Importing: the basics

Before you start importing, it's a good idea to be clear about what you are trying to achieve. You might want to find a cheaper source of supplies overseas, or to import products that aren't yet available in the UK to sell to your customers.

Importing should fit in with your overall business strategy. For example, importing low cost goods might be part of a cost-control strategy, but you want to be sure that this does not compromise your reputation for quality.

It's worth thinking about how much time, money and effort you want to devote to setting up and managing your importing activities. You are unlikely to want to invest heavily for a small, one-off import. But if importing is going to be an important part of your business, you might be prepared to spend more on finding the best suppliers, building relationships and so on.

You also need to decide how much involvement you want to have in the import process. Importing can be fairly straightforward if you only deal with experienced suppliers who handle most of the paperwork and logistics, and get help from an import agent. On the other hand, dealing with less experienced suppliers and handling more of the process yourself could be more time consuming but also more profitable

Importing goods from overseas suppliers involves all the same issues as purchasing from suppliers in the UK. It's up to you to establish what you require, and find the right supplier. Check the supplier is creditworthy and can meet your quality standards. You'll want to check the supplier's subcontractors as well.

You'll need to negotiate deals and manage the relationship. All of this can become more complicated because of the distances involved and different languages, business cultures and legal environments.

Check that any goods will suit your production processes and satisfy customer demands. There are also extra issues to consider, such as whether imported goods meet UK legal requirements or require an import licence.

Resolving problems - such as incomplete deliveries - can be difficult, so it's important to plan ahead. For example, you might decide to hold extra stocks so that you don't run out even if a delivery is late or contains faulty goods.

Logistics and payment

Depending on the contract you agree with your supplier, you might be responsible for clearing goods through UK customs. You might also need to arrange some of the transport and insurance, eg from a UK port to your premises. Draw up a clear agreement setting out each party's responsibilities and who is at risk if goods are delayed, damaged or lost while being delivered.

Allow for the extra costs involved, including transport, insurance and import duties and taxes. Whether you pay these directly, or through a mark-up added by your supplier, they can significantly increase the overall cost of imported goods.

Payment issues can also be more complex, particularly if you are dealing in a foreign currency.

Before you start importing, you should assess whether you have the right skills and resources.

You need to understand UK customs procedures and ensure you have the right paperwork when deliveries arrive in the UK. International trade often uses payment methods, such as letters of credit, that require an understanding of payment documentation. If you agree to pay in a foreign currency, you also need to be able to handle foreign exchange. You will probably need new administrative systems to track deliveries and payments and manage the paperwork.

If you do not have the skills in house, you may want to invest in training. Or you could use someone else - such as an import agent - to handle specialist areas. You may also need extra personnel to handle the additional workload.

Alternatively, you might decide to only deal with suppliers who handle most of the procedures. Many first time or small scale importers prefer to keep things simple.

Financial resources

You should also think about what resources you can devote to importing. Researching overseas markets and managing overseas suppliers can be time-consuming and expensive, particularly if you need to visit them.

If your finances are limited, you may prefer to deal with suppliers who offer credit. On the other hand, agreeing to pay promptly could help you negotiate a competitive price.

Make sure you have planned how you are going to use the imports, and have the skills and resources you need in place. For example, you might need production capacity for processing imported components, or a marketing plan and sales resources for selling imports on to your customers.

It's up to you to decide how involved in importing you want to be, and whether you can cope with the paperwork, logistics and payment issues. Dealing with inexperienced suppliers, and organising most of the logistics yourself can offer greater profit potential. But it also requires more investment, and tends to carry greater risks.

Businesses that are new to importing often prefer to keep things relatively simple and low risk:

• It's generally easiest to import from countries within the European Union. It's also relatively easy to import from developed countries such as the USA. Importing from developing countries can be more complicated.
• If you deal with experienced exporters, it's usually possible to negotiate a contract where they take responsibility for delivering the goods to the UK - or even to your own premises. Of course, the supplier will want to build all these costs into the price they charge you.
• You can also negotiate contracts in pounds sterling, rather than the supplier's currency. Again, the supplier will want to build extra costs into their price for this.
• Some suppliers, particularly in developing countries, require payment by letter of credit. This can cause problems, especially if you are inexperienced.
• You can use third parties to handle your responsibilities. For example, you can use an import agent to handle UK customs clearance, and a freight forwarder to handle onward delivery to your premises.

Understanding your own strengths and weaknesses, and what your supplier's priorities are, helps you negotiate the best deal.

The best way to split responsibility for delivery and customs clearance depends on your skills and what third parties you use. It can be more cost-effective for you (or your agent) to handle UK customs clearance and onwards delivery to your premises. Before you finalise the contract, make sure you can handle everything involved.

Try to plan ahead, anticipating what could go wrong and working out how you could deal with it. Even if the supplier is responsible for something, or you use an agent, you could still have problems if things go wrong, eg if a delivery doesn't arrive and you can't supply your own customers.

Whatever you negotiate, it's important to have a clear contract setting out exactly what payment and delivery terms you have agreed. Using internationally agreed Incoterms (International Commercial Terms) helps reduce the risk of delivery problems or misunderstandings. The contract should also cover what payment is required, when and in what currency, and what payment method will be used. You may want to take advice from a lawyer with experience of international trade.

You can use these points to help you decide whether you are ready to start importing or discover what else you need to do to prepare.

Planning and strategy

• Are you committed to importing? Have all the key people in your business agreed?
• Do you have a well-defined import strategy?
• How much time and money are you prepared to invest in starting to import?
• Do you know what suppliers, in which countries, you will consider? Have you planned how you will research and select them?
• Do you understand your own strengths and weaknesses? What will be your objectives in negotiating import contracts?
• Have you planned how you will store, process and/or sell the imports? Do you have the resources you need?

Product specifics

• Do the goods you plan to import need an import licence?
• Do the goods need to meet any UK standards or legal requirements?
• What requirements are there for the goods to fit in with your production processes or customer demands?

Skills and administration

• Do you understand international payment methods and can you handle them?
• Do you understand international delivery contract terms - ie Incoterms? Have you got the right legal advice?
• Do you have the skills to handle import tasks like customs clearance and delivery, or have you built relationships with third parties to do this for you?
• How do you plan to develop your importing skills? Have you organised any training?
• Have you set up administration systems to handle importing, eg tracking deliveries and payments?
• Do you have the personnel resources to handle the additional work? Which individuals will be responsible for each task?

Finances

• Have you identified all the costs of importing, including transport, insurance and import duties and taxes?
• Do you have enough working capital to finance imports or will you need to negotiate credit from suppliers or arrange a trade finance package with your bank?

Read more about the regulations, documentation and duties involved with importing in Starting to import.