Practical ways to reduce your import costs

Start with the costs you can actually move

Most attempts to cut import costs begin and end with pushing the factory on unit price. It is the least productive lever available, because the supplier's margin is usually the smallest number in the chain, and squeezing it tends to buy you cheaper materials rather than a cheaper product.

The savings that are real sit in four places: how your cash moves, how your goods are packed, how your shipments are organised, and how accurately the customs entry is made. None of them require a difficult conversation with your supplier, and several of them are free.

Stop paying import VAT at the border

This is the single most useful thing most VAT-registered importers are not doing. Postponed VAT accounting lets you declare and recover import VAT on the same VAT return instead of paying it when the goods arrive and reclaiming it later.

It needs no approval and no application. You are eligible if you are VAT registered in the UK and the goods are for use in your business and you have the right to dispose of them, normally as the owner. What you must do is include your VAT registration number on the import declaration and tell whoever makes the entry that you are using it, because they will not assume it.

It does not reduce the tax; it removes a gap of weeks or months where a substantial sum is sitting with HMRC instead of in your business. On a container of goods that is often the largest cash-flow improvement available to a small importer, and it costs nothing to arrange.

For duty, which is not recoverable, a duty deferment account does a similar job on timing: it lets duty be settled monthly rather than shipment by shipment, which smooths cash flow and can also speed up release.

Ship air, not packaging

Part-container sea freight is charged on volume or weight, whichever produces the greater figure, so a light bulky product pays for space rather than mass. That makes carton design a pricing decision, not a packing detail.

Ask the factory for the carton dimensions and the units per carton before production, and ask whether a different arrangement fits more units into the same cube. Nesting, flat-packing, removing an inner box that duplicates the outer, or changing a carton by a few centimetres so that more fit on a pallet layer can move the freight number materially.

The same logic applies to the container itself. Knowing whether your volume nearly fills a container before you book is worth doing, because the step from a large part-container shipment to a full container is often less expensive than buyers expect.

Consolidate, and stop paying fixed charges twice

A large part of the cost of a shipment does not scale with its size. Customs entry, documentation, terminal handling and delivery are much the same whether the shipment is small or large. Four small shipments therefore pay four sets of them.

If you buy from several suppliers, consolidating into one shipment removes those duplicated charges. If you buy repeatedly from one supplier, fewer larger shipments do the same, as long as the stock holding cost does not exceed the saving.

Also check what your supplier is charging you for freight. When a supplier quotes a delivered price, the transport is being bought by them and sold to you, and it is not always sold at cost. Getting one quote from your own forwarder for the same movement tells you quickly whether that convenience is expensive.

Get the commodity code right

Duty is charged at the rate for the code your goods are declared under, so classification is a cost. But the objective is accuracy, not the lowest number you can find: declaring goods under a code that does not describe them is a compliance problem that comes back as an assessment with interest, and it is your responsibility as importer even when a broker keyed it in.

Accuracy cuts both ways, though, and overpaying is common. Products get declared under a vague catch-all when a more specific heading exists at a lower rate, or under a code for a different material. It is worth checking what your goods are actually being declared as, because many importers have never looked.

Two things to know before you order. Anti-dumping duty applies to some goods of Chinese origin on top of normal duty and can dwarf it, so check the code first. And there is no UK trade agreement with China, so there is no preferential rate to claim on Chinese origin goods, whatever a supplier's paperwork implies.

The cheapest saving is administrative

Demurrage and storage charges accrue daily when goods sit at the port waiting for paperwork or clearance. They buy you nothing at all, and they are entirely avoidable by having the documents complete and the entry arranged before the vessel arrives rather than after it.

The same is true of defects. Money spent on an inspection before the goods are packed is small next to the cost of discovering the problem in the UK, where your options are to accept, to scrap, or to ship it back.

And keep your own records tidy. You must keep the documents supporting your customs value for at least four years, and being able to produce them is what turns a query into a short conversation instead of an expensive one.