Where and how can you find the right shipping/freight company for you?

Whether you are importing from China or anywhere else in the world, freight forwarders will play a pivotal role in your business. It is important that you choose the right forwarder for you, which can appear to be a minefield. Look for a forwarder that offers expertise and advice. This will give you immediate feedback and confidence that you are choosing the right one for you. While it is always good to get cost comparisons, quality of service and speed of response should give you a better indication of the service levels you will get moving forward – the cheapest isn’t always the best. Liken it to if you were wanting a new kitchen or building work; you would look for a reputable builder to use, you would want a professional, and your logistics partner should be the same.

What are the customs rules and where can you find them? 

The freight company you choose (especially if it is a reputable one) should be able to navigate you through all the processes and legislation on the product you are looking to purchase from overseas. While you are ultimately responsible for choosing the right commodity code for your goods, a goods forwarder will offer guidance. There are also departments within HM Revenue & Customs that will be able to advise on correct commodity codes, which dictates the duty you will pay. Your freight company should be able to steer you in the right direction.

What costs and fees are involved?

The final costs you face, in particular, the cost of freight from China, are very much dependent on the Incoterms (International Commercial Terms), a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law, of the sale of the product to you. This will dictate which part of your shipment’s journey you are responsible for. The two most common terms are: 1) Ex Works, where you are responsible for all local charges in China, as well as the freight charges to the UK and UK Local Charges, and 2) Free on Board (FOB), where you are only responsible for the freight charges and UK local charges.

A few important things to note:

• JAG-UFS usually recommends FOB to their clients, as this gives more control of costs and shipping to the UK, whether by air or sea. You are in more control of your shipment and there are no nasty surprises of local charges at origin.
• Beware of suppliers offering to get your shipment to the UK for “free”. Especially for ocean freight shipments: often, the local consolidators for less than container (LCL) loads will offer incentives to suppliers and as the UK importer, you will receive overinflated import costs which will have to be paid before the release of your shipment.

How do payments work (upon order or upon delivery)?

Payment is very much dependent on whether your shipment is by air or ocean and your relationship with your supplier. For air shipments, your supplier would probably expect full payment before releasing the shipment to your chosen forwarder. For ocean freight, ownership of your shipment will only happen when full payment has been received and on production of the original bills of lading. Once paid, the supplier will issue a stamped copy of an original bill of lading which can either be surrendered to the local forwarder in China, who will then either send an “Express Release” and no original will be required in the UK, or the supplier will send the original to you, which you will have to send to your freight company to gain release of the shipment. The payment for ocean freight shipments will need to be done at least a week in advance so that the express release or sending of the originals to the UK well in time before the shipment arrives to avoid shipments being delayed awaiting release.

What are bonded warehouses and where should you store your product?

Bonded warehouses are licensed warehouses that can store goods without duty or VAT being paid at the time of importation, although there still must be an import entry produced at the airport or port of arrival and goods can only be delivered directly to the chosen bonded warehouse. Shipments can then be called off in smaller batches, with duty and VAT being paid at the time orders are needed. Bonded warehouses work well for higher value items or for goods that are going to remain in bonded storage for long periods. However, since the introduction of post VAT accounting, the requirement for a bonded warehousing is not as prevalent as before. If you register for post VAT accounting, this will help you defer VAT payment and you will not have to pay at the time of importation.

This article is part of a series on importing from China. See all the articles in the series below.

Part 1: How to source a manufacturer in China
Part 2: How to source and manage suppliers
Part 3: How to ship products and navigate customs

Click here to read our Exporting to China series

Get immediate access to the China market with Launchpad, CBBC’s flagship market entry service. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out more.

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According to China’s Ministry of Commerce, China has become Britain’s 6^th most important trade partner with food & beverage exports amounting to £330 million in 2018. Hindering further growth are the risks associated with market access in China, specifically the possibility of Chinese customs rejecting consignments of British goods.

In general, customs officials reject consignments on two major criteria: deviations from Chinese national standards and food safety/hygiene issues. With reference to Chinese customs data, approximately 423 batches of food products exported from the UK were rejected from 2015 to 2018, with beverages, pastry and biscuits and candy and chocolates being the top three categories of British food rejected.

ChemLinked summarised the top 5 reasons for import failure below:

1. Exceeding shelf life

In 2017, 209 batches of British food products were rejected due to violations of shelf-life requirements, accounting for 70 percent of all batches of British food rejected that year. The obvious logistical challenges of transporting perishable goods from Britain to China are further compounded by the time necessary to complete customs and quarantine inspection at Chinese ports, which in the past has taken an average of 20 days.

In this respect, there have been several extremely positive developments for British exporters. Policy reforms affecting administrative processing of consignments of goods will greatly improve the situation and should lead to greatly expedited customs clearance times. Customs officials have already implemented a series of trade facilitation measures that include simplified documentation requirements and integrating customs declaration and inspection. Under the new policy environment, it is possible for certain foods to receive customs clearance in just three days.

2.Lack of required documents or evidentiary materials

High risk food products such as meats and seafood, as well as special foods (infant formula, health foods, etc.), must obtain market access approval prior to importation, with the enterprise submitting a full test report based on the items listed in national food safety standards. With imported dairy for instance, a quarantine permit is mandatory for raw milk, raw milk product and pasteurized milk. ChemLinked strongly advises stakeholders to have a firm understanding of all market access obligations prior to exportation and to prepare all required documents in advance.

Customs officials reject consignments on two major criteria: deviations from Chinese national standards and food safety/hygiene issues

3. Products fail to meet Chinese national food safety standards

China’s regulatory framework for foods and beverages is a complicated system of horizontal standards that specify rules for all foods, including labeling, use of food additives, nutrient fortification requirements, etc. In addition, there are vertical standards which specify the individualized product specific requirements for various categories of foods. Deviation from these standards is another major headache for British exporters and another common reason for goods being rejected by Chinese officials during customs inspections.

In recent years, China’s regulatory framework has undergone a period of rapid change as it struggles to keep pace with China’s evolving socioeconomic environment. For exporters, staying abreast of these changes can be a daunting prospect and in certain sectors confers considerable risks to investment; the almost cyclical changes in regulation of China’s infant formula sector is a particularly difficult area. Recently China has again proposed revisions to national food safety standards for dairy products, cheese, and infant formula food.

4. Improper use of food additives/nutritional fortification substances

Improper use of food additives/nutritional fortification substances is another significant contributor to Chinese customs rejecting consignments of British foods. Even large multinationals like Nestle suffer in this regard. Importantly, mistakes in this area have the potential of impacting subsequent consignments as China implements a blacklisting system whereby compliance violations are recorded, and the stringency of future inspections stratified are based on the track record of the importer. Importers with a history of violations are subject to more stringent customs inspections. GB 2760 (food additive standard) and GB 14880 (nutrient fortification standard) lists permitted food additives/nutritional fortification substance and stipulates their usage requirements in China. The standards are long and complicated and correctly interpreting compliance requirements can be difficult.

5. Labelling non-compliance

From 2015 to 2018, approximately 5.7 percent of British food exports violated Chinese labelling regulations with tea, beer and biscuits most significantly impacted. As part of the trade facilitation measures previously mentioned, label filing for prepackaged imported food will no longer be required from 1^st October 2019. It will be regarded as a normal sampling inspection item during customs release and the importer shall bear the major responsibility of the label issue.

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