The latter half of the twentieth century and now the new millenium, has evidenced Australia’s vunerability to global economics and for reasons which could not be covered in this brief outline, the fact remains that ‘imports’ still far outweigh our ‘exports’. While successive governments have endeavoured to address the trade imbalance through policy adjustments, we are still very much reliant on imports to satisfy societal needs.

So, knowledge and understanding about importing is a vital factor in the contribution to the economic success of this nation. Poor importing skills leads to the continual slide in revenue lost to offshore interests, given that overseas buying involves Australian funds moving offshore to pay for the goods or services acquired.

Goods or services purchased outside Australia for the purposes of importation, is not the same as goods or services purchased within Australia. Acquisition from an Australian supplier normally requires far less complexity, than is the case if one was to undertake the same or similar exercise by acquiring items from overseas.

There are certain aspects of importing which are common to exporting, the latter being covered adequately in the previous chapter. However, importing has significant differences and we set out below an overview of the many facets of importing which will enable the reader to gain an insight into the process.

Further specialised assistance can be obtained from your professional adviser, such as your Banker, Customs Broker, Freight Forwarder and of course, Commerce Queensland (CQ).

IMPORTING – A DIFFERENT BUYING DECISION

Firstly, to distinguish the domestic purchase from the offshore purchase, the number of commercial transactions involved in a purchase from an overseas vendor can be numerous indeed as distinct from the domestic exercise. Depending on the nature of the goods, there is a myriad of transactions that take place IN BETWEEN the sale by the vendor/exporter and the importation by the purchaser/importer.

Most of these transactions will involve –
- Transport companies
- Consolidators
- Packers/Inspectors – for particular goods
- Shipping/Airline companies
- Freight Forwarders
- Banks
- Insurance companies
- Customs Brokers
- Australian Customs Service (ACS)
- Australian Tax Office (ATO)
- Aust. Quarantine Inspection Service (AQIS)
- Other Australian government bodies
- Buying/Selling Agents
- Australian Ports

All of these involve some transfer of funds (money price paid) for services rendered, or required by law, either in the exporting country or at the time of importation into Australia. Such costs ultimately ADD to the price of the goods entering the Australian marketplace.

The prime objective of any importer then, is to –
MINIMISE COST FACTORS, and
MAXIMISE SAVINGS IN FINANCIAL LIABILITIES

IMPORTING – THE PROCESS

One needs to understand that importing involves a “process” which in turn has three (3) main “phases” – each occurring sequentially or concurrently throughout the process.

These phases come into play once the importer has sought out the goods required and chosen the supplier from which the goods will be purchased – remembering that the seller may not necessarily be the manufacturer of the goods. It may be that a buying/selling agent is utilised to access the goods or indeed that you are importing from an organisation which is on a different level of the supply chain. Whatever the situation, it is assumed from this point that you have “done your homework” (hopefully through CQ) and that you are now in a position to purchase the goods from an overseas seller.

PHASE 1 – DOCUMENTATION

International trade (particularly importing) is evidenced by numerous documents. These can be required both commercially and/or legally, which in turn, generate the “title flow” (that is, the change in ownership and possession) of the goods during transit.

The main documents can be broadly categorised into those which cause subsequent action in the chain of events by either the exporter and/or importer. While Internet and e-commerce trends allow for purchasing by those methods, goods still have to be physically despatched, evidenced by a stream of documents required during transit. Even Services, which do not require physical transit, the purchasing process requires evidentiary documentation in the following process.

THE PURCHASE ORDER.

An Order is placed on the overseas seller, ensuring the request covers, quantity, quality, colour, type, model or any other specification required by the importer, including packaging.

THE INVOICE.

The commercial invoice is then raised by the exporter, accompanied by other documents (if any) required by the agreement.

It is normally at this time that the invoice/payment terms are decided between the parties, usually in accordance with the International Chamber of Commerce Invoice Terms (Incoterms). These set out the responsibilities, accepted internationally, as to which party (exporter/importer) is accountable for which aspect of the transit and at whose cost such expenditures or aspects are to be reconciled.

[Reference should be made to the Incoterms booklet produced by the International Chamber of Commerce and available from the CQ.]

THE CONTRACT.

This document is prepared by the importer in conjunction with his Banker (or financier). This will take the form of a letter of credit, bill of exchange, or some other appropriate method of payment agreed to between the parties. It is the contract which sets out the terms of the whole commercial exercise and must be adhered to by both parties so as to avoid difficult disputes, should any arise.

[NOTE: the Bank becomes an importers “best friend” in these exercises, since they can assist in minimising exchange risks associated with overseas currencies and other vital payment terms.]

THE TRANSPORT DOCKET.

This is evidence of affreightment, arranged by either party, dependent on the Incoterms chosen, such as FOB (free on board), CIF (cost, insurance, freight) or any one of a number of other Invoice terms.

One must distinguish between an Ocean Bill of Lading (seafreight), Airway Bill (airfreight) and a Parcel Post Receipt (mail). Even within these modes of transport, there are sub-groups of documents depending on third party intermediaries which may require their own “in-house” documentation to evidence their particular involvement.

The original Ocean Bill of Lading is a negotiable instrument and is a document of title. This is not the case for any of the other documents, irrespective of the mode of transport used.

THE INSURANCE CERTIFICATE.

This is another crucial document. International transport of goods is fraught with operational dangers whereby cargo can be damaged, pillaged, lost, destroyed or deteriorate during transit. Insuring your imported goods against such risks is a minimal cost and is a wise commercial decision should the unexpected or inevitable circumstances occur where your goods face such situations.

Insurance can be arranged through firms that specialise in marine/overseas insurance, or can be arranged by your freight forwarder. Some Invoice Terms include insurance in the sellers price (CIF, CIP and others) whereby these contracts relieve the importer from arranging this aspect. Reference should be made again to the Incoterms discussed previously.

MISCELLANEOUS DOCUMENTS.

In an endeavour to include all other documents, we simply group them under this general heading. This is not to take away their importance and include such documents as:

- consular invoices required for importation from some countries,
- some commodities may require Australian government permits for certain imports, such as flora and fauna, food, chemicals, medicaments, …(seek advice on such aspects),
- certificates of origin so as to claim tariff preferences, …(refer CQ),
- packing declarations for full container loads,
and many others – refer to your professional Customs Broker.

PHASE 2 – CARRIAGE AND TRANSPORT

This determines the “physical flow” of the goods and like Phase 1, has various aspects to be considered. These are as follows.

THE MODE.

The method of transport must be chosen – whether your goods are to be imported by sea, air or parcel post. The costs are substantially different between sea and air and the way these are calculated by the shipping/airline companies or your freight forwarder, can be very complex – dependant on the weight and/or volume of the goods packed for shipment.

THIRD PARTY INTERMEDIARIES.

Many parties will undoubtedly be involved in the transit of the goods and such organisations have been listed earlier. Most will be physically responsible for your goods at any particular time – not the least, port/wharf stevedores and transport personnel – incredibly important throughout the supply chain. It is vital your goods are closely monitored through your shipping/forwarding agent.

THE CUSTOMS BROKER.

Arguably, this is the most important intermediary and requires special mention. This person (or brokerage contact) should be involved with your importation from the beginning – at the Purchase Order stage in Phase 1.

Customs Brokers are professional business advisers in international trade and normally have overseas offices or global networks specialising in cargo clearances and movements across international boundaries. Australia leads the world in electronic data interchange for international trade and your Customs Broker is at the “coalface” of these activities in terms of monitoring, preparing, coordinating, and interfacing with every other intermediary to ensure the importation process for your goods is a smooth one.

A point to note here is that your customs broker is invariably also your freight forwarder – or, there is a business link between the two. This is a vital aspect in the activities and importance of these organisations to your whole import exercise.

In addition, once arrived in Australia, your goods will be subject to “customs clearance” through ALL relevant port authorities. The goods may be subject to import duties, taxes, and other government barriers such as quarantine. Your professional customs broker has formal qualifications and expertise in all of these areas to ensure your costs are minimised or at least maintained at an equitable level.


PHASE 3 – THE LEGAL REQUIREMENTS

There are rules, regulations and procedures set out in legislative statutes and administrative instruments regulating and ensuring the “compliance flow” of imports into Australia. Some of these are very complex.

In the main, the Australian Customs Service (ACS) is the government body, which administer these laws to ensure import conformance with both the commercial and barrier functions.

The ACS is also, in the first instance, “agents” for many other government bodies which are responsible for stringent laws concerning the importation of goods and services. These include the Australian Tax Office (ATO), Australian Quarantine Inspection Service (AQIS) - which also has ancillary responsibilities for the Imported Foods Inspection Programme, (IFIP) – the Federal Office of Road Safety (FORS), Department of Primary Industry (DPI), to name but a few.

Listed below are various laws (international and domestic) which determine revenue payments (in the form of indirect taxation) for imported goods, or which have other aspects relating generally to industry policy and community protection –

- Customs Act and Regulations, setting out specific administrative rules across a broad range of issues;
- Customs Tariff Act, which sets out the rates of duty to be levied on all imported goods. This is structured into Schedules which also include import concessions for prescribed classes of goods, organisations and persons;
- Prohibited Import Regulations;
- Commerce (Trade Descriptions) Act;
- Endangered Species Regulations;
- Anti-dumping and Countervailing legislation;
- Goods and Services Tax (GST) Act and related legislation;
- Quarantine legislation;
and much more….

It is necessary to outline the “link” between the import customs duty and the new GST. Import duty is based on and levied against a concept known as the “Customs Value” (CV). The CV (in the majority of cases) is normally at the FOB level. GST, however, is payable at the time duty is levied (unless the Importer is registered for the “Deferral Scheme”) on taxable importations only. Non-taxable importations are not subject to GST. It is incumbent on any Importer to establish whether their overseas purchases are either a taxable or non-taxable importation. Any GST is payable on the “value of taxable importation” (VoTI) which essentially is made up of the CIF value plus import duty, multiplied by the 10%.

As noted previously, a thorough working knowledge is required in all of these aspects to ensure compliance with ACS administration of imports. Your customs broker is the one to assist in such complexities – for a professional fee.

It would be a very foolish decision for any importer, without the requisite expertise, to endeavour to import and “clear” goods through the port authorities, without the services of a customs broker.

There are very stringent administrative penalties and criminal offences awaiting the unwary (even for innocent errors pursuant to “strict liability” clauses) should there be any “shortfall” in duty or tax liabilities or indeed any breach of prohibition laws. Reputable customs brokers are covered by professional indemnity (PI) insurance for such circumstances and should, in any event, have the requisite expertise to avoid or minimise those risks. An importer seeking the services of a customs broker should enquire as to the broker’s current PI situation.

LANDED COSTING ANALYSIS

It is beneficial, at the time of importation and delivery to your premises to seek an “all-up” cost analysis of your importation. This should include all expenditure of the importer, beginning with the overseas price paid for the goods – irrespective of the Incoterms.

One can proportion or factorise the individual costs of each phase in the import process and arrive at a total cost for the shipment, or, each invoice line. This can then result in a “unit cost” for every imported item in a particular shipment – even including into store costs and/or profit margin. In this way, you can gauge the acceptable market price for your goods so as to identify any adjustments that need to be made for future importations.

Most customs brokers again should be able to provide these services and can arrange for such analyses to be performed by specialised computer software applications. If your customs broker has been involved with you since the Purchase Order stage, then such cost analyses are in easy access.

IMPORTING – OUR GLOBAL OBLIGATIONS

Much of the laws and regulations concerning imports are simply reflecting Australia’s commitment to our international bi-lateral and multi-lateral trade agreements. The prime example is our membership within the World Trade Organisation (WTO).

This is a powerful body consisting of most of the world’s nations administering the General Agreement on Tariffs and Trade (GATT). This collection of rules, amended and developed through “negotiation rounds” since 1946, endeavours to regulate trade throughout the globe. It seeks to direct policies by the signatory nations towards “obligations” to each other and allows trade preferences for certain sectorial industries and developing nations.

Australia’s policy developments in recent years (particularly in terms of the tariff debate) are a response to some of these obligations under GATT. As noted earlier, these issues are far more complex than what could be covered here.

We wish to highlight however, that our import laws are usually a matter of balancing our commitments to these international agreements with the all important “protection” issues for our domestic economy and the industries which have assisted in making our nation – the lucky country.

CONCLUSION

Imports, cannot and will not jeopardise our future, so long as we have adequate industry incentives and policies in place, to encourage and maintain domestic business and /or export levels.

However, less attention to the “management of importing” can do a great deal of economic damage. That is a most important responsibility on all levels of our society – governments, industries, organisations, companies and individuals.

In this light, Imports are indeed a very crucial component in maintaining Australia’s continued wealth.

Happy and prosperous importing…