Your Ultimate Guide to Sell on AliExpress
Is business expansion your motive? Facts reveal selling on AliExpress is the perfect solution. AliExpress (a wholly-owned subsidiary of Alibaba Group) is a massive marketplace. A leading global marketplace with visitors from 200 plus countries.
It earned $30.8 billion in sales during Singles’ Day 2019 alone, this figure is more than Amazon’s entire year (2019) sales in the UK ($ 22 bn), Japan ($ 17 bn), and Germany ($ 16 bn). Now, this figure is too alluring to overlook.
AliExpress did record sales worth $74 billion (50% hike compared to last year) on Single’s Day 2020. The 5-day long Black Friday, Cyber Monday, and Amazon Prime Day in 2019 could not match the benchmark set by AliExpress in terms of sale. Yes, AliExpress top sellers earned beyond expectations.
60 million active customers on AliExpress is your greatest asset to push your sales from zero to zenith in no time. Take the next step and learn how to become an AliExpress seller and how to open the AliExpress seller account? After this, you can officially sell on AliExpress.
To open a business account, be ready with documents to prove yourself as the owner of a legally established enterprise. You must own a business in mainland China.
If you want to launch your brand or be an agent of the brand, then you need to show your qualifications and documentation from the brand.
You must agree to pay an annual technical service fee and choose a plan to among different technical payment plans.
Aliexpress don’t accept sellers who sell products without registering as a business enterprise.
Selling on AliExpress means increasing your business in front of 200 million more monthly visitors if you are from Mainland China, Russia, Spain, Italy, Turkey, and France. Hence, you can expand the business to the next level on AliExpress. One more benefit of selling on AliExpress is healthy competition. AliExpress never sells its own products directly to customers
Stats reveal that opportunities multiply on AliExpress. AliExpress sellers are lucky enough to sell to 60 million active buyers.
Most important of all, you have the opportunity to ease selling process with AliExpress Dropshipping solution. The solution is fully compatible with AliExpress Official APIs. This means order processing is automated using the APIs and empower seller with the below
Automatic order syncing between your store and AliExpress,
Auto-fetch order from store and creation on AliExpress buyer panel.
Order tracking updates from AliExpress to your store.
Auto order creation upon sipping provider is assigned.
AliExpress crossed the benchmark of 150 million overseas buyers within 2.5 years.
AliExpress allows individual merchants as well as companies. Therefore, you can register as AliExpress seller provided you have a VAT number, company operating license, the ID number of the company’s legal representative, and contact information (email and telephone number – updated one).
How much do I need to pay to sell on AliExpress?
You have to pay the Annual AliExpress seller fee. The AliExpress seller fee is decided based on the product category. It is generally between 5% – 8%. On the bright side, if you reach a specific quantity of sales, then annual payment is slashed by 50% or even more.
In which countries can I sell products through AliExpress?
It includes Austria, Belgium, Cyprus, Germany, Estonia, Finland, France, Spain, Slovakia, Slovenia, Ireland, Italy, Greece, Latvia, Lithuania, Luxembourg, the Netherlands, Malta, and Portugal. Hence, you have the opportunity to sell to the global audience.
Which products am I prohibited from selling on AliExpress?
Prohibited products include food and beverages, illegal traded products, and more product prohibited under the AliExpress product listing policy
Another advantage of AliExpress is the opportunity to earn an 8.5% commission for every sale done with AliExpress affiliate program. Above all, the chances of earning with an Affiliate program are high because cookies last upto 30 days.
Join the league of 10,000 happy sellers on AliExpress. Therefore, you can sell on AliExpress and reach 60 million active buyers worldwide.
AliExpress is one of the biggest online marketplaces that exist today.
Not only do they sell to end consumers, but they also serve as a dropshipping supplier to thousands of dropshippers.
With relatively low prices and millions of products on a user-friendly platform, they turned themselves into one of the most successful dropshipping suppliers available on the market.
Since AliExpress is full of thousands of Chinese agents and sellers who create and run their stores on their platform, it’s easy to run into sellers that aren’t service-oriented. There are no physical warehouses, as the sellers themselves source their products from other Chinese suppliers. Therefore, it’s crucial to know how to locate, communicate, and create mutual-relationships with your suppliers for your store’s long-term survivability.
The Importance Of Choosing A Reliable Dropshipping Supplier
Your job is to create a working connection between your suppliers and your customers. The products need to dispatch and arrive quickly. Their item description needs to be precise. And, if there are any problems with the product (arrived damaged, not as described, missing parts, etc.), your supplier should back you up during the return and refund/replacement process.
Analyze Each Sellers’ Performance
The first parameter is that the seller must have at least a 95% overall rating and above. Anything below 95% can pose a risk to your overall customer satisfaction.
Next, hover your mouse over the feedback percentage. Now you’ll see how long the seller has been selling on AliExpress. You’ll also see a detailed description of the seller rating – Item as described, communication, and shipping speed rating.
Once there, make sure that your seller has been active for at least one year on AliExpress. That’s because many new sellers on AliExpress do not have enough experience providing high-quality products and delivering them quickly. That’s why at least one year of experience minimizes the risk of working with new suppliers who are likely to make mistakes.
The minimum rating for each parameter should be 4.6 and above. Seller ratings with 4.7 and above are shown in green. 4.6 and below are shown in orange/red. While it is better to go with green seller ratings, this shouldn’t hold you back from going with an orange 4.6 rating. Many sellers with that rating still perform well.
Check The Shipping And Delivery Time
Reading the customer reviews will give you a better picture of how this seller performs when it comes to delivery times, item descriptions, and overall product quality. If you raised any questions while reading the product description, you would likely find your answer in the customer reviews.
Communicate With Your Supplier
Below the seller history information, there is a ‘Contact Now’ link
Click on it to open a message box between you and the seller. Use this opportunity to ask them a question about the product quality, shipping speed, or anything else that concerns you. The point of opening this communication protocol is simply to check if the supplier answers quickly and efficiently.
If it takes the supplier longer than 24 hours to respond, you might want to consider moving to the next supplier. And that’s because you don’t want your buyers waiting 2-3 days or more to get replies from you.
Furthermore, if you found high potential in a product that the supplier is selling, you can ask them to order a sample product to take better photos/videos and try the product out for yourself. Either way, as long as your supplier answers fast and their English is good enough to have a conversation with, you won’t have to worry about non-responsive suppliers that can damage your sales and reputation.
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Launched back in 2010, AliExpress is one of the biggest and oldest e-commerce marketplaces for dropshipping
You can find all kinds of dropshipping suppliers in this marketplace, both manufacturers and resellers, for just about any kind of product you are looking to sell on your Shopify store.
Its more famous parent company Alibaba is more suited for businesses looking to place huge quantity orders directly with manufacturers to secure the cheapest price per unit possible.
AliExpress on the other hand caters mostly to retail buyers looking to buy goods in lower quantities at factory prices.
Why AliExpress Is So Great For Dropshipping
This is why you will mostly find manufacturers and wholesalers on Alibaba and on AliExpress you will mostly find trading companies and smaller distributors.
There is no shopping cart on Alibaba; you have to negotiate directly with manufacturers for a price and minimum order quantity. Meanwhile, AliExpress has a shopping cart just like any other retail e-store and you don’t have to negotiate with suppliers.
if a supplier is charging some kind of recurring fee for you to do business with them (such as a monthly membership or service fee), they are most likely a scam.
Write to the supplier with any questions you have about the product’s specific details, shipping, minimum order requirements, and bulk prices.
Keep your message friendly, short, and to the point. Remember to be honest about your purchasing capacity, no need to try sounding “bigger” than you are. After you send the message, pay attention to quickly the supplier responds to your query.
A seller who can’t respond both quickly AND clearly to your requests is unreliable as a business partner.
Manufacturers, Distributors, and Drop Shippers: Understanding the Differences
Manufacturers make products. They operate factories that have materials, machines, and staff to make the product from scratch. Most established manufacturers also have designers who’ll work with you to develop product ideas.
You’ll go to manufacturers when you have a product idea and want help turning it into reality. Most manufacturers will ask for a minimum order quantity (MOQ) before starting the manufacturing process.
Wholesalers/Distributors
A distributor is a company that buys goods in large batches and sells those goods in smaller batches to retailers or traders.
You’ll go to distributors when you want to source large quantities of an existing product and resell it in your home country. For instance, if you want to sell LED lamps in the US, you’ll go to a LED lamp distributor.
Dropshippers
Drop shipping is a retail fulfillment method where the store doesn’t keep the products it sells in stock. The products are stored by the drop shipper who takes care of fulfilling individual orders on behalf of the reseller.
As soon as the reseller receives an order, it is forwarded to the drop shipper for fulfillment. The store never sees the product that is shipped to the customer.
You’ll go to drop shippers when you want to run a store but don’t want to keep an inventory or deal with shipping.
Traders
Trading companies buy multiple kinds of product from different factories and sell to other businesses.
The difference between traders and distributors is that the former usually stocks small to medium quantities of a lot of products, while the latter keeps large quantities of a limited range of products.
For instance, an electronics trading company might sell everything from mobile phones to LED lamps. A phone distributor, on the other hand, will usually only stock phones of a particular brand or type.
Difference Between Alibaba and Aliexpress
Alibaba is ideal for businesses that want to place large quantity orders to get the cheapest price per unit. You will mostly find manufacturers and wholesalers on Alibaba
Business owners can also have a custom product made by the manufacturers or buy certain types of products they specialize in and private label them under their own brand.
There is no shopping cart on Alibaba; you’ll have to work with manufacturers to negotiate a price and minimum order quantity.
Use Alibaba if you want to directly work with manufacturers, develop a private label of your product or to place bulk orders at the cheapest price.
Aliexpress operates at the consumer level — a retail version of Alibaba. It enables buyers to purchase goods in lower quantities at factory prices. You get a shopping cart — just like any retail store — and don’t have to negotiate with suppliers
Because it caters largely to retail buyers, AliExpress doesn’t have as many manufacturers on it. Instead, you’ll find a lot of trading companies and smaller distributors.
While you won’t get as cheap rates as on Alibaba, you won’t have to order large MOQs either. This makes it perfect for small and new businesses who want to get started with e-commerce.
Understand that Custom/Import duty may be charged
Expensive products usually get under the scanner of the custom department. If it happens to you, there is a good chance you will need to pay import duty for the products.
Different countries have different rates at which import duties are charged. Keep in check the duty you might have to pay before purchasing the product.
Check out Duty Calculator to get an estimate.
How to Contact AliExpress Suppliers
Email is the preferred mode of communication for most of suppliers. They will likely use Google Translate to translate your emails so make sure you keep the text concise, well formatted and to the point.
How to Start Your Drop Shipping Online Store
Basically, the process of drop shipping looks like this:
You find a wholesaler who sells mountain bikes for $300.
You list the bikes for $400 on your website.
A customer sees the bike, decides it’s a great deal and buys it.
You buy the bike from the wholesaler for $300 and email them the customer’s shipping information.
The wholesaler sends the bike to the customer.
You just made $100
Many drop shippers can do branded packaging for your orders, so no customer will ever guess you’re using drop shipping services. Reputable drop shippers are invisible for the customer.
The majority of drop ship suppliers receive orders via email. After the order is placed, they send the invoice and the tracking number to the store.
Some of them charge a drop-ship fee per order.
This happens because they normally send products in bulk quantities, and sending a single product takes extra effort. They charge the fee to cover additional expenses and inconveniences, caused by packaging and storage.
The key to a successful drop shipping store is finding reputable and trustworthy suppliers.
For a start, try looking for suppliers on these trusted directories:
WorldWide Brands
Doba
WholeSale Central
Alibaba.com
Starting Sales
As mentioned above, you can sell either on your website or on your supplier’s website, for example, eBay.
Selling on your own website won’t give you as much free traffic as the marketplace, but you also won’t have to pay extra money to the supplier. If you choose to sell on a marketplace, most suppliers will ask you to authorize and create an account, and probably charge an initial setup fee.
Printful is a drop shipping service of custom printed products
Unlike other marketplaces (Amazon, eBay, Etsy), AliExpress has a very unique infrastructure that is most conducive to dropshipping. I’ve talked with dozens of suppliers using AliExpress. They all dropship, so you’ll find many suppliers who are reliable and familiar with this business model and their role in it
AliExpress Premium Shipping is the best balance between cheapness and speediness. ePacket, also known as AliExpress Premium Shipping, is ideal. With ePacket, delivery takes around 14 business days door-to-door and includes a tracking code, which your customers can use to check for the location of their order.
How to Dropship With Aliexpress: Order Samples
only order samples of products that you’re going to use in your advertising campaigns. Let’s say you have two or three items on which you are currently offering the best deals. You know they’re great, so you plan to use them in your Facebook or Instagram Ads to attract many visitors to your store. Order samples of these ones for sure. Savvy ecommerce entrepreneurs would order samples of these products to ensure that they are of the highest quality. If your top selling products are of great quality it will speak volumes about your store, and you’ll be more likely to gain some valuable social proof.
Alibaba, the original site, is built for wholesale purchases. Sellers usually have minimum bulk order requirements. You can directly connect with Chinese manufacturers to place orders, and payment is usually via bank transfer.
Aliexpress is its sister site. It’s made for smaller retailers who don't stock the products they're selling, and it accepts credit card payments. Think of it as Amazon, but cheaper and with a two-week delivery time
Instead of buying directly from the manufacturer, the sellers are actually third-party individuals or companies who are reselling to you. You won’t get the best price, but the buyer protection and ability to make single orders makes it perfect for dropshippers.
Dropshipping simply means when your customer makes a purchase from your site, you order the item from your Chinese supplier and they ship the item to your customer. You don’t need to hold any inventory or worry about packaging and shipping
Dropshipping from AliExpress requires you to first set up a store or have a place to sell your goods, like Amazon or eBay
When a customer makes a purchase, you place the order with the seller on AliExpress. The seller ships the items and you keep the difference in prices as profit
3 Tips to Help You Succeed in AliExpress Dropshipping
Tip #1: Ask the supplier to NOT include a packing slip, invoice, pricing or samples
Tip #2: Avoid selling items that infringe on copyrights
Tip #3: Use the AliExpress affiliate program.
Still not sure whether you want to take the plunge into the world of dropshipping?
If you’re still hesitating, here’s an easier option which you might be interested in:
The AliExpress affiliate program!
You set up a website and promote various AliExpress products on this website.
When your readers are interested in buying the product, they click on the links on your website, and they’re redirected to AliExpress.
When they make their purchase, the AliExpress merchant pays you an affiliate fee.
Your job is simply to get customers intrigued about the product…
you don’t need to place orders, deal with inquiries, or handle returns
you’ll get a minimum of 8.5% commission
In comparison, Amazon affiliates get 4% commission on average - so AliExpress certainly isn’t scrimping when it comes to rewarding their affiliates
Tip #3: Check if you’re working with a manufacturer, trade company or wholesaler
When working with suppliers online, these are three main types of suppliers you’ll run into.
Do you know what each of them are?
Manufacturers: These are people who originally create the item from scratch. Working with them can get you the lowest price, since there’s no middle man involved.
Trade Company: This is the middle man who works as an agent between you and the manufacturer. As a result, they have higher prices than the supplier since they need to make profit too.
Wholesaler: This is another form of middleman. The difference between them and trade companies is that they buy the items in bulk from the manufacturer, and then sell it at a mark-up price to yield a nice profit for themselves too.
On Alibaba, you’re usually going to be running into manufacturers or trade companies. To find out, go to their company’s profile, then under business type, it’ll tell you what type of supplier they are.
Another really cool and easy way to distinguish a wholesaler from a manufacturer is seeing if they sell more than one type of brand.
The Bicycle Association (BA), the trade body representing the bike industry in the UK, has outlined the steps it believes the government should take ahead of the potential easing of lockdown measures, including zero VAT on sales of bicycles and e-bikes, as well as a £250 subsidy on the latter to make them more affordable.
Announced yesterday – the same day that Boris Johnson heralded “a new Golden Age for cycling” – the BA has emphasised the role of cycling in easing pressure on public transport and avoiding gridlock on the roads in the weeks ahead.
Among other things, the BA is calling on the government to encourage people returning to work to do so by bike, to provide funding for pop-up bike lanes, to remove VAT on bikes, e-bikes and repairs, to provide subsidies of £250 for people buying e-bikes, and a £50 voucher for people to get their existing bikes serviced.
It is also urging that the Cycle to Work scheme be extended to groups currently not eligible including the self-employed, to fund “refresher” cycle training for adults, and to loosen planning restrictions and provide funding for NHS facilities to provide secure cycle parking for key workers.
BA executive director Steve Garidis commented: “Feedback from the cycle industry is that 7 out of every 10 customers at the moment are new or returning cyclists.
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Britain to Remove Tariffs on Non-EU Bicycles in Event of No-Deal Brexit
Posted Oct 9, 2019
The British Government has confirmed that bicycles entering the UK will get 0% tariffs for up to 12 months following a No Deal Brexit. Currently bicycles are free to import from other EU countries to the UK, however, bikes coming into the UK from outside the EU are subject to a 17% duty.
A No Deal Brexit would occur if the UK cannot come to an agreement about the "divorce" process with the EU. Overnight, the UK would leave the single market and customs union - arrangements designed to help trade between EU members by eliminating checks and tariffs. The UK is currently planning to leave the EU on October 31, however UK law says that an extension until January must be sought if a Deal cannot be struck with the EU before then. However, if the EU refuses to grant an extension, the UK will "crash out" with a No Deal at the end of the month. There is also another chance of No Deal happening in January if the extension is granted.
The Government's temporary tariff regime, published yesterday, is designed to minimize "costs to business and consumers while protecting vulnerable industries" in the event of a No Deal Brexit. It applies to 87% of goods imported to the UK, of which bicycles are a part.
The British government is hoping that having 0% tariffs will mean cheaper prices for consumers and encourage them to keep spending, despite a forecasted drop in the value of the pound
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Customs Duty Information
Customs Duty is a tariff or tax imposed on goods when transported across international borders. The purpose of Customs Duty is to protect each country's economy, residents, jobs, environment, etc., by controlling the flow of goods, especially restrictive and prohibited goods, into and out of the country.
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Calculate UK Import Duty and Taxes
Manual calculation guide
Import duty and taxes – what are they?
Whenever goods are purchased outside of the EU, duty and tax has to be paid to the UK Customs department
Note that goods travelling within the EU will not have VAT levied against them; normally VAT is only charged on the cost of the shipping or carriage
Once this is done, your goods will be released to you. Nearly all shipments of this type are subject to UK Duty and VAT charges so whenever you are calculating the cost of importing goods from overseas, these two additional charges need to be taken into account. Now we will take a look at each of the two costs individually...
UK Duty
How much import duty you will pay will depend upon the value and type of goods being imported as every product has a different duty percentage rate. In order to calculate the percentage of duty payable you can ask your UK freight agent or work it out yourself using the online tariff from the UK government website . Much will depend on how the goods are classified and described so you will need a detailed description of the product and must take the time to allocate them to the correct tariff heading. Failure to get this right can result in costly fines and penalties. These tariff codes are often referred to as HS Codes.
VAT
As well as UK duty, you will have to pay VAT. Many people make the mistake of thinking that the VAT will be calculated only on the cost of the goods but this is wrong; VAT is calculated based upon the TOTAL cost of shipping the goods to the UK and is usually made up of the cost of the goods from the supplier together with the cost of shipping and duty. You are paying VAT on the total cost accrued when bringing the goods to the UK.
Calculating UK Duty and VAT
Here are a few simple examples to show you how to work out the costs of both UK duty and VAT.
Depending on how your parcels are shipping into the UK the duty and tax can be calculated using one of two methods.
1) CIF – Contract, Insurance and Freight
This considers the cost of shipping & insurance. This is the method that is most commonly used and will produce the higher costs of the two possible calculation methods.
Goods value: £5000 (purchased from outside of EU converted from USD to UK£)
Cost of Shipping/Insurance £500
Sub Total 1: £5500 (amount duty is calculated on)
Duty on Sub Total 1 @3.5%: £192.5
Sub Total 2: £5692.5
VAT @ 20% on Sub Total 2: £1138.5
TOTAL Landed cost including duty and VAT: £6831
So in this example, the total of UK duty and VAT (tax) payable to import these goods to the UK is £192.5 + £1138.5 which is £1331.
2) FOB – Free On Board
This calculation does not take into account the cost of insurance and freight when calculating duty & taxes.
Goods value: £5000 (purchased from outside of EU converted from USD to UK£)
Cost of Shipping/Insurance £500
Sub Total 1: £5000 (amount duty is calculated on)
Duty on Sub Total 1 @3.5%: £175
Sub Total 2: £5175
VAT @ 20% on Sub Total 2: £1035
TOTAL Landed cost including duty and VAT: £6710
So in this example, the total of UK duty and VAT (tax) payable to import these goods to the UK is £175 + £1035 which is £1210.
Calculate UK Import Duty and Taxes
Manual calculation guideThe thought of calculating UK import duty and taxes fills many with dread, but it is not such a difficult task once you understand the basics.
Let’s take a look at how to do it, beginning by looking at what duties and taxes are.
Import duty and taxes – what are they?
Whenever goods are purchased outside of the EU, duty and tax has to be paid to the UK Customs department.
Note that goods travelling within the EU will not have VAT levied against them; normally VAT is only charged on the cost of the shipping or carriage.
Once this is done, your goods will be released to you. Nearly all shipments of this type are subject to UK Duty and VAT charges so whenever you are calculating the cost of importing goods from overseas, these two additional charges need to be taken into account. Now we will take a look at each of the two costs individually.
UK Duty
How much import duty you will pay will depend upon the value and type of goods being imported as every product has a different duty percentage rate. In order to calculate the percentage of duty payable you can ask your UK freight agent or work it out yourself using the online tariff from the UK government website . Much will depend on how the goods are classified and described so you will need a detailed description of the product and must take the time to allocate them to the correct tariff heading. Failure to get this right can result in costly fines and penalties. These tariff codes are often referred to as HS Codes.
How do HS Codes work?
Whenever any goods are imported to the UK, a customs harmonized tariff system code (HS code) needs to be used so that you can work out how much the percentage of duty will be. As the importer, you are legally bound to ensure that this is noted correctly. You will need a detailed description of the products to work out which category of tariff your goods fall into. With this in hand, you can calculate the correct UK duty and VAT.
VAT
As well as UK duty, you will have to pay VAT. Many people make the mistake of thinking that the VAT will be calculated only on the cost of the goods but this is wrong; VAT is calculated based upon the TOTAL cost of shipping the goods to the UK and is usually made up of the cost of the goods from the supplier together with the cost of shipping and duty. You are paying VAT on the total cost accrued when bringing the goods to the UK.
Calculating UK Duty and VAT
Here are a few simple examples to show you how to work out the costs of both UK duty and VAT.
Depending on how your parcels are shipping into the UK the duty and tax can be calculated using one of two methods.
1) CIF – Contract, Insurance and Freight
This considers the cost of shipping & insurance. This is the method that is most commonly used and will produce the higher costs of the two possible calculation methods.
Goods value: £5000 (purchased from outside of EU converted from USD to UK£)
Cost of Shipping/Insurance £500
Sub Total 1: £5500 (amount duty is calculated on)
Duty on Sub Total 1 @3.5%: £192.5
Sub Total 2: £5692.5
VAT @ 20% on Sub Total 2: £1138.5
TOTAL Landed cost including duty and VAT: £6831
So in this example, the total of UK duty and VAT (tax) payable to import these goods to the UK is £192.5 + £1138.5 which is £1331.
Here is a similar example created by our online calculator:
2) FOB – Free On Board
This calculation does not take into account the cost of insurance and freight when calculating duty & taxes.
Goods value: £5000 (purchased from outside of EU converted from USD to UK£)
Cost of Shipping/Insurance £500
Sub Total 1: £5000 (amount duty is calculated on)
Duty on Sub Total 1 @3.5%: £175
Sub Total 2: £5175
VAT @ 20% on Sub Total 2: £1035
TOTAL Landed cost including duty and VAT: £6710
So in this example, the total of UK duty and VAT (tax) payable to import these goods to the UK is £175 + £1035 which is £1210.
Here is a similar example created by our online calculator:
Paying your UK Duty and VAT tax
When you import your goods into the UK, the company that deals with your freight clearance will usually contact you to advise how much you need to pay. Most will send you an invoice and all you have to do is pay it so it is not at all complicated; all you need to do is nominate a freight agent in advance of the shipment arriving and then UK Customs will automatically contact them upon arrival. Your supplier overseas can also email you copies of the shipping invoices so that you can send ahead to your freight agent and pre-alert them of the imminent arrival.
If you are registered for VAT, you will have to pay the VAT but can claim it back when you do your VAT return using Certificate C79 which you should receive each month from HMRC.
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Import Duty Explained
Import duties have two distinct purposes: raise income for the local government and to give a market advantage to locally grown or produced goods that are not subject to import duties. A third related goal is sometimes to penalize a particular nation by charging high import duties on its products.
International Organizations
Around the world, several organizations and treaties have a direct impact on import duties. Several countries have tried to reduce duties to promote free trade. The World Trade Organization (WTO) promotes and enforces commitments that its member nations have made to cut tariffs. Countries make these commitments during complex rounds of negotiations.
Another example of an international effort to reduce tariffs was the North American Free Trade Agreement (NAFTA) between Canada, the United States, and Mexico. NAFTA eliminated tariffs, except those on certain agriculture, between the three North American nations. In 2018, the U.S., Canada, and Mexico signed a new deal to replace NAFTA called the USMCA.
In February 2016, 12 Pacific Rim nations entered into the Trans-Pacific Partnership (TPP), which significantly impacts the import duties between these countries. It is expected to take several years before the TPP comes into force.
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Trade War
What Is a Trade War?
A trade war happens when one country retaliates against another by raising import tariffs or placing other restrictions on the other country's imports.
Trade wars can commence if one country perceives that a competitor nation has unfair trading practices. Domestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war. Also, trade wars are often a result of a misunderstanding of the widespread benefits of free trade.
Beginning in January 2018, former President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines. These duties impacted goods from the European Union (EU) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products. The EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.
By May 2019, tariffs on Chinese imports impacted nearly $200 billion of imports.2 As with all trade wars, China retaliated and imposed stiff duties on American imports. A study by the International Monetary Fund (IMF) shows that U.S. importers of goods have primarily shouldered the cost of the imposed tariffs on Chinese goods. These costs are eventually passed on to the American consumer in the form of higher prices, which is the exact opposite of what the trade war is intended to accomplish.