customs value of your shipment.
For example, if your shipment is subject to a 5% customs duty rate, and has a customs value of $40,000, you would need to pay $2,000 in duty.
Goods and Services Tax (GST)
Goods and services tax must be paid on the majority of goods imported to Australia in addition to import duties. You are usually required to pay GST even if your business is not GST registered.
For the majority of products that companies are importing from China, GST is usually set at 10%.
If you are GST registered, it may be possible to defer GST payment on imported goods if you participate in the deferred GST scheme.
What is the scheme? Businesses that are part of the GST scheme can defer payment of GST on imports until they lodge their first activity statement after the goods have been received. This can better help the management of cash flow and ensure initial trading success.
You can check your eligibility for the scheme on the Australian Taxation Office website.
GST Import Cost Calculation
GST is calculated as a percentage of the total shipping cost, including:
- Customs Value (Free on Board)
- Customs Duty
- Shipping fees
- Insurance
The Total Value of GST can be calculated like this:
Total Value = Customs Value +Customs Duty + Shipping Fees + Insurance
Example of GST Calculation:
- Customs Value = $20,000
- Customs Duty = 5% x $20,000 = $1,000
- Shipping Fees = $1,500
- Insurance = $50
$20,000 + $1,000 + $1,500 + $50 = $22,550
Therefore the GST amount is 10% x $22,550 = GST $2,255
Import Processing Charge
The import processing charge is based on the customs value of your shipment.
It is a fixed cost that varies according to the method of lodging your import declaration.
The current import processing charges in Australia are as follows:
For sea freight when the cargo value is under $10,000 the cost is AUD $116.00 and AUD $218.00 when the value is over $10,000 per entry.
For air freight when the cargo value is under $10,000 the cost is AUD $95.00 and AUD $197.00 when the value is over $10,000 per entry. For goods valued at $1,000 or less, there are generally no import processing charges, but duties and taxes may still apply to certain items including tobacco and alcohol.
Since 2016, import processing charges do not vary according to cargo channels.
It is also important to note that electronic import declarations are cheaper than document submissions.
Documentation
For your goods to be imported under Free On Board terms, your Chinese suppliers and manufacturing partner will need to submit a few documents to your freight forwarder. (The freight forwarder being the company that arranges the movement of shipments on behalf of you and your local Chinese manufacturer).
Typically the documentation required by your freight forwarder include:
- A commercial invoice detailing the value of the importing goods.
- A packing list that states the contents of each box
- A bill of lading that shows the type, quantity, and the destination of the goods
Invoice vs Commercial Invoice
It’s important to understand the difference between an invoice and a commercial invoice.
A commercial invoice includes additional information compared to regular invoices such as a description of the goods being shipped by the trading companies, the value, quality and unit price of the importing goods and any applicable trade terms or import duties.
If you are working with a Chinese supplier or manufacturer that has experience exporting to Australia, they will be familiar with the requirements for Free On Board import/export as well as the documentation required by the freight forwarder.
Before your manufacturer releases the product for export (directly or through freight forwarders), you may need to provide a Letter of Credit or complete a telegraphic transfer to the exporter.
You, as the trading company, will also need to ensure that the goods you import meet Australian customs standards and restrictions. Australia regulates several categories of products, including toys, furniture, and vehicles, etc.
It is your responsibility as the importer to ensure your products comply with AS/NZS product safety standards and AZO substance restrictions.
You can use the Product Safety Australia website to access the regulatory information concerning products and imported goods.
The cost of checking suppliers and meeting any requirements should be factored into the overall cost of imported goods from China to Australia.
Licenses and Permits
The majority of consumer goods imported from China do not require import licences or permits. But there are strict restrictions on the importation of certain chemicals, equipment, plants, and livestock.
You can use the Australian Government’s Biosecurity database to check the import conditions for your goods.
Frequently Asked Questions
Do I have to pay import tax from China?
Yes. If you are importing from China, regardless of the goods, you will need to pay import tax. This tax is also called custom duties or tariffs depending on the particular goods.
The rate of custom duties will vary according to the category of what goods are being imported, with most subject to 5% import tax.
How Long Does It Take for Goods to Arrive in Australia?
Importing and shipping times for goods from China to Australia can vary based on the mode of transport. For air freight this can typically be 3-10 days and sea freight can range from 15 to 40 days.
Factors such as customs clearance and port congestion can affect these transit times as well, so it’s best to consult your logistics provider for specific estimates.
If you use a freight forwarder, they will arrange the delivery of your goods to port in China and provide an estimated date of arrival in Australia. For more specific and updated timelines, as well as estimated shipping times from other countries, we recommend getting in touch with your freight forwarder directly.
After your shipment arrives in Australia, it can take up to a week for your goods to go through the process of customs clearance and be delivered to your business location.
Does China and Australia have a free trade agreement?
Yes, the China-Australia FTA (also known as ChAFTA) is a free trade agreement that is designed to reduce barriers to trade between the two countries.
Under this agreement, many goods are subject to less or no tariffs, while other trade barriers are similarly reduced or eliminated altogether to promote Australian and Chinese companies trading. ChAFTA has significantly enhanced trade relations, with further cooperation being emphasised through recent memorandums. These have been aimed at deepening the implementation of the agreement as of 2024
Many other countries have established free trade agreements with Australia. When one country specialises or has access to resources allowing for production of a particular good needed by another country, and vice versa, free trade agreements can be essential in promoting commerce.
Do I need a licence to import from China to Australia?
In general, importing directly from China does not require a specific licence. However, there are set regulations and requirements that you must comply with.
There are some goods that may require a particular licence in addition to the regular importing regulations. These licences may be required by the Australian Border Force as part of their border protection service or due to other political and economic factors.
We recommend referring to the Australian Border Force website to search for particular categories of goods and for more information regarding the border protection service regulations.
What is a customs broker?
A customs broker is an individual or company that facilitates imported and exported goods through customs.
Customs brokers work with relevant authorities as intermediaries for the importer and ensure all regulatory requirements are met and the process through customs is cleared as efficiently and seamlessly as possible.
Customs brokerage services can vary and include any of the following:
- Arrangement of paperwork and documentation for submission with customs authorities.
- Determining the right tax, tariff or customs duties to be charged.
- Determining the value of the goods being imported.
- Ensuring overall compliance with any relevant customs regulations.
- Consulting on any aspects of customs-related issues and regulations.
Working with customs brokers is a good idea for companies who might not have extensive experience in importing from China, have complex supply chains or special shipping requirements. The right customs broker will ensure that your obligations are met and the entire Australian Border Force importing process is cleared as efficiently and seamlessly as possible.
What is a freight forwarder?
As outlined above, a freight forwarder is a company that provides specialised transportation services for goods. They work on behalf of importers and/or exporters.
Freight forwarders’ services can include shipment coordination, logistics, booking cargo space, rate negotiation and documentation preparation.
Should you engage one? For many importers choosing a freight forwarder with extensive customs clearance experience can make the process of arranging the moving of goods into Australia smooth.
When it comes to global trade, importing/exporting between countries and a free trade agreement, the role of a freight forwarder can be critical.
Arranging Trade Finance with ScotPac
If you are planning on importing goods from China, you need to be aware of the costs involved and how it will impact your cash flow. Once you have placed an order with a manufacturer, your capital can be tied up for several weeks until your goods arrive at port and clear customs.
That’s where ScotPac can help.
Our lending specialists offer a range of Trade Finance solutions to help you access the funding you need to increase your buying power and negotiate a discounted bulk price with manufacturers. We can provide a cash injection that enables you to boost your stock inventory without experiencing a cash flow gap while you wait for goods to arrive.
To find out more about our Trade Finance solutions, give us a call today.