Inport

What is Import Friction?

I defined “Import Friction” as the cost of moving goods into a country from outside. A friction of 0% means there is no cost. 100% means I pay the value of the goods in various taxes and levies just to transfer the product across a border (often simply crossing a line).

In this case, I decided that I needed a dehumidifier for my home. Using the power of the internet I researched what I needed and decided upon the RYDZ-26A. I found two sources – a local source (Moisture Cure Commercial) wanted $2,755 for the unit. Alternatively I could go via Alibaba and pay $650 but I would have to get the dehumidifier imported myself.

Hangzhou Ruiya Electrical Appliance manufactures the unit and kindly offered to arrange delivery to my home address if I didn’t want to use their local distributer. Preliminary import cost estimates suggested I would be paying around $500 so I elected to ask them to arrange delivery to my home. Even if I was 100% out, I would still be ahead of the game!

Here is a table of all the charges that were made for a single unit of $650 (the last column is all AUD):

Dehumidifier 610.00 USD 652.70
Sea freight Handzhou to Sydney (including insurance) 15.00 USD 16.05
Money transfer charge 50.00 GBP 89.00
Import duty 32.49 AUD 32.49
Import GST 68.89 AUD 68.89
AQIS processing charge 15.00 AUD 15.00
Declaration processing charge 50.00 AUD 50.00
AQIS Container charge 8.00 AUD 8.00
Destination Port Charges 95.00 AUD 95.00
Destination Terminal Handling Charges 25.00 AUD 25.00
ISPS Fee 10.00 AUD 10.00
Delivery Order Fee 75.00 AUD 75.00
CMR Fee 25.00 AUD 25.00
Destination Cargo Automation Fee 20.00 AUD 20.00
Destination Docs & Handling Fee 20.00 AUD 20.00
Delivery Fuel surcharge 5.00 AUD 5.00
Origin CFS Charges 27.96 AUD 27.96
Customs Clearance Fees 200.00 AUD 200.00
Delivery Charge 95.00 AUD 95.00
Delivery Fuel surcharge 12.35 AUD 12.35

 

And the total was $1,542.43.

Think about this for a moment. It cost $652 to make the complex unit, $16 to transport it by ship from China to Sydney and $873 to get it from the dock in Sydney to my home (15km). I’ve no idea what half of these charges are except that I have to pay them all.

It cost $90 to send some binary bits (weight 0g) and $16 to send 60Kg of hardware around the world.

The import friction is 133%. That is, it cost me more than the value of the goods to cross the border into Australia.

Even with an additional cost of $873 to a $650 unit, I’m still saving $1,213. While I understand that companies in Australia need to make a profit, this seems to be an incredible mark up.

Just a minute, if I ordered two units, then the only thing that changes is the import duty and GST. In this case I’d save a whopping $3254… anyone need a dehumidifier? I’m thinking of ordering ten!

This Post Has 4 Comments

  1. Excellent break down and table of costs. Really interesting stuff. Import friction is an important factor in my business too. I’ll keep this in mind.

  2. Thanks Brian. Love this. So much oncost.
    Maybe we should all be in the import business?
    Roll on localised 3d manufacturing, when only data will travel these long distances. By 2025?

  3. I have bought countless items from overseas – including a $4000 bicycle frame, bicycle components, electronics, cameras, lenses, a CNC mill, etc, etc. Only ever been charged import duty and GST once – and only because the item was over $1000. A couple of the items have been well over $1000 but customs let them go through sans GST / duty – dumb luck.

    It seems really strange that you have had to pay so many taxes, fees and levies, given your item was less than $1000.

    Tough break.

  4. Hi Aaron,
    Many thanks for your comments.
    In fact I ordered two units first time around which took the total well over the magic $1000 AUD when the GST charge is applied. However the rules state that GST is applicable if the goods charge PLUS all transport charges plus import duty exceed $1000 AUD. Even buying one unit, this was likely to be the case (although I was not able to predict all the charges at the outset).
    Sounds like you have been lucky to have no other charges other than GST and import duty on the imports that you have imported.
    Brian

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