The Complete Guide to UK Import Duties from China

The profitability of any business hinges on balancing their costs and revenue, so it is important to be aware of import duties to avoid any nasty surprises. This article provides a comprehensive overview of the steps that UK companies need to take when importing furniture from China or anything and the import duty rates you can expect to pay.

Begin with your EORI Number

An Economic Operator Registration and Identification System (EORI) number records imported and exported products in the UK. If you are importing goods from outside the UK (or between Northern Ireland and Great Britain) you will need an EORI number.

Thankfully, it’s easy to apply online and you should receive your EORI number immediately, unless HMRC needs to make any checks on your application. In that case, it can take up to 5 working days.

To obtain an EORI number, you will need:

• A registered UK office
• UTR (Unique Taxpayer Reference)
• Date of business start and a SIC (Standard Industrial Classification) code
• ID and password for Government Gateway
• VAT number and registration date
• National insurance number (if you are self-employed or a sole trader)

Obtain Import License for Relevant Goods

Most goods don’t require an import license, but you should check whether or not you need one. Once you have chosen the company that you have decided to buy from, they should be able to help with advice on import licenses. Goods requiring a license include, but are not limited to:

• Animals and animal products
• High-risk food
• Plants and plant products
• Animal medicines
• Human medicines
• Controlled substances
• Tissues and cells for humans
• Military products
• Firearms
• Waste

If in doubt, visit the UK government website for further clarification.

Ensure that Goods for Importing from China are Legal in the UK

You will not be approved for a license if products are banned. Among the products that come under the bans and quotas control list are:

• Self-defence sprays
• Controlled drugs
• Rough diamonds
• Indecent materials
• Endangered animals and plants

Check the Product Commodity Code

Different types of goods come with different VAT and import duty rates. To pay the correct rates on your goods, visit the UK government Trade Tariff website and look up the commodity code for the type of good that you are importing.

Register Goods with CDS

The CDS (Customs Declaration System) is the government’s official system for tracking imports and exports. In order to import goods to the UK, you will need to create an account with CDS and register the goods you are looking to import.

To register goods with CDS, you will need to fill in information for eight data groups:

• Message information – Customs Procedure Codes
• References – Documents, Certificates and Authorisations
• Parties
• Value – Valuation Information, Taxes and Incoterms
• Shipping details – Dates, Periods, Places and Countries
• Goods identification
• Transport information – Modes, Means and Equipment
• Other – Statistical Data, Guarantees and Tariff Data

This looks like an intimidating list, but don’t panic. Filling these out is not complicated, although it can be time consuming.

Power of Attorney and Customs Registration

Exporters and importers must register with customs in China. Your goods will not clear customs without registration. Commercial invoices must include a Customs Registration number. To ease the process of importing from China to the UK use a good freight forwarder who will advise you on any custom limits on imported goods. Alternatively, if you are looking for China sourcing agent, they will take care of the power of attorney and customs registration for you.

A Definition of Terms Relating to Types of UK Import Duties

If you want to understand UK import duties and VAT, you’ll need to familiarise yourself with a couple of key terms.

CIF Value

CIF or ‘Cost, Insurance and Freight’ is a shipping arrangement in which the seller is responsible for the cost of the goods, insurance during shipping, and transporting the goods to their destination port.

CIF value is the total resulting cost.

To calculate a CIF value, let’s look at an example:

The cost of the goods to import from China is £3,000. Insurance is £200. The shipping is £800. Add these together, and you get a total CIF value of £4,000.

FOB (Free on Board)

Free on Board shipping is an alternative shipping arrangement in which the buyer is responsible for the goods or any associated costs once they are loaded on to the ship.

Customs Duty

Customs duty is an import tax on goods shipped into the UK from overseas. If you buy goods online, in another country, and have them sent to the UK, or send a gift from overseas, you may have to pay customs duty.

If personal items are sent back to you from overseas, you are not charged, provided that you describe the items as ‘personal belongings’ on the customs declaration form. With imports, customs duty is a percentage of CIF value.

VAT

VAT (Value Added Tax) is a sales tax charged on all products bought in the UK. The VAT rate is currently 20%. This means you can expect to pay 20% of the total product or shipment value as tax.

All products sold in the UK have VAT applied to them, regardless of where they were produced. For example, if you buy a water bottle from a UK supermarket, a charge of 20% VAT will be made when you buy the water bottle. If you buy a water bottle made in China and sold in the UK, you will still pay 20% VAT.

20% VAT because you’re buying the water bottle in the UK. The charge comes from HMRC in the UK.

Need help with import duties from China?

VAT and Import Duty from China to UK

How to Calculate VAT

A straightforward method to calculate VAT payment is to add the total value of products and freight cost, import duty, insurance, and any further costs. Then multiply the total by 20% (the current UK VAT rate), and you will have the VAT cost.

How to Calculate UK Import Duty

To calculate duty from China to UK you will need to search on Google for the Government trade tariff service. Find the type of product you are selling and look up the third country duty rate.

Then, simply multiply the total value of products and freight cost, import duty, insurance by the duty rate.

If you are on a shipping on an FOB arrangement, the cost of shipping and insurance is not your responsibility, so you can simply multiply the cost of the goods by the duty rate. Let’s take a look at some examples.

1st Example: VAT and Import Duty from China to UK

This first example regarding VAT and import duty from China to UK includes shipping and insurance costs.

Goods value £2,000

Insurance and shipping cost £200

Subtotal £2,200

Subtotal duty (3.5%) £77

Subtotal 2 £2,277

VAT (20%) on Subtotal 2 £456.40

Total landed cost

(VAT and duty included) £2,372.40

2nd Example: FOB (Free On Board)

The second example does not include shipping and insurance when calculating UK import duties and taxes.

Goods value £2,000

Insurance and shipping cost £200

Subtotal £2,000

Subtotal duty (3.5%) £70

Subtotal 2 £2,070

VAT (20%) on Subtotal 2 £414

Total landed cost

(VAT and duty included) £2,484

If you have more questions about imports, exports, and EORI, use the HMRC (Her Majesty’s Revenue and Customs) service. A webchat service is available. Find further details on the HMRC site.

Hidden Fees

When importing goods from China, your order can’t enter the UK until payment of import duties and VAT. To expedite this process, your freight forwarder or air freight company pays the duty or VAT for you. A few weeks later, the freight handler will invoice you for VAT and duty.

They will also charge a clearance admin fee for paying the VAT and duty on your behalf. Clearance admin fees vary; for example, TNT charges 2.5%.

Exceptions to the Standard Duty Rates

There are some situations where the duty rate listed online for your product type doesn’t apply. Here are some examples.

Sample Product Duty and VAT

If you are importing goods for use as commercial samples, you may not have to pay import duty or VAT. To enjoy these savings, you will need to demonstrate that your goods meet the following conditions:

The goods will be used solely be as samples rather than saleable goods, giveaway items, or anything else

The goods are imported solely to win future orders of the type of goods they represent

Typically goods imported as samples will need to be torn, defaced or marked as samples with an indelible pen.

Anti-dumping Duty

Anti-dumping duty is payable when goods are ‘dumped’ in the UK. This duty is applicable when foreign companies trade products at a lower cost than in their home market.

Without anti-dumping duty, the importer’s domestic market may be negatively impacted. Anti-dumping duties often hit e-bikes, motorbikes, solar panels, and tiles. These taxes can be high, sometimes exceeding over 50% of cargo value.

Conclusion

Almost all goods imported into the UK incur duty fees and VAT. To make sure that your business is profitable, it’s important to figure out how much importing goods from China will really cost. You can do this easily by following along with the calculations covered in this article. Alternatively, you can work with a sourcing agent and they will help you figure out the cheapest way to import goods for your business.