Importing goods is a great way to start a profitable business in Australia. The lower costs of overseas production and increased access to materials can offer higher profit margins than manufacturing in Australia.
However, it’s important to understand the costs, risks, and regulatory requirements that come with importing goods into Australia. To help you overcome these challenges and avoid the common pitfalls, we’ve created a 10-step guide to walk you through the process of starting an import business.
1. Market Research
Market research is vital to the success of every business. Before you order a container of goods, you should have a clear target market in mind and a defined business plan. What solution does your potential product offer, and who will buy it?
With clearly defined buyer personas, the next step is to establish the size of the market and the growth potential. It’s important to research any competing products and determine the risk of a competitor bringing a similar product to market.
2. Research Suppliers
Visiting overseas suppliers in person is always recommended if possible. It helps to reduce the risk of misunderstandings and costly corrections once the production of your goods has started. If a physical visit isn’t feasible, you can mitigate the risk by taking the following steps when researching suppliers:
- Ask for references from previous customers
- Run a credit check of the company
- Ask to see the business license and check the “Business Scope” for manufacturing
- Request sample products
- Ask to see factory auditing reports
These steps will help you to verify the legitimacy of your potential supplier. If you can’t conduct first-hand research, you should consider hiring an established sourcing agent with experience in the country you wish to do business. For a fee, they can utilise their contacts and expertise to help you find a reliable supplier.
Importing goods from overseas can be a complicated process. Your goods need to be packaged and labelled correctly, and you’ll need the appropriate documentation for export. It’s usually more cost-effective to hire a freight forwarder to handle the logistics of bringing your goods to port.
Look for an established freight forwarder with experience in the country you’ll be importing goods from and knowledge of your industry. Just like researching a supplier, you should ask for references from previous clients and conduct due diligence before agreeing to any terms.
Depending on your agreement with your supplier, you may need to arrange the domestic transport of your goods once they have cleared customs in Australia.
An incoterm represents a universal term that defines a transaction between importer and exporter, so it’s important to know which Incoterm applies to your transaction. Check out our guide here.
You should have an understanding of how to price your product compared to competitor products already on the market. Product pricing plays a crucial role in your position in the marketplace. Position yourself as a budget product, and you will struggle to develop a reputation for premium quality.
If you can secure an exclusive contract for the sale of the product in Australia, you should be able to charge a premium price. It’s also important to know the price tolerance for your product category. What is the maximum consumers/businesses are willing to pay for your solution/product?
5. Import Laws and Regulations
All imported goods into Australia must meet government regulations. Certain products must meet specific requirements, and It’s your responsibility as the importer to ensure your goods comply with AS/NZS product safety standards.
There is no general license required for importing goods into Australia, but some goods do need a permit to clear customs. You can check the laws and regulations regarding imported goods on relevant government websites, including:
Product Safety Australia – Information regarding safety regulations for product categories.
Australian Border Force – A list of goods that are restricted and those that are prohibited from import.
Australian Department of Agriculture – Information on goods and substances that require permits and licenses.
6. Taxes and Customs Duty
Goods imported into Australia are subject to several taxes and fees. You’ll also need to budget for these costs before you reach an agreement with a supplier and rent a container for shipping.
The amount of duty you will need to pay depends on the customs value and category of your goods. The majority of goods imported into Australia are subject to a 5% duty.
Goods and Services Tax (GST)
GST must be paid on all imported goods over the value of $1,000. You are required to pay this tax even if your business isn’t GST registered. GST is usually charged at 10% of the total value of your imported goods, including:
- Customs Value (Free on Board)
- Customs Duty
- Shipping fees
These taxes and fees are dependent on the type of goods you are importing and other external factors like free trade agreements with the country of origin. For an accurate estimation of costs, you will need to check the taxes and duty applicable to your unique circumstances.
You may also qualify for the GST deferral scheme. Registered members of the scheme may defer payment of GST until the 21st day of the following month after the goods have been imported. You can find more information on the GST deferral scheme on the Australian Taxation Office website.
7. Budget for Additional Costs
Aside from GST and customs duties, you will need to budget for several other costs involved with importing goods. These include:
- International shipping costs
- Domestic transport costs
- Import processing fees
Shipping freight is charged by the cubic metres and weight of your goods. You will need a full container load (FCL) or less than container load (LCL). Pricing for a FCL ranges from $1,500 to $2,500 depending on the month of shipping.
The import processing fee is required for all goods valued at over $1,000. This fee ranges from $50 to $192 depending on the lodgement type and consignment value.
8. Risk Management
Importing goods comes with risks that need to be identified and mitigated, to increase the chances of realising a profit and maintaining healthy margins. These risks can include:
- Problems with supplier
- Shipment lost in transit
- Working capital tied up
- Fluctuations in foreign exchange rate
You should take steps to minimise the risk exposure involved. For example, you can include a specific provision in the contract with your supplier to provide cover if you do not receive the goods in the agreed timeframe.
Purchasing a marine cargo insurance policy is a necessary and important step to protect your investment should your goods suffer any damage or loss during shipping. To mitigate the risks of cash flow gaps and foreign exchange rate fluctuation, you can use trade finance solutions.
9. Trade Finance
Trade finance is widely used to mitigate the risks of importing goods. According to the World Trade Organization, up to 90% of global trade relies on trade finance. There are a number of ways trade finance can be used to pay suppliers and reduce the risks involved with international trade.
We offer a range of trade finance solutions to help your business import goods into Australia. You can finance up to 100% of the cost of goods. We can pay your supplier via Telegraphic Transfer (TT), Letters of Credit (LOC) or Documents against Payment. Supplier payments can be made in a range of currencies, including USD, EUR, and CNY.
We can help you maintain working capital while increasing your purchasing power so you can negotiate a lower bulk buying price with your supplier. With a flexible import finance solution covering a cash flow gap for up to 180 days, you can defer payment of your imported goods until your shipment has arrived and you have realised a profit.
10. Review the Import Process
After your goods have cleared customs and reached your business location, it’s important to review the import process and see which areas can be improved.
- Determine the costs involved in each stage of the journey
- Evaluate the quality of the product
- Review the service of the supplier
Which parts of the process can be made smoother and more cost-effective?
The more experience you gain importing goods, the more easily you will be able to identify areas for cost savings.
Starting an importing business is an excellent option for people that like to build relationships and move quickly on new opportunities. You can fast track the growth of your import business by utilising 3rd parties with the right expertise. A freight forwarder can help you handle the logistics, a sourcing agent can help you find reliable suppliers, and we can help you secure Trade Finance and fuel growth.