7 tips for smarter, cheaper imports
- Marco van Hagen
- 23 May 2023
- Edited 22 Dec 2022
- 5 min
- Managing and growing
Importing goods costs time and money. You have to read up on trade agreements, VAT rules, and customs regulations. And sometimes you pay import duties and clearance costs for your imported goods at the border. There are various clever ways to lower the costs of importing products.
Take advantage of trade agreements, apply special customs regulations, import goods from EU or non-EU countries, and postpone payment of VAT. Or limit your stock as a drop shipper. The 7 tips in this article will help you make smart decisions to save time and money.
1. Take advantage of trade agreements
If you import goods from countries the EU has a trade agreement with, you may qualify for import duty relief. But only if the goods are of preferential origin from the treaty country. This means that the goods have to have been made in the treaty country and meet certain requirements. For a list of requirements for products and countries, use the European Commission’s Access2Markets database or use the Rules of Origin Self-Assessment tool (ROSA).
With preferential documents of origin from the treaty country, you demonstrate the preferential origin of your products and qualify for import duty relief. Examples of documents of origin are an invoice declaration or EUR.1 certificate.
If you import ski suits from the United States (US), you pay 12% import duty. Ski suits of Vietnamese preferential origin imported from Vietnam (VN) are subject to 0% import duty. Import duty rates differ between products and are linked to the product’s HS code, also known as its commodity code.
2. Get to understand customs regimes
If you import products from non-EU countries, there are various customs regulations. With these regulations can mean you pay less or no import duties.
The inward processing (actieve veredeling, in Dutch) scheme lets you temporarily import raw materials from a non-EU country. You process these raw materials into finished or semi-finished products. You then export the processed product back to a non-EU country. Then you do not pay import duties and other import taxes, such as VAT on import, on the imported raw materials. You can also repair or restore goods from non-EU countries with this scheme.
You are a candle manufacturer. A supplier of paraffin granules in Saudi Arabia has candles produced by you under a private label. They provide the paraffin as raw material. With the Inward Processing Permit, you can import this paraffin without having to pay import duties and import VAT. After production, you export the candles to Saudi Arabia as a finished product.
Outward processing (passieve veredeling, in Dutch) is the opposite of inward processing. It involves temporarily exporting goods to a non-EU country. The goods are processed (modified) there, for example, repaired or turned into a finished product. Then you reimport these products into the EU without having to pay full import duties. You only have to pay import duties on the added value of the processing abroad.
You temporarily export fabrics from the EU to a Chinese garment factory. There your fabrics are turned into clothes. You then re-import the clothes into the EU. You do not have to pay import duties on the value of the fabrics you previously temporarily exported.
You purchase non-EU goods and supply them to non-EU customers. Storing these goods in a customs warehouse (in Dutch) may be an interesting option, as you will not have to import the goods and will not have to pay any import duties or other import taxes such as VAT. There are public and private customs warehouses.
You are a supplier of water sports equipment. You have these goods produced under your own brand name in China and you sell them worldwide. A big part of your turnover comes from exporting your products to non-EU countries. Because you store your water sports equipment in a customs warehouse, you do not have to pay import duties or import VAT. This helps to keep your prices low. Your customers will also benefit, because they will not have to pay import duties twice: once for importing the equipment into the EU and again for importing it into their own country. Many transport companies have their own customs warehouse, but you could also turn a space in your own premises into a customs warehouse.
These are but a few of the special regulations that exist for goods. To make use of customs regulations, you have to apply for a permit from Dutch Customs (in Dutch).
3. Take advantage of doing business within the EU
Suppliers can be found all over the world. It is important to carefully consider everything they have to offer. Spread your risks and avoid becoming dependent on a single supplier. It is also important to consider the country you are importing goods from: Do you prefer doing business with a supplier in an EU member state or in a non-EU country? Importing from an EU country has several advantages.
- When you import goods from an EU member state, you do not have to pay import duties. If you import goods from a non-EU country, you will usually have to pay import duties and declare the imported goods to customs.
- Do you want to import branded products outside official distribution channels? This is called parallel import. Parallel imports are allowed if you import branded products from an EU country. But importing branded products from non-EU countries is prohibited unless you have permission from the trademark owner. Please note that you should never import and trade counterfeit goods.
- The EU has many regulations that apply in all EU member states, For example, to set out rules for product safety. When you import a product from another EU country, the product will usually comply with European product requirements. Non-EU countries often have different product requirements. This means that you, the importer, are responsible for ensuring that the products are up to code.
4. Postpone paying VAT
If you regularly import products from non-EU countries, you can postpone paying import VAT to a later date with an article 23 permit (in Dutch) issued by Dutch Customs. Rather than paying it when you import goods, you include it in your VAT return and deduct it as input tax. This lets you avoid advancing the VAT, which will benefit your liquidity.
5. What is dropshipping?
As a dropshipper, you do not keep any products in stock yourself. You order goods from your supplier and they deliver them straight to your customer. So, you do not have any stock costs and excess inventory. Many online shops use dropshipping. Important: with B2C e-commerce sales, VAT can be an issue.
B2B businesses can also use dropshipping, but you will run the risk of your customer finding out who you order your products from, as their details will be on the documents that come with the shipment.
6. Avoid customs issues
If you import goods from a non-EU country, filing an import declaration is skilled work. You need access to the digital system used by customs (AGS) for starters, as well as in-depth knowledge of customs processes and procedures. In 2022, AGS will be phased out in favour of the Customs Declarations Management System (Douaneaangiften Management Systeem, DMS, in Dutch). Starting from 1 July 2023, you will only be able to file customs declarations in DMS. Bring in specialists such as customs brokers and forwarders. Trade association FENEX (in Dutch) has a directory of customs specialists.
Besides filing customs declarations, freight forwarders also specialise in transporting goods (or having them transported) and everything that goes with it.
7. Avoid being scammed
It is becoming more common for business partners to only negotiate over a video conferencing tool. If you never physically meet the person you are in business with, it can be more difficult to vet your business partner. Some suppliers are reliable, but KVK gets many complaints about importers who have been scammed by fake suppliers. Be extra vigilant when the economy takes a turn for the worse. If you prepay your purchase, you will always run the risk that your products may not be delivered. Discuss other forms of payment with your business partner.