New Zealand no longer has an import licensing system, so any individual or organisation can import any goods that are not prohibited. There are, however, regulatory requirements controlling risk to people or the environment which can prevent some products being used or supplied in New Zealand. As with any new commercial venture, it is important to research your market and environment. Here, we explain some ways to do this.
You first need to identify a product you can buy and sell for a profit. You are more likely to be successful if you are already familiar with the product. Many new ventures fail simply because importers select products and markets they know little about. But it is important you are able to assess any manufacturer’s claims about the product’s quality and have a good idea of the likely market in New Zealand. Having decided on a product, you will then need to find one or more suppliers. Naturally, it is best to concentrate your search in areas that you know produce your chosen goods. The obvious sources of information are consulates and trade commissions. This site contains a list of all overseas embassies and consulates accredited to New Zealand, including their telephone and fax numbers, email addresses and links to websites. Several countries have their own trade promotion offices, for example Australia, Denmark, Korea, Japan, Taiwan and the Pacific Forum countries. Trade commissioners usually have access to up-to-date lists of exporters from their respective countries. The quality of information available from consulates varies; some countries are represented by honorary consuls, who have only limited resources. Chambers of Commerce and the Importers Institute also receive inquiries from overseas exporters and may be able to help. Trade fairs are another good source of information; you will be able to meet several suppliers from the same sector at the same time. Once you identify a possible supplier, ask for quotations and all other relevant information – such as how long it will take to ship the goods once the supplier receives your order. It is important to establish whether the supplier’s quotation includes freight and insurance, the level of minimum quantities (if any), the shipping measurements and weights, so you can calculate freight charges. It is wise to travel overseas and meet your prospective suppliers before placing firm orders. This may appear to be an unnecessary expense, but it is always better to do business with real people, as opposed to letterheads. Some new importers want to secure exclusive rights to the product in New Zealand before they start to import. However, overseas exporters are normally reluctant to assign such rights, particularly if your company does not have an established market share. More often than not, they will provide "guarantees" of exclusivity which last only until somebody else comes along with a bigger order. Once you have decided on the product and supplier, try to pre-cost shipments so you can make essential pricing decisions. To do this, you need to know about regulations and transport.
Customs duties and quarantine restrictions are the main regulations affecting importers. You can get free advice on quarantine regulations from the Ministry of Agriculture and Forestry (MAF) and the Ministry of Health, depending on your product. For example, some foodstuffs may be prohibited, while other goods may need to be fumigated or treated in some way before they are allowed into the country. Other compliance requirements may apply to imported goods and prevent their use or supply within New Zealand. The Ministry of Economic Development provides information on its requirements, through the Energy Safety and Radio Spectrum Management web sites. You can get advice on Customs duties from a number of sources, but Customs brokers (formerly known as Customs agents) are the main source of advice. The Customs Service will also provide written tariff classification opinions for a fee of $40. These opinions, however, will not automatically give you advice about what duty rates apply to these goods – they merely list a tariff schedule number. For example, the classification the goods belong to may be subject to duties but they may also be covered by an existing duty concession, making them duty free. Customs brokers would normally tell their clients this. On the other hand, Customs opinions are legally binding, while those issued by Customs brokers are not – unless brokers back up their opinions with Customs Service rulings. Brokers, however, are responsible for the accuracy of their advice and you should check that your broker has negligence insurance. Once you have worked out what duty your goods will attract, its is usually easy to calculate how much it will cost. Most duty rates are expressed as a percentage of their Free on Board, or FOB, cost, i.e. their cost before overseas freight and insurance (see below for a definition). You should note also that imports attract GST. The current rate of 12.5% applies to the cost of the goods, plus their insurance, freight and the duty paid, if any. If you are registered for GST, don’t include this tax in your costing, as you can claim back from the IRD all GST you pay to Customs. You will have to consider the effect on your cash flow, however, between the time you pay GST to Customs and the time you claim it back. Customs’ deferred payment scheme enables importers to pay duty and GST payments in a lump sum on the 20th day of the calendar month after they import the goods. To join the scheme, you will need to pay a credit check fee of $100 or produce a bank guarantee covering your anticipated credit limit. Once you have established a satisfactory pattern of trade, say, after six months, Customs is normally happy to release those guarantees. Customs will provide free advice on which imports are prohibited. For example, importing products made from threatened animal species is prohibited, while other restrictions apply to drugs, pornography, weapons, etc. Some goods, such as cane furniture, need to be fumigated while others, such as crockery, may need to be analysed for lead content. The Customs Service can also provide you with important advice on intellectual property rights. Counterfeit and pirated products can be seized (but not genuine parallel imports). If you are importing these kinds of goods, you would be wise to seek the advice of a patent lawyer.
The costs of international freight are usually a significant proportion of the final cost. You will need to decide on whether your goods are sent by ship or by airfreight. Sometimes it’s not easy to calculate the freight before you import the goods. For example, airfreight is normally charged per kilo while seafreight is rated per cubic metre. You can use our measurement calculator. However, carriers may charge for unusually light airfreight cargo by volume, while seafreight carriers may charge for unusually dense cargo by the tonne. In addition, the international transport industry is riddled with hidden costs. What may sound like an attractive freight rate may not look so good once local charges such as port service charges are added. So it is important that you seek advice in this area. Freight forwarders are the most important source of this advice. Normally, the Customs brokers who advise you on tariffs are also freight forwarders and can provide you with freight advice. Likewise, most freight forwarders are also Customs brokers or have access to those services. Make sure you get more than one quote, as the forwarding industry is quite competitive.
All that remains now is the small matter of payment. Many exporters will demand that new importers raise a letter of credit before they ship the goods. This may seem quite bewildering, but it is actually quite straightforward. Banks are, as could be expected, the best source of advice on methods of payment. However, very few suburban branch staff have specialised knowledge in this area. You should ask your bank manager for an introduction to the appropriate person in the overseas division of the bank's head office in the city. Letters of credit are quite simply promises made by importers that they will pay, provided certain conditions are met – for example, the exporter produces evidence the goods have actually been shipped. This means exporters can confidently manufacture goods for export, secure in the knowledge that they will be paid. It also protects importers, as they know they will not pay unless the goods are shipped. Importers can also use letters of credit to impose additional conditions, for example they can specify the last allowable date for shipment or which documents must be sent with the shipment. This promise is then backed by the importer's bank, which gives the seller an additional level of security. Because of this, banks typically regard a letter of credit as being similar to an overdraft, and usually impose strict limits on how much an importer is allowed to order at any one time. They also will not normally take security on the goods covered by the letter of credit, but will insist on other forms of collateral. It is important to be aware of these limitations. Many new importers find their businesses expanding rapidly only to find their expansion curtailed through lack of collateral. While some alternative sources of trade finance are available, such as confirming houses and trade finance specialists, they do not normally cater to new, small importing ventures.
As an importer, it is important to understand international buying and shipping terms. The most common ones are: EXW – EX WORKS: This is the price suppliers charge for goods taken directly from their factories. It does not include any cartage or delivery to the wharf/airport or export documentation. FOB – FREE ON BOARD: This is the price of goods including the cost of placing them on board ship. Where the goods have been quoted FOB, sellers are responsible for delivering them to the ship at the port of shipment and paying all the expense of getting them there. Sellers are also responsible for making a reasonable contract of carriage for transporting the goods to the buyer. The goods are considered to be delivered once they have been put aboard ship. CIF – COST, INSURANCE AND FREIGHT: This is the same as FOB, plus sellers pay for international freight charges and marine insurance. CFR – COST AND FREIGHT (as CIF except without insurance). You will find a more comprehensive list of terms and definitions on our Incoterms page.
We recommend that you insure and declare all shipments in New Zealand and in New Zealand dollars, rather than arranging for the overseas supplier to do this in a foreign currency. This way, you avoid the risk of an exchange loss. As a broker for the Marine Insurance Company of New Zealand Limited, we can offer you comprehensive cover at a competitive premium.
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