For many New Zealand based companies, importing goods from China is an excellent opportunity to source goods much more cost effectively. In fact, according to the United Nations COMTRADe database which tracks international trade, the value of the total number of imports from China in New Zealand in 2022 totalled $12.69 billion.
Source – Trading Economics
While there are certainly benefits to bringing in products from China, there are also complications and costs to consider. For businesses who are new to the process of importing, it’s critical that these are understood ahead of time.
The additional costs, taxes and duty involved in importing goods into New Zealand can affect cash flow and profitability. With a strong understanding of these costs, you’ll be better able to apply for trade finance through a reputable lender, such as ScotPac, to help you ensure business success.
The first consideration that needs to be taken into account is the cost of shipping. While the goods themselves are almost always cheaper to procure in China, the shipping costs can reduce those margins considerably.
Products can be sent to New Zealand by sea and by air. While air freight is faster, sea freight is significantly cheaper.
Calculating the cost of Sea Freight
When companies work out the cost of shipping goods to New Zealand it is normally charged by the full container load (FCL) or less than container load (LCL).
As you apply for a quote, the fee will be based on a calculation that takes into account both the weight of your goods, the quantity of your goods and the cubic metres of space it will take up. It is important that you have this information, and that the data is accurate, to ensure you get an accurate quote ahead of time. Remember to factor in packaging and storage containers if relevant. Even factors such as the time of the year can affect the cost with peak periods being more expensive when space is at a premium.
While shipping quotes do vary, the average cost to ship a 20-foot container to New Zealand is around $850 to $1,530.
The cost of taxes, duties and other fees can actually even surpass the cost of just sea freight. Make sure to determine the customs value of your imported goods when calculating these outgoings.
Calculating the cost of Air Freight
When it comes to air freight, the cost is similarly based on chargeable weight but this is determined on whichever is greater: The weight or the volume of the shipment.
Some freight companies will charge per kilogram or cubic metre while others offer flat rates.
Express Shipping from China to New Zealand – Source: Sino Shipping
The Cost of Customs
The value of all imports into New Zealand need to be declared to customs. It’s important that this declaration is accurate and truthful to both avoid paying unnecessary taxes and to avoid having your costs adjusted upwards.
Import duties are calculated based on this value, called the free on board (FOB) price. The calculation takes into account a few different factors:
- Transportation to the port in China where the freight was loaded
- The price per unit of items imported
- The export clearance cost
The costs associated with shipping to New Zealand and the costs of transporting within the country are not included in the customs value. Nor is shipping insurance.
Free on Board Price
Free on board is an Incoterm that refers to the point where the goods have been cleared for export and loaded on board the ship. The responsibility and associated risk at this point is transferred to the buyer.
Incoterms are a defined set of commercial terms published by the International Chamber of Commerce (ICC) that set out the obligations, costs, and risks that are associated with transportation (especially sea freight) and delivery of goods.
Each manufacturer will have their own arrangement and you may wish to use a different Incoterm in your agreement when shipping goods to New Zealand.
Importing into New Zealand incurs an import duty rate. This rate is based on the value of the goods (i.e., the price you paid for them) calculated in New Zealand dollars.
The rate is also based on factors such as the type of goods, the source of the goods and from where the goods were sent.
Goods and Services Tax (GST)
The goods and services tax (GST) is an additional cost that is applied to all imported items valued at NZ$1,000 or more, in addition to the customs duty.
The GST rate is 15% which means that goods worth $100,000 will incur a tax of $10,000.
In New Zealand, there are other fees as well, including the Import Entry Transaction Fee (IETF) and the Biosecurity System Entry Level (BSEL) fee which may be charged.
Tax and Fee Exemption
Exemptions from any of the aforementioned taxes and fees should be confirmed and checked directly with the New Zealand taxation and import departments.
Duty Cost Calculation
It can be confusing to calculate the costs of import duty and taxes. Different categories of items, for example, may even incur different associated fees.
Fortunately, the customs department of the NZ government has a handy calculator to help you work out your duty estimate. You can access that right here to find out more tailored estimates for your intended imported goods.
Your Chinese suppliers and manufacturing partners will need to submit a number of documents to your freight forwarder for goods to be imported under the free on board terms.
Specific documentation that is required includes:
- A commercial invoice that lists the value of the goods being imported.
- A packing list that states the contents of each package or box.
- A bill of lading that indicates the type/category of goods, the quantity of goods and the intended destination.
The commercial invoice differs from a regular invoice as it includes additional information that trading companies will need, such as value, quality, unit and descriptions of the goods. Any applicable trade terms or relevant import duties may also be included on the commercial invoice.
Most Chinese suppliers and manufacturers who have exported items to New Zealand before will be familiar with the required documentation and will know how to provide it to the freight forwarder.
Letter of Credit
In some instances, your manufacturer may require a Letter of credit or complete a telegraphic transfer before releasing the product to export. This can apply whether or not you go through a freight forwarder or import it directly.
Customs Standards and Regulations
As the trading company, it is your responsibility that the goods meet the standards and restrictions outlined by the New Zealand customs department. Different categories and values of items can be subjected to different rules.
Similarly, it is your responsibility as the importer to make sure that your products comply with AS/NZS product safety standards and AZO substance restrictions.
Visit the Product Safety New Zealand website to access current regulatory information concerning products and imported goods.
The cost of checking suppliers and meeting any requirements should be factored into the overall cost of and time it takes to deliver imported goods from China to New Zealand.
Licenses and Permits
The majority of consumer goods imported from China do not require import licenses or permits. But there are strict restrictions on the importation of certain items and prohibitions on a select few other categories.
You can use the New Zealand Government’s full prohibited and restricted imports database to check for required licenses and permits for your goods.
Frequently Asked Questions
Do I have to pay import tax from China?
If you are importing items from China to New Zealand that are in excess of NZ$1,000 in value you will be charged customs duty and GST.
Some items, such as alcohol and tobacco products, are always subject to import tax regardless of value.
The rate of GST is 15% and it applies to all items that are bought online or imported into the country.
How Long Does It Take for Goods to Arrive in New Zealand?
While the time it takes for goods to travel from China to New Zealand can be subject to change, the general time is 5 to 8 days by air freight and around 25 to 40 days by sea freight. Once the goods arrive in New Zealand it can take up to 5 business days to go through customs and then move on to delivery to your business location.
For current, specific and updated timelines it is recommended you get in touch with your freight forwarder directly.
Does China and New Zealand have a free trade agreement?
China and New Zealand entered into a free trade agreement in 2008. This agreement came with unique competitive advantages for both countries and has been deemed a success in reducing barriers to trade and improving business relations between the two countries.
In fact, New Zealand was the first OECD country to sign a comprehensive free trade agreement with China with the New Zealand-China Free Trade Agreement (NZCFTA) coming into effect on 1 October 2008.
Similarly, many other countries have established free trade agreements with New Zealand. This ensures that countries can benefit when another country specialises in a particular resource or production of a certain good.
Do I need a license to import from China to New Zealand?
In most cases it is not necessary to obtain a specific license for importing goods into New Zealand from China. But all commercially imported goods must be cleared through the Customers Service. So any importers will need to be appropriately registered with the department and submit an import entry or electronic cargo information (ECI).
Particular goods may require a specific license and these licenses can be subject to change depending on other political and/or economic factors going on. We recommend referring to the NZ government website to find out more about general importing requirements.
What is a customs broker?
A customs broker can be an individual or company and plays a critical role in facilitating the movement of goods across international borders by ensuring a smooth transition through customs.
These professionals collaborate closely with authorities, serving as liaisons on behalf of importers. Their primary role is to navigate the intricate web of regulations and customs to ensure compliance and expedite the customs clearance process.
The spectrum of services offered by customs intermediaries encompasses an array of tasks:
- Coordinating the compilation and submission of any documentation to meet customs’ requirements.
- Determining any appropriate taxes, tariffs, and customs levies that are applicable to the goods being imported.
- Assessing the value of imported goods in accordance with regulations and standards.
- Assuring comprehensive adherence to all relevant customs statutes.
- Providing expert guidance and consultation on various aspects of customs-related matters and regulatory intricacies.
Engaging the services of customs brokers is important for businesses who are new to importing from regions such as China. An adept customs intermediary will not only guarantee compliance with relevant obligations but will also ensure the entire clearing process is streamlined as much as possible.
What is a freight forwarder?
Freight forwarders provide specialised transportation services for goods and work on behalf of either the importer, the exporter or both. These companies provide a range of services including:
- Shipment coordination
- Cargo space booking
- Rate negotiation
- Documentation preparation
It’s important to choose a freight forwarder with extensive customs clearance experience to ensure the process of importing goods into New Zealand goes smoothly.
In terms of global trade, importing/exporting between countries and a free trade agreement, freight forwarders are often critical.
Trade Finance Solutions
If you are interested in importing goods from China knowing the costs involved will help you effectively manage cash flow. Once you have placed an order with your overseas manufacturer you can have to deal with locked up capital for weeks while the goods are shipped and cleared through customs.
Trade finance solutions can help you access the capital you need to increase your buying power and strengthen your negotiations for bulk purchase discounts with manufacturers. An injection of trade finance can help you increase your stock inventory efficiently without causing disruptions to cash flows while you wait for goods to arrive.
To find out more about how ScotPac’s leading trade finance offerings can help your business, give us a call today.