Importing Goods & Services

Lastly, it would be wise to check that the product does not infringe existing intellectual property rights in Australia, including copyrights, patents, and trademarks. Your supplier may lawfully manufacture and distribute their product in their own country but may not be aware of the legal status of the product in Australia. The Australian Customs Service has more information on intellectual property rights.

Bottom Line

The product may be cheap, but have you considered other costs associated with importing? In addition to the product itself, you will need to allow extra in your budget for freight, including transport from overseas and local movement from the port to your place of business. If you plan on storing the goods in a warehouse, you need to factor in the cost of using this storage space.

Find out the applicable taxes (such as GST), customs duties and clearing charges. These taxes vary depending on the type of product you wish to import–for example, you may be eligible for a concession if the product will eventually become an export (see Tradex box). It may be worth hiring a customs broker, a professional who does the paperwork to clear your cargo through customs and quarantine, to help you navigate the importing maze.

How you pay for your goods may also affect the cost of importation. The riskiest way is to pay cash in advance, which is where you pay for the goods before dispatch, whereas the most beneficial is an open account where the supplier sends the relevant documentation to you for payment after dispatch.

The most important cost in account management is the exchange rate. To avoid falling victim to fluctuations in foreign currency, try to secure a price in Australian dollars. If you can’t do this directly, establish a forward deal with your financial services provider to guarantee a certain rate over a specific period so you can conduct imports without being at the mercy of changes.

Other payment methods involve banks, such as a Letter of Credit, which is arranged through your bank and a bank in your supplier’s country. Your bank pays the amount to the supplier’s bank and you pay your bank the arranged amount. The advantage is that the supplier doesn’t receive money until you have received the goods, although this arrangement can be expensive. Sight drafts also involve banks but cost less and require less paperwork than an LOC. In a sight draft arrangement, the lender possesses the freight until the importer sights goods and pays the outstanding amount. A term draft is similar to a sight draft except that payment is due at the end of a fixed term rather than on sight.

Lastly, because of the number of steps involved in importing—from finding a reliable supplier, to shipment, delivery and distribution—it is important to buy insurance. Some freight companies may offer insurance as part of their shipment package, if not, consult your business insurer to see if they cover importation.

Finance & Legalities

Assuming you’ve found a supplier and you’ve decided on the best way to organise payment, the next step is ensuring that you have the means to finance stock not yet sold. If you run an established business, this is generally a matter of incorporating the purchase in your regular business expenditure as you would any other stock.

However, most financial institutions offer a form of credit called inventory finance. This is basically money to buy stock and ensures that you, the importer, can concentrate on the best deal–for example, buying in bulk or buying when the Australian dollar is strong, rather than limiting your purchase because you haven’t pre-sold the product or you’re not sure what you can afford.

As an importer you have a few options in terms of repaying the loan. Often inventory finance involves a fixed term repayment that begins after you receive the goods and start selling. If you have a proven business record, some providers may allow you to nominate a term of repayment.

In addition to the legal issues involved with a sole distribution agreement, you may need to clarify who is liable for the product when it reaches the consumer. Most often, after-sales service is the responsibility of the importer bar exceptional circumstances, for example, a luxury watch company may require that a certified repairer in the country of origin conduct warranty repairs.

Other situations are not so clear and you will need to set out the procedure for dealing with circumstances involving faulty items. This will determine whether faulty items come under Australian law or the law of the supplier country, and whether you have the right to financial compensation in the event that you need to recall the item from sale.

Keep in mind that this is just a basic guide to importing and that you will still need to do your research in terms of finding the right supplier and understanding Australian trade legislation to profit from importation. See our list of contacts that can assist you in understanding import trading in more depth.