How to calculate the costs of an import operation?

When a company decides to import products for the first time, or when they are considering purchasing completely new items internationally, the initial questions that arise concern the associated costs. These common questions make it vital that we know how to calculate importation costs in order to know investment and therefore, to determine whether a purchase will be profitable or not.

As with any purchase, it is important to investigate certain factors before being able to make calculations. This is not easy, especially for companies that are new to importing. For this first step, some companies decide to hire the services of a purchasing consultant so that they obtain the most realistic approximation possible of the final cost of their import. To begin working on the data collection needed, considering the origin of the import is important and despite a large percentage of the products imported into Europe coming from China, many other Asian countries also have good purchasing conditions.

What do I need to know to estimate the investment?

FOB purchase price

Logically, in order to ascertain the purchase price, we must firstly have chosen a supplier. Remember, that the correct selection of suppliers is key for any import, and not only to ensure a good price, but also to avoid subsequent problems. The FOB (Free on Board) purchase price refers to how much the product costs from the factory to the port in the country of origin, i.e., the supplier is responsible for, among other things, the transport and local taxes. Taking into account the minimum order quantity necessary to achieve a certain price is also vital.

HS Code of the product to import

The HS Code is essential in order to know the tariffs associated with the product we are going to import. It is the only way to know what taxes are due at our destination country once the import arrives.

Volume of the goods

In order to calculate all the costs related to transport, we also need to know how much space our order will take up. This means asking the supplier for the weight and volume (in cubic metres) of our purchase to calculate how many units of the product will fit into a container.

Freight cost

Once we know the volume of the goods, we can look for a company to transport the goods to our import country. We will also need to know the port of departure and the port of destination to ascertain the exact freight cost.

Port charges and transport to your company

A mistake is sometimes made by thinking that transport costs end when the products arrive at the port of our country. However, on many occasions, there are still hundreds of kilometres to travel until the product reaches the buyer's warehouses. Additionally, upon arrival at the destination, there are a series of port charges known as THC (Terminal Handling Charges), which vary, depending on the port. This type of cost includes the services that take place at the port of destination namely; unloading of the ship, logistics management, cleaning of the container when it is to be returned empty, etc. Finally, goods must inevitably be declared at customs clearance and the port taxes corresponding to the country of destination, must be paid.

Contact an import expert; the best way to make accurate calculations!

At this point, it is clear that the cost of an import depends on many factors and, for this reason, calculating the investment to be made is not an easy task, especially for companies with little experience in this area. Finding a good supplier, negotiating quantities and conditions with them, as well as managing important issues such as transport; which can make the purchase much more expensive, can lead some companies to mistakenly believe that importing is not the best option for their business. In this context, contacting a sourcing agency is key to speeding up the process, as well as to obtaining the accurate data on how much the import is really going to cost.  Doing this will enable a company to assess whether it is realistically their best option. Furthermore, when the decision is made to import for the first time, a sourcing agency will help  to develop a sourcing strategy that can guarantee, without surprises, the best results in the short, medium and long term. After more than 15 years of working in international purchasing from China to different European countries, we at S3 Group can affirm that having the support of a purchasing consultant is absolutely the best way to ensure a successful import that contributes to the growth of a company's competitiveness.