Importing from China: What You Need to Know

Regardless of political relations, China is the world's factory, and importing from the country gives businesses a competitive advantage due to lower prices that can increase margins. Another reason is that some products are no longer produced in the United States.

Importing from China to the USA shows no signs of slowing and will only continue to grow with the high consumer demand seen post-COVID-19.

Import from China means adhering to many regulations, duties, tariffs, and document filings. You can't afford shipping delays, and fines are never pleasurable. Dot your I’s and cross your T’s to ensure prompt receipt of your goods and know what is required based on the commercial goods you're importing.

Importing from China

Essential and retail products come into the U.S. from China — everything from medical necessities to manufacturing components to the toys you buy for Christmas gifts.

2020 saw the supply chain becoming a problem due to the volatile importing situation. The pandemic disrupted trade, causing stock-outs and an inability to complete finished goods in the US. Despite the continued disruption of China's Zero COVID policy, goods are now moving into the US.

Understanding the China Section 301 Tariffs

The Trump administration enacted high tariffs on Chinese goods to reduce the trade deficit between the U.S. and China. Additional reasoning included buoying U.S. manufacturing and pushing China to respect U.S. intellectual property. These are known as the Section 301 tariffs.

These tariffs had the unfortunate result of prompting a trade war between the two countries that considerably impacted the import tax of products from China in 2020.

The U.S. released four lists of goods subject to higher tariffs, encompassing almost every importable product. Additionally, the tariff rates continued to increase over time, and China retaliated with its own tariffs on U.S. goods. The second component of List 4 was canceled due to positive trade discussions between the two nations.

Following those talks, the U.S. government published several lists of goods that would become exempt from the tariffs. Reviewing the section 301 tariffs exclusions list is recommended. If imported goods were excluded from tariffs, the importer could file for a retroactive drawback for any taxes already paid.

How to Import Wholesale Products from China to the US

If you are considering importing wholesale products from China, there are some questions to ask yourself. They include:

• Do the products have profitable margins?

• Is the market benefiting from these imports?

• Are my imports from China quality products?

• Will my imports be easy to sell?

• Are the suppliers easy to work with and responsive?

Approach the importation of a product by considering marketability, affordability, profitability, and sellability. There are questions to ask yourself regarding each of those product traits.

Marketability

• What makes the product unique?

• What are the product's economics and benefits?

• Is it a sustainable product or has aspects of sustainability?

Affordability

• Is the cost to produce the product in the U.S. similar?

• Will multiple suppliers provide me with quotes?

• Is there a specific supplier specializing in similar products?

Profitability

• What will I be able to sell my product for in the US?

• What is the landed cost?

• What is my per-unit profit margin?

• What is my return on investment (ROI)?

Sellability

• What is my product's demographic?

• Where will my products sell best?

• Why do I think my import will be successful?

• Am I competitive in the market?

China often produces products in specific regions;. For example, toys in one region and electronics in another. Also, season fluctuations in manufacturing take place depending on certain holidays and celebrations. An importer planning to travel to China to meet with suppliers needs to consider these factors.

A sourcing agent could be an excellent alternative for those unable to travel to China and meet with suppliers. The sourcing agent will reach out to suppliers that manufacture the products you wish to import. Another option is online sourcing, which is possible through sites like Alibaba.

A significant consideration is whether the supplier requires a minimum order quantity. The minimum order quantity can vary between manufacturers. Remember that you're testing the market at first, so order appropriately.

Once you've found your items to import, it's time to start the importation process with importers from China.

Incoterms from China

International trade has a component called Incoterms, commercial regulations instituted by the International Chamber of Commerce (ICC). Used in many commercial transactions and procurement, Intercoms relate to international commercial laws. International courts and trade councils strongly encourage using Incoterms to facilitate streamlined importation.

Incoterms spell out the standards for trade and importation tasks, expenses, and risks.

The rules for modes of transport and delivery

• Free Carrier (FCA): According to the ICC, free carrier means the seller delivers to the specified place of delivery for the carrier to transport.

• Ex Works (EXW): Refer to the delivery of goods to the importer's premises by the seller. The buyer is responsible for covering clearances, clearing goods, and loading.

• Carriage Paid To (CPT): The supplier is responsible for delivering the products to the purchaser's carrier or agreed-upon place, such as a warehouse, and the seller assumes the transport cost to the location.

• Delivered and Terminal: Once the goods get unloaded at the port arrival or terminal, they are at the buyer's disposal, putting the risk involved with transportation and unloading on the seller.

• Delivered at Place (DAP): The delivery of goods to the buyer's place of disposal before unloading at the agreed-upon destination, referred to as Delivered at Place.

The rules for inland waterway and sea transport

• Free Alongside Ship (FAS): FAS means the seller has delivered when the goods are alongside the transport vessel at the agreed port of entry. Alongside would entail moving the goods to something like a barge, at which point the buyer shoulders the risk of damage and assumes all costs.

• Free on Board (FOB): The seller delivers goods on board a craft selected by the buyer at the named port of entry. Like FAS, once the goods get transferred to the other craft or vessel, the buyer assumes all costs.

• Cost and Freight (CFR): All responsibility before the goods are on the other vessel or already delivered transfers to the seller. At that point, all risk of damage or loss and responsibility for expenses is no longer with the seller, but the seller must pay the cost and freight associated with bringing the goods to the port of entry.

• Cost, Insurance, and Freight: CIF refers to the responsibilities of contracting insurance to cover the buyer's risk or any loss of goods during transport. The seller must only acquire minimum coverage; any additional coverage above the minimum is the buyer's responsibility.

 

Who pays for what, and what is my responsibility

Following Incoterms for the entire transaction, the responsibilities between you and the manufacturer will never be in doubt. Incoterms define the financial obligations, including who is responsible for the import tax. The point of Incoterms is to eliminate any doubt as to the responsibilities of suppliers and buyers.

Costs of importing from China

Buying from China has the advantage of lower-priced goods, but there are additional costs of bringing those goods to the U.S. that domestically produced products will not have. The costs to be aware of include the following:

• Transportation costs: Transporting freight via sea, rail, air, or truck has costs that can be substantial. Make sure to verify the extent of those costs before contracting to purchase.

• Warehouse, inspection, and port of entry fees: Products imported from China are subject to inspection, which could cost money. The fees might depend on the products, but they can add up. There might also be port fees due at inspection.

• Customs broker fees: A customs broker can help simplify the import process by ensuring fees get paid, permits are in place, and that your goods make it through clearance. Expect to pay a price for that convenience.

• Agent fees: Customs agents might inspect your goods imported from China. The result can be fees paid at the port of arrival.

• Import duties: Due to section 301 tariffs, this is the primary consideration of the import process, as duties can be the highest cost. Duties are assessed based on the value of the imported products.

Do I Need a Permit to Import from China?

There is no general permit for importing from China, but you might need a permit for certain goods. Various federal agencies may require a permit or license depending on the product. You are obligated as an importer to know and meet all federal requirements.

The agencies you'll most commonly need permits from include:

• Department of Transportation (DOT): The imports regulated by the DOT are motor vehicles.

• Federal Trade Commission (FTC): The FTC oversees parts of the import process, including product labeling, advertising, and marking.

• Food and Drug Administration (FDA): Food, cosmetics, medication, health devices, and some housewares and food-related items are just some of the imports overseen by the FDA. Any food product imports require prior notice to the FDA.

• Environmental Protection Agency (EPA): The EPA commonly regulates chemicals imported into the U.S.

• U.S. Department of Agriculture (USDA): Plants, plant products, animals, and wood are some of the items overseen by the USDA. Such products often require permits..

• Alcohol and Tobacco Trade and Tax Bureau (TTB): The importation of alcohol requires a Federal Basic Permit, Certification of Label Approval (COLA), Certification of Age and Origin, and Natural Wine Certificate.

• Consumer Product Safety Commission (CPSC): Any products that could cause risk of injury or death if they pose a chemical, fire, electrical, or mechanical hazard or can injure children fall under the purview of the CPSC. Toys are a commonly regulated import.

 

The agencies regulating goods coming into the U.S. are known as Partner Government Agencies (PGAs), and many exist.

Paying for Goods Imported from China

A domestic supplier is easy to pay, but working with a supplier in China is a little more complex. A credit card isn't going to cut it, so working with your bank becomes a necessity.

Common methods of payment include the following:

• International wire transfer: Wire transfers are a way to send money overseas but often have daily and monthly limits. Once established with the bank, initiating the wire from your online account is often possible.

• Letter of credit: A letter of credit is an official letter from your bank stating the total amount of credit available to you, often in the form of a revolving line of credit. The letter functions as a bank guarantee of payment once the seller has fulfilled its obligations. Your bank makes the payment, and you repay your line of credit.

• Open account: In this situation, the supplier extends credit to the buyer, allowing for payment after receiving the goods.

• Cash advance: Suppliers love getting paid in cash in advance and might offer even better terms but remember this is the riskiest payment method.

• Online escrow: A popular option for small transactions, online escrow is similar to a letter of credit. The escrow account is released to the seller when the goods are received.

• Documentary collection: Similar to cash on delivery (COD), the seller's and buyer's banks work together. The collection methods can vary, meaning goods can be available before or after payment.

The payment method will reflect the seller's preferred preference, risk tolerance, and associated benefits. After establishing payment terms, it's time to move your freight. Most shipments from China will come via sea, as this is the least expensive method.

Nominations from China

When you import from China, nominations are the point when the buyer selects a carrier. The carrier is nominated to deliver the goods from the seller's factory or warehouse, and the buyer makes arrangements to get the goods to their ending destination.

This process has some complexity and considerations, and there are a few terms to keep in mind.

• Containerization: The process of shipping bulk goods in large containers.

• Ocean carriers: The transporters you nominate to move the goods from China across the ocean. There are hundreds to choose from depending on the terminals and ports of entry.

• Port terminals: Cargo containers are delivered to port terminals and shipped via rail or truck.

• Dock receipt: The ocean carrier will issue a dock receipt at the shipment receipt at the carrier's warehouse or dock facility.

• Freight forwarder: The agent responsible for moving the freight to an overseas destination.

How do I get my freight moving?

Shipping your goods from China means considering the amount imported and whether you have enough bulk to use a full container. A 20-by-40-foot container has room for 800 square feet or 2,400 cubic feet of goods and can handle up to 61,000 pounds.

If you can fill a whole container, your shipment is a full cargo load (FCL), whereas less than a full container is a loose cargo load (LCL). LCL shipping means your goods share container space with other similar products.

A freight broker can best help you negotiate in the FCL/LCL landscape. FreightMango helps secure both load types and advises international shipping importers on their best options, factoring in the costs, risks, and shipping times.

Shipping time from China can take weeks or more. Suppose you have small cargo needs and want to fill an entire container immediately. In that case, a broker like FreightMango can secure LCL shipping can ensure your goods are moving as inexpensively and quickly as possible due to combined resources.

FreightMango also secures FCL shipments for larger loads of the same product to or from a single location. FCL shipments often avoid loading and unloading delays due to no need to stop to unload and sort their contents. Also, the FCL flat rate can save money and be easier to manage and track.

Buyer's often have shifting needs based on the types of imported goods and market fluctuations, further complicating FCL vs. LCL. The decision requires significant factors, and some key points to remember include:

 

• Consider the type of freight being shipped, including its volume, size, and weight.

• Double-check LCL volume rates and the FCL flat rates to see which is more cost-efficient.

• Ensure proof of proper documents — bill of lading, custom declarations, dangerous cargo certification, and insurance.

• Consider any special equipment or staffing needed to handle containers and loads.

• Think about the final destination and how many stops occur along the way.

• Monitor trade finance rates and fees closely to ensure the best prices.

• Weigh the pros and cons that ocean FCL vs. LCL options can present to the company.

• Make sure customer deadlines match the timetable LCL and FCL shipping offers.

• Check for features and unique customization options available with each shipping mode.

FreightMango helps importers navigate FCL vs. LCL shipping to their advantage.

Clearing U.S. Customs from China

You have specific responsibilities to the U.S. government when importing goods from China. The Clear Description of Goods outlines the duties and taxes levied on the imports' commercial value. Numbers listed in the Harmonized Tariff Schedule (HTS) determine the duty percentage when weighed against similar U.S. manufactured goods to level the business playing field. 

Importing goods means your imports must be classified to a corresponding HTS code to calculate the correct duties.

Other necessary documentation for customs clearance will include the following:

• A bill of lading or receipt for the imported items.

• An invoice that shows the purchase price, country of origin, and tariff classification.

• A packing list.

• An arrival notice authorized by a U.S. Customs agent who might perform a customs exam.

Using a broker like FreightMango simplifies this process and ensures your goods get to you as quickly as possible.

Do I need a Customs Bond When Importing from China?

U.S. Customs and Border Patrol (CBP) mandates using a customs bond when the value of your imports exceeds $2,500, or they are subject to the oversight of another federal agency.

What is a customs bond?

A customs bond is an insurance policy for paying the duties and taxes required by the U.S. government. The bond ensures they get paid in all circumstances. These bonds are necessary regardless of the method of transport bringing the goods into the country. Without the correct customs bond, you might incur fines and be subject to costly delays.

Importing from China involves two types of customs bonds: continuous and single-day. How you plan to import the goods will be a consideration in choosing which one you choose.

 

• Continuous bonds: Continuous bonds cover all shipments over an entire one-year period — a less-expensive option if you plan to move multiple loads over the year. This bond requires you to pay for at least $50,000 in coverage, but it also covers your importers. Security Filings (ISF) requirements to which you might be subject.

• Single-entry bonds: Single-entry bonds are purchased for each load imported into the country and can be more complicated than continuous bonds. The minimum bond value must be the value of the goods plus the duties, taxes, and fees. If another federal agency regulates the goods, the bond must be worth three times the value of the imported goods. Prices also fluctuate based on the surety company you use. Supplementary bond coverage is required to meet ISF mandates if shipping by sea.

Using a brokers bond

Working with a licensed customs broker allows you to use the broker's bond to secure your imports, saving you time and money. Additionally, the broker's import reputation will help get your goods through customs much more quickly.

Delivery of Goods from China

Goods are considered delivered once cleared by CBP, a drayman with a terminal worker identification card (TWIC), and the goods are placed at the disposal of the receiving party. The authorized receiving party's status at the disposal is considered effective after due notice of arrival, place of delivery, or port of discharge.

How do I receive my goods at my place of business?

The schedule to pick up and deliver the goods to you will be an appointment set with the ocean carrier through an interchange agreement. Transport could be by rail, truck, plane, or any combination. Distance is often the determining factor for which mode(s) to use. Rail is a  cost-effective option for carrying freight over longer middle-mile journeys before transferring the cargo to a truck for the final-mile leg.

Essential Things to Keep in Mind When Importing from China

When importing from China, consider a few more things. 

• Ask yourself if the goods you are buying are legal to import.

• Does your contract make you responsible for the shipping costs? Consider the Incoterms that will apply.

• Is there clear product information? Do you have all the details about your goods?

• Are the proper customs procedures being followed?

• Is liability insurance required?

• Is the customs bond the right one?

Get Help Importing from China

Your new venture could be very profitable but challenging at the same time. FreightMango simplifies the process and ensures documents and bonds are in place, making the import process easy and delivering your goods on time.

How FreightMango Helps With Importing from China Via a Container Marketplace

The container strategy impacts the cost of shipping. FCL and LCL shipping requires a knowledgeable and effective partner that saves you time and money. FreightMango formulates the right plan and finds the correct container.

Simplify the importing process and save money. Contact FreightMango today and see how they can help you.