When purchasing from an international supplier, your goods will be transported from the supplier’s point of origin to the buyer’s destination point. The international commercial terms (incoterms) define the responsibility for carriage, cost, and risk during this transaction. There are 11 incoterms that run the spectrum of full buyer risk/ownership to full supplier risk/ownership.
Importing/Duty Free Entry
There are several areas to consider when purchasing from international suppliers.
Timing of Payments - Consider structuring your requisition with milestone payments. These milestones should be consistent with the transfer of ownership defined by the agreed upon incoterm.
Carriage - We recommend using a customs broker for packages that are heavy/bulky, high-value/sensitive, or involve challenging locations. Customs broker can assist in the following ways: 1) Reduction in time and costs of importing goods; 2) Assistance navigating complex and dynamic trade regulations; and 3) Guidance/Thought Leadership. Involving a customs broker prior to agreeing to purchase a good can help address some of these potential issues in advance.
Costs - These are the cost components of which you should be made aware:
- Export Formalities Taxes and Duties;
- Carriage; and
- Import Formalities, Taxes, and Duties.
Risk - The buyer’s risk begins when the ownership of the good has transferred from the seller. Buyers should consider purchasing insurance for high-value (monetary or non-monetary) goods. If the value of the good exceeds the insurable value offered by the seller and/or carrier, then contact Risk Management for guidance on how to proceed.
- Ex Works (EXW): Seller delivers when it places the goods at the disposal of the buyer at the seller’s premises.
- Free Carrier (FCA): Seller delivers goods to the carrier at the named place.
- Delivered At Place (DAP): Seller delivers when the goods are placed at the disposal of the buyer for unloading at the named place of destination.
- Delivered Duty Paid (DDP) - Seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import, and ready for unloading at the named place of destination.
Suppliers typically prefer EXW since it minimizes their costs and risks throughout the transaction. We recommend FCA, for buyer’s who want to control the logistics of their shipment from the supplier’s location to the buyer’s destination. We recommend DDP or DAP for buyer’s who would prefer that the seller control the logistics of the shipment. Under DDP, the seller pays all costs, including taxes and duties related to import clearance. Under DAP, the buyer pays the aforementioned costs.
It is important to note that a range of logistics and risk components apply when you are shipping or receiving anything, even outside of a purchasing context. American River and Walker International, our preferred customs brokers, can assist you with evaluating the logistics, insurance requirements, permits and taxes, and/or duties associated with the shipment.
A permit might be required if you are importing samples of human pathogens, animal pathogens and biological material of animal origin, soils, or wildlife and animals. For additional guidance on permits, please visit the EHS website. We recommended that you contact American River or Walker International at least 60 days in advance if you will be importing or exporting sample material that requires a permit.
- Exemptions/Relief: In some situations, there are opportunities to receive exemptions or relief from taxes and duties if the appropriate steps are taken in advance.
- Recovery of Taxes and Duties: The process to recover erroneous taxes and duties assessed or paid can be involved, and the time it takes to receive refunds can be extensive or futile.
- A customs broker can provide you with advice regarding the best approach to address your situation.
- Import: firstname.lastname@example.org / (732) 947-5488
- Export: email@example.com , firstname.lastname@example.org / (631) 396-6800)