China remains an excellent source for international sellers to procure a wide range of competitively-priced products. The Office of National Statistics reports that products worth
$61 billion were exported from China to the UK in 2021. These goods incur UK import duties from China. If you’ve yet to make a decision on importing from overseas, here’s more information on how to find a Chinese supplier.
This article provides a comprehensive overview of steps that UK companies need to take when importing from China and the attendant UK import duty rates.
UK Import Duty: Begin with your EORI Number
An Economic Operator Registration and Identification System (EORI) number records imported and exported products in the UK. If you use a freight forwarder, you need an EORI number. This is an essential step before addressing UK import duty. From the online application to receipt of an assigned number takes three 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
- NI (National Insurance) number (for self-employed and sole traders only)
Obtain Import License for Relevant Goods
Most goods do not 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
If in doubt, visit the 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 following products that come under the bans and quotas control list are:
- self-defense sprays
- controlled drugs
- rough diamonds
- indecent materials
- endangered animals and plants
Register Goods with CHIEF
The CHIEF (Customs Handling of Import and Export Freight) system is used by importers, exporters, and freight forwarders for customer data, error detection, and electronic payment of taxes and duties. If consignments require paperwork, CHIEF recognizes them as such.
To register goods with CHIEF, you will need the following details:
- Your contact details
- Name of your nominated Community System Provider
- EORI number
- Badge assigned by the Community System Provider
- Name of the port where the goods will travel through
Check the Product Commodity Code
To pay the correct VAT and UK import duty rate on your goods, visit the UK government Trade Tariff website.
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 the CR 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
Before we deep dive into UK import duties and VAT, here are some of the main terms.
UK Import Duties: 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 (cost insurance freight) value.
UK Import Duties from China: CIF Value
To calculate a total CIF value, we will use the following example:
The cost of the goods to import from China is £3,000. Insurance is £200. The shipping is £800. So the total CIF value is £4,000. You’ll likely be paying your Chinese contact in US dollars, so use the HMRC exchange rate to calculate the price in UK sterling.
Duty from China to UK
To calculate duty from China to UK you will need to search on Google for the Government trade tariff service. Find the product you are selling and then get the Third Country Duty rate. Add the duties rate to the CIF value.
From the previous example, we have a £4,000 CIF value. Times the DIF value by the duties rate percentage. So if the duties rate is 5% we multiply £4,000 by 0.05. The duties rate is £200.
The Total Value to Calculate VAT
Continuing with our example, we now have the Value of goods + Shipping + Insurance + Duties. The total value is £4,200.
VAT is the Total value multiplied by 20%. The total VAT payable is £840.
VAT and duties are £840 + £200. So on this order, we will owe the HMRC £1,040. Adding this onto the CIF value of £4,000 gives us a total landed cost of £5,040.
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 5%.
VAT (Value Added Tax) is a sales tax charged on all products bought in the UK at 20% of the total product or shipment value.
For example, if you buy a water bottle made in the UK and bought from Sainsbury’s 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 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
When considering VAT and import duty from China to UK each product is associated with a code that ascribes the correct product tax rate. If goods are sent outside the EU, and the value of the goods is over £135, the goods incur Customs duty.
When you establish the commodity code for imported goods, you can calculate UK import duties from China on the goods in question. 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.
Calculating UK Import Duty
For UK import duty calculations, there are some commonly used examples for shipping costs and insurance. The examples below are in UK sterling.
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 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 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.
Sample Product Duty and VAT
There are several factors to account for when calculating the VAT and duty on product samples. You will be liable for dusty costs when importing from China. However, there is duty relief on some samples. They must meet these conditions:
- The intention to gain orders for the commercial product they mimic
- The value should be less than £39
- Use must solely be as samples rather than saleable goods
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.
The complex procedures around duty and tax will be considerably simplified when you hire a sourcing agent.
This article should have helped you develop a good understanding of import fees and taxes that are paid on goods imported from China to the UK. The process is complex, notwithstanding the hidden costs and pitfalls that can be set any business endeavor.
To simplify the process, we recommend our procurement services. This is how we began. Let Easy Imex share our experience and expertise in sourcing and shipping from China. We ensure that importing from China to the UK is as straightforward as possible for your business. To find out more, click here.