This part makes or breaks your import. It is essential that you calculate all your costs into the product to make sure you can actually turn a profit.
Import duty can be calculated in different ways. I have a rule of thumb myself. I take the buying price from my supplier and add 20-30% on top, regardless on where I export it from (or import in your case). This gives me a rough idea on what my landing price will be. This rule applies to first world locations like the US, Europe, Hong Kong, and Singapore, for example. Many second or third world countries are not so open to importing and put a high percentage of duties and tax on top of import products to protect the local industry.
Many first world places even have 0% duties and tax to encourage importing. This applies especially to “green products” that are very sustainable and help reduce energy or waste. A good example is an LED bulb with 0% tax and duties. Of course you can check in detail through Customs Tariff Numbers (see above) or resources like www.dutycalculator.com
Lets look at an example:
My product is a Bluetooth speaker and I would like to import it into the US. First I calculate my shipping costs. I have the measurements of the product and also of the export cartons through the supplier’s quotation. I plan to ship 1,000 pieces.
I go onto http://worldfreightrates.com/ and calculate my shipping costs. It will cost me roughly 1,200USD.
Now, I go onto www.dutycalculator.com (first five checks free)
I input details such as country of manufacture, country of import, product category (this website has a nice and easy to use auto-complete), total product value, my estimated shipping cost, and insurance cost. Shipping cost is the rough estimation of 1000 pieces. Insurance is usually 1% of total product value.
I press calculate
Here we go, I have all costs listed. Wow, only 10% landing costs (excluding shipping costs).
Here is a breakdown:
Notes on duty and tax rates and compliance:
Bluetooth speaker has an import duty rate of 4.9% . Restrictions may apply for shipping this product with courier or postal companies (some probability).
Packaging and labeling requirements apply to lithium batteries whether they are contained in the equipment or sent separately from the device. Please, contact your courier for more information.
Notes on import taxes due:
For imports with FOB value exceeding 2500USD, a merchandise processing fee of 0.3464% of the FOB value applies, with a minimum of 25USD and maximum of 485USD.
Please note that your shipping provider may add an additional handling fee.
So essentially I have the following import costs:
- 1200USD Shipping
- ~100USD Insurance
- 10,000USD Product value
- 1,774.64USD Customs & duties
- TOTAL: 13,074.64 USD
That leaves me with almost exactly 30% costs on top of all my product costs. Pretty much within my “rule of thumb of 30%.”That’s 13USD per item (we have 1,000 pcs). That gives me a great span for margin. I know that the selected Bluetooth speaker is sold for around 49USD.Obviously I have to calculate my domestic shipping and storage or fulfillment costs on top but I should have a fair margin that I can sell this product with.I calculate another 8% for fulfillment by Amazon plus another 10% storage and packing costs. I end up with 15.34USD on the item. To be safe I round up to 16USD. That gives me a potential margin of 33USD per item (49USD minus 16USD). Total sales if I sell everything would amount to 49,000USD.In other words after I have deducted all my costs and investment I have the potential to make a gross profit of 33,000USD. I could take that 33,000USD and invest in my next project and build an even larger product portfolio. Not bad I would say.If you aren’t sure about logistic or duty costs you may also contact your logistics provider. We explain this in the next step.